<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 10, 1997
REGISTRATION NO. 333-20491
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------------
AMENDMENT NO. 1
S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
CENTURA SOFTWARE CORPORATION
(Exact Name of Registrants as Specified in Its Charter)
<TABLE>
<S> <C> <C>
CALIFORNIA 7372 94-2874178
(State or Other Jurisdiction of (Primary Standard Industrial (I.R.S. Employer
Incorporation or Organization) Classification Code Number) Identification No.)
</TABLE>
1060 MARSH ROAD
MENLO PARK, CA 94025
(415) 321-9500
(Address, Including Zip Code and Telephone Number, Including Area Code, of
Registrant's Principal Executive Offices)
--------------------------
SAMUEL M. INMAN
PRESIDENT AND CHIEF EXECUTIVE OFFICER
CENTURA SOFTWARE CORPORATION
1060 MARSH ROAD
MENLO PARK, CA 94025
(415) 321-9500
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
--------------------------
COPIES TO:
<TABLE>
<S> <C>
MARK A. MEDEARIS SCOTT C. DETTMER
JOHN V. BAUTISTA DOUGLAS T. SHEEHY
VENTURE LAW GROUP GUNDERSON DETTMER STOUGH VILLENEUVE
A PROFESSIONAL CORPORATION FRANKLIN & HACHIGIAN, LLP
2800 SAND HILL ROAD 155 CONSTITUTION DRIVE
MENLO PARK, CALIFORNIA 94025 MENLO PARK, CA 94025
</TABLE>
--------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As promptly as practicable after this Registration Statement becomes
effective and the effective time of the proposed merger of a subsidiary of the
Registrant with and into InfoSpinner, Inc. ("InfoSpinner"), as described in the
Agreement and Plan of Reorganization dated as of January 6, 1997, attached as
ANNEX A to the Joint Proxy Statement/Prospectus forming a part of this
Registration Statement.
Holders of 5,090,000 shares of InfoSpinner capital stock, or 70.5% of all
outstanding shares of InfoSpinner capital stock (including holders of 4,640,000
shares of InfoSpinner Common Stock, or 76.9% of all outstanding shares of
InfoSpinner Common Stock and holders of 450,000 shares of InfoSpinner Preferred
Stock, or 37.7% of all outstanding shares of InfoSpinner Preferred Stock) have
executed a Stockholders Agreement and Irrevocable Proxy to vote in favor of the
Merger.
If the securities being registered on this Form are being offered in
connection with the formation of a holding Company and there is compliance with
General Instruction G, check the following box. / /
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
TITLE OF EACH CLASS PROPOSED MAXIMUM PROPOSED MAXIMUM
OF SECURITIES AMOUNT TO BE OFFERING PRICE AGGREGATE AMOUNT OF
TO BE REGISTERED REGISTERED PER SHARE OFFERING PRICE REGISTRATION FEE
<S> <C> <C> <C> <C>
Common Stock, par value $0.001 per share 4,500,000 $ (1) $1,567,200(2) $541
</TABLE>
(1) Not applicable.
(2) There is no established trading market for the securities of InfoSpinner
which are to be converted into shares of Common Stock of the Registrant
pursuant to the Merger described herein. In accordance with Rule 457(f)(2)
under the Securities Act of 1933, as amended, the Proposed Maximum Aggregate
Offering Price has been calculated on the basis of the book value of the
InfoSpinner securities as of December 31, 1996.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
[LOGO]
CENTURA SOFTWARE CORPORATION
1060 MARSH ROAD
MENLO PARK, CALIFORNIA 94025
Dear Shareholder:
You are cordially invited to attend a special meeting of the shareholders of
Centura Software Corporation, a California corporation ("Centura"), to be held
at 1:30 p.m. local time, on March 31, 1997, at Hotel Sofitel, 223 Twin Dolphin
Drive, Redwood Shores, California 94065 (the "Special Meeting").
At the Special Meeting, you will be asked to consider and vote on a proposal
to approve and adopt the Agreement and Plan of Reorganization dated January 6,
1997 (the "Merger Agreement") by and among Centura, IS Acquisition Corporation,
a Delaware corporation and wholly owned subsidiary of Centura ("Merger Sub"),
and InfoSpinner, Inc., a Delaware corporation ("InfoSpinner"), and to approve
the Merger (the "Merger") of Merger Sub with and into InfoSpinner pursuant to
the Merger Agreement. As a result of the Merger, InfoSpinner will become a
wholly owned subsidiary of Centura and each outstanding share of Common Stock of
InfoSpinner (assuming the conversion of all outstanding Preferred Stock into
Common Stock prior to the effective time of the Merger on the basis of one share
of Common Stock for each share of Preferred Stock ("Full Conversion")) will be
converted into and exchanged for a fraction of a share of Centura Common Stock
(the "Exchange Ratio"). The Exchange Ratio will be determined by dividing
4,500,000 shares by the number of shares of InfoSpinner Common Stock outstanding
at the effective time of the Merger (assuming Full Conversion). Based on the
number of shares of InfoSpinner Common Stock and Preferred Stock outstanding on
February 28, 1997, 7,223,265 shares, and assuming Full Conversion, the maximum
Exchange Ratio would be approximately 0.6230. The Exchange Ratio is subject to
reduction by up to 10% as a result of the hold-back of shares by Centura
pursuant to the escrow provisions of the Merger Agreement, in which case the
minimum effective Exchange Ratio would be 0.5607. In addition, the Exchange
Ratio for InfoSpinner Common Stock is subject to reduction in the event the
average 30-day price of Centura Common Stock ending three days prior to the
effective time of the Merger (the "Certificate Average Price") falls below
certain threshold levels (approximately $2.92 for the conversion of InfoSpinner
Series B Preferred Stock ("Series B") and approximately $0.32 for the conversion
of InfoSpinner Series A Preferred Stock ("Series A")). In such event, the
holders of Series B and, as applicable, Series A, will most likely not convert
their shares of Preferred Stock into Common Stock in order to retain the
liquidation preference amounts associated with such shares of Preferred Stock.
In accordance with the InfoSpinner Restated Certificate of Incorporation, the
holders of InfoSpinner Preferred Stock will receive shares of Centura Common
Stock in proportion to the liquidation preference amount of each series of
Preferred Stock held by such holders. Such amounts will be paid prior to any
payment of shares of Centura Common Stock to holders of InfoSpinner Common
Stock. The Series B liquidation preference is $1.82 per share, plus an amount
equal to declared but unpaid dividends per share, and the Series A liquidation
preference is $0.20 per share, plus an amount equal to declared but unpaid
dividends per share. As of February 28, 1997, InfoSpinner had not declared any
dividends with respect to any shares of its capital stock and no holder of
InfoSpinner Preferred Stock has entered into a binding agreement to convert such
shares into InfoSpinner Common Stock prior to consummation of the Merger. In
order to ensure that the holders of Series B and Series A receive the number of
shares of Centura Common Stock in accordance with their respective liquidation
preferences, the Series B Exchange Ratio will exceed 0.6230 in the same
proportion that the Certificate Average Stock Price of Centura Common Stock
falls below $2.92 and the Series A Exchange Ratio will exceed 0.6230 in the same
proportion that the Certificate Average Stock Price of Centura Common Stock
falls below $0.32. The Common Stock Exchange Ratio will be reduced
proportionally to offset the increased values of the Preferred Stock Exchange
Ratios. In the event the Certificate Average Stock Price exceeds the Series B
and Series A thresholds of $2.92 and $0.32, respectively, the Common Stock
Exchange Ratio will be greater than both the Series B Exchange Ratio and the
Series A Exchange Ratio, and it is anticipated that holders of Series B
<PAGE>
and Series A will elect to convert their InfoSpinner Preferred Stock to Common
Stock and receive their pro rata share of the Merger consideration based on the
Common Stock Exchange Ratio.
After the Merger, current Centura securityholders will own approximately 77%
of the outstanding shares of Common Stock of the combined company. The Merger
will not result in any change or conversion of outstanding Common Stock of
Centura. Ten percent of the shares of Centura Common Stock issuable in the
Merger will be deposited into an escrow fund to secure certain indemnification
obligations.
CENTURA'S BOARD OF DIRECTORS HAS APPROVED THE MERGER AGREEMENT AND HAS
DETERMINED THAT THE MERGER IS IN THE BEST INTERESTS OF CENTURA AND ITS
SHAREHOLDERS. AFTER CAREFUL CONSIDERATION, THE BOARD OF DIRECTORS RECOMMENDS A
VOTE FOR THE APPROVAL OF THE PROPOSALS CONTAINED HEREIN.
Holders of 5,090,000 shares of InfoSpinner capital stock, or 70.5% of all
outstanding shares of InfoSpinner capital stock (including holders of 4,640,000
shares of InfoSpinner Common Stock, or 76.9% of all outstanding shares of
InfoSpinner Common Stock and holders of 450,000 shares of InfoSpinner Preferred
Stock, or 37.7% of all outstanding shares of InfoSpinner Preferred Stock) have
executed a Stockholders Agreement and Irrevocable Proxy to vote in favor of the
Merger. Details of the proposed Merger and other important information
concerning Centura and InfoSpinner are more fully described in the accompanying
Joint Proxy Statement/Prospectus. Please give this material your careful
attention.
Whether or not you plan to attend the Special Meeting, please complete, sign
and date the accompanying proxy card and return it in the enclosed prepaid
envelope. You may revoke your proxy in the manner described in the accompanying
Joint Proxy Statement/Prospectus at any time before it has been voted at the
Special Meeting. If you attend the Special Meeting, you may vote in person even
if you have previously returned your proxy card. Your prompt cooperation will be
greatly appreciated.
Sincerely,
/s/ SAMUEL M. INMAN
Samuel M. Inman
PRESIDENT AND CHIEF EXECUTIVE OFFICER
Menlo Park, California
March 18, 1997
<PAGE>
CENTURA SOFTWARE CORPORATION
1060 MARSH ROAD
MENLO PARK, CALIFORNIA 94025
------------------------
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD MARCH 31, 1997
------------------------
TO: THE SHAREHOLDERS OF CENTURA SOFTWARE CORPORATION
NOTICE IS HEREBY GIVEN that a special meeting of the shareholders of Centura
Software Corporation, a California corporation ("Centura"), will be held at 1:30
p.m. local time, on March 31, 1997, at Hotel Sofitel, 223 Twin Dolphin Drive,
Redwood Shores, California 94065 (the "Special Meeting"), to consider and vote
upon the following proposals:
1. To approve and adopt the Agreement and Plan of Reorganization dated as
of January 6, 1997 (the "Merger Agreement") by and among Centura, IS Acquisition
Corporation, a Delaware corporation and wholly owned subsidiary of Centura
("Merger Sub"), and InfoSpinner, Inc., a Delaware corporation ("InfoSpinner"),
and to approve the Merger (the "Merger") of Merger Sub with and into InfoSpinner
pursuant to the Merger Agreement. As a result of the Merger, InfoSpinner will
become a wholly owned subsidiary of Centura and each outstanding share of Common
Stock of InfoSpinner (assuming the conversion of all outstanding Preferred Stock
into Common Stock prior to the effective time of the Merger on the basis of one
share of Common Stock for each share of Preferred Stock ("Full Conversion"))
will be converted into and exchanged for a fraction of a share of Centura Common
Stock (the "Exchange Ratio"). The Exchange Ratio will be determined by dividing
4,500,000 shares by the number of shares of InfoSpinner Common Stock outstanding
at the effective time of the Merger (assuming Full Conversion). Based on the
number of shares of InfoSpinner Common Stock and Preferred Stock outstanding on
February 28, 1997, 7,223,265 shares, and assuming Full Conversion, the maximum
Exchange Ratio would be approximately 0.6230. The Exchange Ratio is subject to
reduction by up to 10% as a result of the hold-back of shares by Centura
pursuant to the escrow provisions of the Merger Agreement, in which case the
minimum effective Exchange Ratio would be 0.5607. In addition, the Exchange
Ratio for InfoSpinner Common Stock is subject to reduction in the event the
average 30-day price of Centura Common Stock ending three days prior to the
effective time of the Merger (the "Certificate Average Price") falls below
certain threshold levels (approximately $2.92 for the conversion of InfoSpinner
Series B Preferred Stock ("Series B") and approximately $0.32 for the conversion
of InfoSpinner Series A Preferred Stock ("Series A")). In such event, the
holders of Series B and, as applicable, Series A, will most likely not convert
their shares of Preferred Stock into Common Stock in order to retain the
liquidation preference amounts associated with such shares of Preferred Stock.
In accordance with the InfoSpinner Restated Certificate of Incorporation, the
holders of InfoSpinner Preferred Stock will receive shares of Centura Common
Stock in proportion to the liquidation preference amount of each series of
Preferred Stock held by such holders. Such amounts will be paid prior to any
payment of shares of Centura Common Stock to holders of InfoSpinner Common
Stock. The Series B liquidation preference is $1.82 per share, plus an amount
equal to declared but unpaid dividends per share, and the Series A liquidation
preference is $0.20 per share, plus an amount equal to declared but unpaid
dividends per share. As of February 28, 1997, InfoSpinner had not declared any
dividends with respect to any shares of its capital stock and no holder of
InfoSpinner Preferred Stock has entered into a binding agreement to convert such
shares into InfoSpinner Common Stock prior to consummation of the Merger. In
order to ensure that the holders of Series B and Series A receive the number of
shares of Centura Common Stock in accordance with their respective liquidation
preferences, the Series B Exchange Ratio will exceed 0.6230 in the same
proportion that the Certificate Average Stock Price of Centura Common Stock
falls below $2.92 and the Series A Exchange Ratio will exceed 0.6230 in the same
proportion that the Certificate Average Stock Price of Centura Common Stock
falls below $0.32. The Common Stock Exchange Ratio will be reduced
proportionally to offset the increased values of the Preferred Stock Exchange
Ratios. In the event the Certificate Average Stock Price exceeds the Series B
and Series A thresholds of $2.92 and $0.32, respectively, the Common Stock
Exchange Ratio will be greater than both the Series B Exchange Ratio and the
Series A Exchange
<PAGE>
Ratio, and it is anticipated that holders of Series B and Series A will elect to
convert their InfoSpinner Preferred Stock to Common Stock and receive their pro
rata share of the Merger consideration based on the Common Stock Exchange Ratio.
After the Merger, current Centura securityholders will own approximately 77%
of the outstanding shares of Common Stock of the combined company. The Merger
will not result in any change or conversion of outstanding Common Stock of
Centura. Ten percent of the shares of Centura Common Stock issuable in the
Merger will be deposited into an escrow fund to secure certain indemnification
obligations. A copy of the Merger Agreement is attached as ANNEX A to the Joint
Proxy Statement and Prospectus (the "Joint Proxy Statement/Prospectus")
accompanying this Notice.
Holders of 5,090,000 shares of InfoSpinner capital stock, or 70.5% of all
outstanding shares of InfoSpinner capital stock (including holders of 4,640,000
shares of InfoSpinner Common Stock, or 76.9% of all outstanding shares of
InfoSpinner Common Stock and holders of 450,000 shares of InfoSpinner Preferred
Stock, or 37.7% of all outstanding shares of InfoSpinner Preferred Stock) have
executed a Stockholders Agreement and Irrevocable Proxy to vote in favor of the
Merger.
2. To transact such other business as may properly come before the Special
Meeting or any postponements or adjournments thereof.
The Board of Directors has fixed the close of business on February 28, 1997
as the record date for the determination of the holders of Centura Common Stock
entitled to notice of, and to vote at, the Special Meeting. Accordingly, only
shareholders of record at the close of business on such date are entitled to
notice of and to vote at the Special Meeting and any adjournment or postponement
thereof. The affirmative vote of a majority of the shares of Centura Common
Stock outstanding on the record date is necessary for approval and adoption of
proposal 1. Details of the proposed Merger and other important information
concerning Centura and InfoSpinner are more fully described in the accompanying
Joint Proxy Statement/Prospectus. Please give this material your careful
attention.
You may revoke your proxy in the manner described in the accompanying Joint
Proxy Statement/ Prospectus at any time before it has been voted at the Special
Meeting. Any shareholder attending the Special Meeting may vote in person even
if he or she has returned a proxy.
By Order of the Board of Directors
/s/ RICHARD A. GELHAUS
Richard A. Gelhaus
CHIEF FINANCIAL OFFICER AND SENIOR
VICE PRESIDENT OF FINANCE AND
OPERATIONS
Menlo Park, California
March 18, 1997
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, YOU ARE REQUESTED TO SIGN, DATE
AND MAIL PROMPTLY THE ENCLOSED PROXY WHICH IS BEING SOLICITED ON BEHALF OF THE
CENTURA BOARD OF DIRECTORS. A RETURN ENVELOPE WHICH REQUIRES NO POSTAGE IF
MAILED IN THE UNITED STATES IS ENCLOSED FOR THAT PURPOSE.
<PAGE>
[LOGO]
INFOSPINNER, INC.
1222 E. ARAPAHO ROAD
SUITE 320
RICHARDSON, TEXAS 75081
Dear Stockholder:
You are cordially invited to attend a special meeting of the stockholders of
InfoSpinner, Inc., a Delaware corporation ("InfoSpinner"), to be held at 1:30
p.m. local time, on March 31, 1997, at InfoSpinner's executive offices, 1222 E.
Arapaho Road, Suite 320, Richardson, Texas (the "Special Meeting").
At the Special Meeting, you will be asked to consider and vote on a proposal
to approve and adopt the Agreement and Plan of Reorganization dated January 6,
1997 (the "Merger Agreement") by and among Centura Software Corporation, a
California corporation ("Centura"), IS Acquisition Corporation, a Delaware
corporation and wholly owned subsidiary of Centura ("Merger Sub"), and
InfoSpinner, and to approve the Merger (the "Merger") of Merger Sub with and
into InfoSpinner pursuant to the Merger Agreement. As a result of the Merger,
InfoSpinner will become a wholly owned subsidiary of Centura and each
outstanding share of Common Stock of InfoSpinner (assuming the conversion of all
outstanding Preferred Stock into Common Stock prior to the effective time of the
Merger on the basis of one share of Common Stock for each share of Preferred
Stock ("Full Conversion")) will be converted into and exchanged for a fraction
of a share of Centura Common Stock (the "Exchange Ratio"). The Exchange Ratio
will be determined by dividing 4,500,000 shares by the number of shares of
InfoSpinner Common Stock outstanding at the effective time of the Merger
(assuming Full Conversion). Based on the number of shares of InfoSpinner Common
Stock and Preferred Stock outstanding on February 28, 1997, 7,223,265 shares,
and assuming Full Conversion, the maximum Exchange Ratio would be approximately
0.6230. The Exchange Ratio is subject to reduction by up to 10% as a result of
the hold-back of shares by Centura pursuant to the escrow provisions of the
Merger Agreement, in which case the minimum effective Exchange Ratio would be
0.5607. In addition, the Exchange Ratio for InfoSpinner Common Stock is subject
to reduction in the event the average 30-day price of Centura Common Stock
ending three days prior to the effective time of the Merger (the "Certificate
Average Price") falls below certain threshold levels (approximately $2.92 for
the conversion of InfoSpinner Series B Preferred Stock ("Series B") and
approximately $0.32 for the conversion of InfoSpinner Series A Preferred Stock
("Series A")). In such event, the holders of Series B and, as applicable, Series
A, will most likely not convert their shares of Preferred Stock into Common
Stock in order to retain the liquidation preference amounts associated with such
shares of Preferred Stock. In accordance with the InfoSpinner Restated
Certificate of Incorporation, the holders of InfoSpinner Preferred Stock will
receive shares of Centura Common Stock in proportion to the liquidation
preference amount of each series of Preferred Stock held by such holders. Such
amounts will be paid prior to any payment of shares of Centura Common Stock to
holders of InfoSpinner Common Stock. The Series B liquidation preference is
$1.82 per share, plus an amount equal to declared but unpaid dividends per
share, and the Series A liquidation preference is $0.20 per share, plus an
amount equal to declared but unpaid dividends per share. As of February 28,
1997, InfoSpinner had not declared any dividends with respect to any shares of
its capital stock and no holder of InfoSpinner Preferred Stock has entered into
a binding agreement to convert such shares into InfoSpinner Common Stock prior
to consummation of the Merger. In order to ensure that the holders of Series B
and Series A receive the number of shares of Centura Common Stock in accordance
with their respective liquidation preferences, the Series B Exchange Ratio will
exceed 0.6230 in the same proportion that the Certificate Average Stock Price of
Centura Common Stock falls below $2.92 and the Series A Exchange Ratio will
exceed 0.6230 in the same proportion that the Certificate Average Stock Price of
Centura Common Stock falls below $0.32. The Common Stock Exchange Ratio will be
reduced proportionally to offset the increased values of the Preferred Stock
Exchange Ratios. In the event the Certificate Average Stock Price exceeds the
Series B
<PAGE>
and Series A thresholds of $2.92 and $0.32, respectively, the Common Stock
Exchange Ratio will be greater than both the Series B Exchange Ratio and the
Series A Exchange Ratio, and it is anticipated that holders of Series B and
Series A will elect to convert their InfoSpinner Preferred Stock to Common Stock
and receive their pro rata share of the Merger consideration based on the Common
Stock Exchange Ratio.
After the Merger, InfoSpinner securityholders will own approximately 23% of
the outstanding shares of Common Stock of the combined company. The Merger will
not result in any change or conversion of outstanding Common Stock of Centura.
Ten percent of the shares of Centura Common Stock issuable in the Merger will be
deposited into an escrow fund to secure certain indemnification obligations.
INFOSPINNER'S BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED THE MERGER
AGREEMENT AND HAS DETERMINED THAT THE MERGER IS IN THE BEST INTERESTS OF
INFOSPINNER AND ITS STOCKHOLDERS. AFTER CAREFUL CONSIDERATION, THE BOARD OF
DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE APPROVAL OF THE PROPOSALS
CONTAINED HEREIN.
Holders of 5,090,000 shares of InfoSpinner capital stock, or 70.5% of all
outstanding shares of InfoSpinner capital stock (including holders of 4,640,000
shares of InfoSpinner Common Stock, or 76.9% of all outstanding shares of
InfoSpinner Common Stock and holders of 450,000 shares of InfoSpinner Preferred
Stock, or 37.7% of all outstanding shares of InfoSpinner Preferred Stock) have
executed a Stockholders Agreement and Irrevocable Proxy to vote in favor of the
Merger. Details of the proposed Merger and other important information
concerning Centura and InfoSpinner are more fully described in the accompanying
Joint Proxy Statement/Prospectus. Please give this material your careful
attention.
Whether or not you plan to attend the Special Meeting, please complete, sign
and date the accompanying proxy card and return it in the enclosed prepaid
envelope. You may revoke your proxy in the manner described in the accompanying
Joint Proxy Statement/Prospectus at any time before it has been voted at the
Special Meeting. If you attend the Special Meeting, you may vote in person even
if you have previously returned your proxy card. Your prompt cooperation will be
greatly appreciated.
Sincerely,
/s/ ROBERT L. WEST
Robert L. West
PRESIDENT, CHIEF EXECUTIVE OFFICER AND
CHIEF FINANCIAL OFFICER
Richardson, Texas
March 18, 1997
<PAGE>
INFOSPINNER, INC.
1222 E. ARAPAHO ROAD, SUITE 320
RICHARDSON, TEXAS 75081
------------------------
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD MARCH 31, 1997
------------------------
TO: THE STOCKHOLDERS OF INFOSPINNER, INC.
NOTICE IS HEREBY GIVEN that a special meeting of the stockholders of
InfoSpinner, Inc., a Delaware corporation ("InfoSpinner"), will be held at 1:30
p.m. local time, on March 31, 1997, at InfoSpinner's executive offices, 1222 E.
Arapaho Road, Suite 320, Richardson, Texas (the "Special Meeting"), to consider
and vote upon the following proposals:
1. To approve and adopt the Agreement and Plan of Reorganization dated as
of January 6, 1997 (the "Merger Agreement") by and among Centura Software
Corporation, a California corporation ("Centura"), IS Acquisition Corporation, a
Delaware corporation and wholly owned subsidiary of Centura ("Merger Sub"), and
InfoSpinner, and to approve the Merger (the "Merger") of Merger Sub with and
into InfoSpinner pursuant to the Merger Agreement. As a result of the Merger,
InfoSpinner will become a wholly owned subsidiary of Centura and each
outstanding share of Common Stock of InfoSpinner (assuming the conversion of all
outstanding Preferred Stock into Common Stock prior to the effective time of the
Merger on the basis of one share of Common Stock for each share of Preferred
Stock ("Full Conversion")) will be converted into and exchanged for a fraction
of a share of Centura Common Stock (the "Exchange Ratio"). The Exchange Ratio
will be determined by dividing 4,500,000 shares by the number of shares of
InfoSpinner Common Stock outstanding at the effective time of the Merger
(assuming Full Conversion). Based on the number of shares of InfoSpinner Common
Stock and Preferred Stock outstanding on February 28, 1997, 7,223,265 shares,
and assuming Full Conversion, the maximum Exchange Ratio would be approximately
0.6230. The Exchange Ratio is subject to reduction by up to 10% as a result of
the hold-back of shares by Centura pursuant to the escrow provisions of the
Merger Agreement, in which case the minimum effective Exchange Ratio would be
0.5607. In addition, the Exchange Ratio for InfoSpinner Common Stock is subject
to reduction in the event the average 30-day price of Centura Common Stock
ending three days prior to the effective time of the Merger (the "Certificate
Average Price") falls below certain threshold levels (approximately $2.92 for
the conversion of InfoSpinner Series B Preferred Stock ("Series B") and
approximately $0.32 for the conversion of InfoSpinner Series A Preferred Stock
("Series A")). In such event, the holders of Series B and, as applicable, Series
A, will most likely not convert their shares of Preferred Stock into Common
Stock in order to retain the liquidation preference amounts associated with such
shares of Preferred Stock. In accordance with the InfoSpinner Restated
Certificate of Incorporation, the holders of InfoSpinner Preferred Stock will
receive shares of Centura Common Stock in proportion to the liquidation
preference amount of each series of Preferred Stock held by such holders. Such
amounts will be paid prior to any payment of shares of Centura Common Stock to
holders of InfoSpinner Common Stock. The Series B liquidation preference is
$1.82 per share, plus an amount equal to declared but unpaid dividends per
share, and the Series A liquidation preference is $0.20 per share, plus an
amount equal to declared but unpaid dividends per share. As of February 28,
1997, InfoSpinner had not declared any dividends with respect to any shares of
its capital stock and no holder of InfoSpinner Preferred Stock has entered into
a binding agreement to convert such shares into InfoSpinner Common Stock prior
to consummation of the Merger. In order to ensure that the holders of Series B
and Series A receive the number of shares of Centura Common Stock in accordance
with their respective liquidation preferences, the Series B Exchange Ratio will
exceed 0.6230 in the same proportion that the Certificate Average Stock Price of
Centura Common Stock falls below $2.92 and the Series A Exchange Ratio will
exceed 0.6230 in the same proportion that the Certificate Average Stock Price of
Centura Common Stock falls below $0.32. The Common Stock Exchange Ratio will be
reduced proportionally to offset the increased values of the Preferred Stock
Exchange Ratios. In the event the Certificate Average Stock Price exceeds the
Series B and Series A thresholds of $2.92 and $0.32, respectively, the Common
Stock Exchange Ratio will be greater than both the Series B Exchange Ratio and
the Series A Exchange Ratio, and it is anticipated that holders of Series B
<PAGE>
and Series A will elect to convert their InfoSpinner Preferred Stock to Common
Stock and receive their pro rata share of the Merger consideration based on the
Common Stock Exchange Ratio.
After the Merger, InfoSpinner securityholders will own approximately 23% of
the outstanding shares of Common Stock of the combined company. The Merger will
not result in any change or conversion of outstanding Common Stock of Centura.
Ten percent of the shares of Centura Common Stock issuable in the Merger will be
deposited into an escrow fund to secure certain indemnification obligations. A
copy of the Merger Agreement is attached as ANNEX A to the Joint Proxy Statement
and Prospectus (the "Joint Proxy Statement/Prospectus") accompanying this
Notice.
Holders of 5,090,000 shares of InfoSpinner capital stock, or 70.5% of all
outstanding shares of InfoSpinner capital stock (including holders of 4,640,000
shares of InfoSpinner Common Stock, or 76.9% of all outstanding shares of
InfoSpinner Common Stock and holders of 450,000 shares of InfoSpinner Preferred
Stock, or 37.7% of all outstanding shares of InfoSpinner Preferred Stock) have
executed a Stockholders Agreement and Irrevocable Proxy to vote in favor of the
Merger.
2. To transact such other business as may properly come before the Special
Meeting or any postponements or adjournments thereof.
The Board of Directors has fixed the close of business on February 28, 1997
as the record date for the determination of the holders of InfoSpinner Common
Stock and Preferred Stock entitled to notice of, and to vote at, the Special
Meeting. Accordingly, only stockholders of record at the close of business on
such date are entitled to notice of and to vote at the Special Meeting and any
adjournment or postponement thereof. The affirmative vote of a majority of the
shares of InfoSpinner Common Stock and a majority of the shares of InfoSpinner
Preferred Stock outstanding on the record date, voting as separate classes, is
necessary for approval and adoption of proposal 1 above. Details of the proposed
Merger and other important information concerning Centura and InfoSpinner are
more fully described in the accompanying Joint Proxy Statement/Prospectus.
Please give this material your careful attention.
You may revoke your proxy in the manner described in the accompanying Joint
Proxy Statement/ Prospectus at any time before it has been voted at the Special
Meeting. Any shareholder attending the Special Meeting may vote in person even
if he or she has returned a proxy.
By Order of the Board of Directors
/s/ ROBERT L. WEST
Robert L. West
PRESIDENT, CHIEF EXECUTIVE OFFICER AND
CHIEF FINANCIAL OFFICER
Richardson, Texas
March 18, 1997
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, YOU ARE REQUESTED TO SIGN, DATE
AND MAIL PROMPTLY THE ENCLOSED PROXY WHICH IS BEING SOLICITED ON BEHALF OF THE
INFOSPINNER BOARD OF DIRECTORS. A RETURN ENVELOPE WHICH REQUIRES NO POSTAGE IF
MAILED IN THE UNITED STATES IS ENCLOSED FOR THAT PURPOSE.
<PAGE>
CENTURA SOFTWARE CORPORATION
AND
INFOSPINNER, INC.
JOINT PROXY STATEMENT
---------------------
CENTURA SOFTWARE CORPORATION
PROSPECTUS
This Joint Proxy Statement/Prospectus (the "Proxy Statement/Prospectus") is
being furnished to the holders of common stock, par value $.01 per share (the
"Centura Common Stock"), of Centura Software Corporation, a California
corporation ("Centura"), in connection with the solicitation of proxies by the
Centura Board of Directors for use at the Special Meeting of Shareholders of
Centura to be held on March 31, 1997 at 1:30 p.m., and at any and all
adjournments or postponements thereof (the "Centura Meeting").
This Proxy Statement/Prospectus is also being furnished to the holders of
Common Stock (the "InfoSpinner Common Stock") and Series A Preferred Stock and
Series B Preferred Stock (collectively the "InfoSpinner Preferred Stock") of
InfoSpinner, Inc., a Delaware corporation ("InfoSpinner"), in connection with
the solicitation of proxies by the InfoSpinner Board of Directors for use at the
Special Meeting of Stockholders of InfoSpinner to be held on March 31, 1997 at
1:30 p.m., and at any and all adjournments or postponements thereof (the
"InfoSpinner Meeting").
This Proxy Statement/Prospectus relates to the proposed merger (the
"Merger") of IS Acquisition Corporation ("Merger Sub") with and into
InfoSpinner, Inc. ("InfoSpinner"), pursuant to which InfoSpinner will become a
wholly owned subsidiary of Centura pursuant to an Agreement and Plan of
Reorganization dated as of January 6, 1997 by and among Centura, Merger Sub and
InfoSpinner (the "Merger Agreement"). In the Merger, and each outstanding share
of Common Stock of InfoSpinner (assuming the conversion of all outstanding
Preferred Stock into Common Stock prior to the effective time of the Merger on
the basis of one share of Common Stock for each share of Preferred Stock ("Full
Conversion")) will be converted into and exchanged for a fraction of a share of
Centura Common Stock (the "Exchange Ratio"). The Exchange Ratio will be
determined by dividing 4,500,000 shares by the number of shares of InfoSpinner
Common Stock outstanding at the effective time of the Merger (assuming Full
Conversion). Based on the number of shares of InfoSpinner Common Stock and
Preferred Stock outstanding on February 28, 1997, 7,223,265 shares, and assuming
Full Conversion, the maximum Exchange Ratio would be approximately 0.6230. The
Exchange Ratio is subject to reduction by up to 10% as a result of the hold-back
of shares by Centura pursuant to the escrow provisions of the Merger Agreement,
in which case the minimum effective Exchange Ratio would be 0.5607. In addition,
the Exchange Ratio for InfoSpinner Common Stock is subject to reduction in the
event the average 30-day price of Centura Common Stock ending three days prior
to the effective time of the Merger (the "Certificate Average Price") falls
below certain threshold levels (approximately $2.92 for the conversion of
InfoSpinner Series B Preferred Stock
(CONTINUED ON NEXT PAGE)
------------------------
SEE "RISK FACTORS" BEGINNING ON PAGE 12 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED BY CENTURA AND INFOSPINNER SHAREHOLDERS.
---------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OR THIS PROXY STATEMENT/PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THE DATE OF THIS JOINT PROXY STATEMENT/PROSPECTUS IS MARCH 18, 1997.
<PAGE>
(CONTINUED FROM PREVIOUS PAGE)
("Series B") and approximately $0.32 for the conversion of InfoSpinner Series A
Preferred Stock ("Series A")). In such event, the holders of Series B and, as
applicable, Series A, will most likely not convert their shares of Preferred
Stock into Common Stock in order to retain the liquidation preference amounts
associated with such shares of Preferred Stock. In accordance with the
InfoSpinner Restated Certificate of Incorporation, the holders of InfoSpinner
Preferred Stock will receive shares of Centura Common Stock in proportion to the
liquidation preference amount of each series of Preferred Stock held by such
holders. Such amounts will be paid prior to any payment of shares of Centura
Common Stock to holders of InfoSpinner Common Stock. The Series B liquidation
preference is $1.82 per share, plus an amount equal to declared but unpaid
dividends per share, and the Series A liquidation preference is $0.20 per share,
plus an amount equal to declared but unpaid dividends per share. As of February
28, 1997, InfoSpinner had not declared any dividends with respect to any shares
of its capital stock and no holder of InfoSpinner Preferred Stock has entered
into a binding agreement to convert such shares into InfoSpinner Common Stock
prior to consummation of the Merger. In order to ensure that the holders of
Series B and Series A receive the number of shares of Centura Common Stock in
accordance with their respective liquidation preferences, the Series B Exchange
Ratio will exceed 0.6230 in the same proportion that the Certificate Average
Stock Price of Centura Common Stock falls below $2.92 and the Series A Exchange
Ratio will exceed 0.6230 in the same proportion that the Certificate Average
Stock Price of Centura Common Stock falls below $0.32. The Common Stock Exchange
Ratio will be reduced proportionally to offset the increased values of the
Preferred Stock Exchange Ratios. In the event the Certificate Average Stock
Price exceeds the Series B and Series A thresholds of $2.92 and $0.32,
respectively, the Common Stock Exchange Ratio will be greater than both the
Series B Exchange Ratio and the Series A Exchange Ratio, and it is anticipated
that holders of Series B and Series A will elect to convert their InfoSpinner
Preferred Stock to Common Stock and receive their pro rata share of the Merger
consideration based on the Common Stock Exchange Ratio." Cash will be paid in
lieu of any fractional share of Centura Common Stock. After the Merger, current
Centura securityholders will own approximately 77% of the outstanding shares of
Common Stock of the combined company. The Merger will not result in any change
or conversion of outstanding Centura Common Stock. Pursuant to the Merger
Agreement, 10% of the shares of Centura Common Stock issuable in the Merger will
be deposited into an escrow fund to secure certain indemnification obligations.
Holders of 5,090,000 shares of InfoSpinner capital stock, or 70.5% of all
outstanding shares of InfoSpinner capital stock (including holders of 4,640,000
shares of InfoSpinner Common Stock, or 76.9% of all outstanding shares of
InfoSpinner Common Stock and holders of 450,000 shares of InfoSpinner Preferred
Stock, or 37.7% of all outstanding shares of InfoSpinner Preferred Stock) have
executed a Stockholders Agreement and Irrevocable Proxy requiring them to vote
in favor of the Merger.
This Proxy Statement/Prospectus also constitutes the Prospectus of Centura
with respect to up to 4,500,000 shares of Centura Common Stock to be issued in
connection with the Merger. Centura Common Stock is traded on the Nasdaq
National Market ("Nasdaq") under the symbol "CNTR." On February 28, 1997, the
closing sale price for Centura Common Stock as reported on Nasdaq was $4.25 per
share.
This Proxy Statement/Prospectus and the accompanying form of proxy are first
being mailed to the shareholders of Centura and InfoSpinner on or about March
18, 1997.
ii
<PAGE>
AVAILABLE INFORMATION
Centura is subject to the informational requirements of the Securities
Exchange Act of 1934 (the "Exchange Act") and, in accordance therewith, files
reports, proxy statements and other information with the Securities and Exchange
Commission (the "Commission"). Such reports, proxy statements and other
information can be inspected and copied at the public reference room of the
Commission at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549, and at
the public reference facilities in the New York Regional Office, 75 Park Place,
New York, New York 10007, and the Chicago Regional Office, 500 West Madison
Street, Chicago, Illinois 60661. Copies of such material can be obtained at
prescribed rates by writing to the Securities and Exchange Commission, Public
Reference Section, Washington, D.C. 20549. In addition, material filed by
Centura can be inspected at the offices of the National Association of
Securities Dealers, Inc., Reports Section, 1935 K Street, N.W., Washington, D.C.
20006. The Commission also maintains a Web site at http://www.sec.gov that
contains reports, proxy and information statements and other reports and
information filed electronically by Centura.
Centura has filed with the Commission a Registration Statement on Form S-4
(together with any amendments or supplements thereto, the "Registration
Statement") under the Securities Act of 1933, as amended (the "Securities Act"),
with respect to the securities to be issued pursuant to the Merger Agreement.
This Proxy Statement/Prospectus does not contain all the information set forth
in the Registration Statement. Such additional information may be obtained from
the Commission's principal office in Washington, D.C. Statements contained in
this Proxy Statement/Prospectus as to the contents of any contract or other
document referred to herein are not necessarily complete, and in each instance
reference is made to the copy of such contract or other documents filed as an
exhibit to the Registration Statement, each such statement being qualified in
all respects by such reference.
------------------------
No person has been authorized to give any information or to make any
representations not contained or incorporated in this Proxy Statement/Prospectus
in connection with the matters referred to herein and, if given or made, such
information or representations must not be relied upon as having been so
authorized by Centura or by InfoSpinner. This Proxy Statement/Prospectus does
not constitute an offer of any securities other than the registered securities
to which it relates or an offer to any person in any jurisdiction where such
offer would be unlawful. The delivery of this Proxy Statement/Prospectus shall
not, under any circumstances, create any implication that the information herein
is correct as of any time subsequent to date hereof.
------------------------
TRADEMARKS
Centura, the Centura logo, Centura Ranger, Gupta, the Gupta logo, Gupta
Powered, the Gupta Powered logo, Fast Facts, Quest, QuickObjects, SQL/API,
SQLBase, SQLBase Ranger, SQLConsole, SQLGateway, SQLHost, SQLNetwork, SQLRouter
and SQLTalk are trademarks of Centura Software Corporation and may be registered
in certain jurisdictions. SQLWindows, TeamWindows, ReportWindows and EditWindows
are trademarks exclusively used and licensed by Centura Software Corporation.
InfoSpinner, the InfoSpinner logo, PageBuilder, PageServer, PageMonitor,
PageTester, ForeSite, Dynabot, PageDispatcher and PageAdaptor are trademarks of
InfoSpinner, Inc. and may be registered in certain jurisdictions.
This Joint Proxy Statement/Prospectus also includes trade names and
trademarks of companies other than Centura or InfoSpinner. The use of any such
third party trade name or trademark herein is an editorial fashion only, and to
the benefit of the owner thereof, with no intention of commercial use or
infringement of such trade name or trademark.
------------------------
iii
<PAGE>
FORWARD-LOOKING STATEMENTS
This Prospectus/Proxy Statement contains forward-looking statements within
the meaning of Section 27A of the Securities Act and Section 21E of the Exchange
Act. Actual results could differ materially from those projected in the
forward-looking statements as a result of the risk factors set forth below.
Reference is made to the particular discussions set forth under "Centura
Management's Discussion and Analysis of Financial Condition and Results of
Operations" and "InfoSpinner Management's Discussion and Analysis of Financial
Condition and Results of Operations." In connection with forward-looking
statements which appear in these disclosures, shareholders of Centura and
InfoSpinner should carefully review the factors set forth in this Joint Proxy
Statement/Prospectus under "Risk Factors."
iv
<PAGE>
TABLE OF CONTENTS FOR
PROXY STATEMENT/PROSPECTUS
<TABLE>
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AVAILABLE INFORMATION...................................................................................... iii
TRADEMARKS................................................................................................. iii
FORWARD-LOOKING STATEMENTS................................................................................. iv
TABLE OF CONTENTS.......................................................................................... v
SUMMARY.................................................................................................... 1
The Companies............................................................................................ 1
Date and Place of the Meetings........................................................................... 2
Purposes of the Meetings; The Merger..................................................................... 2
The Centura Meeting.................................................................................... 2
The InfoSpinner Meeting................................................................................ 2
Merger Consideration................................................................................... 2
Effects of Merger...................................................................................... 3
Escrow Fund............................................................................................ 3
Effective Time......................................................................................... 3
Closing Date........................................................................................... 3
Exchange of Shares..................................................................................... 4
Conditions to Merger................................................................................... 4
Termination............................................................................................ 4
No Solicitation........................................................................................ 4
Shareholders Entitled to Vote; Voting Agreement.......................................................... 4
Accounting Treatment..................................................................................... 5
Appraisal Rights; Dissenters' Rights..................................................................... 5
Recommendations of the Boards of Directors; Reasons for the Merger....................................... 5
Fairness Opinion......................................................................................... 6
Operations Following the Merger.......................................................................... 6
Interests of Certain Persons in the Merger............................................................... 6
Certain Federal Income Tax Consequences.................................................................. 6
SELECTED HISTORICAL CONSOLIDATED AND UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL INFORMATION.......... 7
COMPARATIVE PER SHARE DATA AND DIVIDEND HISTORY............................................................ 10
COMPARATIVE STOCK PRICE DATA AND DIVIDEND HISTORY.......................................................... 11
GENERAL INFORMATION........................................................................................ 11
RISK FACTORS............................................................................................... 12
THE CENTURA MEETING........................................................................................ 25
Date, Time and Place of Meeting.......................................................................... 25
Purposes of the Centura Meeting.......................................................................... 25
Record Date; Voting at the Meeting; Proxies.............................................................. 25
Solicitation of Proxies.................................................................................. 25
Quorum................................................................................................... 26
Required Vote............................................................................................ 26
THE INFOSPINNER MEETING.................................................................................... 27
Date, Time and Place of Meeting.......................................................................... 27
Purpose of the InfoSpinner Meeting....................................................................... 27
Record Date; Voting at the Meeting; Proxies.............................................................. 27
Solicitation of Proxies.................................................................................. 27
Quorum................................................................................................... 27
Required Vote............................................................................................ 28
</TABLE>
v
<PAGE>
<TABLE>
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<S> <C>
THE MERGER................................................................................................. 29
Description.............................................................................................. 29
Background of the Merger................................................................................. 29
Recommendation of Centura Board of Directors; Reasons for Merger......................................... 29
Recommendation of InfoSpinner Board of Directors; Reasons for Merger..................................... 31
Opinion of Financial Advisor to Centura.................................................................. 33
Effective Time of the Merger............................................................................. 36
Manner and Basis of Converting InfoSpinner Securities.................................................... 37
Management and Operations Following the Merger........................................................... 40
Interests of Certain Persons in the Merger............................................................... 40
Voting and Affiliate Agreements.......................................................................... 41
Delaware Appraisal Rights................................................................................ 42
California Dissenters' Rights............................................................................ 44
Certain Federal Income Tax Consequences of the Merger.................................................... 46
Resale of Centura Common Stock by InfoSpinner Affiliates................................................. 48
Accounting Treatment..................................................................................... 48
Regulatory Matters....................................................................................... 49
THE MERGER AGREEMENT....................................................................................... 50
Effective Time of the Merger............................................................................. 50
Conversion and Exchange of Shares........................................................................ 50
Business of InfoSpinner and Centura Pending the Merger................................................... 50
Solicitation of Alternative Transactions................................................................. 51
Corporate Structure and Related Matters After the Merger................................................. 51
Certain Covenants........................................................................................ 52
Escrow and Indemnification............................................................................... 52
Conditions to the Merger................................................................................. 54
Termination or Amendment of the Merger Agreement......................................................... 55
Fees and Expenses........................................................................................ 55
Confidentiality Agreements............................................................................... 55
UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS................................................ 56
CENTURA MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.............. 60
Overview................................................................................................. 60
Results of Operations.................................................................................... 61
Liquidity and Capital Resources.......................................................................... 65
Factors That May Affect Future Results................................................................... 66
INFORMATION CONCERNING CENTURA SOFTWARE CORPORATION........................................................ 67
Business Overview........................................................................................ 67
Industry Overview........................................................................................ 67
Company Strategies....................................................................................... 69
Products................................................................................................. 71
End Users and Applications............................................................................... 71
Marketing, Distribution and Product Support.............................................................. 72
Research and Product Development......................................................................... 74
Competition.............................................................................................. 75
Intellectual Property.................................................................................... 75
Employees................................................................................................ 76
Facilities............................................................................................... 76
MANAGEMENT OF CENTURA SOFTWARE CORPORATION................................................................. 77
Directors and Executive Officers......................................................................... 77
</TABLE>
vi
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Director Compensation.................................................................................... 79
COMPENSATION OF EXECUTIVE OFFICERS......................................................................... 80
Summary Compensation Table............................................................................... 80
Option Grants in Fiscal Year 1996........................................................................ 81
Aggregate Option Exercises in Last Fiscal Year and Fiscal Year End Option Values......................... 81
INFORMATION REGARDING BENEFICIAL OWNERSHIP OF PRINCIPAL CENTURA SHAREHOLDERS AND MANAGEMENT................ 82
CERTAIN TRANSACTIONS....................................................................................... 84
INFOSPINNER MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.......... 85
Overview................................................................................................. 85
Results of Operations.................................................................................... 85
Liquidity and Capital Resources.......................................................................... 86
Information Regarding Beneficial Ownership of Principal InfoSpinner Stockholders and Management.......... 86
INFORMATION CONCERNING INFOSPINNER, INC.................................................................... 87
Business Overview........................................................................................ 87
Industry Overview........................................................................................ 87
Products................................................................................................. 87
Marketing, Distribution and Product Support.............................................................. 88
Target Markets........................................................................................... 89
Customer Support and Service............................................................................. 90
Research and Product Development......................................................................... 90
Competition.............................................................................................. 91
Intellectual Property.................................................................................... 91
Employees................................................................................................ 92
Facilities............................................................................................... 92
DESCRIPTION OF CENTURA COMMON STOCK........................................................................ 93
Common Stock............................................................................................. 93
Preferred Stock.......................................................................................... 93
Certain Anti-Takeover Provisions......................................................................... 93
Transfer Agent and Registrar............................................................................. 94
COMPARISON OF RIGHTS OF HOLDERS OF CENTURA COMMON STOCK AND
INFOSPINNER COMMON STOCK................................................................................. 94
EXPERTS.................................................................................................... 99
LEGAL MATTERS.............................................................................................. 99
OTHER MATTERS.............................................................................................. 99
INDEX TO FINANCIAL STATEMENTS.............................................................................. F-1
ANNEX A Agreement and Plan of Reorganization.............................................................. A-1
ANNEX B Opinion of Hambrecht & Quist LLC.................................................................. B-1
ANNEX C Delaware Appraisal Rights Provisions.............................................................. C-1
ANNEX D California Dissenters' Rights Provisions.......................................................... D-1
</TABLE>
vii
<PAGE>
SUMMARY
THE FOLLOWING IS A SUMMARY OF CERTAIN INFORMATION CONTAINED ELSEWHERE IN
THIS PROXY STATEMENT/PROSPECTUS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
THE FULL TEXT OF THIS PROXY STATEMENT/PROSPECTUS AND THE EXHIBITS HERETO.
SHAREHOLDERS ARE URGED TO READ THIS PROXY STATEMENT/PROSPECTUS, AND THE
ACCOMPANYING EXHIBITS IN THEIR ENTIRETY. SEE "RISK FACTORS" FOR CERTAIN
INFORMATION THAT SHOULD BE CONSIDERED BY THE SHAREHOLDERS OF CENTURA AND
INFOSPINNER.
THE COMPANIES
CENTURA SOFTWARE CORPORATION
Centura is a leading provider of enterprise-scale client/server and Internet
application development and deployment software. Centura offers four product
lines: CENTURA a product line that helps customers develop and deploy 32-bit,
next generation client/server applications in traditional two and multi-tiered
client/server environments as well as the Internet and corporate Intranet
environments. (The Internet is also referred to in this Proxy
Statement/Prospectus as the "World Wide Web" or the "Web" and corporate internal
webs are referred to as "Intranets). Created specifically to meet the needs of
organizations seeking the power to move from workgroup and enterprise pilot
projects into large enterprise applications, Centura delivers client/server
application scalability, Internet integration, and drag and drop data
replication facilities. SQLWINDOWS is an open client/server development
environment for creating multi-database applications on desktop platforms.
SQLBASE consists of small-footprint database products that help businesses
deploy decentralized applications easily and cost-effectively. SQLHOST allows
organizations to integrate DB2 or legacy data into a client/server environment
without compromising performance, control, or security.
Centura's products enable customers to obtain the benefits of PC
client/server computing, while preserving their investments in corporate data
sources. Centura has established stratified distribution channels that provide
broad market coverage for its products and address the specific needs of its
varied customer segments worldwide. Centura's products are used in at least 75
countries by organizations including Automatic Data Processing (ADP), Citibank,
Daimler-Benz, Ford Motor Company, Illinois Power, Mobil Oil, Mutualite Fonction
Publique, NASA, New Zealand Post, Norfolk Southern, Ontario Hydro, ORE-IDA
Foods, Siemens-Nixdorf, The Southern Company, United Airlines, United Parcel
Service, Westinghouse, and the States of Alaska and Delaware.
Centura was incorporated in California in February 1983. Centura's principal
executive offices are located at 1060 Marsh Road, Menlo Park, California 94025,
and its telephone number is (415) 321-9500.
INFOSPINNER, INC.
InfoSpinner is a privately held company that develops technologies which
uniquely address the challenges of open, scaleable Internet computing.
InfoSpinner designs, develops and markets a server, authoring and management
tools that allow organizations to build and deploy high-volume sites on the
World Wide Web (the "Web") that integrate legacy data and applications with
client requests for information. InfoSpinner's products provide high performance
through-put, scalability, content extensibility, and Web site management and
maintenance across a distributed network environment. The unique architecture of
the products provides near-fault tolerant reliability and enables the retrieval
and management of static and dynamic information, including video, audio, and
graphics.
InfoSpinner markets and distributes its products through an indirect sales
channel program. InfoSpinner's sales strategy is to achieve rapid growth and
market penetration by partnering with established technology companies seeking a
data access component to their Internet and corporate Intranet solutions. To
date, InfoSpinner has entered into strategic distribution agreements, with
Software AG of North America, Inc., Beacon Information Technology Ltd. of Japan
and Centura.
1
<PAGE>
InfoSpinner was incorporated in Delaware in November 1995. InfoSpinner's
principal executive offices are located at 1222 E. Arapaho Road, Suite 320,
Richardson, Texas 75081, and its telephone number is (972) 479-0135.
IS ACQUISITION CORPORATION
Merger Sub is a Delaware corporation recently organized by Centura for the
purpose of effecting the acquisition of InfoSpinner. It has no material assets
and has not engaged in any activities except in connection with the proposed
acquisition. Its executive offices are located at 1060 Marsh Road, Menlo Park,
California 94025.
DATE AND PLACE OF THE MEETINGS
The Centura Meeting will be held on March 31, 1997 at 1:30 p.m., local time,
at Hotel Sofitel, 223 Twin Dolphin Drive, Redwood Shores, California 94065.
The InfoSpinner Meeting will be held on March 31, 1997 at 1:30 p.m., local
time, at InfoSpinner's executive offices, 1222 E. Arapaho Road, Suite 320,
Richardson, Texas 75081.
PURPOSES OF THE MEETINGS; THE MERGER
THE CENTURA MEETING. At the Centura Meeting, the shareholders of Centura
will consider and vote upon the proposals to (i) to approve and adopt the Merger
Agreement and to approve the Merger and (ii) to transact such other business as
may properly come before the Centura Meeting or any adjournments or
postponements thereof. See "The Centura Meeting."
THE INFOSPINNER MEETING. At the InfoSpinner Meeting, the stockholders of
InfoSpinner will consider and vote upon the proposal (i) to approve and adopt
the Merger Agreement and to approve the Merger and (ii) to transact such other
business as may properly come before the meeting or any adjournments or
postponements thereof. See "The InfoSpinner Meeting."
MERGER CONSIDERATION. Under the Merger Agreement, at the Effective Time (as
defined below) of the Merger, and each outstanding share of Common Stock of
InfoSpinner (assuming the conversion of all outstanding Preferred Stock into
Common Stock prior to the effective time of the Merger on the basis of one share
of Common Stock for each share of Preferred Stock ("Full Conversion")) will be
converted into and exchanged for a fraction of a share of Centura Common Stock
(the "Exchange Ratio"). The Exchange Ratio will be determined by dividing
4,500,000 shares by the number of shares of InfoSpinner Common Stock outstanding
at the effective time of the Merger (assuming Full Conversion). Based on the
number of shares of InfoSpinner Common Stock and Preferred Stock outstanding on
February 28, 1997, 7,223,265 shares, and assuming Full Conversion, the maximum
Exchange Ratio would be approximately 0.6230. The Exchange Ratio is subject to
reduction by up to 10% as a result of the hold-back of shares by Centura
pursuant to the escrow provisions of the Merger Agreement, in which case the
minimum effective Exchange Ratio would be 0.5607. In addition, the Exchange
Ratio for InfoSpinner Common Stock is subject to reduction in the event the
average 30-day price of Centura Common Stock ending three days prior to the
effective time of the Merger (the "Certificate Average Price") falls below
certain threshold levels (approximately $2.92 for the conversion of InfoSpinner
Series B Preferred Stock ("Series B") and approximately $0.32 for the conversion
of InfoSpinner Series A Preferred Stock ("Series A")). In such event, the
holders of Series B and, as applicable, Series A, will most likely not convert
their shares of Preferred Stock into Common Stock in order to retain the
liquidation preference amounts associated with such shares of Preferred Stock.
In accordance with the InfoSpinner Restated Certificate of Incorporation, the
holders of InfoSpinner Preferred Stock will receive shares of Centura Common
Stock in proportion to the liquidation preference amount of each series of
Preferred Stock held by such holders. Such amounts will be paid prior to any
payment of shares of Centura Common Stock to holders of InfoSpinner Common
Stock. The Series B liquidation preference is $1.82 per share, plus an amount
equal to declared but unpaid
2
<PAGE>
dividends per share, and the Series A liquidation preference is $0.20 per share,
plus an amount equal to declared but unpaid dividends per share. As of February
28, 1997, InfoSpinner had not declared any dividends with respect to any shares
of its capital stock and no holder of InfoSpinner Preferred Stock has entered
into a binding agreement to convert such shares into InfoSpinner Common Stock
prior to consummation of the Merger. In order to ensure that the holders of
Series B and Series A receive the number of shares of Centura Common Stock in
accordance with their respective liquidation preferences, the Series B Exchange
Ratio will exceed 0.6230 in the same proportion that the Certificate Average
Stock Price of Centura Common Stock falls below $2.92 and the Series A Exchange
Ratio will exceed 0.6230 in the same proportion that the Certificate Average
Stock Price of Centura Common Stock falls below $0.32. The Common Stock Exchange
Ratio will be reduced proportionally to offset the increased values of the
Preferred Stock Exchange Ratios. In the event the Certificate Average Stock
Price exceeds the Series B and Series A thresholds of $2.92 and $0.32,
respectively, the Common Stock Exchange Ratio will be greater than both the
Series B Exchange Ratio and the Series A Exchange Ratio, and it is anticipated
that holders of Series B and Series A will elect to convert their InfoSpinner
Preferred Stock to Common Stock and receive their pro rata share of the Merger
consideration based on the Common Stock Exchange Ratio." No fractional shares of
Centura Common Stock will be issued by Centura in the Merger. Each stockholder
of InfoSpinner otherwise entitled to a fractional share of Centura Common Stock
will receive an amount of cash in lieu thereof determined by multiplying the
fraction of a share of Centura Common Stock to which the stockholder otherwise
would be entitled by the closing price of Centura Common Stock on the Closing
Date (as defined below) as reported on the Nasdaq National Market. See "The
Merger-- Manner and Basis of Converting InfoSpinner Securities." See
"Comparative Stock Price Data and Dividend History" for information concerning
the recent price of Centura Common Stock.
EFFECTS OF MERGER. The Merger will be consummated promptly after Centura
and InfoSpinner shareholder and stockholder approval and the satisfaction or
waiver of the other conditions to consummation of the Merger. Upon consummation
of the Merger, InfoSpinner will become a wholly-owned subsidiary of Centura. The
stockholders of InfoSpinner will become shareholders of Centura (as described
below), and their rights will be governed by Centura's Articles of Incorporation
and Bylaws.
ESCROW FUND. Ten percent (10%) of the shares of Centura Common Stock
issuable to each stockholder of InfoSpinner in the Merger will be deposited into
an escrow fund to secure certain indemnification obligations of the InfoSpinner
stockholders under the Merger Agreement. The escrow will terminate on the
earlier of (i) one year from the Closing Date (as defined below) or (ii) the
1997 Combined Financials Date (as defined below). See "The Merger
Agreement--Escrow and Indemnification." BY APPROVING THE MERGER AGREEMENT,
INFOSPINNER STOCKHOLDERS WILL BE DEEMED TO HAVE CONSENTED TO THE APPOINTMENT OF
KEITH A. LOWERY AND ROBERT L. WEST TO ACT AS STOCKHOLDERS' AGENT ON BEHALF OF
INFOSPINNER'S STOCKHOLDERS TO GIVE AND RECEIVE NOTICES AND COMMUNICATIONS, TO
AUTHORIZE DELIVERY TO CENTURA OF CENTURA COMMON STOCK FROM THE ESCROW FUND, TO
OBJECT TO SUCH DELIVERIES, TO AGREE TO, NEGOTIATE, ENTER INTO SETTLEMENTS AND
COMPROMISES OF SUCH CLAIMS AND TO TAKE CERTAIN OTHER ACTIONS ON BEHALF OF
INFOSPINNER'S STOCKHOLDERS, ALL AS MORE FULLY DESCRIBED IN ARTICLE VII OF THE
MERGER AGREEMENT. IN ACCORDANCE WITH THE ESCROW AGREEMENT, THE ESCROW AGENT WILL
VOTE SHARES OF CENTURA COMMON STOCK IN THE ESCROW FUND IN ACCORDANCE WITH THE
INSTRUCTIONS OF THE INFOSPINNER STOCKHOLDERS AS BENEFICIAL OWNERS OF SUCH
SHARES, IN PROPORTION TO THE NUMBER OF SHARES THEY ARE ENTITLED TO RECEIVE.
EFFECTIVE TIME. The Merger will become effective at the time a Certificate
of Merger, together with the required officers' certificates with respect to the
Merger, are filed with the Secretary of State of the State of Delaware (the
"Effective Time"), unless Centura and InfoSpinner agree that a later time,
specified in the Agreement of Merger, will be the Effective Time.
CLOSING DATE. The closing of the transactions contemplated by the Merger
Agreement shall take place as soon as practicable after the satisfaction or
waiver of each of the Conditions to Merger (as defined below) (the "Closing
Date"), unless Centura and InfoSpinner agree that the closing should occur at
some
3
<PAGE>
other time, as specified in the Merger Agreement. See "The Merger
Agreement--Conditions to the Merger."
EXCHANGE OF SHARES. At the Effective Time of the Merger, each outstanding
share of InfoSpinner Common Stock and InfoSpinner Preferred Stock will be
converted automatically into a fraction of a share of Centura Common Stock.
Exchange of certificates for shares of Centura Common Stock will be made upon
surrender to ChaseMellon Shareholder Services, as exchange agent, of the
certificates which, prior to the Merger, represented shares of InfoSpinner
Common Stock and InfoSpinner Preferred Stock. CERTIFICATES SHOULD NOT BE
SURRENDERED FOR EXCHANGE PRIOR TO THE APPROVAL OF THE MERGER BY THE SHAREHOLDERS
OF CENTURA AND THE STOCKHOLDERS OF INFOSPINNER. InfoSpinner stockholders will be
provided with a letter of transmittal and related materials needed to exchange
their certificates promptly after the Effective Time. See "The Merger-- Manner
and Basis of Converting InfoSpinner Securities."
CONDITIONS TO MERGER. Consummation of the Merger is subject to the
satisfaction of various conditions, including, the approval of the Merger by the
requisite vote of the shareholders of Centura and the stockholders of
InfoSpinner, respectively; the receipt by Centura and InfoSpinner, respectively,
of certain opinions regarding tax matters; the appropriateness of pooling of
interests accounting; no more than 5% of InfoSpinner Common Stock outstanding at
the time of the Merger (assuming conversion of all Preferred Stock prior to the
Effective Time) having exercised or being eligible to exercise appraisal rights
under Delaware law; receipt of an opinion from Hambrecht & Quist LLC that the
terms of the Merger are fair to Centura shareholders from a financial point of
view; the execution of employment agreements with Centura and binding
non-competition agreements by certain InfoSpinner key employees; and no material
adverse change having occurred with respect to the respective businesses of
either Centura or InfoSpinner. For a complete list of conditions to the Merger,
see "The Merger Agreement--Conditions to the Merger."
TERMINATION. The Merger Agreement may be terminated and the Merger may be
abandoned prior to the Effective Time either before or after its approval by the
shareholders of Centura or the stockholders of InfoSpinner under the
circumstances specified in the Merger Agreement, including by mutual written
agreement of Centura and InfoSpinner and by either party if the Merger is not
consummated by April 30, 1997. Centura and InfoSpinner have entered into a
Distribution Agreement designed to govern the commercial relationship between
the companies during the period prior to the Effective Time and in the event
that the Merger is not consummated. Under terms of the Distribution Agreement,
Centura has agreed to pay to InfoSpinner prepaid royalties totaling $1,250,000
over the period ending March 1998, of which $250,000 has been paid as of
February 28, 1997. If the Merger is not consummated for certain reasons, Centura
has the right to terminate the Distribution Agreement. See "The Merger
Agreement-- Termination or Amendment of the Merger Agreement."
NO SOLICITATION. Centura and InfoSpinner have agreed that InfoSpinner will
not, prior to the Effective Time, initiate or solicit discussions with any other
party relating to any acquisition proposal involving itself or any other
transaction, the consummation of which could prevent or materially delay the
Merger. See "The Merger Agreement--Solicitation of Alternative Transactions."
SHAREHOLDERS ENTITLED TO VOTE; VOTING AGREEMENT
The close of business on February 28, 1997 is the record date for
determination of holders of Centura Common Stock entitled to vote at the Centura
Meeting. At that date, 13,763,760 shares of Centura Common Stock were
outstanding. As of such date, the Centura Common Stock was held by approximately
466 holders of record. As of such date, directors and executive officers of
Centura and their affiliates may be deemed to be beneficial owners of
approximately 9.7% of the outstanding shares of Centura Common Stock.
The close of business on February 28, 1997 is the record date for
determination of holders of InfoSpinner Common Stock and Preferred Stock
entitled to vote at the InfoSpinner Meeting. At that date, 6,030,000 shares of
InfoSpinner Common Stock were outstanding and held by approximately 23 holders
of record and 1,193,265 shares of InfoSpinner Preferred Stock were outstanding
and held by approximately 6 holders of record. As of such date, directors and
executive officers of InfoSpinner and their affiliates may
4
<PAGE>
be deemed to be beneficial owners of approximately 76.9% of the outstanding
shares of InfoSpinner Common Stock and 37.7% of the outstanding shares of
InfoSpinner Preferred Stock.
The directors and executive officers of Centura and InfoSpinner have
indicated that they intend to vote the shares of stock of their respective
companies held by them for approval of the Merger. In addition, certain
shareholders of Centura and stockholders of InfoSpinner have entered into
irrevocable proxy agreements dated January 6, 1997 pursuant to which they have
agreed to vote their shares of Centura Common Stock or InfoSpinner Common or
Preferred Stock, as applicable, in favor of the Merger Agreement and the Merger.
As of December 31, 1996 such shareholders and stockholders collectively held
702,488 shares of Centura Common Stock, representing 5.1% of all outstanding
shares of Centura Common Stock; 4,640,000 shares of InfoSpinner Common Stock, or
76.9% of all outstanding shares of InfoSpinner Common Stock; and 450,000 shares
of InfoSpinner Preferred Stock, representing 37.7% of all outstanding shares of
InfoSpinner Preferred Stock. See "The Merger--Voting and Affiliate Agreements."
ACCOUNTING TREATMENT
Centura and InfoSpinner intend that the Merger will qualify as a "pooling of
interests" for accounting and financial reporting purposes. Consummation of the
Merger is conditioned upon the appropriateness of pooling of interests
accounting for the Merger. Such condition, however, may be waived by Centura and
InfoSpinner. The ability to account for the Merger as a pooling of interests for
financial reporting purposes depends on, among other things, no afffiiate of
either company selling shares of such company (except for certain minimal sales)
during certain times before and following consummation of the Merger. There can
be no assurance, however, that an affiliate of either company (including
officers, directors and shareholders holding more than 10% of either company's
voting stock) will not sell shares of Centura or InfoSpinner during such certain
times before or following consummation of the Merger, in which case the Merger
may not be treated as a pooling of interests and instead may be accounted for
under the purchase method of accounting. See "The Merger--Accounting Treatment"
and "Risk Factors--Accounting Treatment of Merger."
APPRAISAL RIGHTS; DISSENTERS' RIGHTS
Pursuant to Section 262 of the Delaware General Corporation Law ("DGCL"),
the holders of InfoSpinner Common Stock and InfoSpinner Preferred Stock are
entitled to exercise appraisal rights with respect to shares not voted in favor
of the Merger. See "The Merger--Delaware Appraisal Rights". However, it is a
condition to Centura's obligation to consummate the Merger that holders of not
more than 5% of the shares of InfoSpinner Common Stock and not more than 5% of
the shares of each series of InfoSpinner Preferred Stock be eligible to exercise
appraisal rights. Pursuant to Chapter 13 of the California General Corporation
Law ("CGCL"), the holders of Centura Common Stock are entitled to exercise
dissenters' rights with respect to shares not voted in favor of the Merger,
provided that holders of at least 5% of Centura's outstanding Common Stock file
written demands for payment with Centura not later than the date of the Centura
Meeting. See "The Merger--California Dissenters' Rights".
RECOMMENDATIONS OF THE BOARDS OF DIRECTORS; REASONS FOR THE MERGER
The Boards of Directors of Centura and InfoSpinner considered a number of
potential joint benefits resulting from the Merger, including the complimentary
nature of Centura and InfoSpinner products, the opportunity for the combined
company to achieve increased market penetration, economies of scale and
operational efficiency and the ability of the combined company to attract top
quality employees. The InfoSpinner Board believes that the Merger will provide
the InfoSpinner stockholders with the opportunity to receive, on a tax-free
basis, Centura Common Stock that will enable them to participate in potential
opportunities for growth in the combined company after the Merger.
Each Board of Directors has recognized that the potential benefits of the
Merger may not be realized. Risks associated with the Merger include the need to
integrate the operations, facilities and personnel, particularly engineering
personnel, of the two companies and the dilution caused by the issuance of
shares of Centura Common Stock in the Merger. See "Risk Factors."
5
<PAGE>
For a discussion of the factors considered by the respective Boards of
Directors in reaching their decisions to recommend the Merger, see "The
Merger--Recommendation of Centura Board of Directors; Reasons for Merger" and
"The Merger--Recommendation of InfoSpinner Board of Directors; Reasons for
Merger."
FAIRNESS OPINION
Hambrecht & Quist LLC has delivered to the Centura Board of Directors its
written opinion dated as of January 6, 1997 to the effect that based upon and
subject to the various considerations set forth in such opinion, as of the date
of such opinion, terms of the Merger are considered to be fair to the
shareholders of Centura from a financial point of view. A copy of the opinion of
Hambrecht & Quist LLC, which sets forth the assumptions made, matters considered
and scope of their review, is attached to this Proxy Statement Prospectus as
ANNEX B and should be read in its entirety. See "The Merger--Opinion of
Financial Advisor to Centura."
OPERATIONS FOLLOWING THE MERGER
InfoSpinner will become a wholly owned subsidiary of Centura at the
Effective Time of the Merger. Following the Merger, Samuel M. Inman, President
and Chief Executive Officer of Centura, will serve as President and Chief
Executive Officer of the combined company and Keith A. Lowery, Vice President
and Chief Technical Officer of InfoSpinner, will serve as Senior Internet
Technology Architect of the combined company, reporting to Earl Stahl, Senior
Vice President, Engineering and Chief Technical Officer of Centura. See "The
Merger--Management and Operations Following the Merger."
INTERESTS OF CERTAIN PERSONS IN THE MERGER
Keith A. Lowery, Vice President and Chief Technical Officer of InfoSpinner,
and certain other employees of InfoSpinner, have entered into employment and
noncompetition agreements with Centura, in substantially identical form except
for provisions relating to compensation and duties. By their terms, these
agreements will become effective upon the closing of the Merger. In addition,
consummation of the Merger will cause InfoSpinner's right of repurchase to
automatically lapse with respect to all unvested shares of InfoSpinner Common
Stock held by Mr. Lowery, John N. Berens, an officer of InfoSpinner, Yoshi
Noguchi, a director of InfoSpinner, and certain other employees of InfoSpinner.
See "The Merger-- Interests of Certain Persons in the Merger."
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
Consummation of the Merger is conditioned upon receipt by Centura and
InfoSpinner of opinions from their respective legal counsel, Venture Law Group
and Gunderson Dettmer Stough Villeneuve Franklin & Hachigian, LLP, that the
Merger will qualify as a reorganization for federal income tax purposes under
Section 368(a) of the Internal Revenue Code of 1986, as amended (the "Code") (a
"Reorganization"), in which case, no gain or loss will be recognized for federal
income tax purposes by InfoSpinner stockholders upon their receipt of shares of
Centura Common Stock in exchange for their shares of InfoSpinner Capital Stock,
except to the extent of cash received in lieu of fractional shares or in respect
of Dissenting Shares. Receipt of the aforementioned legal opinions may be waived
by Centura and InfoSpinner as a condition to consummation of the Merger and
neither party intends to seek a ruling from the Internal Revenue Service
regarding the federal income tax consequences of the Merger. ALL INFOSPINNER
STOCKHOLDERS SHOULD READ CAREFULLY THE DISCUSSION UNDER "THE MERGER--CERTAIN
FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER." See "The Merger
Agreement--Conditions to the Merger."
The Merger will not have any tax consequences to the shareholders of
Centura.
6
<PAGE>
SELECTED HISTORICAL CONSOLIDATED AND
UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL INFORMATION
The following selected historical annual consolidated financial information
of Centura and InfoSpinner has been derived from their respective historical
consolidated financial statements, and should be read in conjunction with such
consolidated financial statements and the notes thereto, which are included in
this Prospectus/Proxy Statement. The selected historical financial information
of Centura as of and for the years ended December 31, 1996, 1995, 1994 and 1993
has been derived from the consolidated financial statements audited by Price
Waterhouse LLP, independent accountants. The selected historical financial
information of Centura for the year ended December 31, 1992 has been derived
from the consolidated financial statements audited by other independent
accountants. The selected historical financial information of InfoSpinner as of
and for the period from inception (November 1995) through December 31, 1995 and
for the year ended December 31, 1996 has been derived from the financial
statements audited by Price Waterhouse LLP, independent accountants included
herein.
The selected unaudited pro forma combined condensed financial information of
Centura and InfoSpinner gives effect to the Merger and is derived from the
unaudited pro forma combined condensed financial statements and should be read
in conjunction with such pro forma statements and the notes thereto, which are
included in this Prospectus/Proxy Statement. For pro forma purposes, Centura's
consolidated financial statements for the years ended December 31, 1995 and 1996
have been combined with the financial statements of InfoSpinner for the period
from inception (November 1995) through December 31, 1995 and for the year ended
December 31, 1996, respectively. The pro forma data does not reflect the
issuance of additional shares of Centura Common Stock prior to consummation of
the Merger.
The pro forma information is presented for illustrative purposes only and is
not necessarily indicative of the operating results or financial position that
would have occurred if the Merger had been consummated, nor is it necessarily
indicative of future operating results or financial position.
7
<PAGE>
SELECTED HISTORICAL CONSOLIDATED FINANCIAL INFORMATION--CENTURA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------------------
1996 1995 1994 1993 1992
--------- ---------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF OPERATIONS DATA:
Net revenues.................................................. $ 63,233 $ 65,714 $ 56,532 $ 47,475 $ 32,771
Income (loss) from operations................................. 2,484 (42,993) (32,981) (1,858) 2,439
Net income (loss)............................................. 2,027 (44,079) (31,841) (1,908) 1,762
Net income (loss) per share................................... $ 0.15 $ (3.62) $ (2.66) $ (0.17) $ 0.17
Number of shares used to compute net income (loss) per
share....................................................... 13,335 12,175 11,957 11,411 10,455
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------------------------------------
1996 1995 1994 1993 1992
---------- ---------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Working capital (deficit)..................................... $ (15,616) $ (25,604) $ 599 $ 40,919 $ 7,372
Total assets.................................................. 36,705 48,104 58,161 72,372 22,872
Long-term obligations......................................... 12,188 11,744 1,939 477 1,365
Shareholders' equity (deficit)................................ $ (16,923) $ (24,057) $ 18,670 $ 49,223 $ 11,879
</TABLE>
SELECTED HISTORICAL FINANCIAL INFORMATION--INFOSPINNER
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
PERIOD FROM INCEPTION
YEAR ENDED (NOVEMBER 1995) THROUGH
DECEMBER 31, DECEMBER 31,
1996 1995
------------ -----------------------
<S> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net Revenues............................................................ $ 310 $ --
Operating loss.......................................................... (1,254) (92)
Net loss................................................................ (1,232) (92)
Net loss per share...................................................... $ (0.23) $ (0.02)
Number of shares used to compute net loss per share..................... 5,448 4,532
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1996 1995
--------- ---------
<S> <C> <C>
BALANCE SHEET DATA:
Working capital............................................................................... $ 31 $ 13
Total assets.................................................................................. 1,700 23
Long-term obligations......................................................................... -- --
Stockholders' equity (deficit)................................................................ $ (1,075) $ 23
</TABLE>
8
<PAGE>
SUMMARY UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------------------
1996 1995 1994 1993 1992
--------- ---------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C>
PRO FORMA COMBINED OF OPERATIONS DATA:
Net revenues.................................................. $ 63,543 $ 65,714 $ 56,532 $ 47,475 $ 32,771
Operating income (loss)....................................... 1,230 (43,085) (32,981) (1,858) 2,439
Net income loss............................................... 795 (44,171) (31,841) (1,908) 1,762
Net income (loss) per share................................... $ 0.05 $ (3.49) $ (2.66) $ (0.17) $ 0.17
Number of shares used to compute net income (loss) per
share....................................................... 16,719 12,642 11,957 11,411 10,455
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
1996
------------
(UNAUDITED)
<S> <C>
PRO FORMA COMBINED BALANCE SHEET DATA:
Working captial deficit........................................................................... $ (16,283)
Total assets...................................................................................... 37,707
Long-term obligations............................................................................. 12,188
Shareholders' deficit............................................................................. $ (18,696)
</TABLE>
9
<PAGE>
COMPARATIVE PER SHARE DATA AND DIVIDEND HISTORY
The following table sets forth certain historical per share data of Centura
and InfoSpinner and combined per share data on an unaudited pro forma basis
after giving effect to the Merger on a pooling-of-interests basis assuming that
one share of Centura Common Stock is issued in the Merger in exchange for each
1.61 shares of InfoSpinner capital stock. The information set forth below should
be read in conjunction with the selected historical annual consolidated
financial information, the unaudited pro forma combined condensed financial
information and the separate historical consolidated financial statements of
Centura and InfoSpinner and notes thereto, included elsewhere in this
Prospectus/Proxy Statement. The unaudited pro forma combined condensed financial
information is not necessarily indicative of the operating results that would
have been achieved had the transaction been effected as of November 1995 and
should not be construed as representative of future results of operations.
Neither Centura nor InfoSpinner has ever declared or paid cash dividends on its
respective shares of capital stock.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
1996 1995 1994
--------- --------- ---------
<S> <C> <C> <C>
HISTORICAL--CENTURA
Net income (loss) per share......................................................... $ 0.15 $ (3.62) $ (2.66)
--------- --------- ---------
--------- --------- ---------
Book value per share (1)............................................................ $ (1.23) $ (1.94) $ 1.56
--------- --------- ---------
--------- --------- ---------
HISTORICAL--INFOSPINNER
Net loss per share.................................................................. $ (0.23) $ (0.02)
--------- ---------
--------- ---------
Book value per share (1)............................................................ $ 0.04 $ --
--------- ---------
--------- ---------
PRO FORMA AND EQUIVALENT PRO FORMA COMBINED NET INCOME (LOSS) PER SHARE
Pro forma per Centura share......................................................... $ 0.05 $ (3.49) $ (2.66)
--------- --------- ---------
--------- --------- ---------
Equivalent pro forma per InfoSpinner share (2)...................................... $ 0.03 $ (2.17) $ (1.66)
--------- --------- ---------
--------- --------- ---------
PRO FORMA COMBINED BOOK VALUE PER SHARE
Pro forma combined book value per Centura share..................................... $ (0.95) $ (1.57)
--------- ---------
--------- ---------
Equivalent pro forma combined book value per InfoSpinner share (2).................. $ (0.59) $ (0.98)
--------- ---------
--------- ---------
</TABLE>
- ------------------------
(1) Historical book value per share is computed by dividing total
shareholders'/stockholders' equity by the number of common and preferred
shares outstanding at the end of each period. Pro forma combined book value
per share is computed by dividing pro forma shareholders' equity by the pro
forma number of shares of Centura Common Stock outstanding.
(2) The equivalent pro forma combined net income (loss) per InfoSpinner share
and equivalent pro forma combined book value per InfoSpinner share are
calculated by dividing the respective pro forma combined per Centura share
amounts by the exchange ratio of one share of Centura Common Stock for each
1.61 shares of InfoSpinner Capital Stock.
10
<PAGE>
COMPARATIVE STOCK PRICE DATA AND DIVIDEND HISTORY
InfoSpinner Common Stock is not traded in an established public market.
The Centura Common Stock is quoted on the NASDAQ National Market (NASDAQ)
under the trading symbol "CNTR". The following table sets forth, for the periods
indicated, the quarterly high and low sale prices per share of the Centura
Common Stock. The Centura Common Stock began trading on NASDAQ on February 5,
1993 under the trading symbol "GPTA".
<TABLE>
<CAPTION>
CENTURA
COMMON STOCK
--------------------
HIGH LOW
--------- ---------
<S> <C> <C>
First quarter ended March 31, 1995....................................... $ 13.500 $ 9.625
Second quarter ended June 30, 1995....................................... $ 11.500 $ 8.250
Third quarter ended September 30, 1995................................... $ 10.500 $ 8.250
Fourth quarter ended December 31, 1995................................... $ 9.063 $ 4.875
First quarter ended March 31, 1996....................................... $ 7.125 $ 4.875
Second quarter ended June 30, 1996....................................... $ 6.750 $ 3.750
Third quarter ended September 30, 1996................................... $ 5.625 $ 3.000
Fourth quarter ended December 31, 1996................................... $ 4.750 $ 2.625
February 28, 1997........................................................ $ 4.313 $ 4.125
</TABLE>
On January 6, 1997, the last trading day prior to the announcement by
Centura and InfoSpinner that they had reached an agreement concerning the
Merger, the closing price of Centura Common Stock as reported on NASDAQ was
$3.375 per share. As of December 31, 1996 and January 6, 1997, there were
approximately 469 and 468 shareholders of record of Centura Common Stock,
respectively.
Because the market price of Centura Common Stock is subject to fluctuation,
the market value of the shares of Centura Common Stock that the InfoSpinner
stockholders will receive in the Merger may increase or decrease prior to the
Merger. InfoSpinner stockholders are urged to obtain a current market quotation
for Centura Common Stock.
Following the Merger, Centura Common Stock will continue to be traded on
NASDAQ under the symbol "CNTR".
Neither Centura nor InfoSpinner has ever declared or paid cash dividends on
its respective shares of capital stock. If the Merger is not consummated, the
Board of Directors of InfoSpinner presently intends to continue a policy of
retaining all earnings to finance the expansion of its business. Following the
Merger, it is expected that the Board of Directors of Centura will continue the
policy of not paying cash dividends in order to retain earnings for any
reinvestment in the business of the combined company.
GENERAL INFORMATION
The information set forth herein concerning Centura and Merger Sub has been
furnished by Centura and the information set forth herein concerning InfoSpinner
has been furnished by InfoSpinner.
This Prospectus/Joint Proxy Statement contains certain information set forth
more fully in the Agreement and Plan of Reorganization (the "Merger Agreement")
attached as ANNEX A and is qualified by reference to the Merger Agreement, which
is hereby incorporated by reference. The Merger Agreement should be read
carefully by each Centura shareholder and each InfoSpinner stockholder in
formulating his or her voting decision with respect to the proposed Merger.
This Joint Proxy Statement/Prospectus is first being mailed to shareholders
of Centura and InfoSpinner on or about March 18, 1997.
11
<PAGE>
RISK FACTORS
THE FOLLOWING RISK FACTORS SHOULD BE CONSIDERED BY SHAREHOLDERS OF CENTURA
AND STOCKHOLDERS OF INFOSPINNER IN EVALUATING WHETHER TO APPROVE THE MERGER. THE
RISKS ASSOCIATED WITH THE COMBINED COMPANY IN THE MERGER WILL BE ADDITIONAL
RISKS FACED BY BOTH CENTURA SHAREHOLDERS AND INFOSPINNER STOCKHOLDERS FOLLOWING
THE MERGER. THE RISKS DESCRIBED WHICH ARE CURRENTLY SPECIFIC TO INFOSPINNER WILL
BE ADDITIONAL RISKS FACED BY CENTURA SHAREHOLDERS, AND THE RISKS DESCRIBED WHICH
ARE CURRENTLY SPECIFIC TO CENTURA WILL BE ADDITIONAL RISKS FACED BY INFOSPINNER
STOCKHOLDERS FOLLOWING THE MERGER. THESE FACTORS SHOULD BE CONSIDERED IN
CONJUNCTION WITH THE OTHER INFORMATION INCLUDED IN THIS PROXY
STATEMENT/PROSPECTUS.
INTEGRATION OF OPERATIONS; ADVERSE EFFECT ON FINANCIAL RESULTS
The realization of the benefits sought from the Merger depends on the
ability of the combined company to better utilize product development
capabilities, sales and marketing channels, administrative organizations and
facilities than either company could do separately. These benefits may not be
achieved if the activities of Centura and InfoSpinner are not integrated in a
coordinated, timely and efficient manner, and there can be no assurance that
this will occur. The combination of the two organizations will also require the
dedication of management resources, which will temporarily detract attention
from the day-to-day business of the combined company. There can be no assurance
that the integration will be completed without disrupting Centura's and
InfoSpinner's businesses. Should the combined company not be able to achieve
integration in a timely and coordinated fashion, it could result in a material
adverse effect on operating results. In addition, there is no assurance that the
combined company will be able to retain the key management, engineering and
sales and marketing personnel who are critical to its future operations. See
"The Merger--Recommendation of Centura Board of Directors; Reasons for Merger"
and "The Merger--Recommendation of InfoSpinner Board of Directors; Reasons for
Merger."
Centura and InfoSpinner estimate they will incur direct transaction costs of
approximately $1,165,000 associated with the Merger, which primarily represent
fees and expenses of investment bankers, attorneys, accountants and financial
printers. These nonrecurring transaction costs will be charged to operations
upon consummation of the Merger. In addition, Centura anticipates incurring an
additional charge upon consummation of the Merger of approximately $100,000 to
reflect costs and expenses relating to integrating the two companies. These
estimates are preliminary and therefore subject to change. If the Merger has
adverse effects that are not currently anticipated, the Merger could result in a
reduction in per share earnings of the combined company (as compared to the per
share earnings that either or both of the companies would have achieved if the
Merger had not occurred). Even if the effects of the Merger prove to be as
anticipated, there can be no assurance that future earnings will not be
adversely affected by any number of economic, market or other factors that are
not related to the Merger. See "The Merger Agreement--Fees and Expenses" and
"Unaudited Pro Forma Combined Condensed Financial Statements."
RECENT CENTURA LOSSES; FLUCTUATIONS IN QUARTERLY RESULTS
Centura has experienced in the past and expects in the future to continue to
experience significant fluctuations in quarterly operating results. While
Centura reported a profit of $2.0 million for fiscal year 1996, it had net
losses of $44.1 million and $31.8 million for fiscal years 1995 and 1994,
respectively. There can be no assurance that the restructuring of Centura's
business strategies and tactics commenced in early 1996 will be successful or
that Centura or the combined company will be able to sustain any such
profitability on a quarterly or annual basis. Centura's product licensing
arrangements are subject to sell-through revenue recognition which makes
estimation of revenue dependent on reporting by Centura's resellers and
distributors and extremely uncertain. In addition, quarterly operating results
of the combined company will depend on a number of other factors that are
difficult to forecast, including, general market demand for the combined company
products; the size and timing of individual orders during a quarter; the
combined company's ability to fulfill such orders; introduction, localization or
enhancement of products by
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the combined company; delays in the introduction and/or enhancement of products
by the combined company and its competitors; market acceptance of new products;
reviews in the industry press concerning the products of the combined company or
its competitors; software "bugs" or other product quality problems; competition
and pricing in the software industry; sales mix among distribution channels;
customer order deferrals in anticipation of new products; reduction in demand
for existing products and shortening of product life cycles as a result of new
product introductions; changes in operating expenses; changes in Centura's
strategy; personnel changes; foreign currency exchange rates; mix of products
sold; inventory obsolescence; product returns and rotations; and general
economic conditions. Sales of the combined company's products also may be
negatively affected by delays in the introduction or availability of new
hardware and software products from third parties. The combined company
financial results also may vary as a result of seasonal factors including year
and quarter end purchasing and the timing of marketing activities, such as
industry conventions and tradeshows.
Although Centura has operated historically with little or no backlog of
traditional boxed product shipments, it has experienced a seasonal pattern of
product revenue decline between the fourth quarter and the succeeding first
quarter, contributing to lower worldwide product revenues and operating results
during such quarters. It has generally realized lower European product revenues
in the third quarter as compared to the rest of the year. Centura has also
experienced a pattern of recording a substantial portion of its revenues in the
third month of a quarter. As a result, product revenues in any quarter are
dependent on orders booked in the last month. Because Centura's staffing and
other operating expenses are based in part on anticipated net revenues, a
substantial portion of which may not be generated until the end of each quarter,
delays in the receipt or shipment of orders, including delays that may be
occasioned by failures of third party product fulfillment firms to produce and
ship products, or the actual loss of product orders can cause significant
variations in operating results from quarter to quarter. Centura may be unable
to adjust spending in a timely manner to compensate for any unexpected revenue
shortfall. Accordingly, any significant shortfall in sales of Centura's products
in relation to Centura's expectations could have an immediate adverse impact on
Centura's business, operating results and financial condition. To the extent
that Centura's expenses precede or are not subsequently followed by increased
revenues, its business, operating results and financial condition could be
materially and adversely affected. Due to the foregoing factors, it is likely
that Centura's operating results for some future quarter will fall below the
expectations of securities analysts and investors. In such event, the trading
price of Centura's Common Stock could be materially and adversely affected. See
"Centura Management's Discussion and Analysis of Financial Condition and Results
of Operations."
LIMITED OPERATING HISTORY OF INFOSPINNER; UNCERTAIN PROFITABILITY
InfoSpinner was incorporated in 1995 and commenced shipment of its initial
product in the third quarter of 1996. InfoSpinner incurred operating losses in
fiscal year 1996 and at December 31, 1996, had an accumulated deficit of
$1,324,000. InfoSpinner's products are designed for the emerging Internet
software market from which the amount and timing of revenues is uncertain and
expected to be subject to significant fluctuation when and if the products
experience greater exposure and use. With a limited operating history, there can
be no assurance of growth in revenues from sales of InfoSpinner's products
following the Merger or that InfoSpinner will be able to achieve sustained
profitability on a quarterly or annual basis. See "InfoSpinner Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
"Information Concerning InfoSpinner, Inc.--Products."
VOLATILITY OF CENTURA COMMON STOCK PRICE
The market for Centura's Common Stock is highly volatile. The trading price
of Centura's Common Stock fluctuated widely in 1995 and 1996 and may continue to
be subject to wide fluctuations in response to quarterly variations in operating
and financial results, announcements of new products or customer contracts by
Centura or its competitors, litigation and other factors. Any shortfall in
revenue or earnings
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from levels expected by securities analysts or others could have an immediate
and significant adverse effect on the trading price of Centura's Common Stock in
any given period. Additionally, Centura may not learn of, or be able to confirm,
revenue or earnings shortfalls until late in the fiscal quarter or following the
end of the quarter, which could result in an even more immediate and adverse
effect on the trading of Centura's Common Stock. Finally, Centura participates
in a highly dynamic industry, which often results in significant volatility of
its Common Stock price. Centura anticipates that prices for its Common Stock
will continue to be volatile following the Merger.
VALUE OF CONSIDERATION DEPENDS ON PRICE OF CENTURA COMMON STOCK
Under the terms of the Merger Agreement, the shares of InfoSpinner Common
Stock and InfoSpinner Preferred Stock issued and outstanding at the Effective
Time will be converted into the right to receive shares of Centura Common Stock
pursuant to certain conversion provisions. The total consideration to be
received in the Merger by all InfoSpinner stockholders is a fixed number of
shares of Centura Common Stock and, therefore, the value of such consideration
will depend wholly on the market price of the Centura Common Stock at the
Effective Time. In addition, the Merger Agreement provides that the Series A
Preferred Stock Conversion Ratio and the Series B Preferred Stock Conversion
Ratio (collectively, the "Preferred Exchange Ratios," together with the Common
Stock Conversion Ratio, the "Exchange Ratios"), will be calculated so as to
obtain the greater value under two alternative calculation formulas, which are
based on the average of the closing sale price of Centura Common Stock during
the thirty day period ending three days prior to the Effective Time.
Accordingly, the value of the consideration to be received by holders of
InfoSpinner Preferred Stock in relation to the holders of InfoSpinner Common
Stock upon the Merger depends on the average of the closing sale prices of the
Centura Common Stock during the thirty day period indicated above. On January 6,
1997, the date the Merger Agreement was signed, the closing price of the Centura
Common Stock was $3.375. There can be no assurance that the market price of
Centura Common Stock on and after the Effective Time will not be higher or lower
than such price. Shareholders of Centura and stockholders of InfoSpinner should
obtain and consider recent trading prices of Centura Common Stock in determining
whether to vote in favor of the Merger and the Merger Agreement. See "Risk
Factors--Volatility of Centura Common Stock Price."
POTENTIAL DILUTIVE EFFECT TO SHAREHOLDERS
Although the companies believe that beneficial synergies will result from
the Merger, there can be no assurance that the combining of the two companies'
businesses, even if achieved in an efficient, effective and timely manner, will
result in combined results of operations and financial condition superior to
what would have been achieved by each company independently, or as to the period
of time required to achieve such result. The issuance of Centura Common Stock in
connection with the Merger may have the effect of reducing Centura net income
per share from levels otherwise expected and could reduce the market price of
the Centura Common Stock unless revenue growth or cost savings and other
business synergies sufficient to offset the effect of such issuance can be
achieved. As a consequence of the Merger, InfoSpinner stockholders will lose the
chance to invest in the development and exploitation of InfoSpinner's products
on a stand-alone basis. Additionally, the combined company will have different
management than InfoSpinner's current management, and consequently the
management of the combined company may make strategic and operational decisions
that differ from those of InfoSpinner's current management. It is possible that
InfoSpinner, if it remained independent, could achieve economic performance
superior to that of the combined company. Consequently, there can be no
assurance that stockholders of InfoSpinner would not achieve greater returns on
investment if InfoSpinner were to remain an independent company.
On May 2, 1994, a lawsuit was filed against Centura and certain of its
officers and directors by a holder of Centura Common Stock, on his own behalf
and purportedly on behalf of a class of others similarly situated (the "Class
Action Lawsuit"). Centura reached a binding settlement agreement (the
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"Settlement Agreement") with plaintiffs' counsel in the lawsuit, and gained
court approval of the Settlement Agreement on September 30, 1996. As part of the
settlement, Centura agreed to provide up to a maximum of 2,500,000 shares of its
Common Stock (the "Settlement Shares") to a fund to be distributed among the
members of the plaintiff class. As of December 31, 1996, 1,048,296 Settlement
Shares had been issued and distributed, with the remaining number of Settlement
Shares to be determined, issued and distributed according to the Plan of
Allocation set forth in the Settlement Agreement. The maximum number of
additional Settlement Shares required by the Settlement Agreement is 1,451,704.
Issuance of the Settlement Shares is exempt from the registration requirements
of Section 5 of the Securities Act of 1933, as amended (the "Securities Act"),
pursuant to Section 3(a)(10) of the Securities Act, which provides for exemption
of registration under the Securities Act for securities issued pursuant to terms
and conditions which have been approved, after a hearing on the fairness of such
terms and conditions, by a United States court. As a result, the Settlement
Shares, when issued and delivered in accordance with the Settlement Agreement
approved by the United States District Court for the Northern District of
California, will be fully tradeable, fully paid and non-assessable. Issuance of
such shares by Centura will dilute the beneficial ownership of existing Centura
shareholders and InfoSpinner stockholders in the combined company after giving
effect to the Merger. See Note 2 to Centura Condensed Consolidated Financial
Statements (Unaudited)--Litigation.
From time to time, Centura issues shares of Common Stock pursuant to its
1992 Employee Stock Purchase Plan and pursuant to options granted under its 1995
Stock Option Plan and 1996 Directors' Stock Option Plan. Additional options
remain outstanding and are exercisable pursuant to Centura's 1986 Incentive
Stock Option Plan, which terminated in July 1996. As of February 28, 1997,
Centura had reserved (i) an aggregate of 2,000,000 shares of Common Stock
issuable to employees and consultants pursuant to its 1995 Stock Option Plan, of
which 693,499 shares are issuable upon exercise of outstanding options under
such plan, (ii) an aggregate of 1,885,757 shares of Common Stock issuable to
employees and consultants pursuant to its 1986 Stock Option Plan, of which
1,885,757 shares are issuable upon exercise of outstanding options under such
plan, (iii) an aggregate of 400,000 shares of Common Stock issuable to employees
pursuant to its 1992 Employee Stock Purchase Plan, of which 104,306 shares are
available for future issuance under such plan, (iv) 500,000 shares of Common
Stock issuable to non-employee directors pursuant to its 1996 Directors' Stock
Option Plan, of which 200,000 shares are issuable upon exercise of outstanding
options under such plan. Future issuance of such shares of Centura Common Stock
pursuant to any of the foregoing Centura stock plans will dilute the beneficial
ownership of existing Centura shareholders and InfoSpinner stockholders in the
combined company after giving effect to the Merger.
POTENTIAL UNAVAILABILITY OF "POOLING OF INTERESTS" ACCOUNTING TREATMENT OF
MERGER
The Merger is intended to qualify as a "pooling of interests" for accounting
and financial reporting purposes. Under this method of accounting, the assets
and liabilities of Centura and InfoSpinner will be carried forward to the
combined company at their recorded amounts, income from the combined company
will include income from Centura and InfoSpinner for the entire fiscal period in
which the combination occurs and the reported income of the separate companies
for prior periods will be combined and restated as the results of operations of
the combined company. Availability of pooling of interests accounting treatment
are conditions to consummation of Centura and InfoSpinner of the Merger,
although such condition may be waived by Centura and InfoSpinner. See "The
Merger Agreement--Conditions to the Merger" and "Unaudited Pro Forma Combined
Condensed Financial Statements".
Under the pooling of interest rules, none of the officers, directors or
affiliates of either of the combining companies may sell any shares of either of
the combining companies (except for certain de minimis sales) until the combined
company releases financial results covering at least thirty days of combined
operations of Centura and InfoSpinner. Accordingly, pooling of interests
accounting treatment for the Merger as of such time may not be available because
of sales by such shareholders (except for certain de minimis sales) after the
consummation of the Merger and prior to the time the combined
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company releases such financial results. As a result of the unavailability of
such accounting treatment, the Merger would be accounted for under the purchase
method of accounting, which would have the effects discussed below. Each of the
current officers, directors and affiliates of InfoSpinner and each of the
current officers and directors of Centura have entered into affiliate agreements
agreeing to comply with this restriction. Although Umang Gupta served as a
member of Centura's Board of Directors until his resignation from the Board on
December 23, 1996, he may continue to be considered an affiliate of Centura as a
result of his holdings of Centura Common Stock; however, Mr. Gupta has not
signed an affiliate agreement. As of February 28, 1997, Mr. Gupta beneficially
owned 1,740,608 shares of Centura Common Stock, or 12.6% of the total Centura
stock outstanding. See "The Merger--Voting and Affiliate Agreements."
There can be no assurance that an officer, director or affiliate of either
company will not sell shares of Centura or InfoSpinner stock or that all
requirements necessary to qualify for pooling of interests will be met. If any
of such events occur prior to consummation of the Merger, then neither company
is required to consummate the Merger. However, if both companies nevertheless
elected to consummate the Merger, the Merger would necessarily be accounted for
under the purchase method of accounting, which would have the effect of
InfoSpinner's assets being recognized at their fair value and any excess of the
purchase price over such fair value being recognized as goodwill on Centura's
balance sheet. The goodwill would thereafter be amortized as an expense over its
anticipated useful life. The impact of such treatment would have a material
adverse effect on the combined company's results of operations. If any such
events occur subsequent to consummation of the Merger and prior to the release
of the financial results covering at least thirty days of combined operations,
the Merger would also be required to be accounted for under the purchase method
of accounting, which would have the effect on the combined company's results of
operations as described above.
NEED FOR ADDITIONAL EQUITY FINANCING
Centura may be required to seek additional equity financing to meet NASDAQ
minimum net worth requirements and for continuing operations. Furthermore,
Centura must achieve a reasonable operating performance to satisfy its current
and future financing needs. During 1995, Centura completed a private debt
placement with Computer Associates International of approximately $10 million.
If Centura needs further financing, there can be no assurance that it will be
available on reasonable terms or at all. Any additional equity financing will
result in dilution to the combined company's shareholders.
NEW PRODUCT RISKS; RAPID TECHNOLOGICAL CHANGE
The markets for Centura's and InfoSpinner's software products and services
are characterized by rapid technological developments, evolving industry
standards, swift changes in customer requirements and computer operating
environments, and frequent new product introductions and enhancements. As a
result, the success of Centura and InfoSpinner depends substantially upon their
ability to continue to enhance their existing products, develop and introduce in
a timely manner new products incorporating technological advances and meet
increasing customer expectations, all on a timely and cost-effective basis. To
the extent one or more competitors introduce products that better address
customer needs, Centura's and InfoSpinner's businesses could be adversely
affected. Centura currently markets the following primary products: Centura,
SQLWindows, SQLBase and SQLHost. Its strategy, including the recent change in
the company's name, is centered on the successful delivery and market acceptance
of its Centura product line. The release of the Centura line of products
occurred in May 1996. Centura's success will also depend on the ability of its
products to perform well with existing and future leading, industry-standard
application software products intended to be used in connection with RDBMSs. Any
failure to deliver these products as scheduled or their failure to achieve early
market acceptance as a result of competition, technological change, failure of
Centura to timely release new versions or upgrades, the failure of such upgrades
to achieve market acceptance or otherwise, could have a material adverse effect
on the business, operating
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results and financial condition of Centura. In addition, commercial acceptance
of the combined company's products and services could be adversely affected by
critical or negative statements or reports by industry and financial analysts
concerning the combined company and its products, or other factors such as the
combined company's financial performance. InfoSpinner currently is developing
UNIX-based versions of its Windows NT products. There can be no assurance that
such versions will be accomplished, that the products will be released on a
timely basis, or that the products will achieve market acceptance. If the
combined company is unable to develop and introduce new products or enhancements
to existing products, including UNIX-based versions of InfoSpinner's Windows NT
products, in a timely manner in response to changing market conditions or
customer requirements, its business, operating results and financial condition
could be materially and adversely affected.
Centura and InfoSpinner depend substantially upon internal efforts for the
development of new products and product enhancements. Centura has in the past
experienced delays in the development of new products and product versions,
which resulted in loss or delays of product revenues, and there can be no
assurance that Centura will not experience further delays in connection with its
current product development or future development activities. Also, software
products as complex as those offered by Centura and InfoSpinner may contain
undetected errors when first introduced or as new versions are released. Centura
and InfoSpinner have in the past discovered software errors in certain of their
new products and enhancements, respectively, after their introduction. Although
Centura and InfoSpinner have not experienced material adverse effects resulting
from any such errors to date, there can be no assurance that errors will not be
found in new products or releases after commencement of commercial shipments,
resulting in adverse product reviews and a loss of or delay in market
acceptance, which could have a material adverse effect upon Centura's or
InfoSpinner's business, operating results and financial condition.
From time to time, Centura, Centura's competitors or InfoSpinner's
competitors may announce new products, product versions, capabilities or
technologies that have the potential to replace or shorten the life cycles of
Centura's or InfoSpinner's existing products. Centura has historically
experienced increased returns of a particular product version following the
announcement of a planned release of a new version of that product. Centura and
InfoSpinner provide allowances for anticipated returns, and believes its
existing policies result in the establishment of allowances that are adequate,
and have been adequate in the past, but there can be no assurance that product
returns will not exceed such allowances in the future. The announcement of
currently planned or other new products may cause customers to delay their
purchasing decisions in anticipation of such products, which could have a
material adverse effect on business, operating results and financial condition
of the combined company. See "Centura Management's Discussion and Analysis of
Financial Condition and Results of Operations," "Information Concerning Centura
Software Corporation--Research and Product Development" and "Information
Concerning InfoSpinner, Inc.--Research and Product Development."
HIGHLY COMPETITIVE MARKETS
The markets for software products such as Centura's and InfoSpinner's
products are intensely competitive, subject to rapid change and characterized by
constant demand for new product features, pressure to accelerate the release of
new products and product enhancements and to reduce prices. A number of
companies currently offer products that compete directly or indirectly with one
or more Centura or InfoSpinner products. Competitors of Centura include, among
others, providers of sophisticated database software, originally designed and
marketed primarily for use with mainframes and minicomputers, including IBM,
Informix Corporation, Ingres, Oracle Corporation and Sybase, Inc. Centura also
faces competition from providers of PC-based software products, including
Microsoft Corporation and Borland International. These competitors offer
database server products and front-end tools designed for stand-alone PCs but
may currently or may in the future offer additional integrated PC client/server
software. In addition, Centura faces competition from providers of software
specifically developed for the PC client/server market, including front-end
tools offered by Sybase's Powersoft Division, Microsoft, and
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Forte, and connectivity software competitors, such as IBI Systems, Inc. and
Sybases's Micro DecisionWare Division. The combined company also faces potential
competition from vendors of applications development tools based on 4GLs or CASE
technologies. With the emergence of the World Wide Web as an important platform
for application development and deployment, additional competitors or potential
competitors have emerged. InfoSpinner anticipates competition from four primary
directions: in-house solutions developed by IS organizations; young companies
focused on the dynamic data access part of the market; database companies
looking to open up their databases to the Web; and Web server companies such as
Microsoft Corporation, wishing to go beyond shipping static files back-and-forth
across the Web. In addition, InfoSpinner anticipates competition from companies
promoting a Java-based solution to Web-enabling applications. The two principal
competitors currently offering solutions similar to InfoSpinner are NetDynamics,
Inc. and OneWave, Inc. NetDynamics, Inc. offers a Web-development tool set that
is designed to deploy Java-based applications over the Web. OneWave, Inc. offers
Web integration with SAP, Baan, and PeopleSoft applications. In addition
InfoSpinner's competitors include or may include Active Software, Inc., Kiva
Software Corporation, Bluestone, Inc., Aspect Technologies, Inc. and Haht
Software, Inc.
Many of Centura's and InfoSpinner's competitors or potential competitors
have longer operating histories and significantly greater financial, managerial,
technical, and marketing resources, as well as greater name recognition and a
larger installed base, than Centura and InfoSpinner. A variety of potential
actions by any of these competitors, including a reduction of product prices,
increased promotion, announcement or accelerated introduction of new or enhanced
products or features, acquisitions of software applications or technologies from
third parties, the formation of strategic alliances, product giveaways or
product bundling could have a material adverse effect on the business, operating
results and financial condition of the combined company. Centura's products
experienced increased competition in 1995 and 1996, resulting in loss of market
share. Present or future competitors may be able to develop products comparable
or superior to those offered by the companies or adapt more quickly to new
technologies or evolving customer requirements. Such competition has in the past
and may again in the future result in price reductions and/or loss of market
share and has in the past and may again in the future have a material adverse
effect on Centura's business, operating results and financial condition. In
particular, while Centura and InfoSpinner are currently developing additional
product enhancements that they believe address customer requirements, there can
be no assurance that the development or introduction of these additional product
enhancements will be successfully completed on a timely basis or that these
product enhancements will achieve market acceptance. Accordingly, there can be
no assurance that the combined company will be able to continue to compete
effectively in its markets, that competition will not intensify or that future
competition will not have a material adverse effect on the combined company's
business, operating results and financial condition. See "Information Concerning
Centura Software Corporation--Competition," and "Information Concerning
InfoSpinner, Inc.--Competition."
MARKET ACCEPTANCE OF PC CLIENT/SERVER SYSTEMS
Substantially all of Centura's revenues have been derived from the licensing
of software products for PC client/server systems. Licenses of such products are
expected to continue to account for substantially all of Centura's revenues for
the foreseeable future even after accounting for revenues derived from
InfoSpinner products. With the increasing focus on enterprise-wide systems, some
customers may opt for solutions that favor mainframe or mini-computer solutions.
Accordingly, some companies may abandon use of PC client/server systems, which
could have a material adverse effect on Centura's future success. See "Centura
Management's Discussion and Analysis of Financial Condition and Results of
Operations" and "Information Concerning Centura Software Corporation--Products."
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COMPONENTIZED MARKETS
The advent of so-called componentized software may alter the way in which
customers buy software. As specific software functionality can be bundled into
smaller units or objects rather than in broad, highly functional products such
as Centura's development tools, customers may be less willing to buy such broad,
highly functional products. If such a trend continues, there can be no assurance
that Centura will be able to repackage and efficiently distribute its products
in such componentized packages. The costs and efforts necessary to package and
distribute such components are largely unknown. Failure of Centura to introduce
componentized products successfully and cost-effectively could have a material
adverse effect on Centura's business, operating results and financial condition.
INTERNET SOFTWARE MARKET
The market for Internet software in general, and the segments of such market
addressed by Centura's and InfoSpinner's products in particular, are relatively
new. The future financial performance of the combined company will depend in
part on the continued expansion of this market and these market segments and the
growth in the demand for other products developed by Centura and InfoSpinner, as
well as increased acceptance of Centura's and InfoSpinner's products by MIS
professionals. There can be no assurance that the Internet software market and
the relevant segments of the market will continue to grow, that Centura or
InfoSpinner will be able to respond effectively to the evolving requirements of
the market and market segments, or that MIS professionals will accept Centura's
or InfoSpinner's products. If Centura and InfoSpinner are not successful in
developing, marketing, localizing and selling applications that gain commercial
acceptance in these markets and market segments on a timely basis, the combined
company's business, operating results and financial condition could be
materially and adversely affected. See "Information Concerning Centura Software
Corporation--Business Overview."
DEPENDENCE UPON DISTRIBUTION CHANNELS
Centura relies on relationships with value-added resellers and distributors
for a substantial portion of its sales and revenues. Some of Centura's resellers
and distributors also offer competing products. Most of Centura's resellers and
distributors are not subject to any minimum purchase requirements, can cease
marketing Centura's products at any time, and may from time to time be granted
stock exchange or rotation rights. The introduction of new and enhanced products
may result in higher product returns and exchanges. Any product returns or
exchanges in excess of recorded allowances could have a material adverse effect
on Centura's or InfoSpinner's business, operating results and financial
condition. All of InfoSpinner's sales to date have come through its distribution
agreements with Software AG of North America, Inc. and Beacon Information
Technology Ltd. of Japan. Centura and InfoSpinner also maintain strategic
relationships with a number of vertical software vendors and other technology
companies for marketing or resale of Centura's and InfoSpinner's products. Any
termination or significant disruption of Centura's or InfoSpinner's relationship
with any of its resellers or distributors, or the failure by such parties to
renew agreements with Centura or InfoSpinner, could materially and adversely
affect the combined company's business, operating results and financial
condition. Since 1994 Centura has reduced its resources devoted to North
American corporate sales and also decreased its expenditures on corporate and
product marketing. Centura expects to rely increasingly on third-party channels
for sales of packaged product while focusing its corporate sales efforts on
larger opportunities. Failure of Centura to successfully implement, support and
manage the sales strategies could have a material adverse effect on the company.
During the year ended December 31, 1996, no customer or distributor of Centura
accounted for 10% or more of its revenues. Software AG, however, accounted for
approximately 100% of InfoSpinner's revenues for the same period.
The distribution channels through which client/server software products are
sold have been characterized by rapid change, including consolidations and
financial difficulties of distributors, resellers and other marketing partners
including certain of Centura's current distributors. The bankruptcy,
deterioration in
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financial condition or other business difficulties of a distributor or retailer
could render Centura's accounts receivable from such entity uncollectible, which
could result in a material adverse effect on Centura's business, operating
results and financial condition. There can be no assurance that distributors
will continue to purchase Centura's or InfoSpinner's products or provide
Centura's or InfoSpinner's products with adequate promotional support. Failure
of distributors to do so could have a material and adverse effect on the
combined company's business, operating results and financial condition.
In a number of markets, including rapidly growing client/server markets such
as Japan, Korea, China/ Hong Kong and Brazil, Centura has entered into
quasi-exclusive multi-year agreements with independent companies that have also
licensed the use of Centura's name. In addition, InfoSpinner has entered into an
exclusive distribution agreement with Beacon Information Technology Ltd. of
Japan for the sale of the Kanji version of InfoSpinner's product in Japan. These
agreements are in place to increase Centura's and InfoSpinner's opportunities
and penetration in such markets where the rapid adoption of client/server
technologies is anticipated. While Centura and InfoSpinner believe that to date
these agreements have increased each company's penetration in these markets,
there can be no certainty that this performance will continue nor that these
relationships will remain in place. The combined company's future cost of
maintaining its business in these markets could increase substantially if these
agreements are not renewed. See "Information Concerning Centura Software
Corporation--Marketing, Distribution and Product Support" and "Information
Concerning InfoSpinner, Inc.--Marketing, Distribution and Product Support."
DEPENDENCE ON THIRD PARTY ORGANIZATIONS
Centura is increasingly dependent on the efforts of third party "partners,"
including consultants, system houses and software developers to implement,
service and support Centura's products. In addition, InfoSpinner is dependent on
the efforts of third party vendors to market, sell, implement, service and
support InfoSpinner's products. These third parties increasingly have
opportunities to select from a very broad range of products from Centura's and
InfoSpinner's competitors, many of whom have greater resources and market
acceptance than Centura and InfoSpinner. In order to succeed, the combined
company must actively recruit and sustain relationships with these third
parties. There can be no assurance that the combined company will be successful
in recruiting new partners or in sustaining its relationships with its existing
partners.
INTERNATIONAL SALES AND OPERATIONS
International sales represented 60% and 61% of Centura's net revenues in the
fiscal years ended December 31, 1996 and 1995, respectively. A key component of
Centura's strategy is continued expansion into international markets, and the
Company currently anticipates that international sales, particularly in new and
emerging markets, will continue to account for a significant percentage of total
revenues. The combined company will need to retain effective distributors,
integrate InfoSpinner's existing international distribution relationships with
Centura's international channels, and hire, retain and motivate qualified
personnel internationally to maintain and/or expand their international
presence. There can be no assurance that the combined company will be able to
successfully market, sell, localize and deliver its products in these
international markets. In addition to the uncertainty as to the combined
company's ability to sustain or expand its international presence, there are
certain risks inherent in doing business on an international level, such as
unexpected changes in regulatory requirements and government controls, problems
and delays in collecting accounts receivable, tariffs, export license
requirements and other trade barriers, difficulties in staffing and managing
foreign operations, longer payment cycles, political and economic instability,
fluctuations in currency exchange rates, seasonal reductions in business
activity during summer months in Europe and certain other parts of the world,
restrictions on the export of critical technology, and potentially adverse tax
consequences, which could adversely impact the success of international
operations. Sales of products by Centura and InfoSpinner currently are
denominated principally in U.S. dollars. Accordingly, any increase in the value
of the U.S. dollar as compared to
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currencies in overseas markets would increase the foreign currency-denominated
cost of Centura's and InfoSpinner's products, which may negatively affect
Centura's and InfoSpinner's sales in those markets. In addition, effective
copyright and trade secret protection may be limited or unavailable under the
laws of certain foreign jurisdictions. There can be no assurance that one or
more of such factors will not have a material adverse effect on the combined
company's international operations and, consequently, on the combined company's
business, operating results and financial condition. See "Information Concerning
Centura Software Corporation--Marketing, Distribution and Product Support" and
"Information Concerning InfoSpinner, Inc.--Marketing, Distribution and Product
Support" and "--Customer Service and Support."
DEPENDENCE ON KEY PERSONNEL
Centura's future performance is substantially dependent on the performance
of its executive officers and key product development, technical, sales,
marketing and management personnel. (Centura does not have employment or
non-competition agreements with any of its employees except Sam Inman, the
company's CEO and President.) Continued development and commercialization of
InfoSpinner's products also depends substantially upon the continued efforts at
InfoSpinner of engineering and marketing personnel, and in particular, Keith A.
Lowery, Ronald L. Howell and Andrew B. Levine. Although Messrs. Lowery, Howell
and Levine have entered into employment agreements with Centura effective upon
the Merger, such agreements may be terminated at will by the employee or Centura
and there can be no assurance that such individuals will continue to remain
employed by Centura after the Merger. The loss of the services of any executive
officer or other key technical or management personnel of Centura or InfoSpinner
for any reason could have a material adverse effect on the business, operating
results and financial condition of the combined company after the Merger.
The future success of the combined company also depends on its continuing
ability to identify, hire, train, motivate and retain other highly qualified
technical and managerial personnel. Competition for such personnel is intense
and Centura has experienced difficulty in identifying and hiring qualified
engineering and software development personnel. There can be no assurance that
the combined company will be able to attract, assimilate or retain other highly
qualified technical and managerial personnel in the future. The inability to
attract and retain the necessary technical and managerial personnel could have a
material and adverse effect upon its business, operating results and financial
condition. See "Information Concerning Centura Software Corporation--Employees"
and "Management of Centura Software Corporation."
PROPRIETARY RIGHTS
The success and ability of Centura and InfoSpinner to compete is dependent
in part upon each entity's proprietary technology. While the companies rely on
trademark, trade secret and copyright laws to protect their respective
technology, Centura and InfoSpinner believe that factors such as the
technological and creative skills of its personnel, new product developments,
frequent product enhancements, name recognition and customer support are more
essential to establishing and maintaining a technology leadership position.
Centura has one patent with respect to its SQLWindows and Centura products.
InfoSpinner has one patent application pending in connection with its
technology. Centura and InfoSpinner believe that the ownership of patents is not
presently a significant factor in its business and that its success does not
depend on the ownership of patents, but primarily on the innovative skills,
technical competence and marketing abilities of its personnel. Also, there can
be no assurance that others will not develop technologies that are similar or
superior to Centura's or InfoSpinner's technology. The source code for the
companies' proprietary software is protected both as a trade secret and as a
copyrighted work. Despite these precautions, it may be possible for a third
party to copy or otherwise obtain and use their products or technology without
authorization, or to develop similar technology independently. In addition,
effective copyright and trade secret protection may be unavailable or limited in
certain foreign countries.
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Centura and InfoSpinner generally enter into confidentiality or license
agreements with their employees, consultants and vendors, and generally control
access to and distribution of their software, documentation and other
proprietary information. Despite efforts to protect proprietary rights,
unauthorized parties may attempt to copy aspects of the companies' products or
to obtain and use information that is regarded as proprietary. Policing such
unauthorized use is difficult. There can be no assurance that the steps taken by
Centura or InfoSpinner will prevent misappropriation of their respective
technologies or that such agreements will be enforceable. In addition,
litigation may be necessary in the future to enforce intellectual property
rights, to protect trade secrets or to determine the validity and scope of the
proprietary rights of others. Such litigation could result in substantial costs
and diversion of resources and could have a material adverse effect on the
combined company's business, operating results and financial condition.
There can be no assurance that third parties will not claim infringement by
Centura or InfoSpinner with respect to current or future products, and Centura
expects that it and/or InfoSpinner will increasingly be subject to such claims
as the number of products and competitors in the client/server and Internet
connectivity software market grows and the functionality of such products
overlaps with other industry segments. In the past, Centura has received notices
alleging that its products infringe trademarks of third parties. Centura has
historically dealt with and will in the future continue to deal with such claims
in the ordinary course of business, evaluating the merits of each claim on an
individual basis. There are currently no material pending legal proceedings
against Centura regarding trademark infringement. Any such third party claims,
whether or not they are meritorious, could result in costly litigation or
require Centura to enter into royalty or licensing agreements. Such royalty or
license agreements, if required, may not be available on terms acceptable to
Centura, or at all. If Centura or InfoSpinner were found to have infringed upon
the proprietary rights of third parties, it could be required to pay damages,
cease sales of the infringing products and redesign or discontinue such
products, any of which could have a material adverse effect on Centura's
business, operating results and financial condition. See "Information Concerning
Centura Software Corporation--Intellectual Property."
MANAGEMENT OF POTENTIAL GROWTH; INTEGRATION OF POTENTIAL ACQUISITIONS
In recent years, Centura has experienced both expansion and contraction of
its operations each of which has placed significant demands on Centura's
administrative, operational and financial resources. To manage future growth, if
any, Centura must continue to improve its financial and management controls,
reporting systems and procedures on a timely basis and expand, train and manage
its work force. There can be no assurance that Centura will be able to perform
such actions successfully. Centura intends to continue to invest in improving
its financial systems and controls in connection with higher levels of
operations. Although Centura believes that its systems and controls are adequate
for the current level of operations, Centura anticipates that it may need to add
additional personnel and expand and upgrade its financial systems to manage any
future growth. Centura's failure to do so could have a material adverse effect
upon Centura's business, operating results and financial condition. In the
future, Centura may make acquisitions of complementary companies, products or
technologies, such as those anticipated by the Merger. Managing acquired
businesses entails numerous operational and financial risks, including
difficulties in assimilating acquired operations, diversion of management's
attention to other business concerns, amortization of acquired intangible assets
and potential loss of key employees or customers of acquired operations. There
can be no assurance that the combined company will be able to effectively
achieve growth, or manage any such growth, and failure to do so could have a
material adverse effect on the combined company's operating results.
LEGAL PROCEEDINGS
There are currently no material pending legal proceedings against Centura or
any of its subsidiaries, other than ordinary routine litigation incidental to
the business of Centura. Centura and InfoSpinner operate, however, in a complex
and volatile industry in which disputes, litigation, regulatory proceedings
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and other actions are a necessary risk of doing business. There can be no
assurance that Centura or InfoSpinner will not participate in such legal
proceedings and that the costs and charges will not have a material adverse
impact on Centura's or InfoSpinner's future success.
CONCENTRATION OF STOCK OWNERSHIP
Upon completion of the Merger (and without inclusion of additional
Settlement Shares that may be issued pursuant to the Settlement Agreement in
connection with the Class Action Lawsuit), the directors and executive officers
of each of Centura and InfoSpinner and their respective affiliates will
beneficially own approximately 33.8% of the outstanding Common Stock of the
combined company. As a result, these shareholders will be able to exercise
significant influence over all matters requiring shareholder approval, including
the election of directors and approval of significant corporate transactions.
Such concentration of ownership may also have the effect of delaying or
preventing a change in control of Centura. See "Information Regarding Beneficial
Ownership of Principal Centura Shareholders and Management" and "Information
Regarding Beneficial Ownership of Principal InfoSpinner Stockholders and
Management."
SHARES ELIGIBLE FOR FUTURE SALE
Centura will issue 4,500,000 shares of Centura Common Stock in the Merger.
In general, the shares issued in the Merger, other than to InfoSpinner
affiliates, in exchange for outstanding shares of InfoSpinner capital stock will
be freely tradeable following the Merger. In addition, certain persons who,
following the Merger, will be holders of 4,488,530 shares of Centura Common
Stock (on an as-converted basis) have agreed that they will not transfer, sell,
exchange, pledge or otherwise dispose of any Centura Common Stock from January
6, 1997 until the date Centura shall have publicly released financial results
for a period that includes at least thirty days of combined operations of
Centura and InfoSpinner (the "Affiliates Expiration Date"). Immediately after
the Affiliates Expiration Date, these shares will be eligible for sale in the
public market, subject to compliance with Rules 144 and 145 under the Securities
Act. The sale of any of the foregoing shares may cause substantial fluctuations
in the price of Centura Common Stock over short time periods.
LIMITATION ON OPINION OF FINANCIAL ADVISOR TO CENTURA
The fairness opinion of Hambrecht & Quist will not be updated prior to the
closing of the Merger and therefore the delivery of the Hambrecht & Quist
opinion to the Centura Board of Directors should not be used by Centura
shareholders to evaluate the Merger. Hambrecht & Quist's opinion is necessarily
based upon market, economic, financial and other conditions as they existed as
of January 6, 1997 and can be evaluated as of that date. Any subsequent change
in such conditions as well as fluctuations in Centura's stock price would
require a reevaluation of such opinion. For risks associated with fluctuations
in Centura's stock price, see "Risk Factors--Volatility of Centura Common Stock
Price." In addition, Hambrecht & Quist did not independently verify any of the
information concerning Centura or InfoSpinner considered in connection with its
review of the Merger and, for purposes of its opinion, Hambrecht & Quist assumed
and relied upon the accuracy and completeness of all such information. In
connection with its opinion, Hambrecht & Quist did not prepare or obtain any
independent evaluation or appraisal of any of the assets or liabilities of
Centura or InfoSpinner, nor did it conduct a physical inspection of the
properties and facilities of Centura or InfoSpinner. Hambrecht & Quist also
assumed that neither Centura nor InfoSpinner was a party to any pending
transactions, including external financings, recapitalizations or merger
discussions, other than the Merger and those in the ordinary course of
conducting their respective businesses. For purposes of its opinion, Hambrecht &
Quist assumed that the Merger will qualify as a tax-free reorganization under
the Code for the stockholders of InfoSpinner and that the Merger will be
accounted for as a pooling of interests.
The preparation of a fairness opinion is a complex process and is not
necessarily susceptible to partial analysis or summary description. The summary
of the Hambrecht & Quist analyses set forth on page 33
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herein does not purport to be a complete description of the presentation by
Hambrecht & Quist to Centura's Board of Directors. In arriving at its opinion,
Hambrecht & Quist did not attribute any particular weight to any analyses or
factors considered by it, but rather made qualitative judgments as to the
significance and relevance of each analysis and factor. Accordingly, the
analyses and summary set forth on page 33 herein must be considered as a whole.
Selecting portions of the analyses or summary, without considering all factors
and analyses, could create an incomplete view of the processes underlying the
analyses set forth in the Hambrecht & Quist presentation to the Centura Board of
Directors and its opinion. In performing its analyses, Hambrecht & Quist made
numerous assumptions with respect to industry performance, general business and
economic conditions and other matters, many of which are beyond the control of
Centura and InfoSpinner. The analyses performed by Hambrecht & Quist are not
necessarily indicative of actual values or actual future results, which may be
significantly more or less favorable than suggested by such analyses.
Additionally, analyses relating to the values of businesses do not purport to be
appraisals or to reflect the prices at which businesses actually may be
acquired.
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THE CENTURA MEETING
DATE, TIME AND PLACE OF MEETING
The Centura Meeting will be held at Hotel Sofitel, 223 Twin Dolphin Drive,
Redwood Shores, California 94065 on March 31, 1997 at 1:30 p.m., local time.
PURPOSES OF THE CENTURA MEETING
At the Centura Meeting, holders of Centura Common Stock will consider and
vote upon proposals (i) to approve and adopt the Merger Agreement and approve
the Merger and (ii) to transact such other business as may properly come before
the meeting or any adjournments or postponements thereof.
THE CENTURA BOARD OF DIRECTORS HAS APPROVED THE MERGER AGREEMENT AND THE
MERGER AND RECOMMENDS A VOTE FOR ADOPTION AND APPROVAL OF THE MERGER AGREEMENT
AND THE MERGER.
RECORD DATE; VOTING AT THE MEETING; PROXIES
The Centura Board of Directors has fixed the close of business on February
28, 1997 as the record date for determining holders entitled to notice of and to
vote at the Centura Meeting (the "Centura Record Date"). As of the Centura
Record Date there were 13,763,760 shares of Centura Common Stock issued and
outstanding held of record by approximately 466 shareholders. Each Centura
Shareholder is entitled to one vote for each share of Centura Common Stock held
as of the Centura Record Date.
All shares of Centura Common Stock represented by properly executed proxies
will, unless such proxies have been previously revoked, be voted in accordance
with the instructions indicated in such proxies. IF NO INSTRUCTIONS ARE
INDICATED, SUCH SHARES OF CENTURA COMMON STOCK WILL BE VOTED IN FAVOR OF
ADOPTION AND APPROVAL OF THE MERGER AGREEMENT. A shareholder who has given a
proxy may revoke it at any time prior to its exercise by giving written notice
thereof to the Secretary of Centura, by signing and returning a later dated
proxy, or by voting in person at the Centura Meeting (however, mere attendance
at the Centura Meeting will not in and of itself have the effect of revoking the
proxy).
Votes cast by proxy or in person at the Centura Meeting will be tabulated by
the Inspector of Elections appointed for the meeting, who will determine whether
a quorum is present. In general, California law provides that a quorum consists
of a majority of shares entitled to vote, represented in person or by proxy. If
a quorum is present, the affirmative vote of a majority of shares represented
and voting at the meeting will be required under California law to approve the
Merger. Where, as to any matter submitted to the shareholders for a vote,
proxies are marked as abstentions (or shareholders appear in person but abstain
from voting), such abstentions will be treated as shares that are present and
entitled to vote for purposes of determining the presence of a quorum but as
unvoted for purposes of determining the approval of any matter submitted to the
shareholders for a vote. If a broker indicates on the proxy that it does not
have discretionary authority as to certain shares to vote on a particular
matter, those shares will not be considered as voting with respect to that
matter. With respect to the vote on the Merger, abstentions and broker nonvotes
will have the effect of a vote against the Merger Agreement, since they
represent one less vote for approval.
SOLICITATION OF PROXIES
The costs of soliciting proxies from holders of Centura Common Stock will be
borne by Centura. Centura may solicit proxies otherwise than by use of the mail,
and certain officers and regular employees of Centura, without additional
compensation, may use their personal efforts, by telephone or otherwise, to
obtain proxies. Such assistance may take the form of personal, telephonic or
written solicitation or any combination thereof. Centura will also request
persons, firms and corporations holding shares in their names, or in the names
of their nominees, which shares are beneficially owned by others, to send this
proxy
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material to and obtain proxies from such beneficial owners and will reimburse
such holders for their reasonable expenses in doing so.
QUORUM
The presence in person or by properly executed proxy of holders of a
majority of all of the outstanding shares of Centura Common Stock is necessary
to constitute a quorum at the Centura Meeting.
REQUIRED VOTE
Under the California General Corporation Law (the "CGCL"), approval and
adoption of the Merger Agreement and the approval of the Merger will require the
affirmative vote of a majority of the shares of Centura Common Stock outstanding
on the Centura Record Date.
As of the Centura Record Date, Centura directors, executive officers and
their affiliates may be deemed to be the beneficial owners of approximately 9.7%
of the outstanding shares of Centura Common Stock. Each of the directors and
executive officers of Centura has entered into irrevocable proxy agreements with
InfoSpinner pursuant to which each has agreed to vote all shares of Centura
Common Stock over which such shareholder has voting control in favor of the
Merger Agreement and the Merger. Such shareholders hold approximately 5.2% of
the currently outstanding shares of Centura Common Stock.
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THE INFOSPINNER MEETING
DATE, TIME AND PLACE OF MEETING
The InfoSpinner Meeting will be held at InfoSpinner's principal offices at
1222 E. Arapaho Road, Suite 320, Richardson, Texas 75081 on March 31, 1997 at
1:30 p.m., local time.
PURPOSE OF THE INFOSPINNER MEETING
At the InfoSpinner Meeting, holders of InfoSpinner Common Stock will
consider and vote upon proposals (i) to approve and adopt the Merger Agreement
and approve the Merger and (ii) to transact such other business as may properly
come before the meeting.
THE INFOSPINNER BOARD OF DIRECTORS HAS APPROVED THE MERGER AGREEMENT AND
UNANIMOUSLY RECOMMENDS A VOTE FOR ADOPTION AND APPROVAL OF THE MERGER AGREEMENT
AND THE MERGER.
RECORD DATE; VOTING AT THE MEETING; PROXIES
The InfoSpinner Board of Directors has fixed the close of business on
February 28, 1997 as the record date for determining holders entitled to notice
of and to vote at the InfoSpinner Meeting (the "InfoSpinner Record Date"). As of
the InfoSpinner Record Date, there were 6,030,000 shares of InfoSpinner Common
Stock issued and outstanding and held by 23 stockholders of record, and
1,193,265 shares of InfoSpinner Preferred Stock issued and outstanding and held
by 6 stockholders of record. Holders of shares of InfoSpinner Common Stock are
entitled to one vote per share, and holders of shares of InfoSpinner Preferred
Stock, voting as if converted into InfoSpinner Common Stock, are entitled to one
vote per share at the InfoSpinner Meeting. The InfoSpinner Common Stock and
InfoSpinner Preferred Stock are referred to collectively herein as the
"InfoSpinner Capital Stock."
All properly executed proxies that are not revoked will be voted at the
InfoSpinner Meeting in accordance with the instructions contained therein.
Proxies returned and containing no instructions regarding the proposals
specified in the form of proxy will be voted FOR approval and adoption of the
Merger Agreement and the Merger, and as the proxy holders deem advisable on any
other proposals submitted to a vote, in accordance with the recommendations of
the InfoSpinner Board of Directors. A stockholder who has executed and returned
a proxy may revoke it at any time before it is voted at the InfoSpinner Meeting
by executing and returning a proxy bearing a later date, by filing written
notice of such revocation with the Secretary of InfoSpinner stating that the
proxy is revoked, or by attending the InfoSpinner Meeting and voting in person
(however, mere attendance at the meeting will not in and of itself have the
effect of revoking the proxy).
Votes cast by proxy or in person at the InfoSpinner Meeting will be
tabulated by the Inspector of Elections appointed for the meeting. The Inspector
of Elections will also determine whether or not a quorum is present. Abstentions
will be counted for purposes of determining a quorum, but will have the effect
of a vote against approval of the Merger and the Merger Agreement.
SOLICITATION OF PROXIES
The costs of soliciting proxies from holders of InfoSpinner Capital Stock
will be borne by InfoSpinner. In addition to solicitation by mail, the
directors, officers and employees of InfoSpinner may, without additional
compensation, solicit proxies from stockholders by telephone, facsimile or
letter or in person.
QUORUM
The presence in person or by properly executed proxy of holders of a
majority of all of the outstanding shares of InfoSpinner Common Stock and
InfoSpinner Preferred Stock is necessary to constitute a quorum at the
InfoSpinner Meeting.
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REQUIRED VOTE
Under the DGCL and InfoSpinner's Certificate of Incorporation, as amended,
approval and adoption of the Merger Agreement and the Merger requires the
affirmative vote of at least a majority of the total number of votes entitled to
be cast by holders of InfoSpinner Common Stock and holders of InfoSpinner
Preferred Stock, voting together as a single class.
Certain stockholders and the executive officers and directors of InfoSpinner
have agreed to vote all of the shares of InfoSpinner Capital Stock owned or
controlled by them in favor of the Merger and the Merger Agreement. On the
Record Date, such stockholders and such executive officers and directors owned
approximately 70.5%, of all then outstanding shares of InfoSpinner Common Stock
and Preferred Stock. See "The Merger--Voting and Affiliate Agreements." In
addition, it is a condition to the closing of the Merger that holders of at
least 95% of the InfoSpinner Common Stock and 95% of each series of InfoSpinner
Preferred Stock issued and outstanding immediately prior to the Closing Date
have voted such shares for approval of the Merger and may not be deemed to be
dissenters' shares. This condition may be waived by Centura. See "The
Merger--Delaware Appraisal Rights" and "The Merger Agreement-- Conditions to the
Merger."
THE MATTERS TO BE CONSIDERED AT THE CENTURA MEETING AND THE INFOSPINNER
MEETING ARE OF GREAT IMPORTANCE TO THE SHAREHOLDERS OF CENTURA AND STOCKHOLDERS
OF INFOSPINNER. ACCORDINGLY, SHAREHOLDERS AND STOCKHOLDERS ARE URGED TO READ AND
CAREFULLY CONSIDER THE INFORMATION PRESENTED IN THIS PROXY STATEMENT/PROSPECTUS,
AND TO COMPLETE, DATE, SIGN AND PROMPTLY RETURN THE ENCLOSED PROXY IN THE
ENCLOSED POSTAGE-PAID ENVELOPE.
STOCKHOLDERS SHOULD NOT SEND ANY STOCK CERTIFICATES
WITH THEIR PROXY CARDS
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THE MERGER
THE DETAILED TERMS OF, AND CONDITIONS TO, THE MERGER AND CERTAIN RELATED
TRANSACTIONS ARE CONTAINED IN THE MERGER AGREEMENTS, COPIES OF WHICH ARE
ATTACHED TO THIS PROSPECTUS/JOINT PROXY STATEMENT AS ANNEX A. The statements
made herein with respect to the terms of the Merger and such related
transactions are qualified by reference to the more complete information set
forth in the Merger Agreements.
DESCRIPTION
Under the Merger Agreement, IS Acquisition Corporation, a wholly owned
subsidiary of Centura formed for the purpose of effectuating the Merger, will
merge with and into InfoSpinner, which will continue as the surviving
corporation. At the Effective Time of the Merger, each outstanding share (other
than shares held by stockholders who properly exercise their appraisal rights
available under Section 262 of the DGCL) and each outstanding share of Common
Stock of InfoSpinner (assuming the conversion of all outstanding Preferred Stock
into Common Stock prior to the effective time of the Merger on the basis of one
share of Common Stock for each share of Preferred Stock) will be converted into
and exchanged for a fraction of a share of Centura Common Stock (the "Exchange
Ratio"). The Exchange Ratio will be determined by dividing 4,500,000 by the
number of shares of InfoSpinner Common Stock outstanding at the effective time
of the Merger (assuming conversion of all Preferred Stock into Common Stock on
the basis of one share of Common Stock for each share of Preferred Stock). Based
on the number of shares of InfoSpinner Common Stock and Preferred Stock
outstanding on January 6, 1997, the Exchange Ratio would be approximately
0.6230. See "The Merger Agreement--Conversion and Exchange of Shares."
BACKGROUND OF THE MERGER
The founder of InfoSpinner, Keith A. Lowery, is a former engineering manager
of Centura who was employed by Centura from early 1990 until late 1995, when he
resigned from Centura on positive terms to found InfoSpinner and focus on the
emerging market for Internet integration software.
During 1996, as a part of its restructuring efforts, Centura announced the
introduction of products designed to service the Internet and corporate Intranet
marketplace, which is the same marketplace addressed by InfoSpinner. After brief
discussions in the early fall of 1996, it became clear that a combination of
technologies and/or operations would be desirable if appropriate terms could be
reached.
Initial discussions regarding a possible business combination of the two
companies commenced in late October 1996. During a series of meetings occurring
through mid-November, general terms and parameters of various business
combinations were discussed. During that same period representatives of both
companies worked together, under a mutual nondisclosure arrangement, to explore
the business impact of these various business combinations.
On November 22, 1996, Centura retained Hambrecht and Quist LLC to advise
Centura with regard to a possible business combination of the two companies and
to advise Centura's Board of Directors regarding the fair valuation of
InfoSpinner and the impact on Centura operations of the various business
combinations.
A tentative understanding on terms was reached during the middle of December
1996, subject to review by the Boards of Directors of both companies and further
subject to Hambrecht & Quist's ability to render a fairness opinion from a
financial standpoint.
On December 13, 1996, Centura's Board of Directors (except with Mr. Gupta
dissenting) authorized Centura's management to negotiate definitive agreements
to acquire InfoSpinner.
RECOMMENDATION OF CENTURA BOARD OF DIRECTORS; REASONS FOR MERGER
The Centura Board of Directors has approved the Merger Agreement (except
with Mr. Gupta dissenting). The Board believes that the terms of the Merger and
the Merger Agreement are fair to, and in
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the best interests of, Centura and its shareholders, and recommends that
shareholders of Centura vote FOR approval and adoption of the Merger and the
Merger Agreement.
The Centura Board of Directors based its approval of the Merger Agreement
and its determination that the Merger Agreement is in the best interests of
Centura and its shareholders upon a number of factors, including the following
advantages of the Merger.
COMPLIMENTARY PRODUCTS: Centura's Board of Directors believes that
InfoSpinner's products complement Centura's existing product line and enable
Centura to establish a strong position in the emerging Internet and corporate
Intranet marketplace, which is widely discussed and anticipated to experience
substantial growth.
INCREASED MARKET PENETRATION: Centura's Board of Directors believes that
InfoSpinners' products will enable Centura to expand its marketing efforts into
a larger marketplace, including access to customers who have previously chosen
products from some of Centura's competitors. Additionally, Centura's customer
base, existing marketing organization and other resources will enable it to
deliver InfoSpinner products to market in a manner that is more advantageous
than that undertaken by InfoSpinner alone.
EFFICIENCY OF OPERATIONS: Centura's Board of Directors believes that the
combination of Centura's and InfoSpinner's engineering, marketing and
operational personnel will enable both operations to more quickly service their
respective products and customers.
IMPACT OF OTHER PRODUCTS: Centura's Board of Directors believes that
incorporating and integrating InfoSpinner's products with those of Centura will
enable a redeployment of existing Centura resources to other projects and
increase Centura's efficiency and competitiveness in other areas.
The Board of Directors of Centura views the Merger as a means to increase
the value of the combined companies to Centura's shareholders. In evaluating the
proposed Merger, the Board of Directors of Centura considered and discussed a
wide variety of factors, including the details of the Merger Agreement,
Centura's and InfoSpinner's respective products and the synergies between those
products and markets, the recent trading activity of Centura's stock and
financial terms of the Merger Agreement. The Board of Directors of Centura also
discussed each component of the Merger Agreement in light of its fairness to
Centura's shareholders, projected dilution to existing Centura shareholders
resulting from the issuance of the Merger Shares, the impact of the Merger on
current employees of Centura, and the requirements for a tax-free transaction
which could be accounted for as a pooling of interests. In addition, the Board
of Directors of Centura considered the advantages and disadvantages that the
Merger would present to Centura's achievement of its strategic objectives. As
part of the evaluation process, the Board of Directors of Centura reviewed
information about the business, operations and future prospects of both
InfoSpinner and Centura, including Centura's recent operating results, the
relative assets, revenues and results of operations of Centura and InfoSpinner,
and the opinion of Centura's financial advisor, Hambrecht & Quist.
The Board of Directors of Centura also considered the following potentially
negative factors: (i) the potential disruption of Centura's business that might
result from both employee uncertainty and customer uncertainty as a result of
the Merger and during the combination of the operations of Centura and
InfoSpinner; (ii) the possibility that the Merger might not be consummated, and
the effects of the public announcement of the Merger on (A) Centura's revenues
and operating results, and (B) Centura's ability to attract and retain key
management, marketing and technical personnel; (iii) the possible effects of the
public announcement of the Merger on the market price of Centura's Common Stock;
(iv) the risk that, despite the intentions and the efforts of the parties to
reassure Centura's customers and distributors regarding the combined company's
intention to support their future sales efforts, the announcement of the Merger
could result in decisions by such customers or distributors to delay or cancel
purchases of Centura products; (v) the risk that the anticipated benefits of the
Merger will not be realized; (vi) other companies with significantly greater
resources will enter this market and (vii) the other risks described above under
"Risk Factors."
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After considering the foregoing factors, the Board of Directors of Centura
(with Mr. Gupta dissenting) approved the Merger Agreement and the transactions
contemplated thereby, including the Merger, and recommended that the
stockholders of Centura approve and adopt the Merger Agreement and the Merger.
Mr. Gupta's dissent stemmed from his stated belief that much of the short-term
revenue benefit to Centura, if any, associated with the Merger could be achieved
through an OEM licensing agreement with InfoSpinner without the market and
technological risks, financial cost, and operational issues resulting from the
Merger. The Board considered Mr. Gupta's perspective, but rejected his position
based on the analysis of management and Centura's outside advisors and the
Board's determination that an immediate merger of the companies would, among
other factors, enable Centura to establish a strong position in the emerging
Internet and corporate Intranet marketplace, expand its marketing efforts into a
potentially larger marketplace and determine the strategic development of the
InfoSpinner technology. In view of the wide variety of factors considered, both
positive and negative, the Board of Directors of Centura did not find it
practicable to, and did not, quantify or otherwise assign relative weights to
the specific factors considered.
RECOMMENDATION OF INFOSPINNER BOARD OF DIRECTORS; REASONS FOR MERGER
The Board of Directors of InfoSpinner has unanimously approved the Merger
and the Merger Agreement. The Board believes that the terms of the Merger and
the Merger Agreement are fair to, and in the best interests of, InfoSpinner and
its stockholders, and unanimously recommends that stockholders of InfoSpinner
vote FOR approval and adoption of the Merger and the Merger Agreement.
The Board of Directors of InfoSpinner believes that the proposed Merger
would afford InfoSpinner the following additional advantages and a greater
opportunity to accomplish its strategic objectives:
ECONOMIES OF SCALE. The Board of Directors of InfoSpinner believes that
the combination of the two companies would allow InfoSpinner to realize
economies of scale with respect to financial resources, product distribution
channels, a larger installed base of customers and marketing visibility.
COMPLEMENTARY REGIONAL MARKETING. As a result of the complementary
geographical coverage of the marketing programs of the two companies, the
Board of Directors of InfoSpinner believes that the combined company will be
better positioned to market and distribute its products on a worldwide
basis.
ACCELERATED MARKET AWARENESS OF INFOSPINNER PRODUCTS. The Board of
Directors of InfoSpinner believes that Centura's financial and marketing
resources will enable the combined company to accelerate market awareness of
InfoSpinner's products.
SIMILAR CUSTOMER BASE. The Board of Directors of InfoSpinner believes
that substantial benefits in joint marketing will result based on the
similar customer profile of users of the two companies' products, coupled
with the minimal overlap in functionality between the products, thus
allowing the combined company to market more comprehensive software
solutions to a larger identified customer base.
ACCESS TO CAPITAL. The Board of Directors of InfoSpinner believes that
Centura's current resources and access to public markets will allow
InfoSpinner increased operating flexibility and the opportunity to pursue
enhanced development activities.
COMPLEMENTARY OPERATIONS. The Board of Directors of InfoSpinner
believes that the businesses of Centura and InfoSpinner are complementary on
all levels--strategic, operating, technical and marketing.
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EMPLOYEE RECRUITMENT AND RETENTION. The Board of Directors of
InfoSpinner believes that, in addition to greater stability, a publicly
traded company has greater ability to provide financial incentives in order
to recruit and retain employees.
STOCKHOLDER LIQUIDITY. The Board of Directors of InfoSpinner believes
that the Merger will provide InfoSpinner stockholders with the ability to
convert a currently illiquid investment into a liquid one with the
opportunity to realize a future return based on the potential appreciation
of Centura's Common Stock after the Merger.
The Board of Directors of InfoSpinner believes that the prinicpal
disadvantages of the proposed Merger are as follows:
LOSS OF EXCLUSIVE OPPORTUNITY. InfoSpinner stockholders will lose the
opportunity to develop and exploit InfoSpinner's products for their sole
benefit. The combined company may make strategic decisions that differ from
those that InfoSpinner would have made absent the Merger.
DILUTION. InfoSpinner stockholders will suffer dilution in connection
with the proposed Merger. Based on the capitalization of the companies as of
the Record Date, InfoSpinner stockholders will own approximately 23% of the
outstanding shares of the combined company.
In evaluating the proposed Merger, the Board of Directors of InfoSpinner
considered and discussed a wide variety of factors, including the details of the
Merger Agreement, a description of Centura's business and the recent trading
activity of Centura's stock. The Board of Directors of InfoSpinner also
discussed each component of the Merger Agreement in light of its fairness to
InfoSpinner's stockholders, the impact of the Merger on current employees of
InfoSpinner, the availability of liquidity to InfoSpinner's stockholders, and
the requirements for a tax-free transaction which could be accounted for as a
pooling of interests. In addition, the Board of Directors of InfoSpinner
considered the advantages and disadvantages that the Merger would present to
InfoSpinner's achievement of its strategic objectives. As part of the evaluation
process, the Board of Directors of InfoSpinner reviewed information about the
business, operations and future prospects of both InfoSpinner and Centura,
including Centura's recent operating results and product launch and
InfoSpinner's current business plans.
The Board of Directors of InfoSpinner also considered the following
potentially negative factors: (i) the potential disruption of InfoSpinner's
business that might result from employee uncertainty and lack of focus following
announcement of the Merger and during the combination of the operations of
Centura and InfoSpinner; (ii) the possibility that the Merger might not be
consummated, and the effects of the public announcement of the Merger on (A)
InfoSpinner's revenues and operating results, and (B) InfoSpinner's ability to
attract and retain key management, marketing and technical personnel; (iii) the
possible effects of the public announcement of the Merger on the market price of
Centura's Common Stock; (iv) the risk that, despite the intentions and the
efforts of the parties to reassure InfoSpinner's distributors regarding the
combined company's intention to support their future sales efforts, the
announcement of the Merger could result in decisions by such distributors to
delay or cancel purchases of InfoSpinner products; (v) the risk that the
anticipated benefits of the Merger will not be realized; (vi) the risk that the
Merger may not qualify as a pooling of interests for accounting purposes and
financial reporting purposes; and (vii) the other risks described above under
"Risk Factors."
After considering the foregoing factors, the Board of Directors of
InfoSpinner unanimously approved the Merger Agreement and the transactions
contemplated thereby, including the Merger, and recommended that the
stockholders of InfoSpinner approve and adopt the Merger Agreement and the
Merger. In view of the wide variety of factors considered, both positive and
negative, the board of Directors of InfoSpinner did not find it practicable to,
and did not, quantify or otherwise assign relative weights to the specific
factors considered.
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OPINION OF FINANCIAL ADVISOR TO CENTURA
Centura engaged Hambrecht & Quist LLC ("Hambrecht & Quist") to act as its
financial advisor in connection with the Merger and to render an opinion as to
the fairness from a financial point of view to Centura of the consideration to
be paid by Centura in connection with the Merger. The number of shares of
Centura Common Stock comprising the Merger consideration was determined as the
result of arms-length negotiation between Centura and InfoSpinner management. It
was not based on a recommendation from Hambrecht & Quist. Hambrecht & Quist
rendered its oral opinion to Centura's Board of Directors, subsequently
confirmed in writing on January 6, 1997, that, as of such date, the
consideration to be paid by Centura pursuant to the Merger Agreement is fair to
Centura from a financial point of view. The fairness opinion of Hambrecht &
Quist will not be updated to the closing of the merger and therefore the
delivery of the Hambrecht & Quist opinion to the Centura Board of Directors
should not be used by Centura shareholders to evaluate the Merger. A COPY OF
HAMBRECHT & QUIST'S OPINION DATED JANUARY 6, 1997, WHICH SETS FORTH THE
ASSUMPTIONS MADE, MATTERS CONSIDERED, THE SCOPE AND LIMITATION OF THE REVIEW
UNDERTAKEN AND THE PROCEDURES FOLLOWED BY HAMBRECHT & QUIST IS ATTACHED AS ANNEX
B TO THIS PROXY STATEMENT. CENTURA STOCKHOLDERS ARE ADVISED TO READ THE OPINION
IN ITS ENTIRETY. Stockholders should note that the opinion was written for the
information of the Board of Directors in connection with their evaluation of the
Merger. No limitations were placed on Hambrecht & Quist by the Board of
Directors of Centura with respect to the investigation made or the procedures
followed in preparing and rendering its opinion.
In its review of the Merger, and in arriving at its opinion, Hambrecht &
Quist, among other things: (i) reviewed the publicly available consolidated
financial statements of Centura for recent years and interim periods to date and
certain other relevant financial and operating data of Centura made available to
Hambrecht & Quist from published sources and from the internal records of
Centura; (ii) reviewed certain internal financial and operating information,
including certain projections, relating to Centura prepared by the management of
Centura (including preliminary revenue and cost projections prepared by
management); (iii) discussed with certain members of the management of Centura
the business, financial condition and prospects of Centura; (iv) reviewed
certain relevant financial and operating data of InfoSpinner made available to
Hambrecht & Quist from the internal records of InfoSpinner; (v) reviewed certain
internal financial and operating information, including certain projections
relating to InfoSpinner prepared by the management of InfoSpinner (including
preliminary revenue and cost projections prepared by management); (vi) discussed
with certain members of the management of InfoSpinner the business, financial
condition and prospects of InfoSpinner; (vii) reviewed the recent reported
prices and trading activity for Centura's Common Stock and compared such
information and certain financial information of Centura and InfoSpinner with
similar information for certain other companies engaged in businesses Hambrecht
& Quist considered comparable to those of Centura and InfoSpinner; (viii)
reviewed the financial terms, to the extent publicly available, of certain
comparable merger and acquisition transactions; (ix) reviewed the Merger
Agreement; (x) discussed the tax and accounting treatment of the Merger with
Centura and Centura's lawyers and accountants; and (xi) performed such other
analyses and examinations and considered such other information, financial
studies, analyses and investigations and financial, economic and market data
Hambrecht & Quist deemed relevant.
Hambrecht & Quist did not independently verify any of the information
concerning Centura or InfoSpinner considered in connection with its review of
the Merger and, for purposes of its opinion, Hambrecht & Quist assumed and
relied upon the accuracy and completeness of all such information. In
particular, Hambrecht & Quist did not modify or alter the projections provided
to it by Centura relating to Centura and InfoSpinner. In connection with its
opinion, Hambrecht & Quist did not prepare or obtain any independent evaluation
or appraisal of any of the assets or liabilities of Centura or InfoSpinner, nor
did it conduct a physical inspection of the properties and facilities of Centura
or InfoSpinner. Hambrecht & Quist also assumed that neither Centura nor
InfoSpinner was a party to any pending transactions,
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including external financings, recapitalizations or merger discussions, other
than the Merger and those in the ordinary course of conducting their respective
businesses. For purposes of its opinion, Hambrecht & Quist assumed that the
Merger will qualify as a tax-free reorganization under the Code for the
shareholders of Centura and that the Merger will be accounted for as a pooling
of interests. Hambrecht & Quist's opinion is necessarily based upon market,
economic, financial and other conditions as they exist and can be evaluated as
of the date of the opinion and any subsequent change in such conditions would
require a reevaluation of such opinion. See "Risk Factors--Limitation on Opinion
of Financial Advisor to Centura."
The preparation of a fairness opinion is a complex process and is not
necessarily susceptible to partial analysis or summary description. The summary
of the Hambrecht & Quist analyses set forth below does not purport to be a
complete description of the presentation by Hambrecht & Quist to Centura's Board
of Directors. In arriving at is opinion, Hambrecht & Quist did not attribute any
particular weight to any analyses or factors considered by it, but rather made
qualitative judgments as to the significance and relevance of each analysis and
factor. Accordingly, Hambrecht & Quist believes that its analyses and the
summary set forth below must be considered as a whole and that selecting
portions of its analyses, without considering all analyses, or of the following
summary, without considering all factors and analyses, could create an
incomplete view of the processes underlying the analyses set forth in the
Hambrecht & Quist presentation to the Centura Board of Directors and its
opinion. In performing its analyses, Hambrecht & Quist made numerous assumptions
with respect to industry performance, general business and economic conditions
and other matters, many of which are beyond the control of Centura and
InfoSpinner. The analyses performed by Hambrecht & Quist (and summarized below)
are not necessarily indicative of actual values or actual future results, which
may be significantly more or less favorable than suggested by such analyses.
Additionally, analyses relating to the values of businesses do not purport to be
appraisals or to reflect the prices at which businesses actually may be
acquired.
The following is a brief summary of certain financial analyses performed by
Hambrecht & Quist in connection with providing its written opinion to Centura's
Board of Directors on January 6, 1997:
ANALYSIS OF PUBLICLY TRADED COMPARABLE COMPANIES: Hambrecht & Quist
compared selected historical and projected financial information of InfoSpinner
to publicly traded companies Hambrecht & Quist deemed to be comparable to
InfoSpinner. Such data and ratios included market value, market value to
historical and projected net income, and net income growth rates. Hambrecht &
Quist also examined the ratio of the enterprise value (market value plus debt
less cash) to the historical and projected revenues and historical earnings
before interest, taxes, depreciation and amortization. Companies used as
comparables included Borland International, Inc., Cognos, Inc., Forte Software
Inc., Informix Corp., INTERSOLV, Inc., Object Design, Inc., OneWave, Inc.,
Oracle Corp., Progress Software Corp., Seer Technologies, Inc., Sybase, Inc.,
Visigenic Software Inc. and VMARK Software, Inc. The foregoing multiples were
applied to estimated financial results of InfoSpinner for the twelve-month
period ended December 31, 1996 and projected financial results of InfoSpinner
based on Centura management estimates for InfoSpinner for calendar 1997 and
1998. Hambrecht & Quist determined that the average multiple of the last-twelve-
months revenues for these companies was 5.4. Hambrecht & Quist determined that
the average multiple of last-twelve-months earnings before interest, taxes,
depreciation and amortization for these companies was 39.7. Hambrecht & Quist
determined that, for the expected results for calendar year 1997, the average
multiple of revenues for these companies was 3.3. Hambrecht & Quist determined
that for the expected results for calendar year 1997, the average multiple of
net income for these companies was 46.0. Hambrecht & Quist determined that for
the expected results for calendar year 1998, the average multiple of net income
for these companies was 24.3. Hambrecht & Quist also analyzed InfoSpinner's
projected 1997 and 1998 revenues utilizing the last-twelve-months revenue
multiple above, discounting at rates of 50%--100% to present value. This
discount was deemed by Hambrecht & Quist to be reasonable based on the return on
investment typically expected by venture investors investing in early stage
growth companies similar to InfoSpinner. Based on the analysis of publicly
traded comparable companies, InfoSpinner's implied equity value ranged from
approximately $16 million to approximately $60 million. This compared
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with an implied value of $15.2 million of InfoSpinner in the Merger, based on
the closing price of Centura Common Stock on January 6, 1997.
ANALYSIS OF SELECTED MERGER AND ACQUISITION TRANSACTIONS: Hambrecht & Quist
compared the proposed merger with selected comparable merger and acquisition
transactions. This analysis included 14 comparable public and private company
transactions. In examining these transactions, Hambrecht & Quist analyzed
certain income statement and balance sheet parameters of the acquired company
relative to the consideration offered. Multiples analyzed included consideration
offered to historical revenue, to historical cash flow from operations, to
historical earnings before interest, taxes, depreciation and amortization, to
historical earnings before interest and taxes, to historical net income and to
historical book value. Selected transactions analyzed include Atria Software,
Inc./Pure Software, Inc., Open Environment Corp./Borland International, Inc.,
Assets of IRI Software/Oracle Corp., Digitalk, Inc./ParcPlace Systems, Inc.,
Trinzinc Corp./Platinum Technology, Inc., Easel Corp./VMARK Software, Inc.,
Powersoft Corp./Sybase, Inc., DEC Database Division/Oracle Corp., ASK Group
Inc./Computer Associates International Inc., Q+E Software/ INTERSOLV Inc.,
Uniface Holding B.V./Compuware Corp., Gain Technology, Inc./Sybase, Inc.,
Ashton-Tate Corp./Borland International, Inc., and Ingres Corp./ASK Computer
Systems, Inc. The consideration offered in the foregoing transactions was an
average multiple of 3.8 times revenue, 34.5 times earnings before depreciation,
interest and taxes, 45.7 times earnings before interest and taxes, 79.6 times
net income, 7.9 times book value and 32.5 times cash flow from operations. Since
InfoSpinner is a newly-formed company, it does not have meaningful historical
results to which to apply the above multiples. However, Hambrecht & Quist also
analyzed InfoSpinner's projected 1997 and 1998 revenues utilizing the revenue
multiple above, discounting at rates of 50%--100% to present value. The other
multiples and other historical financial data derived from the transactions
deemed comparable were displayed only to provide background information and
context on the transactions shown and were not employed directly in the
valuation process. This discount was deemed by Hambrecht & Quist to be
reasonable based on the return on investment typically expected by venture
investors investing in early stage growth companies similar to InfoSpinner.
Based on the analysis of selected merger and acquisition transactions,
InfoSpinner's implied equity value, calculated by multiplying the revenue
multiple times the projected revenues and applying the 50%-100% discount, ranged
from approximately $12 million to $32 million. This compared with an implied
value of $15.2 million of InfoSpinner in the Merger as of the date of the
Hambrecht & Quist opinion.
CONTRIBUTION ANALYSIS: Hambrecht & Quist analyzed the contribution of each
of Centura and InfoSpinner, excluding any synergies, to certain financial
statement categories of the pro forma combined company, including revenue, gross
profit, operating income, and net income. This analysis was based on the
preliminary internal projected revenue and expense data provided to Hambrecht &
Quist by Centura, and Hambrecht & Quist assumed the accuracy of these
projections. This contribution analysis was then compared to the pro forma
ownership percentage of Centura and InfoSpinner stockholders in the pro forma
combined company. Hambrecht & Quist examined the expected contributions to the
combined company's revenues, gross profit, operating income and pro forma net
income by Centura for 1998 derived from Centura management estimates, and by
InfoSpinner for 1998 derived from Centura management estimates. Hambrecht &
Quist observed that Centura stockholders are expected to own approximately 77%
of the combined company equity at the close of the Merger, and the InfoSpinner
stockholders are expected to own approximately 23% of the combined company at
the close of the Merger. In 1998, it was estimated that Centura and InfoSpinner
would have contributed approximately 80% and 20%, respectively, of the combined
revenues; approximately 79% and 21%, respectively, of the combined gross profit;
approximately 70% and 30%, respectively, of the combined operating income; and
approximately 70% and 30%, respectively, of the combined pro forma net income.
DISCOUNTED CASH FLOW ANALYSIS: Hambrecht & Quist analyzed the theoretical
valuation of InfoSpinner based on the unleveraged discounted cash flow of the
projected financial performance estimates for InfoSpinner. However, because of
the nature of InfoSpinner's business and the current market valuations
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for software companies, Hambrecht & Quist advised Centura's Board of Directors
that this analysis did not provide meaningful information in the context
analyzing the fairness from a financial point of view of the Merger.
No company or transaction used in the above analyses is identical to Centura
or InfoSpinner or the Merger. Accordingly, an analysis of the results of the
foregoing is not mathematical; rather it involves complex considerations and
judgments concerning differences in financial and operating characteristics of
the companies and other factors that could affect the public trading values of
the companies or company to which they are compared.
The foregoing description of Hambrecht & Quist's opinion is qualified in its
entirety by reference to the full text of such opinion which is attached as
ANNEX B to this Proxy Statement.
Hambrecht & Quist, as part of its investment banking services, is regularly
engaged in the valuation of businesses and their securities in connection with
mergers and acquisitions, corporate restructurings, strategic alliances,
negotiated underwritings, secondary distributions of listed and unlisted
securities, private placements and valuations for corporate and other purposes.
Hambrecht & Quist is familiar with Centura. In the past, Hambrecht & Quist has
provided investment banking and other financial advisory services to Centura and
has received fees for rendering these services. In the most recent two fiscal
years, Hambrecht & Quist has not received any payments from Centura for its
services. Hambrecht & Quist was a managing underwriter for the initial public
offering in February 1993 of Centura when it operated under the name Gupta
Corporation. In the ordinary course of business, Hambrecht & Quist acts as a
market maker and broker in the publicly traded securities of Centura and
receives customary compensation in connection therewith, and has provided
research coverage for Centura. In the ordinary course of business, Hambrecht &
Quist actively trades in the equity and derivative securities of Centura for its
own account and for the accounts of its customers and, accordingly, may at any
time hold a long or short position in such securities. Hambrecht & Quist may in
the future provide additional investment banking or other financial advisory
services to Centura.
Pursuant to an engagement letter dated November 22, 1996, Centura has agreed
to pay Hambrecht & Quist a fee of $150,000 upon the delivery of this fairness
opinion. Additionally, Centura has agreed to issue Hambrecht & Quist a warrant
(to be delivered within a reasonable period of time following the execution of
the Merger Agreement) to acquire 100,000 shares of Centura Common Stock at
$3.125 per share, such warrant to vest in full only upon completion of the
Merger. The warrant shall have a term of 5 years. Centura also has agreed to
reimburse Hambrecht & Quist for its reasonable out-of-pocket expenses and to
indemnify Hambrecht & Quist against certain liabilities, including liabilities
under the federal securities laws or relating to or arising out of Hambrecht &
Quist's engagement as financial advisor.
EFFECTIVE TIME OF THE MERGER
The Merger Agreement provides for the Merger of Merger Sub with and into
InfoSpinner. As a result of the Merger, Merger Sub will cease to exist as a
corporation and InfoSpinner will be the surviving corporation and a wholly owned
subsidiary of Centura.
The Merger Agreement provides that the Merger will become effective when the
Certificate of Merger, together with certain required officers' certificates,
shall have been filed with the Secretary of State of Delaware in accordance with
the Delaware General Corporation Law (the "Effective Time"). See "--Conditions
to the Merger." It is anticipated that, if the Merger is approved at the
Meetings and all other conditions of the Merger have been fulfilled or waived,
the Effective Time will occur on a date as soon as practicable after the
Meetings have been held.
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MANNER AND BASIS OF CONVERTING INFOSPINNER SECURITIES
CONVERSION OF INFOSPINNER STOCK. At the Effective Time of the Merger, each
outstanding share of InfoSpinner Common Stock and InfoSpinner Preferred Stock
will be converted into that number of shares of Centura Common Stock determined
in accordance with the provisions, definitions and conversion formulas set forth
below.
Each share of InfoSpinner Common Stock issued and outstanding immediately
prior to the Effective Time (other than Dissenting Shares (as defined below))
will be canceled and extinguished and converted automatically into the right to
receive a number of shares of Centura Common Stock equal to the Common Stock
Conversion Ratio (as defined below). Each share of InfoSpinner Series A
Preferred Stock ("Series A") issued and outstanding immediately prior to the
Effective Time (other than Dissenting Shares) will be canceled and extinguished
and converted automatically into the right to receive a number of shares of
Centura Common Stock equal to the Series A Preferred Stock Conversion Ratio (as
defined below). Each share of InfoSpinner Series B Preferred Stock ("Series B")
issued and outstanding immediately prior to the Effective Time (other than
Dissenting Shares) will be canceled and extinguished and converted automatically
into the right to receive a number of shares of Centura Common Stock equal to
the Series B Preferred Stock Conversion Ratio (as defined below). The Common
Stock Conversion Ratio, the Series A Preferred Stock Conversion Ratio and Series
B Preferred Stock Conversion Ratio may hereinafter be referred to collectively
as the "Conversion Ratios" or the "Exchange Ratios."
In the event the Certificate Average Stock Price of Centura Common Stock
falls below certain threshold levels (approximately $2.92 for the conversion of
Series B and approximately $0.32 for the conversion of Series A), the holders of
Series B and Series A will most likely not convert their shares of Preferred
Stock into Common Stock in order to retain the liquidation preference amounts
associated with such shares of Preferred Stock. In accordance with the
InfoSpinner Restated Certificate of Incorporation (the "Certificate"), the
holders of InfoSpinner Preferred Stock will receive shares of Centura Common
Stock in proportion to the liquidation preference amount of each series of
Preferred Stock held by such holders. Such amounts will be paid prior to any
payment of shares of Centura Common Stock to holders of InfoSpinner Common
Stock. Specifically, the number of shares of Centura Common Stock to be received
by holders of Series A and Series B will depend on the Series A Preferred Stock
Conversion Ratio and the Series B Preferred Stock Conversion Ratio.
Both the Series A Preferred Stock Conversion Ratio and the Series B
Preferred Stock Conversion Ratio provide for alternative ways to calculate the
number of shares of Centura Common Stock to be received by holders of Series A
and Series B, respectively, to ensure that such holders will receive, at a
minimum, the number of shares of Centura Common Stock equal in value (based on
the Certificate Average Stock Price) to the respective liquidation values of the
Series A and Series B set forth in the Certificate prior to any distribution of
Centura Common Stock to holders of InfoSpinner Common Stock. The Series B
Preferred Stock Conversion Ratio is equal to the greater of the Series B
Liquidation Preference set forth in the Certificate ($1.82) divided by the
Certificate Average Stock Price of Centura Common Stock (the "Series B
Liquidation Ratio") or the Common Stock Conversion Ratio and the Series A
Preferred Stock Conversion Ratio is equal to the greater of the Series A
Liquidation Preference set forth in the Certificate ($0.20) divided by the
Certificate Average Stock Price of Centura Common Stock (the "Series A
Liquidation Ratio") or the Common Stock Conversion Ratio. The Series B
Liquidation Ratio will exceed 0.6230 in the same proportion that the Certificate
Average Stock Price falls below $2.92 and the Series A Liquidation Ratio will
exceed 0.6230 in the same proportion that the Certificate Average Stock Price
falls below $0.32. The Common Stock Conversion Ratio will be reduced
proportionally to offset the increased value of either or both of the Preferred
Stock Conversion Ratios. If the Certificate Average Stock Price of Centura
Common Stock exceeds the Series B and Series A thresholds of $2.92 and $0.32,
respectively, the Common Stock Conversion Ratio will be greater than both the
Series B Liquidation Ratio and the Series A Liquidation Ratio, and it is
anticipated that holders of
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Series B and Series A will elect to convert their InfoSpinner Preferred Stock to
Common Stock and receive their pro rata share of the Merger consideration based
on the Common Stock Conversion Ratio.
Pursuant to the definitions set forth below, the Series A and Series B
conversion thresholds are calculated as follow:
1. The Series A Preferred Stock Conversion Ratio will be the greater of:
(A) $.20 + unpaid dividends (=$0) / Certificate Average Stock Price or
(B) Common Stock Conversion Ratio (=$0.6230) x $0.20/$0.20 = $0.6230
Therefore, for 1(A) to apply, the Certificate Average Stock Price must be less
than $.32 per share.
2. The Series B Preferred Stock Conversion Ratio will be the greater of:
(A) $1.82 + unpaid dividends (=$0) / Certificate Average Stock Price or
(B) Common Stock Conversion Ratio (=$0.6230) x $1.82/$1.82 = $0.6230
Therefore, for 2(A) to apply, the Certificate Average Stock Price must be less
than $2.92 per share.
If, for example, the Certificate Average Stock Price equals or is higher
than $3.00 per share, the calculation under 1(A) equals a maximum 0.0667 and the
calculation under 2(A) equals a maximum of 0.6067, and the holders of
InfoSpinner Series A and Series B will choose to convert their Series A and
Series B to Common Stock and benefit from the higher exchange ratio of 0.6230.
If the Certificate Average Stock Price equals $2.00 per share, the
calculation under 1(A) above equals 0.10 and the calculation under 2(A) above
equals 0.91. Therefore, the holders of InfoSpinner Series A will choose to
convert their Series A to Common Stock and benefit from the higher exchange
ratio of .593001 (as calculated below). The holders of Series B, however, will
choose to convert their Series B to shares of Centura Common Stock at the
exchange rate of 0.91 (the Series B Liquidation Ratio), and will therefore be
eligible to receive a maximum of 621,771 shares of Centura Common Stock (683,265
Series B Preferred Shares x 0.91).
The Common Stock Conversion Ratio will be recalculated as follows:
(Aggregate Stock Number less shares issued to Series B Holders pursuant to the
Series B Liquidation Ratio) divided by (total number of shares of InfoSpinner
capital stock outstanding less the number of shares of Series B converted at the
Series B Liquidation Ratio):
(4,500,000 - 621,771 = 3,878,229) / (7,223,265 - 683,265 = 6,540,000) = 0.593001
Therefore, the 6,030,000 shares of InfoSpinner Common Stock outstanding will be
converted at the exchange rate of 0.593001 into a maximum of 3,575,798 shares of
Centura Common Stock, and the 510,000 shares of Series A outstanding will be
converted at the exchange rate of 0.593001 into a maximum of 302,431 shares of
Centura Common Stock. Not including fractional shares, the total number of
shares of Centura Common Stock issued will be 4,500,000 (= 621,771 + 3,575,798 +
302,431).
If the Certificate Average Stock Price equals $1.00 per share, the
calculation under 1(A) above equals 0.20 and the calculation under 2(A) above
equals 1.82. The holders of Series B will again choose to convert their Series B
to shares of Centura Common Stock at the exchange rate of 1.82 (the Series B
Liquidation Ratio), and will be eligible to receive a maximum of 1,243,542
shares of Centura Common Stock (683,265 Series B Preferred Shares x 1.82).
The Common Stock Conversion Ratio will be recalculated as follows:
(4,500,000 - 1,243,542 = 3,256,458) / (7,223,265 - 683,265 = 6,540,000) =
0.497929
Therefore, the 6,030,000 shares of InfoSpinner Common Stock outstanding will be
converted at the exchange rate of 0.497929 into a maximum of 3,002,514 shares of
Centura Common Stock, and the 510,000 shares of Series A outstanding will be
converted at the exchange rate of 0.497929 into a maximum of 253,944 shares of
Centura Common Stock. Not including fractional shares, the total number of
shares of Centura Common Stock issued will be 4,500,000 (= 1,243,542 + 3,002,514
+ 253,944).
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The following Table summarizes the impact of a change in the Certificate Average
Stock Price:
<TABLE>
<CAPTION>
As of February 28, 1997:
<S> <C>
Number of Centura Shares to be issued: 4,500,000
Number of shares of InfoSpinner:
Common Stock 6,030,000
Series A 510,000
Series B 683,265
</TABLE>
<TABLE>
<CAPTION>
CERTIFICATE AVERAGE SHARES RECEIVED BY SHARES RECEIVED BY SHARES RECEIVED BY
STOCK PRICE COMMON HOLDERS SERIES A HOLDERS SERIES B HOLDERS
- ------------------------ ------------------------ ------------------------ ------------------------
<S> <C> <C> <C>
$2.92 or higher 3,756,611 317,723 425,665
$2.00 3,575,798 302,431 621,771
$1.00 3,002,514 253,944 1,243,542
</TABLE>
InfoSpinner Preferred Stockholders who have executed Affiliate Agreements and
irrevocable proxies to vote for the Merger are Robert L. West and Evelyn West.
However, they hold Series A stock and no Series B stock. No holder of
InfoSpinner Preferred Stock has entered into a binding agreement to convert such
shares into InfoSpinner Common Stock prior to consummation of the Merger.
"AGGREGATE STOCK NUMBER" means 4,500,000 shares.
"CERTIFICATE AVERAGE STOCK PRICE" means the average of the closing sale
prices of Centura Common Stock reported in the Wall Street Journal, on the basis
of information provided by the Nasdaq National Market during the thirty-day
period ending three days prior to the Effective Time.
"COMMON STOCK CONVERSION RATIO" means the amount equal to the quotient
obtained by dividing (i) the Aggregate Stock Number by (ii) the Total Pre-Merger
Common Stock Equivalents; provided, however, that for purposes of calculating
the Common Stock Conversion Ratio, the Aggregate Stock Number shall be reduced
by the total number of shares of Centura Common Stock to be issued upon
conversion of InfoSpinner Series A Preferred Stock if the Series A Preferred
Stock Conversion Ratio is determined to be equal to the Series A Liquidation
Ratio and shall be reduced by the total number of shares of Centura Common Stock
to be issued upon conversion of InfoSpinner Series B Preferred Stock if the
Series B Preferred Stock Conversion Ratio is determined to be equal to the
Series B Liquidation Ratio.
"DISSENTING SHARES" means any shares of InfoSpinner capital stock held by
an InfoSpinner stockholder who has demanded and perfected appraisal rights for
such shares in accordance with DGCL and who has not, as of the Effective Time,
withdrawn or lost such appraisal rights.
"SERIES A PREFERRED STOCK CONVERSION RATIO" means an amount equal to the
greater of (A) the quotient (such quotient, "The Series A Liquidation Ratio")
obtained by dividing (i) the sum of $0.20 (appropriately adjusted to reflect the
occurrence prior to the Effective Time of any stock split or combination or the
like of InfoSpinner Series A Preferred Stock or dividend of InfoSpinner Series A
Preferred Stock, or the like) and the declared but unpaid dividends on one share
of Series A Preferred Stock computed as of the Effective Time (such sum the
"Series A Liquidation Preference") by (ii) the Certificate Average Stock Price
or (B) the product of (i) the Common Stock Conversion Ratio (assuming no
reduction in the Total Pre-Merger Common Stock Equivalents), and (ii) $0.20
divided by the then applicable conversion price for the InfoSpinner Series A
Preferred Stock (as set forth in Section 4 of Article III of InfoSpinner's
Certificate of Incorporation).
"SERIES B PREFERRED STOCK CONVERSION RATIO" means an amount equal to the
greater of (A) the quotient (such quotient, the "Series B Liquidation Ratio")
obtained by dividing (i) the sum of $1.82
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<PAGE>
(appropriately adjusted to reflect the occurrence prior to the Effective Time of
any stock split or combination of InfoSpinner Series B Preferred Stock, dividend
of InfoSpinner Series B Preferred Stock, or the like) and the declared but
unpaid dividends on one share of Series B Preferred Stock computed as of the
Effective Time (such sum, the "Series B Liquidation Preference") by (ii) the
Certificate Average Stock Price or (B) the product of (i) the Common Stock
Conversion Ratio (assuming no reduction in the Total Pre-Merger Common Stock
Equivalents), and (ii) $1.82 divided by the then applicable conversion price for
InfoSpinner Series B Preferred Stock (as set forth in Section 4 of Article III
of InfoSpinner Certificate of Incorporation).
"TOTAL PRE-MERGER COMMON STOCK EQUIVALENTS" means the total number of
shares of outstanding InfoSpinner Common Stock immediately prior to the
Effective Time. For purposes of this definition, all shares of InfoSpinner
Common Stock issuable upon exercise of options or upon conversion, exchange or
exercise of other securities or other rights outstanding immediately prior to
the Effective Time (regardless of whether then exercisable, convertible or
exchangeable), shall be deemed outstanding; provided, however, that for purposes
of calculating Total Pre-Merger Common Stock Equivalents, the shares of
InfoSpinner Common Stock issuable upon conversion of InfoSpinner Series A
Preferred Stock shall not be deemed to be outstanding if the Series A Conversion
Ratio is determined to be equal to the Series A Liquidation Ratio and the shares
of InfoSpinner Common Stock issuable upon conversion of InfoSpinner Series B
Preferred Stock shall not be deemed to be outstanding if the Series B Conversion
Ratio is determined to be equal to the Series B Liquidation Ratio.
FRACTIONAL SHARES. No fractional shares shall be issued by Centura in the
Merger. Each stockholder of InfoSpinner otherwise entitled to a fractional
interest shall receive an amount of cash in lieu thereof determined by
multiplying the fractional share interest to which the stockholder would
otherwise be entitled by the closing price of Centura Common Stock on the
Closing Date as reported on the Nasdaq National Market.
MANAGEMENT AND OPERATIONS FOLLOWING THE MERGER
InfoSpinner will become a wholly-owned subsidiary of Centura as a result of
the Merger. Following the Merger, Samuel M. Inman, President and Chief Executive
Officer of Centura, will serve as President and Chief Executive Officer of the
combined company. Keith Lowery, currently InfoSpinner's Vice President and Chief
Technical Officer, will serve as the Senior Internet Technology Architect of the
combined company and report to Earl M. Stahl, Senior Vice President, Engineering
and Chief Technical Officer of Centura.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
Keith A. Lowery, Vice President and Chief Technical Officer and a director
of InfoSpinner, has entered into an employment agreement and noncompetition
agreement with Centura. Under the employment agreement, Mr. Lowery will become
Senior Internet Technology Architect of Centura, will receive a base salary of
$9,808.33 per month and will be eligible for participation in Centura's
management bonus plan. The term of the employment agreement is three years, with
earlier termination permitted upon thirty days prior written notice to the other
party. Premature termination of employment by Centura without valid cause (as
defined in such employment agreements) obligates Centura to pay severance
payments equal to Mr. Lowery's then-current salary, for a period of six months
from termination.
Under the non-competition agreement, Mr. Lowery is restricted from engaging
in activities on behalf of himself or related commercial entities with respect
to participating in any business that engages in the designing, developing,
marketing, or selling of software products that offer feature sets similar to
the current InfoSpinner and Centura products. Such restriction is effective for
a period of three years from the closing of the Merger. Certain other employees
of InfoSpinner have entered into employment and noncompetition agreements with
Centura, in substantially identical form except for provisions relating to
40
<PAGE>
compensation and duties. By their terms, these agreements become effective upon
the closing of the Merger.
Consummation of the Merger will cause InfoSpinner's right of repurchase to
automatically lapse with respect to all unvested shares of InfoSpinner Common
Stock held by Mr. Lowery, John N. Berens, Vice President of Marketing of
InfoSpinner and Yoshi Noguchi, a director of InfoSpinner.
Beacon Information Technology Ltd. ("Beacon"), which owns 663,265 shares of
InfoSpinner Series B Preferred Stock, has entered into a Master Distributorship
Agreement with InfoSpinner dated October 25, 1996 pursuant to which Beacon has
the right to distribute certain of InfoSpinner's products in Japan.
Centura and InfoSpinner have entered into a Distribution Agreement designed
to govern the commercial relationship between the companies during the period
prior to the Effective Time and in the event that the Merger is not consummated.
Pursuant to the Distribution Agreement, InfoSpinner has granted Centura a
nonexclusive, nontransferable worldwide right to reproduce, market and license
use of certain InfoSpinner products during a three-year term. If the Merger is
not consummated for certain reasons, Centura has the right to terminate the
Distribution Agreement. Under terms of the Distribution Agreement, Centura has
agreed to pay to InfoSpinner prepaid royalties totaling $1,250,000 over the
period ending March 1998.
VOTING AND AFFILIATE AGREEMENTS
The officers and directors of Centura and the officers, directors and
affiliates of InfoSpinner (each, a "Shareholder" or "Stockholder") have entered
into irrevocable proxy agreements dated January 6, 1997 (each, a "Voting
Agreement"), pursuant to which each Shareholder or Stockholder agreed, among
other things, to vote all shares of Centura Common Stock or InfoSpinner capital
stock ("InfoSpinner Capital Stock"), as applicable, over which such Shareholder
or Stockholder has voting control in favor of the Merger Agreement and the
Merger, and, with respect to the InfoSpinner Stockholders, to vote all shares of
InfoSpinner Capital Stock over which such Stockholder has voting control against
approval of any other agreement providing for or proposal authorizing a merger,
consolidation or other business combination of InfoSpinner with any person or
entity other than Centura. See "Centura Principal Shareholders" and "InfoSpinner
Principal Stockholders" for the number of shares of Centura Common Stock and
InfoSpinner Capital Stock held by each of the respective Shareholders and
Stockholders. In addition, the officers and directors of Centura and the
officers, directors and affiliates of InfoSpinner have executed affiliate
agreements dated January 6, 1997 (each, an "Affiliate Agreement") pursuant to
which each Shareholder or Stockholder has agreed not to sell, assign, transfer
or otherwise dispose of any shares of InfoSpinner Capital Stock and Centura
Common Stock from the date of such Affiliate Agreements until the date on which
the combined company releases financial results covering at least thirty days of
combined operations of Centura and InfoSpinner. As of the Record Date, the
Shareholders collectively hold 702,488 shares of Centura Common Stock, or 5.1%
of all outstanding shares of Centura Common Stock and the Stockholders
collectively hold 4,640,000 shares of InfoSpinner Common Stock, or 76.9% of all
outstanding shares of InfoSpinner Common Stock, and 450,000 shares of
InfoSpinner Preferred Stock, or 37.7% of all outstanding shares of InfoSpinner
Preferred Stock.
Certain "affiliates" (as that term is defined in Rule 145 under the
Securities Act) of Centura and InfoSpinner have entered into agreements
restricting the sale or disposition of their shares of Centura Common Stock
received in the Merger so as to comply with the requirements of the securities
laws, in the case of affiliates of InfoSpinner, and with the requirements for
"pooling of interests" accounting, in the case of affiliates of both InfoSpinner
and Centura.
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<PAGE>
DELAWARE APPRAISAL RIGHTS
THE FOLLOWING SUMMARY OF APPRAISAL RIGHTS UNDER DELAWARE LAW IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SECTION 262 OF THE DELAWARE GENERAL CORPORATION LAW
(the "DGCL"), THE COMPLETE TEXT OF WHICH IS ATTACHED HERETO AS ANNEX C.
FAILURE TO STRICTLY FOLLOW THE PROCEDURES SET FORTH IN SECTION 262 OF THE
DELAWARE GENERAL CORPORATION LAW MAY RESULT IN THE LOSS, TERMINATION OR WAIVER
OF APPRAISAL RIGHTS. AN INFOSPINNER STOCKHOLDER WHO SIGNS A PROXY CARD APPROVING
AND AUTHORIZING THE MERGER AGREEMENT OR WHO RETURNS A BLANK EXECUTED PROXY WILL
NOT HAVE A RIGHT TO DISSENT FROM THE AGREEMENT.
Under the DGCL each InfoSpinner stockholder as of the InfoSpinner Record
Date who does not vote in favor of the Merger is entitled to demand and receive
payment of the fair value of all or any portion of such holder's shares of
InfoSpinner Capital Stock ("InfoSpinner Shares") pursuant to Section 262 of the
DGCL owned by such holder, if the Merger is consummated. Any InfoSpinner
stockholder who elects to perfect such holder's appraisal rights and demands
payment of the fair value of such holder's shares of InfoSpinner Stock must
strictly comply with Section 262 of the DGCL. The following summary does not
purport to be complete and is qualified in its entirety by reference to Section
262 of the DGCL, the text of which is attached as ANNEX C and is incorporated
hereby reference. Any holder of shares of InfoSpinner Stock considering
demanding appraisal rights is advised to consult legal counsel. Appraisal rights
will not be available unless and until the Merger (or a similar business
combination) is consummated. To perfect the appraisal right and to receive the
fair value of such holder's shares, the stockholder must not vote in favor of
the Merger. A dissenting shareholder must either vote against the Merger or
abstain from voting.
If any stockholder elects to demand appraisal of his or her InfoSpinner
Shares, the stockholder must satisfy each of the following conditions:
(i) the stockholder must deliver to InfoSpinner a written demand for
appraisal of his or her InfoSpinner Shares before the vote with respect to
the Merger is taken (this written demand for appraisal must be in addition
to and separate from any proxy or vote abstaining from or against the
Merger; voting against or failing to vote for the Merger by itself does not
constitute a demand for appraisal within the meaning of Section 262); and
(ii) the stockholder must not vote in favor of the Merger (an abstention
or failure to vote will satisfy this requirement, but a vote in favor of the
Merger, by proxy or in person, will constitute a waiver of the stockholder's
appraisal right in respect of the InfoSpinner Shares so voted and will
nullify any previously filed written demands for appraisal).
Within ten days after the Effective Time, InfoSpinner must give written
notice that the Merger has become effective to each stockholder who so filed a
written demand for appraisal and who did not vote in favor of the Merger. Within
120 days after the Effective Time, but not thereafter, either InfoSpinner or any
stockholder who has complied with the requirements of Section 262 of the DGCL
may file a petition in the Delaware Court of Chancery (the "Court") demanding a
determination of the fair value of the InfoSpinner Shares held by all
stockholders entitled to appraisal. InfoSpinner does not presently intend to
file such a petition in the event there are dissenting stockholders. INASMUCH AS
INFOSPINNER HAS NO OBLIGATION TO FILE SUCH A PETITION, THE FAILURE OF A
STOCKHOLDER TO DO SO WITHIN THE PERIOD SPECIFIED COULD NULLIFY SUCH
STOCKHOLDER'S PREVIOUSLY WRITTEN DEMAND FOR APPRAISAL. At any time within 60
days after the Effective Time, any stockholder who has demanded appraisal has
the right to withdraw the demand and to accept the shares of Centura Common
Stock to be issued to that stockholder pursuant to the conversion ratios set
forth in the Merger Agreement (the "Merger Consideration").
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If any stockholder fails to comply with the above provisions and the Merger
becomes effective, the stockholder will be entitled to receive the Merger
Consideration as provided for in the Merger Agreement but will have no appraisal
rights with respect to his or her InfoSpinner Shares.
All demands for appraisal should be addressed to InfoSpinner at Gunderson
Dettmer Stough Villeneuve Franklin & Hachigian, LLP, 155 Constitution Drive,
Menlo Park, California 94025, Attention: Scott C. Dettmer, Esq., before the vote
on the Merger Agreement is taken at the InfoSpinner Meeting, and should be
executed by, or on behalf of, the holder of record of the InfoSpinner Shares.
The demand must reasonably inform InfoSpinner of the identity of the stockholder
and the intention of the stockholder to demand appraisal of his or her
InfoSpinner Shares.
To be effective, a demand for appraisal must be made by or in the name of
the registered stockholder, fully and correctly, as the stockholder's name
appears on his or her stock certificate(s) and cannot be made by the beneficial
owner if the beneficial owner does not also hold the InfoSpinner Shares of
record. The beneficial holder must, in such cases, have the registered owner
submit the required demand in respect of such InfoSpinner Shares.
If InfoSpinner Shares are owned of record in a fiduciary capacity, such as
by a trustee, guardian or custodian, execution of a demand for appraisal should
be made in such a capacity, and if the InfoSpinner Shares are owned of record by
more than one person, as in joint tenancy or tenancy in common, the demand
should be executed by or for all joint owners. An authorized agent, including
one for two or more joint owners, may execute the demand for appraisal for a
stockholder of record; however, the agent must identify the record owner or
owners and expressly disclose the fact that, in executing the demand, he or she
is acting as agent for the record owner. A record owner, such as a broker, who
holds InfoSpinner Shares as a nominee for others, may exercise his or her right
of appraisal with respect to the InfoSpinner Shares held for one or more
beneficial owners, while not exercising this right for other beneficial owners.
In such case, the written demand should state the number of InfoSpinner Shares
as to which appraisal is sought. Where no number of InfoSpinner Shares is
expressly mentioned, the demand will be presumed to cover all InfoSpinner Shares
held in the name of such record owner.
If a petition for appraisal is duly filed by a stockholder and a copy
thereof is delivered to InfoSpinner, InfoSpinner will then be obligated within
20 days thereafter to provide the Court with a duly verified list containing the
names and addresses of all stockholders who have demanded an appraisal of their
InfoSpinner Shares. After notice to such stockholders, the Court is empowered to
conduct a hearing upon the petition, to determine those stockholders who have
complied with Section 262 of the DGCL and who have become entitled to appraisal
rights. The Court may require the stockholders who have demanded payment for
their InfoSpinner Shares to submit their stock certificates to the Register in
Chancery for notation thereon of the pendency of the appraisal proceedings, and
if any stockholder fails to comply with such direction, the Court may dismiss
the proceedings as to such stockholder.
After determination of the stockholders entitled to an appraisal, the Court
will appraise the InfoSpinner Shares, determining their fair value exclusive of
any element of value arising from the accomplishment or expectation of the
Merger. When the value is so determined, the Court will direct the payment by
InfoSpinner of such value, with interest thereon accrued during the pendency of
the proceeding if the Court so determines, to the stockholders entitled to
receive the same, upon surrender to InfoSpinner by such holders of the
certificates representing such InfoSpinner Shares. In determining fair value,
the Court is required to take into account all relevant factors exclusive of any
element of value arising from the accomplishment or expectation of the Merger.
Stockholders considering seeking appraisal should be aware that the fair
value of their InfoSpinner Shares determined under Section 262 could be more,
the same or less than the Merger Consideration that they are entitled to receive
pursuant to the Merger Agreement if they do not seek appraisal of their
InfoSpinner Shares, and that investment banking opinions as to fairness from a
financial point of view are not necessarily opinions as to fair value under
Section 262.
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Costs of the appraisal proceeding may be imposed upon the parties thereto
(i.e., InfoSpinner and the stockholders participating in the appraisal
proceeding) by the Court as the Court deems equitable in the circumstances. Upon
the application of a stockholder, the Court may order all or a portion of the
expenses incurred by any stockholder in connection with the appraisal
proceeding, including, without limitation, reasonable attorneys' fees and the
fees and expenses of experts, to be charged PRO RATA against the value of all
InfoSpinner Shares entitled to appraisal.
Any stockholder who had demanded Appraisal rights will not, after the
Effective Time, be entitled to vote InfoSpinner Shares subject to such demand
for any purpose or to receive payments of dividends or any other distribution
with respect to such InfoSpinner Shares (other than with respect to payment as
of a record date prior to the Effective Time) or to receive the Merger
Consideration pursuant to the Merger Agreement; however, if no petition for
appraisal is filed within 120 days after the Effective Time, or if such
stockholder delivers a written withdrawal of his or her demand for appraisal and
an acceptance of the Merger, either within 60 days after the Effective Time, or
thereafter with written approval of InfoSpinner, then the right of such
stockholder to appraisal will cease and such stockholder will be entitled to
receive the Merger Consideration without interest.
FAILURE TO FOLLOW THE STEPS REQUIRED BY SECTION 262 OF THE DGCL FOR
PERFECTING APPRAISAL RIGHTS MAY RESULT IN THE LOSS OF SUCH RIGHTS. IN VIEW OF
THE COMPLEXITY OF SECTION 262 OF THE DGCL, STOCKHOLDERS OF INFOSPINNER WHO ARE
CONSIDERING DISSENTING FROM THE MERGER SHOULD CONSULT THEIR LEGAL ADVISORS.
CALIFORNIA DISSENTERS' RIGHTS
THE FOLLOWING SUMMARY OF DISSENTERS' RIGHTS UNDER CALIFORNIA LAW IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO CHAPTER 13 OF THE CALIFORNIA GENERAL
CORPORATION LAW, THE COMPLETE TEXT OF WHICH IS ATTACHED HERETO AS ANNEX D.
FAILURE TO STRICTLY FOLLOW THE PROCEDURES SET FORTH IN CHAPTER 13 OF THE
CALIFORNIA GENERAL CORPORATION LAW ("CGCL") MAY RESULT IN THE LOSS, TERMINATION
OR WAIVER OF DISSENTERS' RIGHTS. A CENTURA SHAREHOLDER WHO SIGNS A PROXY CARD
APPROVING AND AUTHORIZING THE MERGER AGREEMENT OR WHO RETURNS A BLANK EXECUTED
PROXY WILL NOT HAVE A RIGHT TO DISSENT FROM THE AGREEMENT. A CENTURA SHAREHOLDER
WHO DESIRES TO EXERCISE HIS DISSENTER'S RIGHTS MUST ALSO SUBMIT A WRITTEN DEMAND
FOR PAYMENT TO CENTURA BEFORE THE DATE OF THE CENTURA MEETING. IN ADDITION, NO
CENTURA SHAREHOLDER, UNDER ANY CIRCUMSTANCES, WILL HAVE A RIGHT TO DISSENT FROM
THE AGREEMENT IF LESS THAN FIVE PERCENT (5%) OF THE OUTSTANDING SHARES OF
CENTURA COMMON STOCK DO NOT PERFECT THEIR RIGHT TO DISSENT AND EXERCISE THEIR
DISSENTERS' RIGHTS IN ACCORDANCE WITH CHAPTER 13 OF THE CALIFORNIA GENERAL
CORPORATION LAW.
Under the CGCL each Centura shareholder as of the Centura Record Date who
does not vote in favor of the Merger is entitled to demand and receive payment
of the fair value of all or any portion of such holder's shares of Centura Stock
pursuant to Chapter 13 of the CGCL owned by such holder if the Merger is
consummated, provided that holders of at least 5% of the outstanding shares of
Centura Common Stock file written demands for payment with Centura not later
than the date of the Centura meeting and in the manner set forth in Chapter 13
of the CGCL. The fair value of such shares is determined as of January 6, 1997,
the last day before the first announcement of the terms of the Merger. Any
Centura shareholder who elects to perfect such holder's dissenters' rights and
demands payment of the fair value of such holder's shares of Centura Stock must
strictly comply with Chapter 13 of the CGCL.
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The following summary does not purport to be complete and is qualified in its
entirety by reference to Chapter 13 of the CGCL, the text of which is attached
as ANNEX D and is incorporated herein by reference. Any holder of shares of
Centura Stock considering demanding dissenters' rights is advised to consult
legal counsel. Dissenting rights will not be available unless and until the
Merger (or a similar business combination) is consummated. To perfect the right
to dissent and receive the fair value of such holder's shares, the shareholder
must not vote in favor of the Merger. A Centura dissenting shareholder must vote
against the Merger.
Prior to the Centura meeting, each Centura shareholder who elects to
exercise dissenters' rights must make written demand upon Centura for the
purchase of such shares. The demand must be made no later than 30 days after the
Notice was mailed to the shareholder. The Centura shareholder's demand must
state the number and class of shares held of record by the Centura shareholder
which the shareholder demands that Centura purchase, as well as a statement by
the Centura shareholder as to what such holder claims the fair market value of
such share was as of the day prior to the announcement of the Merger. The
statement of fair market value constitutes an offer by the Centura shareholder
to sell the shares at such price. Neither voting against, abstaining from voting
nor failing to vote on the Merger constitutes such written demand.
Within 10 days after the date of approval of the Merger, Centura will mail
to each Centura shareholder who did not vote in favor of the Merger notice (the
"Notice") of the approval of the merger by the Centura shareholders, accompanied
by a copy of Sections 1300-1304 of the CGCL. The Notice shall also state the
price determined by Centura to be the fair market value of the Centura Common
Stock with respect to which dissenters' rights are properly exercised under
Chapter 13 of the CGCL ("Centura Dissenting Shares") and a brief description of
the procedure to be followed by a shareholder who elects to dissent.
Within the same 30-day period following the mailing of the Centura Notice,
the dissenting shareholder must submit to Centura for endorsement certificates
for any shares which the Centura shareholder demands Centura purchase. If
Centura and the Centura shareholder agree upon the price of the Centura
Dissenting Shares, the dissenting Centura shareholder is entitled to the agreed
price with interest at the legal rate on judgments from the date of such
agreement. Payment must be made within 30 days of the later of the date of the
agreement between the Centura shareholder and Centura or the date the
contractual conditions to the Merger are satisfied or waived.
If Centura and the shareholder cannot agree as to the fair market value or
as to the fact that such shares are Dissenting Shares, such Centura shareholder
may file within six months of the date of mailing of the Notice a complaint with
the California Superior Court for the County of San Mateo demanding judicial
determination of such matters. Centura will then be required to make any
payments in accordance with such judicial determination. If the complaint is not
filed within the specified six-month period, the Centura shareholder's rights as
a dissenter are lost.
Centura Dissenting Shares lose their status as such if (i) Centura abandons
the Merger; (ii) the shares are transferred or are surrendered for conversion
into shares of another class in accordance with the Articles of Incorporation;
(iii) the Centura shareholder and Centura do not agree as to the fair market
value of such shares and a complaint is not filed within six months of the date
the Centura Notice was mailed; or (iv) the dissenting Centura shareholder
withdraws, with the consent of Centura, his demand for purchase of such shares.
At the Effective Date, the shares of Centura held by a Centura shareholder
exercising his dissenters' rights will be canceled, and such shareholder will be
entitled to no further rights except the right to receive payment of the fair
value of such holder's shares of Centura Capital Stock. However, if the Centura
shareholder fails to perfect or withdraws or loses such holder's rights as a
dissenter with respect to such holder's shares of Centura Capital Stock, such
holder's shares of Centura Capital Stock will not be purchased by Centura as set
forth above.
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CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER
The following discussion summarizes the material federal income tax
considerations relevant to the Merger that are applicable to InfoSpinner
stockholders. This discussion is based on currently existing provisions of the
Code, existing Treasury Regulations thereunder and current administrative
rulings and court decisions, all of which are subject to change. Any such
change, which may or may not be retroactive, could alter the tax consequences to
Centura, InfoSpinner or InfoSpinner's stockholders as described herein.
InfoSpinner stockholders should be aware that this discussion does not deal
with all federal income tax considerations that may be relevant to particular
InfoSpinner stockholders in light of their particular circumstances, such as
stockholders who are dealers in securities, who are subject to the alternative
minimum tax provisions of the Code, who are foreign persons or entities, who do
not hold their InfoSpinner Capital Stock as capital assets or who acquired their
shares in connection with stock options or in other compensatory transactions or
who receive cash for their InfoSpinner Capital Stock pursuant to exercises of
their dissenter's rights under the DGCL. In addition, the following discussion
does not address the tax consequences of the Merger under foreign, state or
local tax laws, the tax consequences of transactions effectuated prior or
subsequent to, or concurrently with, the Merger (whether or not any such
transactions are undertaken in connection with the Merger), including without
limitation any transaction in which shares of InfoSpinner Capital Stock are
acquired or shares of Centura Common Stock are disposed of, or the tax
consequences of the assumption by Centura of outstanding options and warrants to
acquire InfoSpinner Capital Stock. ACCORDINGLY, INFOSPINNER STOCKHOLDERS ARE
URGED TO CONSULT THEIR OWN TAX ADVISORS AS TO THE SPECIFIC TAX CONSEQUENCES OF
THE MERGER, INCLUDING THE APPLICABLE FEDERAL, STATE, LOCAL AND FOREIGN TAX
CONSEQUENCES TO THEM OF THE MERGER.
Consummation of the Merger is conditioned upon receipt by Centura and
InfoSpinner of opinions (the "Tax Opinions") from their respective legal
counsel, Venture Law Group, a Professional Corporation, and Gunderson Dettmer
Stough Villeneuve Franklin & Hachigian, LLP, that the Merger will constitute a
"reorganization" within the meaning of Section 368(a) of the Code (a
"Reorganization"), in which case, subject to the assumptions, limitations and
qualifications referred to herein and in the Tax Opinions, the Merger will have
the following federal income tax consequences:
(i) No gain or loss will be recognized by holders of InfoSpinner Capital
Stock solely upon their receipt in the Merger of Centura Common Stock in
exchange therefor (except to the extent of cash received in lieu of a
fractional share of Centura Common Stock).
(ii) The aggregate tax basis of the Centura Common Stock received by
InfoSpinner stockholders in the Merger (including any fractional share of
Centura Common Stock not actually received and the Escrow Shares) will be
the same as the aggregate tax basis of the InfoSpinner Capital Stock
surrendered in exchange therefor (excluding the basis related to any
fractional share for which a cash payment is received).
(iii) The holding period of the Centura Common Stock received by each
InfoSpinner stockholder in the Merger will include the period for which the
InfoSpinner Capital Stock surrendered in exchange therefor was considered to
be held, provided that the InfoSpinner Capital Stock so surrendered is held
as a capital asset at the time of the Merger.
(iv) Cash payments received by holders of InfoSpinner Capital Stock in
lieu of a fractional share will be treated as if such fractional share of
Centura Common Stock had been issued in the Merger and then redeemed by
Centura. An InfoSpinner stockholder receiving cash will recognize gain or
loss, upon such payment, measured by the difference (if any) between the
amount of cash received and the basis in the fractional share.
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(v) Holders of InfoSpinner Capital Stock who exercise appraisal rights
with respect to their shares of InfoSpinner Capital Stock and who receive
payment for the shares in cash will generally recognize gain or loss
measured by the difference between the amount of cash received and the
stockholder's basis in the shares surrendered, if the payment is neither
essentially equivalent to a dividend within the meaning of Section 302 of
the Code nor has the effect of a distribution of a dividend within the
meaning of Section 356(a)(2) of the Code (collectively, a "Dividend
Equivalent Transaction"). A sale of InfoSpinner Capital Stock pursuant to an
exercise of appraisal rights will generally not be a Dividend Equivalent
Transaction if, as a result of such exercise, the stockholder exercising
appraisal rights owns no shares of Centura Common Stock (either actually or
constructively within the meaning of Section 318 of the Code) immediately
after the Merger. If, however, a stockholder's sale for cash of InfoSpinner
Capital Stock pursuant to an exercise of appraisal rights is a Dividend
Equivalent Transaction, then such stockholder will generally recognize
income for federal income tax purposes in an amount equal to the entire
amount of cash so received.
Although Centura and InfoSpinner will, as a condition to closing of the
Merger (which condition may be waived in the case of either party), receive Tax
Opinions from their respective counsel to the effect that the Merger will
qualify as a Reorganization, irrespective of such qualification a recipient of
shares of Centura Common Stock will have taxable ordinary income to the extent
that such shares were considered to be received in exchange for services or
property or could have a taxable gain if such shares are received in exchange
for property (other than solely for InfoSpinner Capital Stock). All or a portion
of such gain may be taxable as ordinary income. Gain could also have to be
recognized to the extent that an InfoSpinner stockholder was treated as
receiving (directly or indirectly) consideration other than Centura Common Stock
in exchange for such stockholder's InfoSpinner Capital Stock.
The parties will not request a ruling from the Internal Revenue Service (the
"IRS") in connection with the Merger. InfoSpinner stockholders should be aware
that the Tax Opinions do not bind the IRS and the IRS is therefore not precluded
from successfully asserting a contrary opinion. In addition, the Tax Opinions
are subject to certain assumptions, limitations and qualifications, including
but not limited to the truth and accuracy of certain representations made by
Centura, InfoSpinner, Merger Sub and certain stockholders of InfoSpinner,
including representations in certain certificates to be delivered to counsel by
the respective managements of Centura, InfoSpinner and Merger Sub and by certain
stockholders of InfoSpinner. Of particular importance is the assumption that the
"continuity of interest" requirement for treatment of the Merger as a
Reorganization is satisfied.
To satisfy the continuity of interest requirement, InfoSpinner stockholders
must not, pursuant to a plan or intent existing at or prior to the Merger,
dispose of or transfer so much of either (i) their InfoSpinner Capital Stock in
anticipation of the Merger or (ii) the Centura Common Stock to be received in
the Merger (collectively, "Planned Dispositions") such that InfoSpinner
stockholders, as a group, would no longer have a significant equity interest in
the InfoSpinner business being conducted after the Merger. InfoSpinner
stockholders will generally be regarded as having a significant equity interest
as long as the number of shares of Centura Common Stock received in the Merger
less the number of shares subject to Planned Dispositions (if any) represents,
in the aggregate, at least 50% of the fair market value of the entire
consideration received by the InfoSpinner stockholders in the Merger.
InfoSpinner and Centura have represented to respective counsel for Centura and
InfoSpinner that they have no knowledge of any plan or intent on the part of
InfoSpinner stockholders to engage in Planned Dispositions of more than 50% of
the shares of Centura Common Stock issued in the Merger. However,
notwithstanding such representations, no assurance can be made that the
"continuity of interest" requirement will be satisfied. If such requirement is
not satisfied, the Merger would not be treated as a Reorganization. For purposes
of the "continuity of interest" requirement, arrangements (including puts, calls
and "collars") that have the effect of eliminating, or substantially reducing,
the economic benefits and burdens of ownership of stock will be treated as
dispositions of the stock.
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A successful IRS challenge to the Reorganization status of the Merger (as a
result of a failure of the "continuity of interest" requirement or otherwise)
would result in InfoSpinner stockholders recognizing taxable gain or loss with
respect to each share of InfoSpinner Capital Stock surrendered equal to the
difference between the stockholder's basis in such share and the fair market
value, as of the Effective Time, of the Centura Common Stock received in
exchange therefor. In such event, a stockholder's aggregate basis in the Centura
Common Stock so received would equal its fair market value as of the Effective
Time, and the stockholder's holding period for such stock would begin the day
after the Merger.
RESALE OF CENTURA COMMON STOCK BY INFOSPINNER AFFILIATES
The shares of Centura Common Stock to be issued in the Merger will have been
registered under the Securities Act of 1933, as amended (the "Securities Act")
pursuant to the Registration Statement on Form S-4 of which this Proxy
Statement/Prospectus is a part, thereby allowing such shares to be traded
without restriction by all former holders of InfoSpinner Capital Stock who (i)
are not deemed "affiliates" of InfoSpinner prior to the merger and (ii) who do
not become "affiliates" of Centura after the Merger.
Rule 145 promulgated under the Securities Act regulates the disposition of
securities of "affiliates" of InfoSpinner in connection with the Merger.
InfoSpinner has delivered to Centura a list (the "Affiliate List") identifying
all persons who InfoSpinner believes to be, at the time of the signing of the
Merger Agreement, "Affiliates" of InfoSpinner for purposes of Rule 145 under the
Securities Act. Each of the Affiliates who is identified as an Affiliate in the
Affiliate List has delivered to Centura a written agreement (an "Affiliate
Agreement").
Under the Affiliate Agreement, such Affiliate has agreed not to sell,
transfer or otherwise dispose of Centura Common Stock issued to the Affiliate in
the Merger unless such sale, transfer or other disposition (i) has been
registered under the Securities Act, (ii) is made in compliance with the
requirements of Rule 145 under the Securities Act or (iii) in the opinion of
counsel reasonably acceptable to Centura, is otherwise exempt from registration
under the Securities Act.
Under the Affiliate Agreement, Centura is entitled to issue appropriate stop
transfer instructions to the transfer agent for the shares of Centura Common
Stock that are to be received by such Affiliate and to place restrictive legends
on the certificates evidencing Centura Common Stock evidencing the restrictions
contained in the Affiliate Agreement. Centura has the right to insert
restrictive legends on the certificates issued to any transferee of the
Affiliate.
The foregoing restrictions apply, with respect to Affiliates, to all
purported sales, transfers and other conveyances of Centura Common Stock
received or to be received by such Affiliate pursuant to the Merger Agreement
and to all purported reductions in the interest in or risks relating to such
Centura Common Stock, whether or not such Affiliate shall have exchanged
following the Effective Time such InfoSpinner Capital Stock certificates for
Centura Common Stock certificates.
The Affiliate Agreement also prohibits the Affiliate from any sale, transfer
or other disposition or any other reduction of the Affiliate's risk of ownership
of or investment in any securities of Centura from the date of the Affiliate
Agreement and through the time Centura releases publicly financial results for a
period that includes at least 30 days of combined operations of Centura and
InfoSpinner after the Effective Time, and thereafter not to make any sale of
Centura Common Stock received in the Merger, except in compliance with Rule 145
under the Securities Act. Such rule generally requires that, for specified
periods, such sales be made in compliance with the volume limitations, manner of
sale provisions and current information requirements of Rule 144 under the
Securities Act.
ACCOUNTING TREATMENT
The Merger is intended to qualify as a "pooling of interests" for accounting
purposes and financial reporting purposes. Under this method of accounting, the
assets and liabilities of Centura and InfoSpinner
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will be carried forward to the combined company at their recorded amounts and
income from the combined company will include income from Centura and
InfoSpinner for the entire fiscal period in which the combination occurs and the
reported income of the separate companies for prior periods will be combined and
restated as the results of operations of the combined company.
Centura anticipates receiving a letter dated as of the Effective Time from
Price Waterhouse LLP independent accountants for Centura and InfoSpinner,
respectively, regarding the appropriateness of pooling of interests accounting
treatment for the Merger under Accounting Principles Board Opinion No. 16.,
provided the Merger is consummated in accordance with the Merger Agreement. See
"The Merger Agreement--Conditions to the Merger" and "Unaudited Pro Forma
Combined Condensed Financial Statements." Receipt of such letter and
availability of pooling of interests accounting treatment are conditions of
Centura and InfoSpinner to consummation of the Merger, although such condition
may be waived by Centura and InfoSpinner.
Under the pooling of interest accounting rules, none of the officers,
directors or affiliates of either of the combining companies may sell any shares
of either of the combining companies (except for certain de minimis sales) until
the combined company releases financial results covering at least thirty days of
combined operations of Centura and InfoSpinner. Accordingly, if sales (except
for certain de minimis sales), by such shareholders occur pooling of interests
accounting treatment for the Merger may not be available in spite of such
treatment being appropriate as of the consummation of the Merger. As a result of
the unavailability of such accounting treatment, the Merger would be accounted
for under the purchase method of accounting, which would have the effects
discussed below. Each of the current officers, directors and affiliates of
InfoSpinner and each of the current officers and directors of Centura have
entered into affiliate agreements agreeing to comply with this restriction.
Although Umang Gupta served as a member of Centura's Board of Directors until
his resignation from the Board on December 23, 1996, he may continue to be
considered an affiliate of Centura as a result of his holdings of Centura Common
Stock; however, Mr. Gupta has not signed an affiliate agreement. As of February
28, 1997, Mr. Gupta beneficially owned 1,740,608 shares of Centura Common Stock,
or 12.6% of the total Centura stock outstanding. See "The Merger--Voting and
Affiliate Agreements."
There can be no assurance that an officer, director or affiliate of either
company will not sell shares of Centura or InfoSpinner stock or that all
requirements necessary to qualify for pooling of interests will be met. If any
of such events occur prior to consummation of the Merger, then neither company
is required to consummate the Merger. However, if both companies nevertheless
elect to consummate the Merger, the Merger would necessarily be accounted for
under the purchase method of accounting, which would have the effect of
InfoSpinner's assets being recognized at their fair value and any excess of the
purchase price over such fair value being recognized as goodwill on Centura's
balance sheet. The goodwill would thereafter be amortized as an expense over its
anticipated useful life. The impact of such treatment would have a material
adverse effect on the combined company's results of operations. If any of such
events occur subsequent to consummation of the Merger and prior to the release
of the financial results covering at least thirty days of combined operations,
the Merger would also be required to be accounted for under the purchase method
of accounting, which would have a material adverse effect on the combined
company's results of operations as described above.
REGULATORY MATTERS
Other than compliance with the federal securities laws and applicable
securities laws of various states, Centura and InfoSpinner are not aware of any
governmental or regulatory approvals required for consummation of the Merger.
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THE MERGER AGREEMENT
The following paragraphs summarize, among other things, the material terms
of the Merger Agreement, which is attached hereto as ANNEX A and incorporated by
reference herein. Shareholders of Centura and stockholders of InfoSpinner are
urged to read the Merger Agreement in its entirety for a more complete
description of the Merger.
EFFECTIVE TIME OF THE MERGER
As promptly as practicable after the satisfaction or waiver of the
conditions set forth in the Merger Agreement, the parties thereto will file the
Certificate of Merger, together with the required officers' certificates, with
the Secretary of State of the State of Delaware. The Merger will become
effective upon such filing (the "Effective Time").
CONVERSION AND EXCHANGE OF SHARES
At the Effective Time, (i) each outstanding share (other than those shares
of InfoSpinner Stock held by shareholders who properly exercise their appraisals
rights available under Section 262 of the DGCL) of InfoSpinner Common Stock,
InfoSpinner Series A Preferred Stock and InfoSpinner Series B Preferred Stock
will be converted into and exchanged for a fraction of a share of Centura Common
Stock determined by the respective Conversion Ratios. Other than as specifically
set forth in the Conversion Ratios, they will not be adjusted based on
fluctuations in the stock prices of either Centura or InfoSpinner. See "The
Merger--Manner and Basis of Converting InfoSpinner Securities."
Based upon the capitalization of Centura and InfoSpinner as of the Record
Date, InfoSpinner stockholders will own Centura Common Stock representing
approximately 23% of the shares of Centura Common Stock outstanding immediately
after consummation of the Merger.
As promptly as practicable after the Effective Time, Centura will cause
ChaseMellon Shareholder Services (the "Exchange Agent") to mail to each
stockholder of record of InfoSpinner as of the Effective Time transmittal
materials for use in exchanging certificates of InfoSpinner Stock for
certificates of Centura Common Stock. The transmittal materials will contain
information and instructions with respect to the surrender of InfoSpinner Common
Stock certificates and Preferred Stock Certificates in exchange for new
certificates representing Centura Common Stock and cash in payment for any
fractional shares resulting from the exchange. Certificates should not be
surrendered until the Letter of Transmittal is received. Pending delivery to the
Exchange Agent of InfoSpinner stock certificates, any dividends on the Centura
Common Stock to be issued as a result of the Merger that are payable prior to
the delivery of such certificates will be held by the Exchange Agent. Such
dividends will be paid, without interest, to the persons entitled thereto upon
delivery of such InfoSpinner stock certificates to the Exchange Agent.
Fractional shares of Centura Common Stock will not be issued in the Merger.
Instead, each stockholder of InfoSpinner who would otherwise be entitled to a
fraction of a share will receive, in lieu thereof, an amount of cash (rounded to
the nearest whole cent) equal to the product of such fractional interest
multiplied by the closing price of a share of Centura Common Stock on the
Closing Date, as reported on the Nasdaq National Market. All certificates
representing shares of InfoSpinner Capital Stock shall be aggregated prior to
determining the number of fractional shares.
BUSINESS OF INFOSPINNER AND CENTURA PENDING THE MERGER
Pending the consummation of the Merger, and except as otherwise consented to
or approved in advance by the other party in writing, each of Centura and
InfoSpinner has agreed that it will, among other things, carry on its and its
subsidiaries' business in the usual, regular and ordinary course in
substantially the same manner as it has been conducted, to pay and cause its
subsidiaries to pay its debts and taxes when due, and to use all reasonable
efforts to preserve intact its present business organization, keep available the
services of certain employees agreed upon by Centura and InfoSpinner, preserve
its relationships with
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customers, suppliers, distributors, licensors, licensees, and others having
business dealings with it to promptly notify the other party in of any event or
occurrence not in the ordinary course of its business, and of any event which
could have a material adverse effect on its business or properties.
In addition, InfoSpinner has agreed not to take certain actions without the
prior written consent of Centura, which consent shall not be unreasonably
withheld, including the following: amend its Certificate of Incorporation or
Bylaws; declare or pay any dividends on or split, combine or reclassify any of
its capital stock, or repurchase any shares of its capital stock; accelerate or
change the vesting period or exercisability of any stock options or restricted
stock previously issued; take any action, which could reasonably be expected to
jeopardize the tax-free status of the reorganization; take any action which
would make any of its representations or warranties contained in the Merger
Agreement untrue or incorrect as of the date of the Merger Agreement or as of
the Effective Time, or prevent it from performing its covenants under the Merger
Agreement; enter into any material contract or commitment, or violate or modify
any term of a material contract, other than in the ordinary course of business;
issue, sell or purchase, any shares of its capital stock, other than pursuant to
the conversion of its Preferred Stock or the issuance of InfoSpinner Common
Stock to InfoSpinner employees; transfer any rights to its Intellectual Property
(as defined in the Merger Agreement) other than standard end-user licenses in
the ordinary course of business; enter into or amend any agreements pursuant to
which a party is granted marketing distribution or other rights of any type or
scope with respect to any of its products; sell, license or otherwise encumber
any of its properties or assets except in the ordinary course of business and
consistent with past practices; incur any indebtedness for borrowed money or
issue or sell any such debt securities of InfoSpinner or guarantee any debt
securities of others; pay or satisfy in an amount in excess of $20,000 in any
one case or $50,000 in the aggregate, any claim, liability or obligation arising
other than in the ordinary course of business, other than the payment of
liabilities reflected or reserved against in the ordinary course of business on
the InfoSpinner Financial Statements; adopt or amend any employee benefit plan,
enter into any employment contract or relationship, pay any special bonus or
special remuneration to any employee or director, or increase the salaries or
wage rates of its employees (other than salary increases granted to non-officer
employees in the ordinary course of business); grant any severance or
termination pay (A) to any director or officer or (B) to any employee except
payments made pursuant to standard written agreements outstanding on the date of
the Merger Agreement; commence any litigation; acquire or agree to acquire, by
merger or otherwise, any business or assets which are material to InfoSpinner's
business; make or change any material election in respect of Taxes or file any
material Tax Return or amendment; revalue any of its assets; violate, amend or
otherwise modify in any material respect the terms of any contracts or
agreements set forth on InfoSpinner's Disclosure Letter; or take or agree to
take any of the actions described above.
SOLICITATION OF ALTERNATIVE TRANSACTIONS
Until the Effective Time, InfoSpinner has agreed that it will not, directly
or indirectly, solicit any proposals or offers from any third party relating to
any possible acquisition of InfoSpinner, or participate (except to the extent
reasonably required by fiduciary obligations) in any negotiations regarding or
furnish to any person (except to the extent reasonably required by fiduciary
obligations) any information with respect to, or otherwise cooperate with, any
effort by any person to do any such transaction. However, if an unsolicited
takeover proposal, shall be received by the Board of Directors of InfoSpinner,
then, InfoSpinner has agreed that it shall immediately notify Centura upon
receipt of any such proposal, and will immediately provide Centura with the
material facts relating to such offer or proposal (including the identity of the
third party making such offer and specific terms thereof) and will cooperate
with Centura by furnishing any information it may reasonably request.
CORPORATE STRUCTURE AND RELATED MATTERS AFTER THE MERGER
At the Effective Time, Merger Sub will merge with and into InfoSpinner,
which will survive as a wholly owned subsidiary of Centura. Following the
Merger, the Certificate of Incorporation of Merger Sub, as in effect immediately
prior to the Effective Time, will be the Certificate of Incorporation of
InfoSpinner until
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thereafter amended as provided by Delaware Law and such Certificate of
Incorporation. The Bylaws of Merger Sub, as in effect immediately prior to the
Effective Time, will be the Bylaws of InfoSpinner until thereafter amended.
The directors and the officers of Merger Sub immediately prior to the
Effective Time will be the initial directors and officers of the InfoSpinner, in
each case until their respective successors are duly elected or appointed and
qualified.
CERTAIN COVENANTS
InfoSpinner has agreed to afford Centura and its representatives reasonable
access to its properties, books and other information concerning its business,
properties and personnel as said party and representatives may reasonably
request. Each party has also agreed to provide the other party copies of its
internal financial statements upon request.
Centura will use its best efforts to obtain all necessary state securities
law or "Blue Sky" permits and approvals required to carry out the transactions
contemplated by the Merger Agreement, and InfoSpinner shall use its reasonable
efforts to assist Centura in complying with any applicable securities and "Blue
Sky" laws.
Centura and InfoSpinner have each agreed to use their best efforts to cause
the Merger to be accounted for as a pooling of interests and to use each party's
best efforts to cause its Affiliates not to take any action that would adversely
affect the ability of Centura to account for the business combination to be
effected by the merger as a pooling of interests.
Centura and InfoSpinner have agreed that representatives of each company
will execute an Escrow Agreement as described below. See "--Escrow and
Indemnification." InfoSpinner has agreed to use its best efforts to cause each
InfoSpinner Affiliate to execute and deliver to Centura an Affiliate Agreement
imposing certain restrictions regarding the resale of Centura Common Stock
received in the Merger. Centura has agreed to file with the Nasdaq National
Market a Notification Form for Listing of additional shares of its Common Stock
to be issued in connection with this Merger.
Centura has agreed to negotiate in good faith to hire certain employees of
InfoSpinner, and InfoSpinner has agreed to cooperate with and assist Centura in
employing such employees.
Centura and InfoSpinner have each agreed to call a meeting of their
respective shareholders and stockholders to be held as soon as practicable for
the purpose of obtaining the shareholder and stockholder approvals required in
connection with the Merger Agreement, and each has agreed to consult with the
other regarding scheduling of the respective shareholders' and stockholders'
meetings. Subject to compliance with certain provisions of the Merger Agreement
and the directors' applicable fiduciary duties, the Boards of Directors of
Centura and InfoSpinner will recommend to their respective shareholders and
stockholders that they vote to approve the Merger Agreement and the Merger.
Each of Centura and InfoSpinner will use its best efforts to take, or cause
to be taken, all actions necessary, proper or advisable to comply with all legal
requirements which may be imposed on such party with respect to the Merger
(including obtaining any required consents from entities with whom Centura and
InfoSpinner have entered into material agreements and any governmental
authorities) and to consummate the transaction contemplated by the Merger
Agreement.
ESCROW AND INDEMNIFICATION
At the Effective Date, Centura will cause a number of shares equal to 10% of
the shares of Centura Common Stock that each holder of InfoSpinner Common Stock
and InfoSpinner Preferred Stock is entitled to receive pursuant to the Merger
Agreement (excluding Dissenting Shares) (the "Escrow Shares") to be deposited
with Chemical Trust Company of California ("the Escrow Agent") pursuant to
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the Escrow Agreement. The Escrow Shares will be available to indemnify Centura
and its officers, directors, employees or other agents for any losses incurred
directly by Centura or arising from claims against Centura, including, without
limitation, reasonable legal fees, net of any recoveries under existing
insurance policies or indemnities from third parties (collectively, "Losses") in
each case arising out of any breach of the representations, warranties or
covenants given or made by InfoSpinner in the Merger Agreement.
Notwithstanding the foregoing, Centura may not receive any Escrow Shares
unless and until an officer's certificate of Centura identifying Losses has been
delivered to the Escrow Agent, and then only in the event the cumulative amount
of Losses exceeds $250,000. In such event, Centura shall receive the number of
Escrow Shares equal in value to the total amount of losses. For the purpose of
compensating Centura for its Losses, the Escrow Shares shall be valued at the
average closing price of a share of Centura Common Stock reported in THE WALL
STREET JOURNAL, on the basis of information provided by the Nasdaq National
Market during the thirty (30) day period ending three days prior to (but not
including) the Effective Time. In no event shall Centura receive more than the
number of Escrow Shares then remaining in the Escrow Fund at the time of
Centura's claim for Losses.
If the Merger is consummated, the Escrow Fund shall be the exclusive remedy
of Centura for any breaches of any representation, warranty or covenant of
InfoSpinner in connection with the Merger.
The Escrow Fund will remain in existence until the earlier of the date that
is one year from the Effective Time or the date the audit of Centura's financial
statements for the year ended December 31, 1997 has been completed and Centura
has received a signed opinion from its independent auditors certifying such
financial statements (the "1997 Combined Financials Date") ("Escrow Period"),
provided that the number of Escrow Shares, equal to the amount of any
unsatisfied claims in any officer's certificate delivered to the Escrow Agent
prior to termination of the Escrow Period with respect to Losses incurred or
litigation pending prior to expiration of the Escrow Period, shall remain in the
Escrow Fund until such claims have been resolved.
Keith A. Lowery and Robert L. West will collectively be appointed the
Stockholders' Agent (the "Stockholders' Agent") and shall have the discretion to
make decisions and take actions on behalf of, and without the consent of, the
InfoSpinner stockholders. Such decisions and actions of the Stockholders' Agent
will be final, binding and conclusive upon each such InfoSpinner stockholder.
Such agency may be changed by the holders of a majority in interest of the
Escrow Fund from time to time upon not less than 10 days prior written notice to
Centura. The Stockholders' Agent will not be personally liable for making such
decisions or taking such actions if the Stockholders' Agent acts in good faith
and is not grossly negligent. The Escrow Agent and Centura will be relieved from
any liability to any person for any acts done by them in accordance with any
decisions or actions of the Stockholders' Agent. BY APPROVING THE MERGER
AGREEMENT, INFOSPINNER STOCKHOLDERS WILL BE DEEMED TO HAVE CONSENTED TO THE
APPOINTMENT OF KEITH A. LOWERY AND ROBERT L. WEST, WHO ARE STOCKHOLDERS OF
INFOSPINNER, TO ACT AS STOCKHOLDERS' AGENT ON BEHALF OF INFOSPINNER'S
STOCKHOLDERS TO GIVE AND RECEIVE COMMUNICATIONS, TO AUTHORIZE DELIVERY TO
CENTURA OF CENTURA COMMON STOCK FROM THE ESCROW FUND, TO OBJECT TO SUCH
DELIVERIES, TO AGREE TO, NEGOTIATE, AND ENTER INTO SETTLEMENTS AND COMPROMISES
OF SUCH CLAIMS AND TO TAKE CERTAIN OTHER ACTIONS ON BEHALF OF INFOSPINNER'S
STOCKHOLDERS, ALL AS MORE FULLY DESCRIBED IN ARTICLE VII OF THE MERGER
AGREEMENT.
In the event Centura becomes aware of a third-party claim which Centura
believes may result in a demand against the Escrow Fund, Centura must notify the
Stockholders' Agent of such claim, and the Stockholders' Agent and the
InfoSpinner stockholders for whom shares of Centura Common Stock otherwise
issuable to them are deposited in the Escrow Fund shall be entitled to assume
the defense of such claim so long as Centura has reasonably determined that
Losses which may be incurred as a result of such claim do not exceed either
individually, or when aggregated with all other claims, the total dollar value
of the Escrow Fund, the claim involves only money damages and does not seek an
injunction or other equitable relief, and settlement of, or an adverse judgment
with respect to, such claim is not likely to
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establish a precedential custom or practice adverse to the continuing business
interests of Centura. The Stockholder's Agent shall have the right to settle any
such claim; provided, however, that the Stockholders' Agent may not affect the
settlement of any such claim without the prior written consent of Centura, which
consent shall not be unreasonably withheld. Centura may, at its expense, retain
separate counsel and participate in the defense of any such claim.
In the event that the Stockholder's Agent is entitled to but fails or elects
not to assume the defense against any third party claim, Centura shall have the
right to undertake the defense and shall not compromise or settle such claim
without the prior written consent of the Stockholders' Agent, which consent
shall not be unreasonably withheld. In the event that the Stockholders' Agent is
not entitled to assume the defense of such third party claim, Centura shall have
the right to undertake the defense, consent to the entry of any judgment or
enter into any settlement with respect to such claim in any manner it may deem
appropriate, provided, however, that except with the written consent of the
Agent, no settlement of any claim or consent to the entry of any judgment with
respect to the third-party claim shall alone be determinative of the validity of
the claim against the Escrow Fund.
CONDITIONS TO THE MERGER
Consummation of the Merger is subject to the satisfaction of various
conditions, including (i) the approval and adoption of the Merger Agreement and
the Merger by the requisite vote of the shareholders of Centura and the
stockholders of InfoSpinner, respectively, (ii) the authorization for listing on
the Nasdaq National Market of the shares of Centura Common Stock to be issued in
connection with the Merger; (iii) the absence of any restrictive court orders or
any other legal restraints or prohibitions, and of any governmental proceedings
preventing the consummation of the Merger; (iv) the receipt of an officer
certificate by each of Centura and InfoSpinner from the other party's officers
to the effect that certain representations and warranties made by the respective
party are true and correct in all material respects on and as of the Effective
Time; (v) the receipt of an officer certificate by Centura and InfoSpinner from
the other party's officers to the effect that the respective party has performed
or complied in all material respects with all obligations, covenants and
conditions required by the Merger Agreement on or prior to the Effective Time;
(vi) the execution of employment agreements by each of Keith A. Lowery, Ronald
L. Howell and Andy Levine, respectively, with Centura; (vii) the obtaining by
Centura and InfoSpinner of all permits, licenses, consents and approvals
relating to the sale of securities from governmental entities; (viii) the
receipt by Centura and InfoSpinner of executed Affiliate Agreements from each
Affiliate of InfoSpinner; (ix) the execution of an Escrow Agreement acceptable
in form and substance to Centura, InfoSpinner and the designated Escrow Agent;
(x) the filing by Centura and InfoSpinner, respectively, of all the documents
required to be filed for the authorization, execution and delivery of the Merger
Agreement and the consummation of the transactions contemplated thereby; (xi)
the receipt by Centura and InfoSpinner, respectively, of certain opinions
regarding tax and accounting matters and (xii) receipt of a letter from Price
Waterhouse LLP, independent accountants, concurring that the Merger may be
accounted for as a pooling of interests. Centura' obligation to consummate the
Merger is conditioned on: (i) the obtaining by Centura and InfoSpinner,
respectively, of all material consents, waivers, approvals, authorizations or
orders required to be obtained for the authorization, execution and delivery of
the Merger Agreement and the consummation of the transactions contemplated
thereby; (ii) no more than 5% of InfoSpinner Common Stock (assuming conversion
of all Preferred Stock prior to the Effective Time) outstanding at the time of
the Merger having exercised or being eligible to exercise appraisal rights under
Delaware law; (iii) no material adverse change having occurred to the business
of InfoSpinner; (iv) the execution by each of Keith A. Lowery, Ronald L. Howell
and Andy Levine, respectively, of binding Non-Competition Agreements in form and
substance acceptable to Centura; (v) receipt of an opinion from H & Q that the
terms of the Merger are fair to Centura shareholders from a financial point of
view; and (vi) receipt of a legal opinion from InfoSpinner's legal counsel as to
certain matters regarding InfoSpinner. Neither party presently intends to waive
any of the conditions to the Merger. InfoSpinner's obligations to consummate the
Merger will be further conditioned among other things upon (i) no material
adverse
54
<PAGE>
change having occurred to the business of Centura; (ii) no claims having
occurred which materially and adversely affect the consummation of the Merger or
Centura's business operations; and (iii) receipt of a legal opinion from
Centura's legal counsel as to certain matters regarding Centura and Merger Sub.
TERMINATION OR AMENDMENT OF THE MERGER AGREEMENT
The Merger Agreement may be terminated and the Merger may be abandoned prior
to the Effective Time either before or after its approval by the stockholders of
InfoSpinner and the shareholders of Centura, under the circumstances specified
therein, including (i) by mutual consent of Centura, Merger Sub and InfoSpinner;
(ii) by either Centura or InfoSpinner, if, without fault of the terminating
party, the Merger shall not have been consummated by April 30, 1997 (or such
later date as may be agreed upon in writing by the Centura and InfoSpinner);
(iii) by either Centura or InfoSpinner if any non-appealable order of a court or
other competent authority preventing the consummation of the Merger shall have
become final; (iv) by Centura or InfoSpinner if (a) any required approval of the
stockholders of InfoSpinner shall not have been obtained by reason of the
failure to obtain the required vote at a duly held meeting of InfoSpinner
stockholders, or, (b) the approval of the shareholders of Centura to the Merger
shall not have been obtained by reason of the failure to obtain the required
vote of shareholders of Centura to approve the Merger at the Centura
Shareholders Meeting; (v) by either Centura or InfoSpinner if there shall be any
final action taken, or any statute rule, regulation or order enacted by any
governmental entity that would prohibit (i) Centura's or InfoSpinner's ownership
or operation of all or a material portion of the business of InfoSpinner or (ii)
Centura's or InfoSpinner's right to dispose of or hold separate all or a
material portion of the business or assets of Centura or InfoSpinner as a result
of the Merger, or that would make consummation of the Merger illegal; (vi) by
Centura if InfoSpinner shall materially breach any of its representations
warranties or covenants under the Merger Agreement and such breach shall not
have been cured within five business days of receipt by InfoSpinner of written
notice of such breach; or (vii) by InfoSpinner, if Centura shall materially
breach any of its representations, warranties or covenants under the Merger
Agreement and such breach shall not have been cured within five days following
receipt by Centura of written notice of such breach.
The companies have also entered into a Distribution Agreement designed to
govern the commercial relationship between the companies during the period prior
to the Effective Time and in the event that the Merger is not consummated. If
the Merger is not consummated for certain reasons, Centura has the right to
terminate the Distribution Agreement. Under terms of the Distribution Agreement,
Centura has agreed to pay to InfoSpinner prepaid royalties totaling $1,250,000
over the period ending March 1998, of which $250,000 has been paid as of
February 28, 1997.
The Merger Agreement may be amended by an agreement in writing among the
parties thereto at any time prior to the Effective Time.
FEES AND EXPENSES
Except as set forth above (see "--Termination or Amendment of the Merger
Agreement"), all fees and expenses incurred in connection with the Merger
Agreement and the transactions contemplated thereby will be paid by the party
incurring such expenses, whether or not the Merger is consummated.
CONFIDENTIALITY AGREEMENTS
Each party to the Merger Agreement has agreed to keep confidential, pursuant
to a Mutual Nondisclosure Agreement dated October 28, 1996 between Centura and
InfoSpinner (the "Nondisclosure Agreement"), information provided to the other
party pursuant to the Merger Agreement, including information with respect to
the business and intellectual properties of the party furnishing such
information. The Nondisclosure Agreement contains terms restricting the
disclosure and use of confidential information exchanged between the two parties
in evaluating the Merger and otherwise.
55
<PAGE>
UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS
The following unaudited pro forma combined condensed financial statements
give effect to the merger of Centura Software Corporation (Centura) and
InfoSpinner, Inc. (InfoSpinner) to be accounted for as a pooling of interests.
The unaudited pro forma combined condensed balance sheet presents the combined
financial position of Centura and InfoSpinner as of December 31, 1996 assuming
that the proposed merger had occurred as of December 31, 1996. The unaudited pro
forma combined condensed statements of operations give effect to the proposed
merger of Centura and InfoSpinner by combining the results of operations of
Centura for the years ended December 31, 1994, 1995 and 1996 with the results of
operations of InfoSpinner for the period from inception (November 1995) through
December 31, 1995 and the year ended December 31, 1996, respectively. These
unaudited pro forma combined condensed financial statements are based on and
should be read in conjunction with the historical financial statements and notes
thereto of Centura and InfoSpinner, which are included elsewhere or incorporated
by reference in this Joint Proxy Statement/Prospectus.
56
<PAGE>
CENTURA SOFTWARE CORPORATION
UNAUDITED PRO FORMA COMBINED CONDENSED BALANCE SHEET
(IN THOUSANDS)
<TABLE>
<CAPTION>
CENTURA INFOSPINNER PRO FORMA
DECEMBER 31, DECEMBER 31, -------------------------
1996 1996 ADJUSTMENTS COMBINED
------------ ------------- ------------- ----------
<S> <C> <C> <C> <C>
Current Assets:
Cash and cash equivalents.............................. $ 6,669 $ 1,368 $ (698) $ 7,339
Short-term investments................................. 2,065 -- -- 2,065
Accounts receivable, net............................... 13,574 71 -- 13,645
Inventories............................................ 216 -- -- 216
Other current assets................................... 3,300 28 -- 3,328
------------ ------------- ------------- ----------
Total current assets................................. 25,824 1,467 (698) 26,593
------------ ------------- ------------- ----------
Property and equipment, at cost, less accumulated
depreciation........................................... 3,622 140 -- 3,762
Capitalized software, at cost, net of accumulated
amortization........................................... 4,226 90 -- 4,316
Long-term investments.................................... 1,221 -- -- 1,221
Other Assets............................................. 1,812 3 -- 1,815
------------ ------------- ------------- ----------
Total Assets......................................... $ 36,705 $ 1,700 $ (698) $ 37,707
------------ ------------- ------------- ----------
------------ ------------- ------------- ----------
Current liabilities:
Current portion of long-term........................... $ 336 $ -- $ -- $ 336
Accounts payable....................................... 5,683 20 -- 5,703
Accrued compensation and related expenses.............. 2,484 59 -- 2,543
Other accrued liabilities.............................. 4,313 -- -- 4,313
Accrued litigation expense............................. 6,733 -- -- 6,733
Deferred revenue....................................... 21,891 1,357 -- 23,248
------------ ------------- ------------- ----------
Total current liabilities............................ 41,440 1,436 -- 42,876
Non-current portion of long-term debt.................... 10,032 -- -- 10,032
Other long-term liabilities.............................. 2,156 -- -- 2,156
------------ ------------- ------------- ----------
Total liabilities.................................... 53,628 1,436 -- 55,064
------------ ------------- ------------- ----------
Mandatorily redeemable preferred stock................... -- 1,339,000 (1,339,000) --
Preferred stock.......................................... -- 1 (1) --
Common stock............................................. 63,047 6 1,582 64,635
Additional paid-in capital............................... -- 243 (243) --
Cumulative translation adjustment........................ (513) -- -- (513)
Accumulated deficit...................................... (79,457) (1,324) (698) (81,479)
------------ ------------- ------------- ----------
Total shareholders' deficit.......................... (16,923) (1,075) (698) (17,357)
------------ ------------- ------------- ----------
Total liabilities and shareholders' deficit.......... $ 36,705 $ 1,700 $ -- $ 37,707
------------ ------------- ------------- ----------
------------ ------------- ------------- ----------
</TABLE>
See Accompanying Notes to Unaudited Pro Forma Combined Condensed Financial
Statements.
57
<PAGE>
CENTURA SOFTWARE CORPORATION
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------
1996 1995 1994
------------ ---------- ----------
<S> <C> <C> <C>
Net revenues................................................................ $ 63,543 $ 65,714 $ 56,532
Cost of revenues............................................................ 14,688 19,640 17,146
------------ ---------- ----------
Gross profit.............................................................. 48,855 46,074 39,386
Operating expenses:
Sales and marketing....................................................... 29,617 42,931 48,209
Research and development.................................................. 11,631 14,510 11,225
General and administrative................................................ 7,011 11,045 11,136
Litigation expense........................................................ (878) 15,323 1,797
Restructuring expense..................................................... (223) 5,350 --
------------ ---------- ----------
Acquisition expense....................................................... (467) -- --
Total operating expenses................................................ 47,625 89,159 72,367
------------ ---------- ----------
Operating income (loss)............................................... 1,230 (43,085) (32,981)
Other income (expense):
Interest income........................................................... 659 1,127 1,188
Interest expense.......................................................... (831) (701) (137)
Foreign currency gain (loss).............................................. 215 (439) 306
------------ ---------- ----------
Income (loss) before income taxes........................................... 1,273 (43,098) (31,264)
Provision for income taxes.................................................. (478) 1,073 217
------------ ---------- ----------
Net income (loss)........................................................... $ 795 $ (44,171) $ (31,841)
------------ ---------- ----------
------------ ---------- ----------
Net income (loss) per share................................................. $ 0.05 $ (3.49) $ (2.66)
------------ ---------- ----------
------------ ---------- ----------
Weighted average shares and equivalent shares............................... 16,729 12,642 11,957
------------ ---------- ----------
------------ ---------- ----------
</TABLE>
See Accompanying Notes to Unaudited Pro Forma Combined Condensed Financial
Statements.
58
<PAGE>
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION
1. PERIODS COVERED
The unaudited pro forma combined condensed balance sheet presents the
combined financial position of Centura and InfoSpinner as of December 31, 1996
assuming that the proposed Merger had occurred as of December 31, 1996. Such pro
forma information is based upon the historical consolidated balance sheet data
of Centura and InfoSpinner as of that date. The unaudited pro forma combined
condensed statements of operations give effect to the proposed Merger of Centura
and InfoSpinner by combining the results of operations of Centura for the three
years ended December 31, 1996, with the results of operations of InfoSpinner for
the period from inception through December 31, 1995 and the year ended December
31, 1996, respectively, on a pooling of interests basis.
2. PRO FORMA NET INCOME (LOSS) PER SHARE
The unaudited pro forma combined net income (loss) per share is based upon
the weighted average number of common stock and common stock equivalent shares
outstanding of Centura and InfoSpinner for each period using an exchange ratio
of one share of Centura Common Stock for 1.61 shares of InfoSpinner Common
Stock.
3. CONFORMING ADJUSTMENTS AND INTERCOMPANY TRANSACTIONS
There were no material transactions between Centura and InfoSpinner during
any period presented.
4. TRANSACTION COSTS AND RESTRUCTURING EXPENSES
Total costs associated with the Merger are expected to be approximately
$1,165,000. This amount is a preliminary estimate only and is, therefore,
subject to change. Such costs include approximately $1,065,000 of transaction
costs and $100,000 of other costs. Transaction costs to be incurred by Centura
and InfoSpinner include fees to financial advisors and for legal and accounting
expenses and other related expenses.
These costs of the Merger will be expensed in the periods in which they are
incurred. $467,000 of these costs were incurred in 1996 and are included in the
historical financial statements. The unaudited pro forma combined condensed
balance sheet gives effect to the remaining $698,000 of such expenses as if they
had been incurred as of December 31, 1996.
59
<PAGE>
CENTURA MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
Centura Software Corporation commenced operations in 1984 and develops,
markets and supports enterprise-scale client/server and Internet application
development and deployment software. Centura's product lines include development
environments (including tools), compact databases, and connectivity products
that enable teams of developers to build and deploy scalable client/server
applications. Sales of four products--Centura, SQLWindows, SQLBase and
SQLHost--are the primary source of Centura's net revenues. The Centura product
was introduced in May of 1996, and the other three SQL products have been
marketed since 1988. These four products are expected to constitute the majority
of Centura's net revenues for the foreseeable future. Centura cannot accurately
predict the exact timing of a new product release or enhancement. Any failure to
deliver products as scheduled or such products' failure to achieve early market
acceptance as a result of competition, technological change, failure of Centura
to timely release new versions or upgrades, the failure of such upgrades to
achieve market acceptance or otherwise, could have a material adverse effect on
the business, operating results and financial condition of Centura. Centura
distributes its products in the U.S. and internationally through a corporate
sales organization consisting of Centura's internal sales force complimented by
marketing arrangements with vertical software partners, hardware original
equipment manufacturers and systems integrators, and a channel sales
organization consisting of value-added resellers and distributors.
Centura had net income of $2.0 million for fiscal year 1996, which reversed
a three-year trend of net losses. In December 1995, Centura initiated a plan to
restructure its operations by reducing its operating expense structure through
staff reductions, closure of certain sales and marketing offices,
rationalization of its product lines and write-offs of certain assets. Centura
had net losses of $44.1 million and $31.8 million for fiscal years 1995 and
1994, respectively and took total restructuring charges of approximately $5.4
million in 1995. There can be no assurance that the restructuring of Centura's
business strategies and tactics which commenced in late 1995 will be successful
or that Centura or the combined company after the Merger will be able to sustain
any such profitability on a quarterly basis or achieve profitability on an
annual basis. Centura has experienced in the past and expects in the future to
continue to experience significant fluctuations in quarterly operating results.
Centura's product licensing arrangements are subject to sell-through revenue
recognition which makes estimation of revenue dependent on reporting by
Centura's resellers and distributors and extremely uncertain. In addition,
quarterly operating results of the combined company will depend on a number of
other factors that are difficult to forecast, including, the factors listed in
"Risk Factors--Recent Centura Losses; Fluctuations in Quarterly Results."
Although Centura has operated historically with little or no backlog of
traditional boxed product shipments, it has experienced a seasonal pattern of
product revenue decline between the fourth quarter and the succeeding first
quarter, contributing to lower worldwide product revenues and operating results
during such quarters. It has generally realized lower European product revenues
in the third quarter as compared to the rest of the year. Centura has also
experienced a pattern of recording a substantial portion of its revenues in the
third month of a quarter. As a result, product revenues in any quarter are
dependent on orders booked in the last month. Due to the foregoing factors, it
is likely that Centura's operating results for some future quarter will fall
below the expectations of securities analysts and investors.
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<PAGE>
RESULTS OF OPERATIONS
The following table sets forth consolidated statements of operations data as
a percentage of revenues for the periods indicated:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------
1996 1995 1994
----------- ----------- -----------
<S> <C> <C> <C>
Net revenues:
Product....................................................... 72% 75% 82%
Service....................................................... 28 25 18
--- --- ---
Net revenues................................................ 100 100 100
--- --- ---
Cost of revenues:
Product....................................................... 8 14 13
Service....................................................... 15 16 17
--- --- ---
Cost of revenues............................................ 23 30 30
--- --- ---
Gross profit.............................................. 77 70 70
--- --- ---
Operating expenses:
Sales and marketing........................................... 46 65 85
Research and development...................................... 17 22 20
General and administrative.................................... 10 17 20
Acquisition expense........................................... 1 -- --
Litigation expense............................................ (1) 23 3
Restructuring expense......................................... -- 8 --
--- --- ---
Total operating expenses.................................... 73 135 128
--- --- ---
Operating income (loss)................................... 4 (65) (58)
Other income, net............................................... -- -- 2
Provision for income taxes...................................... 1 2 --
--- --- ---
Net income (loss)............................................... 3% (67)% (56)%
--- --- ---
--- --- ---
Gross Margins:
Gross margin on product revenues.............................. 89% 82% 83%
Gross margin on service revenues.............................. 46% 34% 8%
</TABLE>
NET PRODUCT REVENUES. Net product revenues for 1996 decreased 8% to $45.4
million from $49.4 million for 1995 primarily due to decreased sales of
SQLWindows as demand for such products diminished in anticipation of the release
of Centura and to decreased sales of database products from a single customer.
These decreases were partially offset by sales of the Centura product line
introduced in May 1996. Sales of the Centura product line, accounted for $8.5
million or 19% of net product revenues for 1996. In addition, SQLWindows
customers under maintenance agreements were able to purchase Centura products at
a discount for a limited introductory period which is not expected to continue.
Centura plans to release enhanced versions of existing products, some with
internet functionality, and new Internet and corporate Intranet products which
may offset the declining sales of client server tools, database and connectivity
products. (See "Risk Factors--New Product Risks; Rapid Technological
Change,--Highly Competitive Markets,--Market Acceptance of PC Client/Server
Systems and--Internet Software Market" and Note 12 of Notes to Financial
Statements). Net product revenues for 1995 increased 7% from $46.1 million for
1994 primarily due to increased sales of database products. Sales of tools and
connectivity software accounted for $13.1 million or 29%, $24.6 million or 50%
and $27.7 million or 60%, and database software accounted for $23.8 million or
52%, $24.8 million or 50% and $18.4 million or 40% of net product revenues for
1996, 1995 and 1994, respectively. Channel sales provided 53%, 53% and 60%, and
corporate sales provided 47%, 47% and 40% of net product revenues for 1996, 1995
and 1994, respectively.
61
<PAGE>
International sales accounted for 67%, 66% and 62% of total net product revenues
for 1996, 1995 and 1994, respectively.
NET SERVICE REVENUES. Net service revenues increased 9% to $17.8 million
for 1996 from $16.3 million in 1995 due to a larger installed customer base,
inception of a group focusing on sales of license maintenance and telephone
support and marketing programs designed to encourage customers to reinstate
support. In 1995, net service revenues increased 57% from $10.4 million in 1994.
This increase was primarily due to increases in maintenance and training
revenues related to increases in Centura's installed customer base. License
maintenance and telephone support contracts are typically paid in advance, and
revenue is recognized ratably over the term of the contract. International
service revenues accounted for 41%, 46% and 29% of total net service revenues
for 1996, 1995 and 1994, respectively.
COST OF PRODUCT REVENUES. Cost of product includes the cost of
subcontracted production and the amortization of capitalized software. Cost of
product varies significantly by distribution channel. Channel sales typically
involve sales of packaged products and, as a result, generally have higher costs
of production than corporate sales, which generally involve software
reproduction licenses. Cost of product as a percentage of product revenues was
11%, 18% and 17% for 1996, 1995 and 1994, respectively. In December 1995,
Centura completed a financial restructuring which included a decision to
consolidate all warehouse and manufacturing functions into a single new vendor.
This resulted in a non-recurring charge against cost of sales for an estimated
write-off of raw materials of approximately $0.6 million and led to a more
efficient production process which contributed to the reduced cost of product in
1996.
In accordance with Statement of Financial Accounting Standards ("SFAS") No.
86, "Accounting for the costs of computer software to be sold, leased or
otherwise marketed", Centura capitalizes internal development costs on a project
when the technological feasibility of such project has been determined. Centura
ceases capitalizing such expenses when the products derived from the project are
released for sale. The capitalized costs are then amortized ratably over the
useful life of the products, generally estimated to be two to three years.
Amortization of capitalized software costs, which include the software purchased
from third parties, decreased to $1,644,000 in 1996 from $2,200,000 in 1995. In
1995 amortization of capitalized software costs increased from $1,476,000 in
1994. See Notes 2 and 3 of Notes to Consolidated Financial Statements.
COST OF SERVICE REVENUES. Cost of service revenues consists primarily of
personnel costs related to maintenance, training and technical support. Cost of
service revenues, as a percentage of service revenues, decreased to 54% in 1996
from 66% in 1995 and 92% in 1994. In 1994, Centura continued to expand its
support services and personnel to better serve current and prospective customers
on a worldwide basis, particularly in Europe. As a result of the investment
Centura made to grow this area, Centura has now experienced increased revenues
relative to the cost of providing service. In addition, in December 1995,
Centura completed a financial restructuring which included a decision to
outsource certain support functions which contributed to the lower cost of
service while better serving the customers.
SALES AND MARKETING EXPENSES. Sales and marketing expenses decreased to
$29.1 million in 1996 from $42.9 million in 1995. In 1995, sales and marketing
expenses decreased 11% from $48.2 million in 1994. Sales and marketing expenses
represented 46%, 65% and 85% of net revenues in 1996, 1995 and 1994,
respectively. The decrease in sales and marketing expenses in 1996 was due to
reductions in staffing including the elimination of the telebusiness product
sales organization and the reduction of marketing staff and programs with the
objective of targeting marketing at enterprise client/server solution providers.
The decrease in sales and marketing expenses in 1995 was due to reductions in
marketing programs and staff reductions. Sales and marketing expenses in 1994
were at high levels due to aggressive marketing campaigns to introduce new
products, which included free seminars and product samples, and investments to
expand Centura's sales force in the United States and Europe.
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<PAGE>
RESEARCH AND DEVELOPMENT EXPENSES. The table below sets forth gross
research and development expenses, capitalized internal software development
costs, and net research and development expenses in dollar amounts and as a
percentage of net revenues for the periods indicated:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
1996 1995 1994
--------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C>
Dollar amounts:
Gross research and development expenses.................... $ 12,898 $ 16,662 $ 12,880
Capitalized internal software development costs............ (1,866) (2,242) (1,655)
--------- --------- ---------
Net research and development expenses...................... $ 11,032 $ 14,420 $ 11,225
--------- --------- ---------
--------- --------- ---------
As a Percentage of Net Revenues:
Gross research and development expenses.................... 20% 25% 23%
Net research and development expenses...................... 17% 22% 20%
</TABLE>
Research and development expenses in 1996 were essentially flat with the
prior two years (after consideration of writeoff in 1995) as Centura maintained
staffing and associated support costs required to develop the Centura line of
products and to continuously enhance Centura's product lines. Research and
development expenses in 1995 reflected a $3.4 million writeoff of previously
capitalized software development costs in conjunction with Centura's financial
restructuring. Centura believes that the development of new products and the
enhancement of existing products, are essential to its continued success, and
Centura intends to continue to devote substantial resources to new product
development.
GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses
decreased to $6.7 million in 1996 from $11.0 million in 1995. In 1995, general
and administrative expenses were down approximately $1.4 million compared to
$11.1 million in 1994, after considering the $1.3 million one time charge for
accounting and professional fees for re-audits of 1993 and 1994 and audit of
1995. These expenses represented 10%, 17% and 20% of net revenues in 1996, 1995
and 1994, respectively. In December 1995, Centura completed a financial
restructuring which included staff reductions and the abandonment of certain MIS
projects which led to reduced general and administrative expenses in 1996. In
1995, Centura reduced administrative expenses by staff reductions, deferring MIS
projects, and reductions in discretionary spending. In 1994, Centura experienced
significantly higher European administrative expenses as a result of supporting
new locations for sales and technical support. Additionally, Centura in 1994
incurred a loss in excess of $1 million as a result of the bankruptcy of a
distributor.
RESTRUCTURING CHARGES: In December 1995, the Company approved a plan to
restructure its operations to meet emerging market opportunities in next
generation client/server computing. In connection with the restructuring, the
Company reduced its worldwide headcount by approximately 16% and consolidated
facilities and operations to improve efficiency. The following analysis sets
forth the significant components of the restructuring charge included in other
accrued liabilities at December 31, 1996 and 1995:
<TABLE>
<CAPTION>
SEVERANCE
AND WRITE OFF FACILITY
BENEFITS OF ASSETS CHARGES OTHER TOTAL
----------- ----------- ----------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Restructuring................................................. $ 1,623 $ 2,205 $ 1,029 $ 493 $ 5,350
Less: Non-cash costs.......................................... -- (2,205) -- -- (2,205)
----------- ----------- ----------- --------- ---------
Accrued liability at December 31, 1995........................ 1,623 -- 1,029 493 3,145
Less: payments applied........................................ (1,400) -- (466) (493) (2,359)
Reversal of reserve........................................... (223) -- -- -- (223)
----------- ----------- ----------- --------- ---------
Accrued liability at December 31, 1996........................ $ -- $ -- $ 563 $ -- $ 563
----------- ----------- ----------- --------- ---------
----------- ----------- ----------- --------- ---------
</TABLE>
63
<PAGE>
Severance and related costs represented the reduction of 59 employees on a
worldwide basis primarily impacting sales and marketing. Asset charges included
a write-off of purchased technology and prepaid license fees associated with the
discontinuation of the Company's bundling of Novell's NetWare Run-Time with its
SQLBase Server. Facility charges included early termination costs associated
with the closing of certain domestic and international sales offices. Other
restructuring costs consist primarily of costs associated with the cancellation
of distribution agreements. The 1996 results of operations include the reversal
of $223,000 of restructuring reserves due to a change in estimated employee
reduction costs.
Severance and related costs related to the reduction of 59 employees on a
worldwide basis, primarily impacting sales and marketing. Asset charges included
a write-off of purchased technology and prepaid license fees associated with
discontinuation of the Company's bundling of Novell's NetWare Run-Time with
SQLBase Server. The facilities charges included early termination costs
associated with the closing of certain domestic and international sales offices.
Other restructuring costs consisted primarily of costs associated with the
cancellation of distribution agreements.
In addition to the restructuring charges detailed above, Centura took
certain one-time charges that were reflected against operations in the 1995
results. These charges included $1.3 million in accounting and related
professional fees for audits of 1995, 1994 and 1993, charged to general and
administrative; $3.4 million in write-offs of capitalized software development,
charged to research and development; and $0.6 million in liquidation of
inventories, charged to cost of revenues.
OTHER INCOME (EXPENSE), NET. Other income (expense), net is comprised of
interest income, interest expense and gains or losses on foreign currency
transactions. Centura's gains or losses from foreign currency transactions have
fluctuated from period to period, primarily as a result of fluctuating values of
the U.S. dollar and instability in European and Latin American currency markets.
Centura sometimes purchases monthly contracts to protect against a substantial
portion of the outstanding exposure. Since the inception of this program the
costs of the currency hedging have been reflected in the reported gains and
losses of foreign currency transactions. Centura recorded a gain of $215,000 in
1996, a loss of $439,000 in 1995, and a gain of $306,000 in 1994. Centura
anticipates that it will continue the hedging program in 1997. Nonetheless, a
decrease in the value of foreign currencies relative to the U.S. dollar could
result in losses from foreign currency transactions.
LITIGATION SETTLEMENT. Centura reached an agreement with the plaintiff
counsel in this lawsuit. See Note 6 of Notes to Centura Consolidated Financial
Statements. Under the terms of the settlement agreement, Centura would provide
$3 million and 1,875,000 shares to a fund to be distributed among the members of
the plaintiff class. Centura also agreed to supplement this payment with up to
625,000 additional shares in the event the value of its common stock is less
than $6.00 per share at certain dates in the future. The 1995 financial
statements include $15.3 million in litigation expense arising from the
agreement and associated legal expenses. Centura's directors and officers
liability insurer paid $2 million of the cash contribution to the settlement
fund. Centura paid the balance in 1996. Centura has issued approximately
1,050,000 shares in the first distribution in the fourth quarter of 1996 with
the balance of the shares expected to be distributed in the first quarter of
1997.
In 1994 Centura settled a lawsuit, filed by a former distributor, for the
amount of $525,000.
PROVISION FOR INCOME TAXES. The provision for income taxes was $0.5 million
in 1996, $1.1 million in 1995 and $0.2 million in 1994. The provision for income
taxes related primarily to foreign withholding taxes. As of December 31, 1996,
Centura had net operating loss carryforwards of approximately $57.9 million
available to offset future federal taxable income and $22.5 million available to
offset future state taxes, which expire through 2010. The availability and
timing of these carryforwards to offset future taxable income may be limited due
to the occurrence of certain events, including certain changes in ownership
interests. At December 31, 1996, 1995 and 1994, Centura fully reserved its
deferred tax assets due to the
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existence of sufficient uncertainty on the ability to realize the deferred tax
assets. See Note 8 of Notes to Centura Consolidated Financial Statements.
INFLATION. Centura believes that inflation has not had a material impact on
Centura's operating results and does not expect inflation to have a material
impact on Centura's operating results in 1997.
LIQUIDITY AND CAPITAL RESOURCES:
At December 31, 1996, Centura had a deficit working capital position of
$15.6 million due principally to deferred product and support revenue of $21.9
million and litigation accrual of $6.7 million. The final settlement of the
lawsuit does not require Centura to spend any more cash with the remainder of
the settlement achieved by issuance of shares of common stock. The deferred
product and support revenue of $21.9 million at December 31, 1996 reflects a
delay in recognition of revenue in accordance with contractual agreements and
requires minimal resources of Centura.
The Company had an unsecured foreign currency contract in place at December
31, 1996. A revolving unsecured bank line of credit, available for foreign
currency contracts and letters of credit, expired on February 15, 1995. Centura
entered into an unsecured Floating Rate Convertible Subordinated Note and
related agreement with Computer Associates International, Inc. ("CA") (the "CA
Agreement") in March 1995 for $10 million. Material covenants of Centura under
the CA Agreement include Centura's agreement to: pay and discharge its material
obligations and liabilities, including tax obligations; continue to engage in
business of the same general type currently conducted; refrain from declaring
any dividend or from repurchasing or redeeming its capital stock or
indebtedness; refrain from consolidating or merging (except where Centura is the
surviving corporation and incurs no event of default under such note); refrain
from incurring senior or pari passu indebtedness or from creating or incurring
encumbrances or liens, other than certain permitted liens on its properties. At
December 31, 1996, Centura also had an outstanding promissory note of $0.4
million.
Net cash used by operating activities was $7.7 million in 1996, $6.7 million
in 1995 and $12.1 million in 1994, net income and increases in depreciation and
amortization in 1996 were offset by decreases in accounts payable and accrued
liabilities, litigation expense and deferred revenue. In 1995, increases in
depreciation and amortization, deferred revenue, provision for sales returns and
allowances, accounts payable and accrued litigation, were offset by the net
loss. Inventories, which were located at Centura's third party turnkey vendor,
decreased by $1.1 million in 1995 following an increase of $1.2 million in 1994.
This decrease in 1995 was due in part to planned reductions of inventories and a
consolidation of worldwide inventories into a single third party vendor
location.
Cash provided from investing activities in 1996 totaled $4.6 million and
resulted primarily from maturities of investments offset by acquisition of
property and equipment, capitalization of software development costs, and
capitalization of other intangible assets. Cash used in investing activities of
$1.1 million in 1995 was utilized for additions of $4.0 million of internally
developed and purchased software and $3.1 million in additions to property and
equipment, primarily computer and other capital equipment, partially offset by
the sale of $5.4 million of short-term investments, net of purchases. Cash
provided by investing activities of $2.1 million in 1994 was generated by the
sale of $11.6 million of short-term investments, net of purchases, which was
offset by the capitalization of $3.2 million of software development costs and
the purchase of $5.9 million of property and equipment.
Net cash provided by financing activities in 1996 totaled $0.2 million
primarily as a result of proceeds from issuance of common stock offset by
repayment of the notes payable. Net cash provided by financing activities in
1995 totaled $10.5 million primarily as a result of the $10 million subordinated
convertible debt financing by Computer Associates. In 1994, Centura generated
cash of $1.2 million through financing activities, primarily related to proceeds
from a $1 million note payable to a bank and $1.1 million of employee purchases
of Company stock through both the Incentive Stock Option Plan and the Employee
Stock Purchase Plan.
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Additional financing may be required to meet NASDAQ minimum net worth
requirements. Furthermore, Centura is dependent upon achieving a reasonable
operating performance to satisfy its current and future financing needs. During
1995, Centura completed a private debt placement with Computer Associates
International of approximately $10 million. Centura believes that expected cash
flows from operations and existing cash balances, will be sufficient to meet
Centura's currently anticipated working capital and capital expenditure
requirements for the next 12 months. However, Centura may choose to raise cash
for operational or other needs sometime in the future. If Centura needs further
financing, there can be no assurance that it will be available on reasonable
terms or at all. Any additional equity financing will result in dilution to
Centura's shareholders.
Centura's capital requirements also may be affected by acquisitions of
businesses, products and technologies that are complementary to Centura's
business, which Centura considers from time to time. Centura regularly evaluates
such opportunities. Any such transaction, if consummated, may further reduce
Centura's working capital or require the issuance of equity.
FACTORS THAT MAY AFFECT FUTURE RESULTS
Centura has experienced in the past and expects in the future to continue to
experience significant fluctuations in quarterly operating results. Centura has
at times recognized a substantial portion of its net revenues in the last month
or last few weeks of a quarter. Centura generally ships products as orders are
received and, therefore, has little or no backlog. As a result, quarterly sales
and operating results generally depend on a number of factors that are difficult
to forecast, including, among others, the volume and timing of and ability to
fulfill orders received within the quarter. Operating results also may fluctuate
due to factors such as demand for Centura's products, introduction, localization
or enhancement of products by Centura and its competitors, market acceptance of
new products, reviews in the industry press concerning the products of Centura
or its competitors, changes or anticipated changes in pricing by Centura or its
competitors, mix of distribution channels through which products are sold, mix
of products sold, returns from Centura's distributors and general economic
conditions. As a result, Centura believes that period-to-period comparisons of
its results of operations are not necessarily meaningful and should not be
relied upon as any indication of future performance.
In addition, because Centura's staffing and other operating expenses are
based in part on anticipated net revenues, a substantial portion of which may
not be generated until the end of each quarter, delays in the receipt or
shipment of orders and ability to achieve anticipated revenue levels can cause
significant variations in operating results from quarter to quarter. Centura may
be unable to adjust spending in a timely manner to compensate for any unexpected
revenue shortfall. Accordingly, any significant shortfall in sales of Centura's
products in relation to Centura's expectations could have an immediate adverse
impact on Centura's business, operating results and financial condition. In
addition, Centura currently intends to increase its operating expenses to fund
greater levels of research and product development, increase its sales and
marketing operations and expand distribution channels. To the extent that such
expenses precede or are not subsequently followed by increased net revenues,
Centura's business, operating results and financial condition could be
materially and adversely affected.
In the future, Centura may make acquisitions of complementary companies,
products or technologies. Managing acquired businesses entails numerous
operational and financial risks, including difficulties in assimilating acquired
operations, diversion of management's attention to other business concerns,
amortization of acquired intangible assets and potential loss of key employees
or customers of acquired operations. There can be no assurance that Centura will
be able to effectively complete or integrate acquisitions, and failure to do so
could have a material adverse effect on Centura's operating results. As of the
date hereof, Centura has no understanding or agreement with any other entity
regarding any potential acquisition or combination, the consummation of which is
probable.
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INFORMATION CONCERNING
CENTURA SOFTWARE CORPORATION
BUSINESS OVERVIEW
Centura Software Corporation, provides application development and
deployment software to organizations building and deploying large-scale client
server and Web-based applications. Centura's product lines include development
tools (SQLWindows and Centura), compact databases (SQLBase), and connectivity
products (SQLHost) that enable teams of developers to build and deploy scaleable
client/server applications. Centura offers these products: Centura, a product
evolved from SQLWindows logic that helps customers develop and deploy 32-bit,
next generation client/server applications in traditional two- and multi-tiered
client/server environments as well as the Internet and corporate Intranet
environments. (The Internet is also referred to in this Proxy
Statement/Prospectus as the "World Wide Web" or the "Web" and corporate internal
webs are referred to as "Intranets). Created specifically to meet the needs of
organizations seeking the power to move from workgroup and enterprise pilot
projects into large enterprise applications, Centura delivers client/server
application scalability, Internet integration, and drag and drop data
replication facilities. SQLWindows is an open client/server development
environment for creating multi-database applications on desktop platforms.
SQLBase consists of small-footprint database products that help businesses
deploy decentralized applications easily and cost-effectively. SQLHost allows
organizations to integrate DB2 or legacy data into a client/server environment
without compromising performance, control, or security.
Centura's products enable customers to obtain the benefits of personal
computer ("PC") client/server (including Web-based) computing, while preserving
their investments in corporate data sources. Centura has established stratified
distribution channels that provide broad market coverage for its products and
address the specific needs of its varied customer segments worldwide. Centura's
products are used in at least 75 countries by organizations including Automatic
Data Processing ("ADP"), Citibank N.A., Daimler-Benz, Ford Motor Company,
Illinois Power, Mobil Oil, Mutualite Fonction Publique, NASA, New Zealand Post,
Norfolk Southern, Ontario Hydro, ORE-IDA Foods, Siemens-Nixdorf Informations
Systeme AG ("Siemens-Nixdorf"), The Southern Company, United Airlines, United
Parcel Service, Westinghouse, and the States of Alaska and Delaware.
INDUSTRY OVERVIEW
Over the past few decades, organizations have increasingly used their
computing systems to improve their management of mission-critical business
functions, such as manufacturing, distribution, customer support, finance and
administration. In the 1970's and 1980's, computing environments for such
applications were dominated by large computer systems with a mainframe or
minicomputer acting as a host processor for terminals with very limited
computing power. These traditional host-based systems are expensive to install
and maintain, and related software development is typically time consuming. In
addition, management of and access to the critical information resources
residing on these systems is generally limited to a staff of dedicated
management information systems ("MIS") professionals and relatively inaccessible
to a broader base of users.
In the late 1980s, a new architecture for information processing called
"client/server" computing emerged to address the many shortcomings of host-based
systems. Client/server computing typically provides increased functionality at a
lower hardware and software cost, an easier-to-use operating environment and
information access by a broader base of users. A client/server system typically
consists of multiple intelligent desktop client computers linked in a network
with high performance server computers. The client replaces the dumb terminal
employed in host-based systems and has resident software that manages the user
interface and performs local data access and manipulation. The server performs
many of the functions previously performed by the host in a host-based system,
such as network management, data storage, printing, communications and data
security and integrity.
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The widespread use of increasingly powerful PCs has made it possible for
organizations to deploy client/server systems based on local area networks
("LANs"), thereby increasing the benefits of the large existing installed base
of PCs. A LAN is a group of computers connected for the purpose of sharing data
and networked resources such as printers and data storage devices. PC
client/server computing combines the benefits of host-based systems with the
cost-effectiveness and ease of use of PCs. Other factors increasing the
deployment of PC client/server systems include the continued decline in the
costs of high-performance PCs and improvements to PC operating systems,
including easy-to-use graphical user interfaces such as those incorporated in
Microsoft Corporation's ("Microsoft's") Windows and Windows 95, and
International Business Machines Corporation's ("IBM's") OS/2 operating systems.
In addition, connectivity software is available to enable PC clients to access
varied data sources, including existing mainframes and minicomputers, thereby
protecting an organization's investment in these host-based systems.
Similar to the rapid emergence of PC's and LAN's in the late 1980's and
early 1990's, the emergence of the Web over the past several years has raised
new challenges to organizations. The Web opens the corporate data sources and
applications to new and highly distributed end-users who typically operate
through standard platform-independent user environments, commonly known as
"browsers" and typically also run on PCs. Such users typically demand a high
level of access to data and applications and to new applications that take
advantage of the user environment. The demands of such users are typically
unpredictable and raise new issues of security, response and data availability.
A traditional PC client/server system can be deployed as a stand-alone
system in a small or medium sized organization or as a departmental system
within a larger organization. Web-based systems can be deployed as simple
departmental systems or highly distributed networks that can provide access to
users in locations and geographies outside the corporate network. There is also
an increasing trend toward disconnected or so-called "mobile" applications where
a stand-alone or laptop PC manages data locally and may be connected
asynchronously to centralized, host-based data sources. Such systems can also be
deployed as part of an overall enterprise system combining stand-alone PCs,
multiple PC client/servers and enterprise-wide servers.
The increase in the deployment of PCs--in both traditional client/server
environments and increasingly for implementation and access to Web-based
applications--is fueling demand by organizations, application software vendors
and software consultants for specialized systems software utilizing PC, object-
oriented, client/server or Web technologies. The software required to implement
PC client/server systems includes end user and programmer tools, relational
database management systems ("RDBMS") and connectivity software. End user tools
facilitate the access of data stored throughout the network or across the Web.
Programmer tools are used to create application programs for client PCs, while
object-oriented technologies increase the productivity of programmers and
programming teams and reduce the life-cycle cost of maintenance of such
applications. RDBMS software facilitates data sharing in a network while
maintaining data integrity and security through a sophisticated data access
language called structured query language ("SQL"). Connectivity software enables
the transfer of information between clients and servers as well as between PC
client/servers and host-based information systems. A number of software
companies have addressed specific segments of the PC client/server systems
software market with software originally designed for other computing
environments. However, a need has emerged for an integrated software solution
that addresses all segments of this market and to be specifically optimized for
the PC client/server environment.
Centura was founded to provide cost-effective software solutions developed
and deployed on PC clients and servers. In 1996 and 1997 Centura has announced
and delivered an extension to this architecture to also address the needs of
Web-based applications as well. As Centura's products have matured, they have
been augmented by multi-tier applications, an object repository, 32-bit
architecture, and heterogeneous data replication. In addition to offering these
enhanced technologies, Centura continues to support and improve its existing
product lines to provide customers with a smooth transition to
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"next generation" client/server development. Centura's top line products are
optimized for the next generation of client/server, which requires large-scale
applications that can accommodate a decentralized business environment and the
new challenges of the Internet and Web-enabled applications (i.e., accessing the
World Wide Web or corporate Intranets). The Centura products include Web-enabled
application development tools, a relational database, and connectivity software.
As computing evolves into the next century, the reliance of businesses on
information systems is expected to increase. More than ever before, information
is a strategic corporate asset that can be translated into a significant
competitive advantage. The emergence of the Web has placed new user demands for
access to and management of that information. To fully harness the power of
information in today's highly competitive economy, better information systems
need to be built in less time. In the late 1980s and early 1990s, client/server
technology spawned a revolution in information systems delivery. These systems
have demonstrated business benefits that are driving the adoption of
client/server for a broader and more challenging set of information system
functions. To help businesses use information better than they have ever before,
the next generation of client/server applications is required. Such applications
should ideally also integrate with and embrace the Web.
The next generation of client/server systems will need to meet three
business needs. First, these systems should automate more complex business
processes and support more end users who rely on traditional client environments
as well as enabling access from the Web. In other words, they need to scale up
to deliver more functional and more widely deployed business solutions. Second,
they need to encourage teamwork within the organization and help strengthen
relationships with customers, suppliers, distributors and others outside the
organization. Therefore, they should reach out to all entities involved in the
business process, ranging from the customer to the CEO. Finally, they need to
work together in a highly integrated manner to place all information resources
at the command of decision makers and staff members. To do that, next generation
systems should connect it all, i.e., integrate the disparate pieces of
information technology throughout the organization, and thereby deliver greater
business value than if they were used apart. In summary, Centura believes the
next generation client/server systems need to scale up, reach out and connect it
all, to deliver business benefits that result in a measurable and sustainable
competitive advantage.
During 1996, Centura introduced its next-generation product line for
building and deploying large-scale 32-bit-client/server applications. The new
product line, Centura, builds on Centura's technology leadership over the last
decade to help customers move to the next generation of client/server. With
support for multi-tier applications, including those deployed on the World Wide
Web, an object repository, 32-bit architecture, and heterogeneous data
replication, this new product line provides the productivity, flexibility, and
scalability needed to build large-scale, multi-database applications. At the
same time, Centura continues to support its existing product lines to provide
customers with a smooth transition to next-generation client/server development.
See "Risk Factors--New Product Risks; Rapid Technological Change."
COMPANY STRATEGIES
Centura's objective is to be one of the leading suppliers of
enterprise-scale client/server and Internet application development and
deployment software. As part of this objective, Centura announced a
restructuring of its organization and business strategies to reflect new
positioning and to meet emerging market opportunities in next-generation
client/server and Web computing. Key elements of its strategies are highlighted
below:
INTEGRATED PRODUCT LINE
Centura develops software specifically for development and deployment of PC
client/server and Web-based applications. Centura's products provide users with
the benefits of an integrated, cost-effective solution that supports multi-tier
applications, an object repository, 32-bit architecture, heterogeneous data
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replication, object-oriented front-end tools, database and Web application
servers and engines and connectivity software. This product line is evolving
into a framework for migrating, integrating and scaling such applications to the
Web. Such a framework will embrace (i) legacy or large system applications; (ii)
traditional two and multi-tiered client/server applications (including those
developed with the Company's products and those from other vendors); and (iii)
new Web-based applications that are yet to be developed. This product strategy
distinguishes Centura from some software vendors that offer only a single
product type such as front-end tools. Each of Centura's products is designed to
be competitive with stand-alone products offered by other vendors. Centura also
believes that its focus on PC and Web client/server applications development and
deployment provides it with a competitive advantage over vendors that use
software originally developed for larger computer systems. In addition, the
ability of each product to operate separately and compatibly with products from
other vendors also enables Centura to sell its software to those customers who
may acquire part of the solution from other vendors. See "Risk Factors-- New
Product Risks; Rapid Technological Change" and "--Highly Competitive Markets."
PRICE/PERFORMANCE
Centura provides software with advanced functionality and performance
necessary for implementing client/server and Web-based systems, but at prices
targeted for PCs, PC networks and Internet/Intranets rather than monolithic
minicomputers or mainframes. Centura offers its database server products at
prices generally lower than RDBMS server products designed for minicomputers.
This pricing is designed to appeal both to entry-level programmers who are new
to object-oriented application development as well as to teams of programmers in
large organizations who need to build enterprise-wide applications.
Centura believes that value-oriented pricing models will continue to be
necessary even as applications scale up to the multi-location and even
multi-national enterprise. See "Risk Factors--Highly Competitive Markets."
DISTRIBUTION CHANNELS, PARTNERSHIPS AND STRATEGIC ALLIANCES
Centura distributes its products using a blended distribution model that
provides incentives for its direct sales force to work closely with business
partners. Centura's Synergy Partner Program is designed to meet the needs of
businesses that include resellers, commercial application developers,
consultants, independent software vendors ("ISVs"), and complementary tools
providers. A number of companies, including SQL Financials and PeopleSoft, have
strategic alliances with Centura to provide superior client/ server solutions
based on Centura technology. See "Risk Factors--Dependence Upon Distribution
Channels" and "Dependence on Third Party Organizations."
GLOBAL MARKET FOCUS
Centura has designed its products and established its marketing and sales
channels to address the global market opportunities for PC client/server
systems. Centura has established operations that have exclusive rights through
subsidiaries and operations on six continents. Approximately 60% of Centura's
net revenues for 1996 were derived from sales outside North America, and its
products are installed in at least 75 countries. Centura generally launches new
products on a worldwide basis. In addition, Centura has established an
international distribution network through strategic partners, distributors and
foreign subsidiaries. Centura's software products support international data
conventions, and certain products have been localized into French, German and
Japanese language editions.
SUPPORT PROGRAMS
Centura provides product support services directly and through third-party
vendors to enable easy customer implementation of its client/server systems.
Centura provides a variety of programs to support customers ranging from small
development groups to those who require access to qualified support engineers 24
hours a day, seven days a week. Traditional service offerings are augmented with
an informal
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support network through a forum on CompuServe, an Internet news group, and a
strong presence on the World Wide Web.
Centura-certified training partners offer courses each year, assuring
Centura customers of the right mix of classroom or on-site training. They can
also opt to study at their own pace with a specially developed computer-based
training course.
PRODUCTS
Centura's development environments, compact database, and family of
connectivity products enable teams of developers to build and deploy scaleable
client/server applications. Centura's major products include:
CENTURA--The Centura product is based on SQLWindows logic and helps
customers develop and deploy 32-bit, next-generation and Web-centric
client/server applications. Created specifically to meet the needs of
organizations seeking the power to move from workgroup and enterprise pilot
projects into large enterprise applications, Centura delivers client/server
application scalability, new Internet integration, and drag-and-drop replication
facilities. The Centura products include Centura Team Developer, Centura
Application Server and Centura Ranger.
SQLWINDOWS--SQLWindows is an open client/server development environment for
creating, multi-database applications on desktop platforms. The Component
Developer's Kit (CDK), sold as an add-on, is a set of object-oriented interfaces
into SQLWindows that helps developers create reusable objects. SQLWindows is
available on Microsoft desktop and server platforms as well as on the Sun
MicroSystem's Solaris platform. The product family includes SQLWindows,
SQLWindows for Microsoft SQL Server 6, and SQLWindows for the Solaris Operating
Environment.
SQLBASE--The SQLBase family consists of small-footprint database products
that help businesses deploy decentralized applications easily and
cost-effectively. These products--SQLBase Server and SQLBase Desktop--help
organizations store data on machines ranging from mobile and single-user PCs to
workgroup servers and company-wide database servers.
SQLHOST--The SQLHost products allow organizations to integrate DB2 or legacy
data into a client/ server environment without compromising performance, control
or security. SQLHost for Visual Basic allows Visual Basic applications to access
host-based data.
END USERS AND APPLICATIONS
No customer accounted for more than 10% of net revenues during the fiscal
years ended December 31, 1996, 1995, or 1994.
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Centura's products are used by end users in a wide variety of industries for
different applications:
<TABLE>
<CAPTION>
INDUSTRY APPLICATION
- --------------------------------------------- --------------------------------------------------------
<S> <C>
Aerospace Engineering information tracking and analysis
Automotive Products Multi-media-based information management
Consulting Services Information and human resource management
Consumer Products Sales tracking Central repository for corporate
financial data
Financial Services Various commercial real estate applications Portfolio
and credit tracking Decision support for insurance
underwriters Tax preparation automation
Government Child welfare case management
Industrial Products Sales administration and analysis
Non-profit Missionary information tracking
Petroleum and Chemicals Chemical hazard assessment and evaluation
Pharmaceuticals Document creation and management
Retail, Wholesale and Distribution Enterprise security On-line help desk telecommunications
maintenance Mission-critical pricing and production
management
Systems Integration Services Document-image processing
Telecommunications Call tracking for technical support Human resources
management
Transportation Economic analysis
Utilities Decision-support for purchasing Marketing contact and
customer support
</TABLE>
MARKETING, DISTRIBUTION AND PRODUCT SUPPORT
Centura's marketing and sales efforts are targeted to worldwide users of PC
client/server systems. These users, ranging from individual PC application
developers to MIS departments of large corporations, typically purchase
client/server software through different channels and require different levels
of support. Centura has stratified its sales organization by size and type of
sale to address the distinct needs of Centura's diverse customer segments, as
shown in the table below.
STRATIFIED DISTRIBUTION STRATEGY
<TABLE>
<CAPTION>
SALES ORGANIZATION SIZE OF SALE TYPE OF SALE
- --------------------------------- ---------------- -------------------------
<S> <C> <C>
Corporate Sales Organization Large Enterprise Projects
Channel Sales Organization Small/Medium Departmental Projects
</TABLE>
Centura pursues similar distribution strategies internationally, tailoring
those strategies to the specific requirements of particular foreign markets.
Sales outside of North America represented approximately 60%, 61% and 56% of
Centura's net revenues during 1996, 1995 and 1994, respectively. Certain risks
are inherent in international operations. See "Risk Factors--International Sales
and Operations," and "-- Recent Centura Losses; Fluctuations in Quarterly
Results."
CORPORATE SALES ORGANIZATION
Centura's corporate sales organization focuses primarily on customers
establishing large, sophisticated, enterprise-wide client/server systems. These
customers typically request support from either Centura or technically
sophisticated third parties in establishing these systems. To address these
requirements, Centura has established a modest internal sales force, which
operates from eight sales locations in North
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America as well as offices located in France, Germany, Italy, Switzerland,
Austria, Australia, Singapore, Mexico, the Netherlands, Belgium, and the United
Kingdom.
To complement its internal sales force, Centura has increasingly focused
energies on developing marketing arrangements with third parties, such as
vertical software partners, hardware original equipment manufacturers ("OEMs")
and systems integrators. Centura's vertical software partners develop and sell
applications software for use with Centura's products and include Learmonth and
Burchett Management Systems PLC (CASE tools), Artemis International (project
management), PeopleSoft, Inc. (human resources), Project Software & Development,
Inc. (facilities management), Aurum Software Inc. (sales management) and
Spectrum Associates (manufacturing). In addition, Centura has an architecture
which enables independent software vendors to use Centura's products to
co-engineer enterprise-wide client/ server applications or deliver add-on
software. Hardware OEMs purchase Centura's products and bundle them with their
personal computer hardware or applications software for resale to their
customers. Centura currently has OEM relationships with AT&T Global Information
Systems ("AT&T GIS," formerly NCR), Computer Associates, IBM, Siemens-Nixdorf,
and other computer vendors. Centura has entered into cooperative arrangements
with system integrators, such as Electronic Data Systems, Price Waterhouse, and
BDO Seidman, that build large, custom turnkey solutions for their corporate
customers using Centura's products.
CHANNEL SALES ORGANIZATION
Centura's channel sales organization focuses on customers who need outside
services to specify, design, build and deploy client/server systems.
Increasingly, these customers include both medium and large size businesses.
Centura reaches these customers through an indirect distribution channel,
consisting of resellers, application developers, distributors, value-added
resellers ("VARs") and consultants.
Centura also distributes its products through major independent distributors
that may in turn sell such products to smaller VARs, resellers and dealers.
Centura presently has distribution agreements with Ingram Micro, Inc., Techdata,
Inc. and DistribuPro, for distribution of Centura's products in North America.
Centura also has a network of international distributors, including Computer
2000 AG GmbH in Europe and Mitsubishi in Japan. Many of Centura's distributors
carry competing product lines. Centura's distributors may from time to time be
granted stock exchange or rotation rights. Such returns or exchanges are
generally offset by an immediate replacement order of equal or greater value.
Although Centura believes that, to date, it has provided adequate allowances for
exchanges and returns, there can be no certainty that actual returns will not
exceed Centura's allowances, particularly in connection with introduction of new
products or enhancements.
In a number of markets, including rapidly growing client/server markets such
as Japan, Korea, China/ Hong Kong and Brazil, Centura has entered into
multi-year master distribution agreements with unrelated companies that have
also licensed the use of Centura's name. These organizations are in place to
increase Centura's opportunities and penetration in such markets where the rapid
adoption of client/server technologies is anticipated. While Centura believes
that to date these agreements have increased Centura's penetration in these
markets, there can be no certainty that this performance will continue nor that
these relationships will remain in place. Centura has the option to acquire 100%
of the outstanding stock of one of its foreign distributors, using a purchase
price formula based on net profits and revenues.
Centura also sells its products through a worldwide network of VARs and
consultants that specialize in developing customized solutions for smaller,
departmental networks. These VARs bundle Centura's products and products of
other software vendors into systems that are sold directly to end users. Centura
has certified over 1,000 VARs marketing to industries such as financial
services, telecommunications, publishing, transportation and health care.
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MARKETING
To support its sales organizations, Centura conducts comprehensive marketing
programs and cooperative selling arrangements with Centura's strategic partners.
Centura's marketing programs include direct mail, public relations, advertising,
seminars, trade shows and ongoing customer communication programs. Centura has
entered into cooperative selling arrangements with strategic partners, including
AT&T GIS, Hewlett-Packard Company, ICL Personal Systems, Microsoft,
Siemens-Nixdorf and Sun MicroSystems that provide joint marketing or network
solutions for incorporating their products with Centura's products. Centura has
cooperative selling arrangements with Microsoft and IBM for the AS/400 computing
environment. Centura also cooperates with suppliers of competitive client/server
software, such as Oracle Corporation ("Oracle") and Sybase, Inc., ("Sybase"),
when customers desire large-scale, joint solutions that include front-end tools
from Centura.
The majority of Centura's revenues have been derived from the licensing of
software products for PC client/server systems, and such products are expected
to continue to account for substantially all of Centura's revenues for the
foreseeable future. Accordingly, broad market acceptance of PC client/server
systems is critical to Centura's future success. Failure of Centura to
successfully implement its sales and marketing strategies, or the loss of one or
more resellers, distributors, vertical software partners or other marketing
partners, could have a material adverse effect on Centura's business, operating
results and financial condition. See "Risk Factors--Dependence Upon Distribution
Channels" and "--Market Acceptance of PC Client/Server Systems."
CUSTOMER SUPPORT AND SERVICE
Centura is committed to providing timely, high-quality technical support,
which Centura believes is critical to maintaining customer satisfaction in the
PC client/server market.
Customer requirements for support and service vary depending on factors such
as the number of different hardware and software vendors involved in an
installation, the complexity of the application and the nature of the hardware
configuration. Centura offers flexible multi-tiered technical support programs
tailored to these specific customer needs. Centura offers a licensed maintenance
service to all its customers to provide timely bug fixes and software
enhancements. In addition, Centura provides technical support through a
telephone hotline service. For the large enterprise-wide customer, Centura
offers comprehensive premium support programs. Centura also maintains an
interactive electronic bulletin board that facilitates real-time access between
Centura and its customers. Centura broadens its support coverage through its
worldwide network of authorized support centers, certified business partners and
authorized consultants. See "Risk Factors--Dependence on Third Party
Organizations."
RESEARCH AND PRODUCT DEVELOPMENT
Since inception, Centura has made substantial investments in research and
product development. Centura products have been developed by its internal
product development staff and, in certain instances, by strategic use of outside
consultants. Centura believes that timely development of new products and
enhancements to existing products is essential to maintain its competitive
position.
Centura is committed to continued development of new technologies for PC
client/server computing. Centura supports or intends to support major advanced
32-bit operating systems, including Microsoft Windows 95, Microsoft Windows NT,
Novell NetWare and SUN Solaris. In addition, Centura plans to continue to offer
upgrades to its products. Delays or difficulties associated with new products or
product enhancements could have a material adverse effect on Centura's business,
operating results and financial condition. See "Risk Factors--New Product Risks;
Rapid Technological Change" and "--Componentized Markets."
During 1996, 1995 and 1994, Centura's expenditures in research and
development, net of capitalized software, were $11.0 million, $14.4 million and
$11.2 million, representing 17%, 22% and 20% of net
74
<PAGE>
revenues, respectively. As of December 31, 1996, Centura had 74 employees
engaged in product development activities.
COMPETITION
The market for client/server system software is intensely competitive and
rapidly changing. Centura's products are specifically targeted at the emerging
portion of this market relating to PC and Web client/ server software, and
Centura's current and prospective competitors offer a variety of solutions to
address this market segment. Centura's competitors include providers of
sophisticated database software originally designed and marketed primarily for
use with mainframes and minicomputers. These competitors include IBM, Informix
Corporation, Ingres, Oracle, and Sybase. Centura also faces competition from the
providers of PC-based software products, including Microsoft and Borland. These
competitors offer database server products and front-end tools designed for
stand-alone PCs but may currently or may in the future offer additional
integrated PC client/server software. In addition, Centura faces competition
from providers of software specifically developed for the PC client/server
market, including tools competitors, such as Sybase's Powersoft Division,
Microsoft, and Forte, and connectivity software competitors, such as IBI
Systems, Inc. and Sybase's Micro DecisionWare Division. Centura also faces
potential competition from vendors of applications development tools based on
4GLs (generation languages) or CASE (Computer Aided Software Engineers)
technologies. With the emergence of the World Wide Web as an important platform
for application development and deployment additional competitors or potential
competitors have emerged.
Many of Centura's competitors have longer operating histories and
significantly greater financial, technical, sales, marketing and other
resources, as well as greater name recognition and a larger installed base, than
Centura. In addition, many competitors have established relationships with
customers of Centura. Centura's competitors could in the future introduce
products with more features and lower prices than Centura's offerings. These
companies could also bundle existing or new products with more established
products to compete with Centura. Furthermore, as the PC and Web client/server
market expands, a number of companies with significantly greater resources than
Centura, could attempt to increase their presence in this market by acquiring or
forming strategic alliances with competitors of Centura or by introducing
products specifically designed for the PC and Web client/server market.
The principal competitive factors affecting the market for Centura's
products include product architecture, performance, functionality, price,
product quality, customer support, breadth of distribution and name recognition.
Centura experienced increased competition during 1996, 1995, and 1994, resulting
in loss of market share. Centura must continue to introduce enhancements to its
existing products and offer new products on a timely basis in order to remain
competitive. However, even if Centura introduces such products in this manner,
it may not be able to compete effectively because of the significantly larger
resources available to many of Centura's competitors. There can be no assurance
that Centura will be able to compete successfully or that competition will not
have a material adverse effect on Centura's business, operating results and
financial condition. See "Risk Factors--Highly Competitive Markets" and
"--Market Acceptance of PC Client/Server Systems."
INTELLECTUAL PROPERTY
Centura currently has one patent issued on its SQLWindows and Centura
products and relies on a combination of trademark, copyright and trade secret
protection and nondisclosure agreements to establish and protect its proprietary
rights. Policing unauthorized use of Centura's technology is expensive and
difficult, and there can be no assurance that these measures will be successful.
While Centura's competitive position may be affected by its ability to protect
its proprietary information, Centura believes that ultimately factors such as
the technical expertise and innovative skill of its personnel, its name
recognition and ongoing product support and enhancements may be more significant
in maintaining Centura's competitive position.
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<PAGE>
Centura provides its software products to customers under non-exclusive,
non-transferable license agreements. As is customary in the software industry,
to protect its intellectual property rights, Centura does not sell or transfer
title to its software products to customers. Under Centura's current standard
form of end user license agreement, licensed software may be used solely for the
customer's internal operations and, except for limited deployment rights
provided in certain of its SQLWindows packages, and only on designated computers
at specified sites. Centura relies primarily on "shrink-wrap" licenses for the
protection of certain products. A shrink-wrap license agreement is a printed
license agreement included within packaged software that sets forth the terms
and conditions under which the purchaser can use the product, and binds the
purchaser by its acceptance and purchase of the software products to such terms
and conditions. Shrink-wrap licenses typically are not signed by the licensee
and therefore may be unenforceable under the laws of certain jurisdictions.
Centura has entered into source code escrow agreements with a number of
resellers and end users that require release of source code to such parties with
a limited, nonexclusive right to use such code in the event that there is a
bankruptcy proceeding by or against Centura, Centura ceases to do business or
Centura breaches its contractual obligations to the customer. Centura has, in
certain cases, licensed its source code to customers for specific uses.
There can be no assurance that third parties will not assert infringement
claims against Centura in the future with respect to current or future products
or that any such assertion may not result in costly litigation or require
Centura to obtain a license to intellectual property rights of third parties.
There can be no assurance that such licenses will be available on reasonable
terms, or at all. As the number of software products in the industry increases
and the functionality of these products further overlap, Centura believes that
software developers may become increasingly subject to infringement claims. Any
such claims, with or without merit, can be time consuming and expensive to
defend.
EMPLOYEES
As of December 31, 1996, Centura had 270 full-time employees, including 74
in research and development, 7 in manufacturing, 105 in sales and marketing, 40
in technical services and 44 in finance and administration. Centura maintains
competitive compensation, benefits, equity participation and work environment
policies to assist in attracting and retaining qualified personnel. None of
Centura's employees are covered by collective bargaining agreements. Centura
believes its relationship with its employees is good. Centura believes that the
success of its business will depend in large part on its ability to attract and
retain qualified personnel. Competition for such personnel is intense, and there
can be no assurance that Centura will be successful in attracting and retaining
such personnel.
FACILITIES
Centura leases approximately 54,000 square feet of office, development and
warehousing space in facilities in Menlo Park, California.
As of December 31, 1996, Centura also has offices in the metropolitan areas
of Atlanta, Chicago, Dallas, Los Angeles, New York, Washington D.C., Bruetten
(Switzerland), Duesseldorf, Leuven (Belgium), London, Sydney (Australia), Mexico
City, Milan, Maarssen (The Netherlands), Munich, Paris, Singapore, and Vienna.
Centura believes that its facilities are adequate for its current needs and that
suitable additional space will be available as needed.
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<PAGE>
MANAGEMENT OF CENTURA SOFTWARE CORPORATION
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth information as of December 31, 1996,
regarding the directors and executive officers of Centura:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ------------------------------------------------ --- ------------------------------------------------
<S> <C> <C>
Samuel M. Inman III............................. 46 President and Chief Executive Officer (Principal
Executive Officer), Chairman of the Board
Richard A. Gelhaus.............................. 54 Chief Financial Officer (Principal Financial and
Accounting Officer) and Senior Vice President
of Finance and Operations
Richard J. Heaps................................ 44 Senior Vice President, Business Development and
General Counsel
Earl M. Stahl................................... 42 Senior Vice President, Engineering and Chief
Technical Officer
Robert Bramley.................................. 38 Vice President, Technical Services
Michael K. Keddington........................... 37 Vice President, North American Marketing and
Sales
Helmut G. Wilke................................. 42 Vice President, European Operations
D. Bruce Scott.................................. 43 Director
William O. Grabe (1)(2)......................... 58 Director
Max D. Hopper................................... 62 Director
Anthony Sun (1)(2).............................. 43 Director
</TABLE>
- ------------------------
(1) Member of the Audit Committee of the Board of Directors.
(2) Member of the Compensation Committee of the Board of Directors.
Mr. Inman has served as Chairman of the Board since September 1996,
President and Chief Executive Officer (Principal Executive Officer) since
December 1995, and President and Chief Operating Officer since April 1995. Prior
to joining Centura, Mr. Inman served as President and Chief Operating Officer of
Ingram Micro Inc., the largest microcomputer products distributor worldwide,
where he was responsible for overseeing and managing Ingram's U.S. operations.
Prior to joining Ingram, Mr. Inman, a 21-year veteran of IBM, served as
president of IBM's Personal Computer Company for the Americas. He is a graduate
of Purdue University, where he earned his B.S. degree in mathematics.
Mr. Gelhaus joined Centura as Chief Financial Officer (Principal Financial
and Accounting Officer) and Senior Vice President of Finance and Operations in
January 1996. Prior to joining Centura, Mr. Gelhaus was Senior Vice President
Finance and Operations (CFO) of Spectrum HoloByte, Inc. ("Spectrum"), an
entertainment software company. Previously, Mr. Gelhaus was the Executive Vice
President, Finance and Operations (CFO) and Secretary of Sierra On-line, Inc. He
has held executive-level positions with Safeway Inc., Levi Strauss & Co., and
Ernst & Young. Mr. Gelhaus holds a B.S. in chemical engineering from South
Dakota School of Mines and Technology and an M.B.A. from The University of
Michigan. He is a registered C.P.A.
Mr. Heaps joined Centura in 1987, and has served as Senior Vice President,
Business Development and General Counsel since 1995. Mr. Heaps has served in
various capacities at Centura, including Vice President of Business Development,
Vice President of Intercontinental Operations, Director of Business Development,
and Director of Technical Services and Marketing. Prior to joining Centura, Mr.
Heaps was a Strategic Accounts Manager of UniSoft Corporation, a computer
software corporation, from 1986 to
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<PAGE>
1987. From 1983 to 1985, Mr. Heaps held various positions at Oracle Corporation,
most recently as Director of Personal Computer Sales. Mr. Heaps holds an M.B.A.
degree from Stanford University Graduate School of Business, a J.D. degree from
Stanford School of Law, and a B.A. in Economics and Mathematics from Yale
University.
Mr. Stahl joined Centura in 1989, and presently serves as Chief Technology
Officer and Senior Vice President for the Products organization. Mr. Stahl has
held various key positions within Centura's development organization, including
spearheading Centura's client/server tools development effort. Prior to joining
Centura, Mr. Stahl managed development projects at Bell Northern Research, Dest
Corporation, and VisiCorp. He holds a B.S. in Computer Science from San Diego
State University.
Mr. Bramley joined Centura in January 1994 and presently serves as Vice
President, Technical Support Services. Mr. Bramley has served as Senior Director
of North American Technical Support. Prior to joining Centura, he held the
position of Vice President of Technical Services at Verity, a full text
retrieval software company from November 1991 to September 1993, and held
director-level positions in support and development at Oracle Corporation from
March 1987 to November 1991.
Mr. Keddington joined Centura in July 1995 as Vice President, North American
Marketing and Sales. Mr. Keddington most recently was Vice President of Sales
with Pure Software, Inc., a software testing and development tools company from
July 1994 to April 1995; Vice President of Sales and Marketing, Coactive
Computing Corporation a networking company from January 1993 to July 1994;
Americas Sales Manager, Reseller Channels Organization, Intel Corporation, a
semi-conductor manufacturer from December 1988 to January 1993. Mr. Keddington
attended San Diego State University, where he concentrated in marketing
management.
Dr. Wilke joined Centura in July 1991 and he presently serves as Vice
President, European Operations. He started Centura's operations in Central
Europe in 1991, and was then promoted to Vice President, Central Europe. Prior
to joining Centura, Dr. Wilke worked for SUP, a Frankfurt-based Centura partner,
and served as the Managing Director of the German subsidiary of Ingres. Dr.
Wilke founded and managed his own software company, specializing in database
application development, and has lectured on statistical and empirical methods
and statistical computing. Dr. Wilke holds degrees in political and social
sciences from the Free University in Berlin.
Mr. Scott has served as a director since November 1984. In May 1995, Mr.
Scott co-founded inquiry.com Inc., an Internet company. Effective April 30,
1995, Mr. Scott resigned as Senior Vice President of Database Products, in which
position he had served since January 1994. From July 1993 to January 1994, Mr.
Scott served as Senior Vice President, Research and Development, Database and
Connectivity Products for Centura. Prior to assuming this position, Mr. Scott
was Senior Vice President and General Manager of Database Server Products from
July 1992 to June 1993, Senior Vice President, Research and Development from
January 1989 to June 1992, and Vice President from December 1984 to January
1989. Prior to joining Centura, Mr. Scott served as Manager of Database
Development at Victor Technologies, a computer manufacturer corporation, from
1982 to 1983. Mr. Scott served as Senior Member of Technical Staff at Oracle
Corporation from 1977 to 1982.
Mr. Grabe has served as a director since July 1992. He has been a General
Partner of General Atlantic Partners, an investment firm, since April 1992. From
February 1984 until March 1992, Mr. Grabe was a Vice President at IBM. Mr. Grabe
is a director of Compuware Corporation, a computer systems software corporation.
Mr. Grabe is also a director of Baan N.V., an enterprise solutions planning
software company, CODA Plc, a financial accounting software company, Gartner
Group, an information systems consulting company and Marcam Corporation, an
enterprise resource planning software company. He is also a director of several
other privately held companies in the computer software and services industry.
Mr. Hopper has served as a director since April 1995. Mr. Hopper has been
Principal and Chief Executive Officer of Max D. Hopper Associates, Inc., a
consulting firm specializing in creating benefits from the strategic use of
advanced information technologies, since January 1995. Prior to forming Max D.
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<PAGE>
Hopper Associates, Inc., Mr. Hopper served at AMR Corporation, an air
transportation company and provider of information services to the travel and
transportation industry, as Senior Vice President from 1985 through January
1995, as well as Chairman of The SABRE Group from April 1993 through January
1995. Mr. Hopper served as Executive Vice President for Bank of America from
1982 through 1985. Mr. Hopper is also a director of the Gartner Group, Computer
Language Research, Inc., Bolt Beranek & Newman, Inc., VTEL Corporation, Scopus
Technology Corporation, USData Corporation, BBN Corporation, and Worldtalk
Communications Corporation.
Mr. Sun has served as a director since September 1988. He has been at
Venrock Associates, a venture capital firm, since 1979. Previously he was
employed by Hewlett-Packard, TRW, and Caere Corporation. He is a director of
Award Software International, Inc., a computer systems software company, Cognex
Corporation, a computer systems company, Conductus, Inc., a superconductive
electronics company, Fractal Design Corporation, a multimedia software tools
company, Inference Corporation, a client/server and Internet help desk software
company, Komag, Inc., a computer storage component company, and Worldtalk
Communications Corporation, a software application router company. He is also a
director of several private companies. Mr. Sun received S.B.E.E., S.M.E.E. and
Engineer degrees from Massachusetts Institute of Technology, and a Master of
Business Administration degree from Harvard University.
The Board of Directors elects Centura's officers and such officers serve at
the discretion of the Board of Directors of Centura. There are no family
relationships among the officers or directors of Centura.
DIRECTOR COMPENSATION
Directors are reimbursed for out-of-pocket travel expenses associated with
their attendance at Board meetings. Directors received no cash compensation for
their services on the Board of Directors. Nonemployee directors of Centura are
automatically granted options to purchase shares of Centura's Common Stock
pursuant to the terms of Centura's 1996 Directors' Stock Option Plan (the
"Directors' Option Plan") provided that such nonemployee director agrees to
cancel all options granted to such director from Centura's 1995 Directors' Stock
Option Plan, except that each affected director will retain certain options to
purchase 20,000 shares of Centura's Common Stock granted to the director under
Centura's 1986 Incentive Stock Option Plan. Under the Directors' Option Plan,
each nonemployee director receives an option to purchase 50,000 shares of Common
Stock on the date on which the later of the following events occur: the
effective date of the Directors' Option Plan or the date on which such person
first becomes a nonemployee director of Centura. Each option granted under the
Directors' Option Plan becomes exercisable in installments of 1/48th of the
shares subject to such option on each of the first forty-eight (48) monthly
anniversaries of the date of grant of the option and each option granted under
the 1986 Incentive Stock Option Plan becomes exercisable in installments of 25%
of the shares subject to such option on each of the first, second, third and
fourth anniversaries of the date of grant of the option. Options granted under
the Directors' Option Plan and the 1986 Incentive Stock Option Plan have an
exercise price equal to the fair market value of Centura's Common Stock on the
date of grant, and a term of ten years.
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<PAGE>
COMPENSATION OF EXECUTIVE OFFICERS
SUMMARY COMPENSATION TABLE
The following table shows the compensation received by (a) the individual
who served as the Company's Chief Executive Officer ("CEO") during 1996; (b) the
four most highly compensated executive officers other than the CEO who were
serving as executive officers of the Company at December 31, 1996, and (c) the
compensation received by each such individual for the Company's two preceding
fiscal years.
<TABLE>
<CAPTION>
SECURITIES
UNDERLYING
OPTIONS (#)
-------------
OTHER ANNUAL LONG-TERM ALL OTHER
SALARY BONUS COMPENSATION COMPENSATION COMPENSATION
NAME AND PRINCIPAL POSITION YEAR ($)(1) ($)(2) ($)(3) AWARDS ($)(4)
- -------------------------------------- --------- --------- --------- ------------- ------------- -----------------
<S> <C> <C> <C> <C> <C> <C>
Samuel M. Inman III .................. 1996 400,000 190,000 -- -- 468
President and Chief Executive 1995 182,693 112,500 -- 479,999 -- --
Officer (Principle Executive 1994 -- -- --
Officer)
Richard A. Gelhaus ................... 1996 172,500 40,000 -- 120,000 343
Senior Vice President, Finance and 1995 -- -- -- -- --
Operations and Chief Financial 1994 -- -- -- -- --
Officer (Principal Financial and
Accounting Officer)
Earl M. Stahl ........................ 1996 160,000 60,000 -- -- 281
Senior Vice President, Engineering 1995 154,167 9,000 -- 85,000 205
and Chief Technical Officer 1994 134,750 23,500 -- 40,000 184
Helmut G. Wilke ...................... 1996 178,723 -- 93,387 -- --
Vice President European Division 1995 129,980 -- 70,556 60,000 --
1994 123,481 2,372 104,238 40,000 --
Michael K. Keddington ................ 1996 161,000 17,375 39,600 10,000 412
Vice President North America Sales 1995 68,750 16,250 -- 90,000 --
1994 -- -- -- -- --
</TABLE>
- ------------------------
(1) Includes amounts deferred under the Company's 401(k) plan.
(2) Includes bonus paid in the indicated year. Excludes bonuses earned in the
indicated year but paid in the subsequent year, except for Sam Inman in
1996. Sam Inman's 1996 bonus includes $150,000 bonus approved on March 3,
1997, by the Compensation Committee of the Board of Directors and paid March
6, 1997 plus a $40,000 moving allowance paid in 1996.
(3) Comprised of commissions paid in the indicated year.
(4) Comprised of premiums paid by the Company under the Company's group term
life insurance policy.
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<PAGE>
OPTION GRANTS IN FISCAL YEAR 1996
The following table sets forth information for the Named Executive Officers
with respect to grants of options to purchase Common Stock of Centura made
during the fiscal year ended December 31, 1996:
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS (1)
-----------------------------------------------------------------------------
POTENTIAL REALIZABLE
VALUE AT
ASSUMED ANNUAL
% OF TOTAL RATES OF
NUMBER OF OPTIONS STOCK PRICE
SECURITIES GRANTED TO APPRECIATION
UNDERLYING EMPLOYEES EXERCISE FOR OPTION TERM (2)
OPTIONS IN FISCAL PRICE EXPIRATION ---------------------
NAME GRANTED (#) YEAR (1) $/SH. DATE 5% 10%
- ---------------------------------------- ----------- --------------- ----------- ----------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
Samuel M. Inman......................... -- -- -- -- -- --
Richard A. Gelhaus...................... 120,000 13.8 $ 6.625 1/23/06 499,971 1,267,025
Earl M. Stahl........................... -- -- -- -- -- --
Helmut G. Wilke......................... -- -- -- -- -- --
Michael Keddington...................... 10,000 1.1 $ 4.375 7/23/06 27,514 69,726
</TABLE>
- ------------------------
(1) Options to purchase a total of 2,886,000 shares of Common Stock were granted
under Centura's 1995 Stock Option Plan during the fiscal year ended December
31, 1996, including 2,337,000 options issued in connection with a repricing
upon which an equivalent number of previously issued options were canceled.
These options vest over a period of four years, provided however, that the
stock options of the officers listed vest automatically in the event of any
sale of all or substantially all of Centura's assets or any merger,
consolidation or stock sale which results in the holders of Centura's
capital stock immediately prior to such transaction owning less than 50% of
the voting power of Centura's capital stock immediately after such
transaction.
(2) Potential realizable values are reported net of the option exercise price
but before taxes associated with exercise. These amounts represent certain
assumed rates of appreciation only. Actual realized gains, if any, on stock
option exercises are dependent on future performance of Centura's Common
Stock, as well as the optionee's continued employment through the vesting
period.
AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR END OPTION VALUES
The following table sets forth information for the Named Executive Officers
with respect to options to purchase Common Stock of Centura held as of December
31, 1996. No executive officer exercised any stock options during the fiscal
year ended December 31, 1996.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING IN-THE-MONEY
UNEXERCISED OPTIONS AT OPTIONS AT FISCAL YEAR-END ($)
FISCAL YEAR-END (#) (1)
NAME (EXERCISABLE/UNEXERCISABLE) (EXERCISABLE/UNEXERCISABLE)
- ----------------------------- ----------------------------- -------------------------------
<S> <C> <C>
Samuel M. Inman.............. 159,999/320,000 -/-
Richard A. Gelhaus........... -/120,000 -/-
Earl M. Stahl................ 88,750/71,250 $ 18,750/-
Helmut G. Wilke.............. 81,667/58,333 $ 30,000/-
Michael Keddington........... 30,833/69,167 -/-
</TABLE>
- ------------------------
(1) The fair market value of Centura's Common Stock at the close of business on
December 31, 1996 was $2.75 per share.
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<PAGE>
INFORMATION REGARDING BENEFICIAL OWNERSHIP OF
PRINCIPAL CENTURA SHAREHOLDERS AND MANAGEMENT
The following table sets forth certain information with respect to
beneficial ownership of the Company's common stock as of December 31, 1996, (i)
by each person known by the Company to own beneficially more than five percent
of the outstanding shares of the Company's common stock, (ii) by each director
of the Company who beneficially owns shares of the Company's common stock, (iii)
by each executive officer of the Company named in the Summary Compensation Table
and (iv) by all directors and executive officers as a group. The number of
shares of Centura Common Stock outstanding as of December 31, 1996 was
13,728,407.
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF PERCENT OF PERCENT
BENEFICIAL COMMON STOCK AFTER
NAME OF BENEFICIAL OWNER OWNERSHIP (1)(2) OUTSTANDING MERGER (8)
- ------------------------------------------------------------------- ---------------- -----------------
<S> <C> <C> <C>
Novell, Inc. (3)................................................... 1,057,500 7.70% 5.80%
2180 Fortune Drive
San Jose, CA 95131
Umang P. Gupta..................................................... 1,953,941 14.03% 10.60%
D. Bruce Scott (4)................................................. 621,219 4.52% 3.41%
William O. Grabe (5)............................................... 40,542 * *
Max D. Hopper...................................................... 13,542 * *
Anthony Sun........................................................ 75,287 * *
Samuel M. Inman (6)................................................ 195,000 1.40% 1.06%
Richard A. Gelhaus................................................. 34,500 * *
Earl M. Stahl...................................................... 98,959 * *
Michael K. Keddington.............................................. 38,956 * *
Helmut G. Wilke.................................................... 89,336 * *
All directors and executive officers as group (11 persons)
(4)(5)(6)(7)....................................................... 1,319,526 9.20% 7.00%
</TABLE>
- ------------------------
* Less than one percent.
(1) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission. In computing the number of shares
beneficially owned by a person and the percentage ownership of that person,
shares of common stock subject to options or warrants held by that person
that are exercisable on or before March 2, 1997, are deemed outstanding.
Such shares, however, are not deemed outstanding for purposes of computing
the ownership of each other person. Except as indicated in the footnotes to
this table and pursuant to applicable community property laws, the
shareholder named in the table has sole voting and investment power with
respect to the shares set forth opposite such shareholder's name.
(2) Includes with respect to each named person the following shares subject to
stock options exercisable within 60 days of December 31, 1996: Mr.
Gupta--203,333; Mr. Scott--13,542; Mr. Grabe--38,542; Mr. Hopper--13,542;
Mr. Sun--33,542; Mr. Inman--180,000; Mr. Gelhaus--32,500; Mr. Stahl--
93,959; Mr. Keddington--34,584; and Mr. Wilke--86,250. As of December 23,
1996, the effective date of Mr. Gupta's termination as a director, 203,333
shares subject to Mr. Gupta's stock options had vested and are included
above.
(3) Novell, Inc. and the Company were parties to a marketing agreement to
promote the sale of the Company's products through Novell's authorized
resellers that expired in 1996. See Note 11 of Notes to Centura Consolidated
Financial Statements.
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<PAGE>
(4) Includes 6,000 shares held for the benefit of Mr. Scott's children. Excludes
4,500 shares held by members of Mr. Scott's family, as to which Mr. Scott
disclaims beneficial ownership. Excludes 477,758 shares transferred to Mr.
Scott's ex-wife pursuant to a final divorce decree dated March 1, 1996, as
to which Mr. Scott disclaims beneficial ownership. Mr. Scott resigned his
position as an executive officer in April 1995 and has been on leave from
the Company since January 1995.
(5) Includes 2,000 shares held for the benefit for Mr. Grabe's children.
(6) Mr. Inman has served as Chairman of the Board, President and Chief Executive
Officer since September 1996, President and Chief Executive Officer
(Principal Executive Officer) since December 1995, and he served as
President and Chief Operating Officer from April 1995 to December 1995.
(7) Includes 612,538 shares subject to options held by directors and officers
that are exercisable within 60 days of December 31, 1996.
(8) Percentage calculations do not reflect the issuance of up to 1,451,704
shares of Centura Common Stock to plaintiffs in partial setlement of the
Class Action Lawsuit.
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CERTAIN TRANSACTIONS
In August 1992, Centura and Novell, which owns 7.69% at December 31, 1996,
of Centura's common stock, entered into a reseller agreement under which Centura
agreed to pay Novell certain quarterly sales commissions and trademark license
fees. In 1993, this agreement was extended until September 1996. The commissions
and fees prepaid under this agreement at December 31,1994 and 1993 were $666,000
and $625,000, respectively. Amounts accrued at December 31, 1993 were $750,000
and there were no outstanding balances at December 31, 1995 and 1994. In the
fourth quarter of 1995, Centura as a result of its restructuring plan, wrote off
the remaining prepaid balance of $338,000 which is included in restructuring
charges described in Note 4. The amounts expensed during the years ended
December 31, 1996, 1995 and 1994 were approximately $0, $666,000 and $209,000,
respectively.
Centura has the option to acquire 100% of the outstanding stock of one of
its foreign distributors, using a purchase price formula based on net profits
and revenues. At December 31, 1996, 1995 and 1994 Centura had no outstanding
receivables from this distributor. Centura recognized revenue of $1,783,000,
$2,007,000, and $0 for the years ended December 31, 1996, 1995 and 1994,
respectively, from this distributor.
Centura has entered into indemnification agreements with each of its
directors and executive officers, which may require Centura, among other things,
to indemnify them against certain liabilities that may arise by reason of their
status or service as directors or officers, to advance their expenses incurred
as a result of any proceeding against them as to which they could be
indemnified, and to obtain directors' and officers' liability insurance if
available on reasonable terms.
Centura has entered into an employment agreement with Sam Inman dated April
10, 1995 with respect to Mr. Inman's employment as President and Chief Executive
Officer of Centura. Pursuant to this agreement, Mr. Inman received a base salary
of not less than $250,000 per year and is entitled to earn a target bonus of
$150,000 per year, based upon achievement of financial and other goals,
provided, however, that Mr. Inman is guaranteed a minimum bonus of $150,000
during the initial year of this agreement. In addition, pursuant to the
agreement, Mr. Inman was granted an option to acquire up to 240,000 shares of
Centura's Common Stock at an exercise price of $10.25 per share, which shares
vest at the rate of 12,000 shares per quarter commencing July 1, 1995, and of
which 48,000 shares will be considered by the Board for certain accelerated
vesting on the basis of Mr. Inman's job performance. In January 1996, as part of
the Company's repricing of employee stock options, shares awarded Mr. Inman were
priced at $5.94. All shares subject to the option will vest on acquisition or
change of control of Centura. Upon the agreement, upon termination of Mr.
Inman's employment without cause, Mr. Inman is entitled to severance in the
amount of his base salary and any additional benefits provided under the
agreement for a period of one year.
Centura and Earl Stahl entered into a loan agreement dated August 31, 1995
pursuant to which Mr. Stahl borrowed $300,000 in connection with his purchase of
a new home. This loan will be forgiven at the rate of $40,000 of principal on
each yearly anniversary of the loan, provided, for such date, Mr. Stahl is
employed by Centura on such date. As of December 31, 1996, principal and
interest totaling $283,355 was outstanding under this loan and the largest
aggregate amount outstanding under this loan in 1996 was $318,120. The loan is
due in August, 1999, or earlier, within six months after termination of Mr.
Stahl's employment with Centura for cause.
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INFOSPINNER MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
InfoSpinner was incorporated in November 1995, and designs, develops,
markets and supports software products that provide high performance access to
new and legacy data across the Internet. InfoSpinner develops and markets these
software products to businesses seeking solutions to enable dynamic access over
the Internet and corporate Intranets to information stored in multiple data
sources.
InfoSpinner has not been profitable to date. InfoSpinner's losses have
resulted principally from expenses associated with the research and development
of its products, and the establishment of its products in the marketplace. There
can be no assurance that InfoSpinner will attain profitability on a quarterly or
an annual basis. Potential risks and uncertainties include, among others,
fluctuations in the volume and timing of product orders, changes in demand for
InfoSpinner's products, the timing of the introduction, localization or
enhancement of products by InfoSpinner and its competitors, market acceptance of
new products, localization and upgrades, reviews in the industry press
concerning the products of InfoSpinner or its competitors, pricing changes,
changes in distribution mix, returns from InfoSpinner's distributors, general
economic conditions and those discussed elsewhere in this Proxy
Statement/Prospectus, particularly in "Risk Factors."
InfoSpinner markets and distributes its products through an indirect sales
channels program. InfoSpinner's sales strategy is to achieve rapid growth and
market penetration by partnering with established technology companies seeking a
data access component of their Internet and corporate Intranet solutions. To
date, InfoSpinner has entered into strategic distribution agreements with
Software AG of North America, Inc., Beacon Information Technology Ltd. of Japan
and Centura. Any termination or significant disruption of InfoSpinner's
relationship with any of its distributors, or the failure of such parties to
renew agreements with InfoSpinner, could materially and adversely affect the
business, operating results and financial condition of InfoSpinner.
RESULTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 1996
InfoSpinner generated $310,000 of total net revenue comprised of $185,000 of
product revenue and $125,000 of service revenue. These revenues were offset by
cost of product of $10,000 and cost of service of $100,000 primarily for the
development of software under contract.
InfoSpinner incurred $599,000 of research and development expenses and
$511,000 of sales and marketing expenses, primarily consisting of employee and
contractor labor expenses, for the development of its products and the
establishment of its products in the marketplace, respectively. General and
administrative expenses of $344,000 consist of labor costs, office rent and
recruitment costs associated with the employment of software engineers and sales
and marketing personnel. Interest income from an interest bearing bank account
and certificates of deposits was $22,000.
PERIOD FROM INCEPTION (NOVEMBER 1995) THROUGH DECEMBER 1995
InfoSpinner incurred $92,000 of operating expenses primarily consisting of
expenses associated with the formation of the company, including the exchange of
4,500,000 shares of InfoSpinner Common Stock to the founder for software
technology that provides high performance access to new and legacy data across
the Internet.
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LIQUIDITY AND CAPITAL RESOURCES
Since inception, InfoSpinner has financed its operations through advances on
future royalties from Software AG of North America, Inc. and the sale of equity
securities. As of December 31, 1996, InfoSpinner had $1,368,000 in cash and cash
equivalents and working capital of $31,000.
During 1996 and 1995, InfoSpinner's principal uses of cash were to support
increases in inventory and additions to capital equipment resulting from
InfoSpinner's growth, as well as to finance operating losses related to sales
and marketing and research and development expenses incurred to establish
InfoSpinner's business. Net cash provided by (used in) operating activities was
approximately $165,000 and $(2,000) for 1996 and 1995, respectively.
InfoSpinner's expenditures for capital equipment were $167,000 and $10,000 for
1996 and 1995, respectively.
InfoSpinner believes that cash from operations will be sufficient to support
its operations in the short term. Over the longer term, InfoSpinner may find it
necessary to seek additional equity or debt financing to support its growth.
INFORMATION REGARDING BENEFICIAL OWNERSHIP OF PRINCIPAL INFOSPINNER STOCKHOLDERS
AND MANAGEMENT
The following table sets forth certain information regarding beneficial
ownership of InfoSpinner Common Stock and InfoSpinner Preferred Stock as of
December 31, 1996 by (i) each person known to InfoSpinner to beneficially own
more than 5% of the outstanding shares of InfoSpinner Common Stock or more than
5% of the outstanding shares of InfoSpinner Preferred Stock, (ii) each of the
directors and executive officers of InfoSpinner, and (iii) all of InfoSpinner's
directors and executive officers as a group.
<TABLE>
<CAPTION>
NUMBER OF
SHARES PERCENT
BENEFICIALLY BENEFICIALLY
BENEFICIAL OWNER (1) OWNED (2) OWNED (3)
- ---------------------------------------------------------------------------------------- ----------- -------------
<S> <C> <C>
Keith A. Lowery......................................................................... 3,840,000 53.16%
Beacon Information Technology Ltd. ..................................................... 663,265 9.18%
Shinjuku L. Tower, 7F
1-6-1 Nishi-shinjuku
Shinjuku-ku
Tokyo, Japan 160
Robert L. West and Evelyn K. West....................................................... 650,000 9.00%
John N. Berens.......................................................................... 500,000 6.92%
Yoshi Noguchi........................................................................... 100,000 1.38%
All current directors and executive officers as a group (4 persons)..................... 5,090,000 70.47%
</TABLE>
- ------------------------
(1) Except as indicated by footnote, and subject to community property laws
where applicable, the persons named in the table above have sole voting and
investment power with respect to all shares of Common Stock as beneficially
owned by them.
(2) Beneficial ownership is determined in accordance with the rules of the
Securities Exchange Commission and generally includes voting or investment
power with respect to securities. The number of shares set forth as
beneficially owned assumes (i) the conversion of all outstanding InfoSpinner
Preferred Stock into InfoSpinner Common Stock and (ii) that the Merger will
occur within 60 days of December 31, 1996, thus causing InfoSpinner's right
of repurchase to automatically lapse with respect to all unvested shares of
InfoSpinner Common Stock held by Messrs. Lowery, Berens, and Noguchi and two
other holders of InfoSpinner Common Stock.
(3) Computed on the basis of 7,223,265 shares of InfoSpinner Common Stock
outstanding on December 31, 1996.
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INFORMATION CONCERNING
INFOSPINNER INC.
BUSINESS OVERVIEW
InfoSpinner, designs, develops and markets server, authoring and management
tools that allow organizations to build and deploy high-volume Web sites that
integrate legacy data and applications with client requests for information.
InfoSpinner designed its ForeSite product to provide high performance
through-put, scalability, content extensibility, and Web site management and
maintenance across a distributed network environment. The unique architecture of
ForeSite provides for near-fault tolerant reliability and enables the retrieval
and management of static and dynamic information, including video, audio, and
graphics.
InfoSpinner's target market is small to large businesses seeking solutions
to enable dynamic access over the Internet and corporate Intranets to
information stored in multiple data sources. Such solutions allow businesses to
protect their investments in legacy data and applications, and to facilitate new
revenue opportunities utilizing the World Wide Web as a vehicle for expanding
their sales and services. InfoSpinner addresses this market by offering products
that allow highly reliable, scalable, extensible, and secure access to
information and applications over the Internet and corporate Intranets.
InfoSpinner markets and distributes its products through an indirect sales
channels program. InfoSpinner's sales strategy is to achieve rapid growth and
market penetration by partnering with established technology companies seeking a
data access component to their Internet and corporate Intranet solutions. To
date, InfoSpinner has entered into strategic distribution agreements with
Software AG of North America, Inc., Beacon Information Technology Ltd. of Japan
and Centura.
INDUSTRY OVERVIEW
The rapid expansion of the Internet has greatly increased the ability of
organizations to economically communicate information to customers and
employees. The massive connectivity potential of the Web has blurred the
distinction between client and server. The dramatic advances in computing power,
storage capacity, user interfaces and open operating environments that come from
the networked nature of the Internet offer organizations a radical new way of
defining and building their business. Further, the Web has significantly
increased the ability of IS organizations to offer information as a strategic
resource for business. Legacy data, once left for dead on corporate mainframes,
can now be revived as a useful source of strategic information.
InfoSpinner's products and services focus on the data access component of
the server software market. Data access server software enables organizations to
use information from legacy data and applications. InfoSpinner's products are
designed to overcome the inherent architectural limitations of traditional Web
servers such as those offered by Netscape, Spyglass, and Microsoft, which
currently do not allow for dynamic scaling or load balancing. InfoSpinner's
products and services also provide authoring tools and data retrieval.
PRODUCTS
InfoSpinner makes server, authoring and management tools that allow
organizations to build and deploy high-volume Web sites that enable such
organizations to obtain information from legacy data and applications.
InfoSpinner's products provide high performance through-put, scalability,
content extensibility, and Web site management and maintenance across a
distributed network environment. InfoSpinner's software architecture is intended
to provide near-fault tolerant reliability and to enable the retrieval and
management of static and dynamic information, including video, audio, and
graphics.
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InfoSpinner's ForeSite product is an advanced application integration and
deployment environment for the Web. One of ForeSite's key advantages is its
patent-pending clustering technology. This clustering technology is implemented
in distributed and multithreaded deployment modules designed to maximize
performance, throughput and availability. ForeSite also includes a powerful and
easy to use integration module that simplifies the integration of applications
and data sources with the Web. Several extension modules are available for
integrating common data sources such as client/server applications, 3270
applications and SQL databases.
Key advantages of the ForeSite product family include:
1. Scalability--ForeSite is designed to maximize three important design
goals: performance, throughput and availability through the following features:
- Performance Features:
- Multithreaded PageServer
- Page caching and connection caching
- Throughput Features
- Multiple, distributed PageServers for processing Web page requests
- PageDispatcher load balances Web page requests across multiple
PageServers
- Availability Features
- "Hot Spare" PageDispatchers available for redundancy
- Multiple, distributed PageServers for redundancy
2. Extensibility--ForeSite can integrate applications and data sources with
the Web. Extension modules are available for integrating ActiveX Controls and
client/server applications that are implemented as ActiveX servers, for 3270
applications, and for integrating SQL databases via Open Database Connectivity
(ODBC). A Software Development Kit (SDK) is included and provides a COM-based
framework to facilitate access to any other data source.
3. Usability--ForeSite provides a powerful and easy-to-use integration
module, called PageBuilder, that simplifies the integration of applications and
databases with the Web. ForeSite-specific Hyper-Text Mark-Up Language (HTML)
tags, called DYNATAGs, are inserted into Web pages to form templates. DYNATAGs
are designed to minimize required programming knowledge.
MARKETING, DISTRIBUTION AND PRODUCT SUPPORT
InfoSpinner believes the market for its products and services can broadly be
described as organizations that desire to utilize the broad-band communications
capabilities of the Internet to provide both internal and external access to
existing information that resides in organization-controlled data sources. While
existing Internet browsers and servers (such as Netscape) provide reasonable
access to information and data in a static format, the current server products
on the market generally do not solve the problem of making dynamic and changing
information available in a manner that meets the performance and distribution
requirements of most businesses. The target customer for InfoSpinner's products
is one that desires to deploy a high-volume Web site that integrates legacy data
with new or existing applications.
InfoSpinner utilizes a multi-channel sales strategy, including technology
partners and OEM's, solutions partners (VAR's, systems integrators and
independent software vendors ("ISV's")), Internet service providers ("ISP's"),
and direct sales (field sales, telesales, and Web marketing).
TECHNOLOGY PARTNERS/OEMS
InfoSpinner's sales strategy contemplates establishing relationships with
technology partners and OEMs in three key areas: high-end enterprise (i.e.,
mainframe) partners, database companies, and
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client/server fourth generation language ("4GL") application generators.
InfoSpinner hopes to partner with high-end enterprise organizations, such as
Software AG and IBM, who implement large information sources such as the DB2,
IMS and Adabase databases. InfoSpinner has already signed a worldwide licensing
agreement with Software AG to OEM InfoSpinner's development tool and server tool
products. InfoSpinner's sales strategy also includes establishing OEM or
bundling relationships with database companies, such as Sybase, Oracle and
Informix, who may view dynamic access to their core products via the Internet as
both a natural extension of their own businesses as well as a means of managing
some of the resource and licensing challenges that opening up databases to the
public will create. Finally, client/server 4GL application generators, such as
Centura and Borland, may desire to Web-enable their development tools using
InfoSpinner's technology. InfoSpinner has entered into a worldwide licensing
agreement with Centura.
SOLUTION PARTNERS (VAR'S, SYSTEMS INTEGRATORS, ISV'S)
VAR's, systems integrators and ISV's view the Internet as a significant
opportunity for their consulting and customization services. VAR's and systems
integrators are primarily technology transition agents. They see the Internet as
an opportunity to help their clients transition legacy applications to an
Internet environment. Building dynamic Web sites or enabling applications to
become distributed across the Web are two areas that VAR's and systems
integrators are currently focusing on. InfoSpinner's products act as an enabling
technology to help with this transition.
INTERNET SERVICE PROVIDERS (ISP'S)
ISP's are a natural channel for InfoSpinner's products. InfoSpinner can
offer ISP's a new market opportunity by allowing small businesses to publish
both static and dynamic information on the Web. InfoSpinner's current pricing
model for ISP's will allow them to offer Web site development and presence at a
significantly reduced price when compared to current Web Server solutions such
as Netscape. In addition, because InfoSpinner's solution, as sold by the ISP,
places the responsibility for publishing content on the customer, the ISP can
reduce both its hardware costs as well as its Web site maintenance and
management costs.
DIRECT SALES
Direct field sales will focus on medium to large organizations that require
the scalability and extensibility InfoSpinner's products offer, and are
undertaking Web development and management through in-house resources (i.e., via
their internal IS departments). In addition, the direct field sales force will
target ISP's and Web site hosting vendors who have high-volume requirements and
significant Web management and maintenance issues. The ability to deploy
PageServers in a distributed fashion can greatly alleviate the maintenance and
management challenges currently facing ISP's because it passes the content
management portion of Web management back onto the original content provider.
Finally, the direct field sales force will be responsible for engaging and
managing indirect channel partners such as OEM's, VAR's and ISV's.
InfoSpinner's sales strategy also includes the establishment of a telesales
organization in conjunction with InfoSpinner's Web site offering of a low-end
dynamic Web building tool.
TARGET MARKETS
HIGH-END LEGACY PRODUCTION SYSTEMS
InfoSpinner believes that many businesses will begin to make available
existing information stored in legacy data sources, such as relational
databases, to enhance customer service, improve employee productivity, extend
the life of legacy applications and open up new markets. Examples of
applications where access to live information can benefit customers include
order tracking, account balance status, problem tracking and status, and other
applications which require interaction with live data. The high-performance
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characteristics of InfoSpinner's products are designed to address the needs of
businesses that anticipate a high-volume load against their deployed Web site.
CLIENT/SERVER APPLICATION MARKET
InfoSpinner believes that there exists a substantial market for providing
Web-access to client/server legacy applications traditionally built with one of
the major 4GL-based application development tools such as PowerBuilder, Visual
Basic, Visual C++, SQL Windows and Delphi. Traditionally, businesses have
invested a large amount of time and money in developing the client/server
skill-sets necessary to deploy these kinds of applications. InfoSpinner believes
these businesses will seek solutions that allow them to leverage their existing
skill-sets (and the applications they build and maintain) across the Web. To
this end, ForeSite utilizes the extensibility model available in all these
legacy tool sets to Web-enable the existing applications for access by Web
browsers anywhere in the world. By partnering with those organizations (VAR's
and ISV's) most familiar with these tool sets, InfoSpinner believes it can
compete in a significant market for Web-enabling legacy client/server
applications.
INTERNET COMMERCE MARKET
Internet service providers (ISP's) offer access to the Internet by allowing
the browsing and downloading of information published on the Web, as well as
presence on the Internet to allow businesses and organizations to publish
information in the form of HTML Web Sites and Web pages. Currently, the
information published on Web sites tends to be static in nature, and creates
significant maintenance challenges for many ISP's who provide presence for small
businesses. InfoSpinner believes that its products will allow ISP's to offer
dynamic information publishing in a cost-effective, easily managed way.
InfoSpinner offers ISP's a package of dynamic server products and pre-packaged
Web sites and custom management and maintenance tools, that allow ISP's to
service small businesses and personal users who wish to publish dynamic content
on the Web. InfoSpinner believes that this solution will open up the networking
capacity of the Web to small businesses, giving them access to the connectivity
power of the Web that historically has only been available to much larger
companies.
CUSTOMER SUPPORT AND SERVICE
InfoSpinner provides on-site and in-house training for all of its products.
Support is available to its customers on both a pre-sale and post-sale basis.
Pre-sale support involves InfoSpinner technical resources working with the
direct sales forces of its channel partners to provide critical technical
support during the evaluation phase of the sale. Post-sale support is provided
during initial implementation and through annual maintenance agreements.
Customers with maintenance agreements receive all product enhancement
releases without additional charge. Product upgrades that add significant new
functionality are available for an additional fee. In addition, InfoSpinner has
a Web-based support chat room, and will be offering a toll-free support hotline
in the near future.
InfoSpinner provides product training via its channel partners, and has an
extensive "train-the-trainer" program to insure that its channels partners are
equipped to effectively train end-user customers on the ForeSite product.
RESEARCH AND PRODUCT DEVELOPMENT
The InfoSpinner product vision is driven by the basic underlying assumption
that commercial viability of Internet-based systems will, in the end, be driven
by the same factors that drive a business computing system's success today:
- Predictable and reliable performance across a range of application
systems
- Ability to integrate and be compatible with existing information systems
environments
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- Extensible and adaptable to rapidly changing requirements
InfoSpinner products were designed to perform in a predictable and robust
manner during peak work loads. Fundamentally, InfoSpinner products must scale
from the low-end to the high-end and support an architecture that facilitates
the utilization of additional CPU cycles when work-loads require it.
COMPETITION
Although new, the Internet/Intranet marketplace is intensely competitive and
characterized by rapidly changing technology, evolving industry standards,
frequent new product introductions, and rapidly changing customer requirements.
InfoSpinner anticipates competition from four primary directions: in-house
solutions developed by IS organizations; young companies focused on the dynamic
data access part of the market; database companies looking to open up their
databases to the Web; and Web server companies, such as Microsoft, wishing to go
beyond shipping static files back-and-forth across the Web. In addition,
InfoSpinner anticipates competition from companies promoting a Java-based
solution to Web-enabling applications.
InfoSpinner has experienced and expects to continue to experience
competition from current and future competitors, many of whom have significantly
greater financial, technical, marketing, and other resources than InfoSpinner.
The two principal competitors currently offering solutions similar to
InfoSpinner are NetDynamics, Inc. and OneWave, Inc. NetDynamics, Inc. offers a
Web-development tool set that is designed to deploy Java-based applications over
the Web. OneWave, Inc. offers Web integration with SAP, Baan, and PeopleSoft
applications. In addition, InfoSpinner's competitors include or may include
Active Software, Inc., Kiva Software Corporation, Bluestone, Inc., Aspect
Technologies, Inc. and Haht Software, Inc.
The principal competitive factors affecting the market for InfoSpinner's
products are product architecture, scalability/performance, extensibility and
usability. In addition, distribution and market awareness are critical to
achieving market penetration. InfoSpinner believes it presently competes
favorably with respect to each of these factors. However, InfoSpinner's market
is still evolving and there can be no assurance that InfoSpinner will be able to
compete successfully against current and future competitors and the failure to
do so successfully will have a material adverse affect upon InfoSpinner's
business, operating results and financial condition.
InfoSpinner has filed a patent application with the U.S Patent and Trademark
Office for the technology underlying InfoSpinner's core product.
INTELLECTUAL PROPERTY
InfoSpinner relies primarily on a combination of patent, copyright and
trademark laws, trade secrets, confidentiality procedures and contractual
provisions to protect its proprietary rights. InfoSpinner seeks to protect its
software, documentation and other written materials under trade secret and
copyright laws, which afford only limited protection. InfoSpinner has filed one
patent application with the U.S. Patent and Trademark Office. There can be no
assurance that InfoSpinner's patent application will effectively protect
InfoSpinner's technology, provide a competitive advantage to InfoSpinner, be
issued within the scope of the claims sought by InfoSpinner, if at all, or not
be invalidated, circumvented or challenged. Furthermore, there can be no
assurance that others will not develop technologies that are similar or superior
to InfoSpinner's technology or design around the patent application. Despite
InfoSpinner's efforts to protect its proprietary rights, unauthorized parties
may attempt to copy aspects of InfoSpinner's products or to obtain and use
information that InfoSpinner regards as proprietary. There can be no assurance
that InfoSpinner's means of protecting its proprietary rights will be adequate
or that competition will not independently develop similar technology.
InfoSpinner has entered into source code escrow agreements with its
distributors requiring release of source code in certain circumstances. Such
agreements generally provide that such parties will have a
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limited, nonexclusive right to use such code in the event that there is a
bankruptcy proceeding by or against InfoSpinner or if InfoSpinner ceases to do
business.
InfoSpinner provides its software products to customers under non-exclusive,
non-transferable license agreements. To protect its proprietary rights,
InfoSpinner does not sell or transfer title to its software products to
customers.
InfoSpinner is not aware that it is infringing any proprietary rights of
third parties. There can be no assurance, however, that third parties will not
claim infringement by InfoSpinner of their intellectual property rights.
EMPLOYEES
As of December 31, 1996, InfoSpinner had 14 full-time employees, including 8
in research and development, 5 in sales and marketing, and 1 in administration.
None of InfoSpinner's employees is represented by a labor union or is party to a
collective bargaining agreement. InfoSpinner has not experienced any work
stoppages and considers relations with its employees to be good. InfoSpinner
believes that the success of its business will depend in large part on its
ability to attract and retain qualified personnel. Competition for such
personnel is intense, and there can be no assurance that InfoSpinner will be
successful in attracting and retaining such personnel.
FACILITIES
InfoSpinner leases approximately 12,000 square feet of office space in
Richardson, Texas, which remains its principal place of business.
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DESCRIPTION OF CENTURA CAPITAL STOCK
The authorized capital stock of Centura consists of 60,000,000 shares of
Common Stock, $.01 par value, and 2,000,000 shares of Preferred Stock, $.01 par
value.
COMMON STOCK
The holders of Common Stock are entitled to one vote per share on all
matters to be voted upon by the shareholders, except that, upon giving the
legally required notice, shareholders may cumulate their votes in the election
of directors. Subject to preferences that may be applicable to any outstanding
shares of Preferred Stock, the holders of Common Stock are entitled to receive
ratably such dividends, if any, as may be declared from time to time by the
Board of Directors out of funds legally available therefor. See "Dividend
Policy." In the event of a liquidation, dissolution or winding up of Centura,
the holders of Common Stock are entitled to share ratably in all assets
remaining after payment of liabilities, subject to prior rights of holders of
Preferred Stock then outstanding, if any. The Common Stock has no preemptive or
conversion rights or other subscription rights. There are no redemption or
sinking fund provisions available to the Common Stock. All outstanding shares of
Common Stock are fully paid and non-assessable.
At February 28, 1997, 13,763,760 shares of Common Stock were outstanding and
held of record by 466 shareholders. In addition, options to purchase an
aggregate of 2,779,256 shares of Common Stock were outstanding at February 28,
1997 under Centura's 1986 Stock Option Plan, 1995 Stock Option Plan and 1996
Directors' Stock Option Plan.
PREFERRED STOCK
The Board of Directors has the authority to issue up to 2,000,000 shares of
Preferred Stock and to determine the powers, preferences and rights and the
qualifications, limitations or restrictions granted to or imposed upon any
wholly unissued shares of undesignated Preferred Stock and to fix the number of
shares constituting any series and the designation of such series, without any
further vote or action by the shareholders. The issuance of Preferred Stock may
have the effect of delaying, deferring or preventing a change in control of
Centura without further action by the shareholders and may adversely affect the
voting and other rights of the holders of Common Stock. At present, Centura has
no plans to issue any shares of Preferred Stock.
CERTAIN ANTI-TAKEOVER PROVISIONS
In August 1994, the Centura Board of Directors adopted a Shareholder Rights
Plan pursuant to which one Preferred Share Purchase Right (a "Right") was
distributed for each outstanding share of common stock. Each Right entitles
shareholders to purchase a fraction of a share of Preferred Stock at an exercise
price of $60.00 upon certain events. The Rights expire on August 3, 2004, unless
earlier redeemed by Centura.
The Rights become exercisable if a person acquires 15% or more of Centura's
common stock or announces a tender offer that would result in such person owning
15% or more of Centura's common stock. If the Rights become exercisable, the
holder of each Right (other than the person whose acquisition triggered the
exercisability of the Rights) will be entitled to purchase, at the Right's then
current exercise price, a number of shares of Centura's common stock having a
market value of twice the exercise price. In addition, if Centura were to be
acquired in a merger or Centura sells more than 50% of its assets or earning
power, each Right will entitle its holder to purchase, at the Right's then
current exercise price, common stock of the acquiring company having a market
value of twice the exercise price. The Rights are redeemable by Centura at a
price of $.01 per Right at any time within ten days after a person has acquired
15% or more of Centura's common stock.
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<PAGE>
TRANSFER AGENT AND REGISTRAR
The Transfer Agent and Registrar for the Centura Common Stock is ChaseMellon
Shareholder Services.
COMPARISON OF RIGHTS OF HOLDERS OF CENTURA COMMON STOCK
AND INFOSPINNER COMMON STOCK
SIGNIFICANT DIFFERENCES BETWEEN THE CHARTERS AND BYLAWS OF CENTURA AND
INFOSPINNER
In connection with the Merger, the InfoSpinner stockholders will be
converting their shares of InfoSpinner capital stock into shares of Centura
Common Stock. The charter and Bylaws of Centura differ from those of InfoSpinner
in several significant respects.
CAPITALIZATION. The Certificate of Incorporation of InfoSpinner currently
provides that InfoSpinner is authorized to issue up to 15,000,000 shares of
Common Stock, $0.0001 par value, and 5,000,000 shares of Preferred Stock,
$0.0001 par value. The Articles of Incorporation of Centura currently provide
that Centura is authorized to issue up to 60,000,000 shares of Common Stock,
$.01 par value, and 2,000,000 shares of Preferred Stock, $.01 par value. The
Board of Directors of Centura is authorized to fix, or alter all or any of, the
dividend rights, dividend rate, conversion rights, voting rights, rights and
terms of redemption (including sinking fund provisions), the redemption price or
prices, and the liquidation preferences of any wholly unissued series of
Preferred Stock, and to fix the number of shares constituting any such series.
The Preferred Stock may be issued from time to time in one or more series.
CHANGE IN NUMBER OF DIRECTORS. Under the Delaware Law, the authorized
number of directors may be changed by resolution of the board of directors.
Under the California Law, the directors can change the authorized number of
directors if the shareholders have adopted a provision in the articles of
incorporation or bylaws permitting the directors to fix their number, but only
within the bounds of stated minimum and maximum numbers which have been approved
by the shareholders. The Bylaws of Centura currently provide the directors with
authority to fix the number of directors in a range from five to nine, and the
currently established number is seven. The Bylaws of InfoSpinner provide that
the number of directors shall be determined by resolution of the Board of
Directors or by the stockholders at the annual meeting of stockholders, and the
currently established number is three. The Board of Directors of InfoSpinner
currently has the power to amend the Bylaws to change the size of the Board of
Directors from three directors, without stockholder approval.
INDEMNIFICATION AND LIMITATION OF LIABILITY. Under the Delaware Law,
Delaware corporations are permitted to adopt a provision in their certificates
of incorporation reducing or eliminating the liability of a director to the
corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, provided that such liability does not arise from certain
proscribed conduct (including intentional misconduct and breach of the duty of
loyalty). InfoSpinner has adopted such a provision in its Certificate of
Incorporation. California has adopted a similar provision. Centura has adopted a
provision in its Articles of Incorporation limiting the liability of Centura's
directors for monetary damages to the fullest extent permissible under the
California Law.
AMENDMENT OF BYLAWS. The Certificate of Incorporation of InfoSpinner
provides that the Board of Directors of InfoSpinner is expressly authorized to
adopt, amend or repeal InfoSpinner's Bylaws; provided, however, that the
InfoSpinner stockholders may change or repeal any Bylaw adopted by the Board of
Directors, and no amendment or supplement to the Bylaws adopted by the Board of
Directors shall vary or conflict with any amendment or supplement adopted by the
stockholders. The Articles of Incorporation of Centura contain no similar
provision.
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SIGNIFICANT DIFFERENCES BETWEEN THE CORPORATION LAWS OF CALIFORNIA AND
DELAWARE
In connection with the Merger, the InfoSpinner stockholders will be
exchanging shares of a Delaware corporation (InfoSpinner) for shares of a
California corporation (Centura). The California Law and the Delaware Law differ
in many respects. It is not practical to summarize all of such differences in
this Prospectus/Joint Proxy Statement, but the principal differences which could
materially affect the rights of shareholders include the following:
SIZE OF BOARD OF DIRECTORS. Under the California Law, although changes in
the number of directors must in general be approved by the shareholders, the
board of directors may fix the exact number of directors within a stated range
set forth in the articles of incorporation or bylaws, if the stated range has
been approved by the shareholders. The Delaware Law permits the board of
directors to change the authorized number of directors by amendment to the
bylaws or in the manner provided in the bylaws unless the number of directors is
fixed in the certificate of incorporation, in which case a change in the number
of directors may be made only by amendment to the certificate of incorporation.
The Bylaws of Centura provide the directors with authority to fix the number of
directors within a range from five to nine.
CLASSIFIED BOARD OF DIRECTORS. A classified board is one on which a certain
number, but not all, of the directors are elected on a rotating basis each year.
Under the California Law, directors generally must be elected annually; however,
a "listed" corporation is permitted to adopt a classified board. A "listed"
corporation is defined under the California Law as a corporation with (1)
outstanding securities listed on the New York or American Stock Exchange or (2)
a class of securities designated as a national market security on NASDAQ if the
corporation has at least 800 holders of its equity securities. The Delaware Law
permits, but does not require, a classified board of directors, pursuant to
which the directors can be divided into as many as three classes with staggered
terms of office, with only one class of directors standing for election each
year. Centura's Articles of Incorporation do not provide for a classified board.
REMOVAL OF DIRECTORS. Under the California Law, any director or the entire
board of directors may be removed, with or without cause, with the approval of a
majority of the outstanding shares entitled to vote; however, no directors may
be removed (unless the entire board is removed) if the number of votes cast
against the removal would be sufficient to elect the director under cumulative
voting. Under the Delaware Law, a director of a corporation that does not have a
classified board of directors or cumulative voting may be removed without cause
by a majority shareholder vote. In the case of a Delaware corporation having
cumulative voting, if less than the entire board is to be removed, a director
may not be removed unless the shares voted against such removal would not be
sufficient to elect the director under cumulative voting. A director of a
corporation with a classified board of directors can be removed only for cause
unless the certificate of incorporation otherwise provides. Centura's Articles
of Incorporation do not provide for a classified board of directors and do not
eliminate cumulative voting and, therefore, no director may be removed from
office (unless the entire board is removed) if the votes cast against his or her
removal would be sufficient to elect him or her under cumulative voting.
CUMULATIVE VOTING. A "listed" California corporation, as defined above, may
eliminate cumulative voting in the election of directors. For corporations not
meeting such criteria, the California Law provides that any shareholder is
entitled to cumulate his or her votes in the election of directors upon proper
notice of his or her intention to do so. Under the Delaware Law, cumulative
voting in the election of directors is not mandatory. Centura's Articles of
Incorporation do not eliminate cumulative voting. In an election of directors
under cumulative voting, each share of stock normally having one vote is
entitled to a number of votes equal to the number of directors to be elected. A
shareholder may then cast all such votes for a single candidate or may allocate
them among as many candidates as the shareholder may choose. Without cumulative
voting, the holders of a majority of the shares present at an annual meeting
would have the power to elect all the directors to be elected at that meeting,
and no person could be elected without the support of holders of a majority of
the shares.
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<PAGE>
LOANS TO OFFICERS AND EMPLOYEES. Under the Delaware Law, a corporation may
make loans to, guarantee the obligations of, or otherwise assist its officers or
other employees and those of its subsidiaries when such action, in the judgment
of the directors, may reasonably be expected to benefit the corporation. Under
the California Law, any such loan or guaranty to or for the benefit of a
director or officer of the corporation or any of its subsidiaries requires
approval of the shareholders unless such loan or guaranty is provided under a
plan approved by shareholders owning a majority of the outstanding shares of the
corporation. In addition, under the California Law, shareholders of any
corporation with 100 or more shareholders of record may approve a bylaw
authorizing the board of directors alone to approve a loan or guaranty to or on
behalf of an officer (whether or not a director) if the board determines that
such a loan or guaranty may reasonably be expected to benefit the corporation.
POWER TO CALL SPECIAL SHAREHOLDERS' MEETING. Under the California Law, a
special meeting of shareholders may be called by the board of directors, the
Chairman of the Board, the President and the holders of shares entitled to cast
not less than 10% of the votes at such meeting and such persons are authorized
by the articles of incorporation or bylaws. Under the Delaware Law, a special
meeting of shareholders may be called by the board of directors or by any other
person authorized to do so in the certificate of incorporation or the bylaws.
INDEMNIFICATION AND LIMITATION OF LIABILITY. The California and Delaware
Laws have similar provisions and limitations respecting indemnification by a
corporation of its officers, directors and employees. Neither Centura nor
InfoSpinner is aware of any pending legal action against the officers, directors
or employees of such company which would be covered by such indemnification
provisions.
Both the California and Delaware Laws permit a corporation to adopt a
provision in its charter eliminating the liability of a director to the
corporation or its shareholders for monetary damages for breach of fiduciary
duty as a director, provided such liability does not arise from certain
proscribed conduct (including intentional misconduct and breach of the duty of
loyalty). Both Centura and InfoSpinner have adopted such a provision in their
charters.
INSPECTION OF SHAREHOLDERS' LIST. Both the California and Delaware Laws
allow any shareholder to inspect the shareholders' list for a purpose reasonably
related to such person's interest as a shareholder.
The California Law provides, in addition, an absolute right to inspect and
copy the corporation's shareholders' list by a person or persons holding 5% or
more of a corporation's voting shares, or any shareholder or shareholders
holding 1% or more of such shares who has filed a Schedule 14B with the
Securities and Exchange Commission relating to the election of directors. The
Delaware Law does not provide for any such absolute right of inspection.
DIVIDENDS AND REPURCHASES OF SHARES. The Delaware Law permits a
corporation, unless otherwise restricted by its certificate of incorporation, to
declare and pay dividends out of surplus or, if there is no surplus, out of net
profits for the fiscal year in which the dividend is declared and/or for the
preceding fiscal year as long as the amount of capital of the corporation is not
less than the aggregate amount of the capital represented by the issued and
outstanding stock of all classes having a preference upon the distribution of
assets. In addition, the Delaware Law generally provides that a corporation may
redeem or repurchase its shares only if such redemption or repurchase would not
impair the capital of the corporation. The ability of a Delaware corporation to
pay dividends on, or to make repurchases or redemptions of, its shares is
dependent on the financial status of the corporation standing alone and not on a
consolidated basis. In determining the amount of surplus of a Delaware
corporation, the assets of the corporation, including stock of subsidiaries
owned by the corporation, must be valued at their fair market value as
determined by the board of directors, regardless of their historical book value.
Under the California Law, a corporation may not make any distribution
(including dividends, whether in cash or other property, and repurchases of its
shares) unless either the corporation's retained earnings immediately prior to
the proposed distribution equal or exceed the amount of the proposed
distribution or,
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<PAGE>
immediately after giving effect to such distribution, the corporation's assets
(exclusive of good will, capitalized research and development expenses and
deferred charges) would be at least equal to 1 1/4 times its liabilities (not
including deferred taxes, deferred income and other deferred credits), and the
corporation's current assets, as defined, would be at least equal to its current
liabilities (or 1 1/4 times its current liabilities if the average pre-tax and
pre-interest earnings for the preceding two fiscal years were less than the
average interest expenses for such years). Such tests are applied to California
corporations on a consolidated basis. Under the California Law, there are
certain exceptions to the foregoing rules for repurchases of shares in
connection with certain rescission actions or pursuant to certain employee stock
plans.
APPROVAL OF CERTAIN CORPORATE TRANSACTIONS. Under both the California and
Delaware Laws, with certain exceptions, any merger, consolidation or sale of all
or substantially all the assets must be approved by the board of directors and a
majority of the outstanding shares entitled to vote. Under the California Law,
similar board and shareholder approval is also required in connection with
certain additional acquisition transactions.
CLASS VOTING IN CERTAIN CORPORATE TRANSACTIONS. Under the California Law,
with certain exceptions, any merger, certain sales of all or substantially all
the assets of a corporation and certain other transactions must be approved by a
majority of the outstanding shares of each class of stock (without regard to
limitations on voting rights). The Delaware Law does not generally require a
class vote, except in connection with certain amendments to the certificate of
incorporation that, among other things, adversely affect a class of stock.
APPRAISAL RIGHTS. Under the California and Delaware Laws, a shareholder of
a corporation participating in certain major corporate transactions may, under
varying circumstances, be entitled to appraisal rights pursuant to which such
shareholder may receive cash in the amount of the fair market value of the
shares held by such shareholder (as determined by a court or by agreement of the
corporation and the shareholder) in lieu of the consideration such shareholder
would otherwise receive in the transaction. Under the Delaware Law, such
appraisal rights are not available to (i) shareholders with respect to a merger
or consolidation by a corporation the shares of which are either listed on a
national securities exchange or designated as a national market system security
on an interdealer quotation system by the National Association of Securities
Dealers, Inc. or are held of record by more than 2,000 holders if such
shareholders receive only shares of the surviving corporation or shares of any
other corporation which are either listed on a national securities exchange or
designated as a national market system security on an interdealer quotation
system by the National Association of Securities Dealers, Inc. or are held of
record by more than 2,000 holders; or (ii) shareholders of a corporation
surviving a merger if no vote of the shareholders of the surviving corporation
is required to approve the merger because, among other things, the number of
shares to be issued in the merger does not exceed 20% of the shares of the
surviving corporation outstanding immediately prior to the merger and if certain
other conditions are met.
The Delaware Law also does not provide shareholders of a corporation with
appraisal rights when the corporation acquires another business through the
issuance of its stock (i) in exchange for the assets of the business to be
acquired, (ii) in exchange for the outstanding stock of the corporation to be
acquired, or (iii) in a merger of the corporation to be acquired with a
subsidiary of the acquiring corporation. The California Law treats these kinds
of acquisitions in the same manner as a direct merger of the acquiring
corporation with the corporation to be acquired.
The limitations on the availability of appraisal rights under the California
Law are different from those under the Delaware Law. Shareholders of a
California corporation whose shares are listed on a national securities exchange
or on a list of over-the-counter margin stocks issued by the Board of Governors
of the Federal Reserve System generally do not have such appraisal rights unless
the holders of at least 5% of the class of outstanding shares claim the right.
Appraisal rights are unavailable, however, if the shareholders of a corporation
or the corporation itself, or both, immediately prior to a reorganization
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<PAGE>
shall own (immediately after the reorganization) more than five-sixths of the
voting power of the surviving or acquiring corporation or its parent.
Appraisal or dissenters' rights are available to shareholders of Centura
with respect to the Merger. See "Dissenters' Rights."
DISSOLUTION. Under the California Law, shareholders holding 50% or more of
the voting power may authorize a corporation's dissolution, with or without the
approval of the corporation's Board of Directors and this right may not be
modified by the articles of incorporation. Under the Delaware Law, a dissolution
must be approved by shareholders holding 100% of the total voting power or the
dissolution must be initiated by the Board of Directors and approved by a simple
majority of the shareholders of the corporation. In the event of such a
Board-initiated dissolution, the Delaware Law allows a Delaware corporation to
include in its certificate of incorporation a supermajority voting requirement
in connection with dissolutions.
TAKEOVER LEGISLATION. Section 203 of the Delaware Law makes it more
difficult to effect certain transactions between a corporation and a person or
group who or which owns 15% or more of the corporation's outstanding voting
stock (including any rights to acquire stock pursuant to an option, warrant,
agreement, arrangement or understanding, or upon the exercise of conversion or
exchange rights, and stock with respect to which the person has voting rights
only), or is an affiliate or associate of the corporation and was the owner of
15% or more of such voting stock at any time within the previous three years
(excluding persons who became 15% shareholders by action of the corporation
alone). The legislation prevents, for a period of three years following the date
that a shareholder became a holder of 15% or more of the corporation's
outstanding voting stock, the following types of transactions between the
corporation and the 15% shareholder (unless certain conditions, described below,
are met): (i) mergers or consolidations, (ii) sales, leases, exchanges or other
transfers of 10% or more of the aggregate assets of the corporation, (iii)
issuances or transfers by the corporation of any stock of the corporation which
would have the effect of increasing the 15% shareholder's proportionate share of
the stock of any class or series of the corporation, (iv) receipt by the 15%
shareholder of the benefit (except proportionately as a shareholder) of loans,
advances, guarantees, pledges or other financial benefits provided by the
corporation and (v) any other transaction which has the effect of increasing the
proportionate share of the stock of any class or series of the corporation which
is owned by the 15% shareholder. Section 203 does not apply to transactions
involving individuals or entities who became 15% shareholders prior to December
23, 1987 or who became 15% shareholders through a tender offer commenced prior
to December 23, 1987.
The three-year ban does not apply if either the proposed transactions or the
transaction by which the 15% shareholder became a 15% shareholder is approved by
the board of directors of the corporation prior to the date such shareholder
became a 15% shareholder. Additionally, a 15% shareholder may avoid the
statutory restriction if, upon the consummation of the transaction whereby such
shareholder became a 15% shareholder, the shareholder owns at least 85% of the
outstanding voting stock of the corporation without regard to those shares owned
by the corporation's officers and directors or certain employee stock plans.
Business combinations are also permitted within the three year period if
approved by the board of directors and, at an annual or special meeting, by the
holders of 66 2/3% of the outstanding voting stock not owned by the 15%
shareholder.
A corporation may, at its option, exclude itself from the coverage of
Section 203 by providing in its certificate of incorporation or bylaws at any
time to exempt itself from coverage, provided that a bylaw or charter amendment
cannot become effective for 12 months after such amendment is adopted. In
addition, any transaction is exempt from the statutory ban if it is proposed at
a time when the corporation has proposed, and a majority of certain continuing
directors of the corporation have approved, a transaction with a party who is
not a l5% shareholder of the corporation (or who became such with board
approval) if the proposed transaction involves (i) certain mergers or
consolidations involving the corporation, (ii) a sale
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or other transfer of over 50% of the aggregate assets of the corporation or
(iii) a tender or exchange offer for 50% or more of the outstanding voting stock
of the corporation.
The Certificate of Incorporation of InfoSpinner does not contain a provision
"opting out" of the coverage of Section 203.
EXPERTS
The consolidated financial statements of Centura Software Corporation as of
December 31, 1995 and for each of the three years in the period ended December
31, 1995 included in this Proxy Statement/ Prospectus have been so included in
reliance on the report of Price Waterhouse LLP, independent accountants, given
on the authority of said firm as experts in auditing and accounting.
The financial statements of InfoSpinner, Inc. as of December 31, 1996 and
for the year ended December 31, 1996 and as of December 31, 1995 and for the
period from inception (November 1995) through December 31, 1995 included in this
Proxy Statement/Prospectus, have been so included in reliance on the report of
Price Waterhouse LLP, independent accountants, given on the authority of said
firm as experts in auditing and accounting.
LEGAL MATTERS
The validity of the Centura Common Stock issuable pursuant to the Merger and
certain other legal matters relating thereto will be passed upon for Centura by
Venture Law Group, A Professional Corporation, Menlo Park, California. Gunderson
Dettmer Stough Villeneuve Franklin & Hachigian, LLP ("GDSVFH"), Menlo Park,
California is acting as counsel for InfoSpinner in connection with certain legal
matters relating to the Merger and the transactions contemplated thereby. As of
the date of this Prospectus, certain attorneys of Venture Law Group and
affiliated partnerships beneficially own an aggregate of 28,000 shares of the
Centura's Common Stock and, certain attorneys of GDSVFH and affiliated
partnerships beneficially own an aggregate of 10,000 shares of InfoSpinner's
Preferred Stock.
OTHER MATTERS
Neither the Centura Board nor the InfoSpinner Board intends to bring any
matters before the meetings other than those specifically set forth in the
notices of meetings and neither knows of any matters to be brought before the
respective meetings by others. If any other matters properly come before the
meetings, it is the intention of the persons named in the accompanying proxies
to vote such proxies in accordance with the judgment of the Centura Board or the
InfoSpinner Board, as applicable.
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INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
CENTURA SOFTWARE CORPORATION
Report of Independent Accountants........................................................................ F-2
Consolidated Balance Sheets as of December 31, 1996, and 1995............................................ F-3
Consolidated Statements of Operations for the years ended December 31, 1996, 1995 and 1994............... F-4
Consolidated Statements of Shareholders' Deficit for the years ended December 31, 1996, 1995 and 1994.... F-5
Consolidated Statements of Cash Flows for the years ended December 31, 1996, 1995 and 1994............... F-6
Notes to Consolidated Financial Statements............................................................... F-7
Valuation and Qualifying Accounts........................................................................ F-20
INFOSPINNER, INC.
Report of Independent Accountants........................................................................ F-21
Balance Sheets as of December 31, 1996 and 1995.......................................................... F-22
Statements of Operations for the year ended December 31, 1996 and for the period from inception (November
1995) through December 31, 1995........................................................................ F-23
Statements of Stockholders' Equity for the year ended December 31, 1996 and for the period from inception
(November 1995) through December 31, 1995,............................................................. F-24
Statements of Cash Flows for the year ended December 31, 1996 and for the period from inception (November
1995) through December 31, 1995,....................................................................... F-25
Notes to Financial Statements............................................................................ F-26
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders of Centura Software Corporation:
In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of operations, of cash flows and of shareholders' equity
(deficit) present fairly, in all material respects, the financial position of
Centura Software Corporation at December 31, 1996 and 1995, and the results of
their operations and their cash flows for each of the three years in the period
ended December 31, 1996, in conformity with generally accepted accounting
principles. These financial statements are the responsibility of the management
of Centura Software Corporation; our responsibility is to express an opinion on
these financial statements based on our audits. We conducted our audits of these
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for the opinion expressed above.
Our audits of the consolidated financial statements of Centura Software
Corporation also included an audit of the Financial Statement Schedule on page
F-20. In our opinion, the Financial Statement Schedule presents fairly, in all
material respects, the information set forth therein when read in conjunction
with the related combined financial statements.
Price Waterhouse LLP
San Jose, California
January 28, 1997
F-2
<PAGE>
CENTURA SOFTWARE CORPORATION
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1996 1995
--------- ---------
(IN THOUSANDS EXCEPT
PER SHARE DATA)
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents............................................. $ 6,669 $ 9,865
Short-term investments................................................ 2,065 9,557
Accounts receivable, less allowances of $2,826, and $3,475............ 13,574 12,174
Inventories........................................................... 216 218
Other current assets.................................................. 3,300 2,999
--------- ---------
Total current assets................................................ 25,824 34,813
Property and equipment, at cost, net of accumulated depreciation........ 3,622 5,881
Capitalized software, at cost, net of accumulated amortization.......... 4,226 2,980
Long-term investments................................................... 1,221 2,354
Other assets............................................................ 1,812 2,076
--------- ---------
Total assets........................................................ $ 36,705 $ 48,104
--------- ---------
--------- ---------
LIABILITIES AND SHAREHOLDERS' DEFICIT
Current Liabilities:
Current portion of long-term debt..................................... $ 336 $ 397
Accounts payable...................................................... 5,683 6,152
Accrued compensation and related expenses............................. 2,484 3,168
Other accrued liabilities............................................. 4,313 7,572
Accrued litigation expenses........................................... 6,733 14,328
Deferred revenue...................................................... 21,891 28,800
--------- ---------
Total current liabilities........................................... 41,440 60,417
Long-term debt, less current portion.................................... 10,032 10,330
Other long-term liabilities............................................. 2,156 1,414
--------- ---------
Total liabilities................................................... 53,628 72,161
--------- ---------
Commitments and contingencies (Notes 6 and 12)
Shareholders' Deficit:
Preferred stock, no par value; authorized 2,000 shares; none issued..... -- --
Common stock, $.01 par value; authorized 60,000 shares; 13,728 and
12,382 shares issued and outstanding.................................. 63,047 57,577
Cumulative translation adjustment....................................... (513) (150)
Accumulated deficit..................................................... (79,457) (81,484)
--------- ---------
Total shareholders' deficit......................................... (16,923) (24,057)
--------- ---------
Total liabilities and shareholders' deficit......................... $ 36,705 $ 48,104
--------- ---------
--------- ---------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE>
CENTURA SOFTWARE CORPORATION
CONSOLIDATED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
1996 1995 1994
--------- --------- ---------
(IN THOUSANDS, EXCEPT PER SHARE
DATA)
<S> <C> <C> <C>
Net revenues:
Product...................................................... $ 45,452 $ 49,408 $ 46,134
Service...................................................... 17,781 16,306 10,398
--------- --------- ---------
Net revenues............................................... 63,233 65,714 56,532
--------- --------- ---------
Cost of revenues:
Product...................................................... 5,060 8,878 7,625
Service...................................................... 9,518 10,762 9,521
--------- --------- ---------
Cost of revenues........................................... 14,578 19,640 17,146
--------- --------- ---------
Gross profit............................................. 48,655 46,074 39,386
--------- --------- ---------
Operating expenses:
Sales and marketing.......................................... 29,106 42,931 48,209
Research and development..................................... 11,032 14,420 11,225
General and administrative................................... 6,667 11,043 11,136
Acquisition expense.......................................... 467 -- --
Litigation expense........................................... (878) 15,323 1,797
Restructuring expense........................................ (223) 5,350 --
--------- --------- ---------
Total operating expenses................................... 46,171 89,067 72,367
--------- --------- ---------
Operating income (loss).................................. 2,484 (42,993) (32,981)
Other income (expense):
Interest income.............................................. 637 1,127 1,188
Interest expense............................................. (831) (701) (137)
Foreign currency gain (loss)................................. 215 (439) 306
--------- --------- ---------
Income (loss) before income taxes.............................. 2,505 (43,006) (31,624)
Provision for income taxes..................................... 478 1,073 217
--------- --------- ---------
Net income (loss).............................................. $ 2,027 $ (44,079) $ (31,841)
--------- --------- ---------
--------- --------- ---------
Earnings (loss) per share...................................... $ 0.15 $ (3.62) $ (2.66)
--------- --------- ---------
--------- --------- ---------
Weighted average common shares and equivalents................. 13,335 12,175 11,957
--------- --------- ---------
--------- --------- ---------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-4
<PAGE>
CENTURA SOFTWARE CORPORATION
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIT)
<TABLE>
<CAPTION>
COMMON STOCK CUMULATIVE
-------------------- TRANSLATION (ACCUMULATED
SHARES AMOUNT ADJUSTMENT DEFICIT) TOTAL
--------- --------- ------------- ------------ ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Balances, December 31, 1993.......................... 11,620 $ 55,151 $ (364) (5,564) $ 49,223
Issuance of common stock under stock option
plans............................................ 380 799 -- -- 799
Issuance of common stock under Employee Stock
Purchase Plan.................................... 41 327 -- -- 327
Cumulative translation adjustment.................. -- -- 162 -- 162
Net loss........................................... -- -- (31,841) (31,841)
--------- --------- ----- ------------ ----------
Balances, December 31, 1994.......................... 12,041 56,277 (202) (37,405) 18,670
Issuance of common stock under stock option
plans............................................ 243 397 -- -- 397
Issuance of common stock under Employee Stock
Purchase Plan.................................... 98 903 -- -- 903
Cumulative translation adjustment.................. -- -- 52 -- 52
Net loss........................................... -- -- (44,079) (44,079)
--------- --------- ----- ------------ ----------
Balances, December 31, 1995.......................... 12,382 57,577 (150) (81,484) (24,057)
Issuance of common stock under stock option
plans............................................ 198 362 -- -- 362
Issuance of common stock under Employee Stock
Purchase Plan.................................... 100 225 -- -- 225
Issuance of common stock in relation to settlement
of class action securities litigation............ 1,048 4,718 -- -- 4,718
Issuance of stock warrants for 100,000 shares
related to merger with InfoSpinner, Inc.......... -- 165 -- -- 165
Cumulative translation adjustment.................. -- -- (363) -- (363)
Net income......................................... -- -- -- 2,027 2,027
--------- --------- ----- ------------ ----------
Balances, December 31, 1996.......................... 13,728 $ 63,047 $ (513) $ (79,457) $ (16,923)
--------- --------- ----- ------------ ----------
--------- --------- ----- ------------ ----------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-5
<PAGE>
CENTURA SOFTWARE CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------
1996 1995 1994
---------- ---------- ----------
(IN THOUSANDS)
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss)........................................................... $ 2,027 $ (44,079) $ (31,841)
Adjustments to reconcile net income (loss) to net cash used in operating
activities:
Depreciation and amortization............................................. 5,311 6,252 4,774
Adjustments to capitalized software development costs..................... -- 3,360 --
Valuation of stock warrants issued........................................ 165 -- --
Provision for doubtful accounts........................................... 406 1,708 2,470
Provision for sales returns and allowances................................ 180 5,430 5,778
Non-cash restructuring charges............................................ 223 2,205 --
Changes in assets and liabilities:
Accounts receivable..................................................... (1,986) (4,978) (5,824)
Inventories 2 1,096 (1,152)
Other current assets.................................................... (301) 803 (1,669)
Other assets............................................................ (21) (155) (421)
Accounts payable and accrued liabilities................................ (4,635) (114) 5,276
Deferred revenue........................................................ (6,909) 6,921 9,618
Accrued litigation expense.............................................. (2,877) 14,328 --
Other long-term liabilities............................................. 742 546 868
---------- ---------- ----------
Net cash used in operating activities................................. (7,673) (6,677) (12,123)
---------- ---------- ----------
Cash flows from investing activities:
Maturities of investments................................................... 8,748 19,812 29,617
Purchases of investments.................................................... (123) (14,419) (18,025)
Proceeds from sale of property and equipment................................ 341 1,579 --
Acquisitions of property and equipment...................................... (1,262) (3,115) (5,849)
Capitalization of software costs............................................ (2,890) (4,013) (3,235)
Capitalization of other intangibles......................................... (202) (932) (401)
---------- ---------- ----------
Net cash provided by (used in) investing activities................... 4,612 (1,088) 2,107
---------- ---------- ----------
Cash flows from financing activities:
Repayment of note payable................................................... (327) (305) --
Proceeds from notes payable................................................. -- 10,000 1,000
Repayment of capital lease obligations...................................... (32) (448) (883)
Proceeds from issuance of common stock, net................................. 587 1,300 1,126
---------- ---------- ----------
Net cash provided by financing activities............................. 228 10,547 1,243
---------- ---------- ----------
Effect of exchange rate changes on cash and cash equivalents.................. (363) 52 162
---------- ---------- ----------
Net increase (decrease) in cash and cash equivalents.......................... (3,196) 2,834 (8,611)
Cash and cash equivalents at beginning of period.............................. 9,865 7,031 15,642
---------- ---------- ----------
Cash and cash equivalents at end of period.................................... $ 6,669 $ 9,865 $ 7,031
---------- ---------- ----------
---------- ---------- ----------
Supplemental disclosure of cash flow information:
Cash paid for income taxes.................................................. $ 154 $ 1,183 $ 274
---------- ---------- ----------
---------- ---------- ----------
Cash paid for interest...................................................... $ 62 $ 142 $ 138
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-6
<PAGE>
CENTURA SOFTWARE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. BUSINESS AND RISK FACTORS
Centura Software Corporation (the "Company"), formerly Gupta Corporation,
develops, markets and supports an integrated set of software solutions for the
PC client/server system market.
The Company experienced significant losses from operations during 1995 and
1994, and as a result its liquidity and capital resources have declined.
Management implemented measures which improved its operating results, including
cost-cutting measures, new product introductions and refocused marketing
efforts. However, the Company's future profitability is subject to certain
risks, including competition from larger companies with greater financial
resources, its ability to raise additional financing, if needed, its ability to
retain key personnel and its ability to successfully develop, produce and market
new products. Management feels that the recent measures combined with the
introduction of new product has heightened the possibility of the Company to
improve cash flow.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and reported amounts of revenues and expenses during the reported
period. Actual results could differ materially from those estimates.
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
PRINCIPLES OF CONSOLIDATION: The consolidated financial statements include
the financial statements of the Company and its wholly-owned subsidiaries. All
significant intercompany balances and transactions have been eliminated in
consolidation.
CASH AND CASH EQUIVALENTS: The Company considers all highly liquid
investments purchased with an original maturity of three months or less to be
cash equivalents.
FINANCIAL INSTRUMENTS: The Company accounts for investments under the
Statement of Financial Accounting Standards No. 115 ("SFAS 115"), "Accounting
for Certain Investments in Debt and Equity Securities". SFAS 115 establishes
standards for financial accounting and reporting for investments in equity
securities that have readily determinable fair values and for all investments in
debt securities. Each investment is classified into one of three categories:
held-to-maturity, available-for-sale or trading. Investments which the Company
has the intent and ability to hold until maturity are classified as held-to
maturity and are recorded at amortized cost.
At December 31, 1996, the Company's investments consist of Money Markets,
Certificates of Deposit and other debt securities. Cost approximates market
value of the securities at December 31, 1996.
The Company has classified all of its securities as held-to-maturity, and
accordingly it only liquidates these investments upon their maturity. Securities
which mature during 1997, except those classified as cash equivalents, are
classified as short-term investments on the accompanying balance sheets, and
those with maturities after 1997 are classified as long-term investments on the
accompanying balance sheets.
The Company sometimes enters into forward contracts to reduce the risks
associated with foreign currency fluctuations on net assets denominated in
foreign currencies. At December 31, 1996, the Company had $400,000 forward
contracts denominated in Mexican Pesos. At December 31, 1995 the company had no
forward contracts. Foreign currency gains (losses) for 1996, 1995 and 1994 under
these and similar type contracts were immaterial.
F-7
<PAGE>
CENTURA SOFTWARE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
It is not practical to estimate the fair value of the Company's subordinated
debt at December 31, 1996 since no quoted market price exists due to the unique
characteristics of the debt instrument. The carrying value of all other
financial instruments approximate their respective fair values.
INVENTORIES: Inventories are stated at the lower of cost (determined on a
first-in, first-out basis) or market, and consist principally of finished goods.
PROPERTY AND EQUIPMENT: Property and equipment are stated at cost.
Depreciation is computed using the straight-line method over the estimated
useful lives of three to five years. Leasehold improvements are amortized over
the life of the lease or the estimated useful life, whichever is shorter.
CAPITALIZED SOFTWARE DEVELOPMENT COSTS: The Company capitalizes internally
generated software development costs and purchased software in compliance with
Statement of Financial Accounting Standards No. 86, "Accounting for the Costs of
Computer Software to be Sold, Leased or Otherwise Marketed". Capitalization of
internally generated software development costs begins upon the establishment of
technological feasibility of the product, which the Company defines as the time
when a complete product is available. The Company makes an ongoing assessment of
the recoverability of these costs which requires considerable judgment by
management with respect to certain external factors, including but not limited
to, anticipated future gross product revenue, estimated economic life and
changes in software and hardware technology. Internally generated software
development costs capitalized were $1,865,000 and $2,242,000 for the years ended
December 31, 1996 and 1995, respectively. The Company capitalized $1,025,000 and
$1,791,000 of purchased software in 1996 and 1995, respectively.
Amortization of all capitalized software costs begins when a product is
available for general release to customers, and is computed separately for each
product as the greater of (a) current gross revenue for a product to the total
of current and anticipated gross revenue for the product, or (b) the
straight-line method over the remaining estimated economic life of the product,
up to three years. Amortization and adjustments are included in cost of product
revenues and amounted to $1,644,000, $5,580,000 and $1,476,000 for the years
ended December 31, 1996, 1995 and 1994, respectively.
FOREIGN CURRENCY TRANSACTIONS: The functional currency of each foreign
subsidiary is the local currency. For these operations, assets and liabilities
are translated into U.S. dollars at period-end exchange rates, and income and
expense accounts are translated at a rate that approximates the average exchange
rate prevailing during the period. The resulting translation adjustments are
recorded as a separate component of shareholders' equity. Gains and losses from
foreign currency-denominated transactions effected by the Company's U.S.
operations are included in other income (expense), net, and were not material in
any of the periods presented.
REVENUE RECOGNITION: The Company receives fees from certain resellers
(including original equipment manufacturers) under product licensing
arrangements. Such fees are recorded as revenue on a sell through basis as
reported by the reseller. For licensing agreements with end-users, fees are
recognized upon shipment of product, if there are no significant post-delivery
obligations and collectibility is probable. Service revenues from customer
maintenance fees for ongoing customer support and product updates, including
maintenance bundled with software licenses, is recognized ratably over the
period of the contract. When licensing agreements terminate, the Company records
any licensing fees previously not recognized. Revenue from other services,
including training, are recognized as performed.
F-8
<PAGE>
CENTURA SOFTWARE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
The Company enters into agreements with certain of its distributors
involving boxed product. Revenues from these distributors are generally
recognized when the product is shipped and are reduced by management's estimate
of anticipated stock exchanges based on historical experience.
License maintenance and telephone support contracts are typically paid in
advance, and revenue is recognized ratably over the term of the contract.
NET INCOME (LOSS) PER SHARE: Net income (loss) per share is computed using
the weighted average number of common and common equivalent shares outstanding.
Common equivalent shares (using the modified treasury stock method) have been
included in the computation when dilutive. Debentures which are not common stock
equivalents are also not included in the calculation of loss per share because
their effect is antidilutive.
RECENT ACCOUNTING PRONOUNCEMENT: During 1995, FASB issued Financial
Accounting Standards No. 121 ("SFAS 121"), "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed Of", which
establishes accounting standards for the impairment of long-lived assets,
certain identifiable intangibles and goodwill related to those assets to be held
and used and for long-lived assets and certain identifiable intangibles to be
disposed of. SFAS 121 is required to be adopted for the first quarter of 1996.
The Company has evaluated the impact of SFAS 121 and determined it will not have
a significant effect on the consolidated financial position or results of
operation when adopted.
STOCK-BASED COMPENSATION: During 1995, the Financial Accounting Standards
Board ("FASB") issued Statement of Financial Accounting Standards No. 123 ("SFAS
123"), "Accounting for Stock-Based Compensation", which requires companies to
measure employee stock compensation based on the fair value method of accounting
or to continue to apply the provisions of Accounting Principles Board Opinion
No. 25 ("APB 25"), "Accounting for Stock Issued to Employees", and provide pro
forma footnote disclosure under the fair value method described in SFAS 123. The
Company adopted SFAS 123 on January 1, 1996, and will continue to apply the
principles of APB 25, while providing the pro forma footnote disclosure required
by SFAS 123. See note 7 for the required pro forma disclosure.
RECLASSIFICATIONS: In order to conform to the 1996 presentation, certain
reclassifications have been made to the 1995 and 1994 consolidated financial
statements.
NOTE 3. BALANCE SHEET DETAIL:
Property and equipment, at cost, net of accumulated depreciation consists of
the following:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
1996 1995
---------- ----------
(IN THOUSANDS)
<S> <C> <C>
Computer equipment.............................................................. $ 16,253 $ 15,882
Furniture and fixtures.......................................................... 2,045 1,902
Leasehold improvements.......................................................... 491 476
---------- ----------
18,789 18,260
Less: accumulated depreciation and amortization................................. (15,167) (12,379)
---------- ----------
$ 3,622 $ 5,881
---------- ----------
---------- ----------
</TABLE>
F-9
<PAGE>
CENTURA SOFTWARE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 3. BALANCE SHEET DETAIL: (CONTINUED)
The net book value of equipment and other assets under capital leases
included in property and equipment were $23,000 and $114,000 at December 31,
1996 and 1995, respectively.
Capitalized software, at cost, net of accumulated amortization consists of
the following:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
1996 1995
---------- ----------
(IN THOUSANDS)
<S> <C> <C>
Internally developed software................................................... $ 6,124 $ 4,259
Purchased software.............................................................. 3,852 2,827
---------- ----------
9,976 7,086
Less: accumulated amortization.................................................. (5,750) (4,106)
---------- ----------
$ 4,226 $ 2,980
---------- ----------
---------- ----------
</TABLE>
Deferred revenue consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
1996 1995
---------- ----------
(IN THOUSANDS)
<S> <C> <C>
Deferred product revenue........................................................ $ 15,002 $ 21,166
Deferred support revenue........................................................ 6,889 7,634
---------- ----------
$ 21,891 $ 28,800
---------- ----------
---------- ----------
</TABLE>
NOTE 4. RESTRUCTURING CHARGES
In December 1995, the Company approved a plan to restructure its operations
to meet emerging market opportunities in next generation client/server
computing. In connection with the restructuring, the Company reduced its
worldwide headcount by approximately 16% and consolidated facilities and
operations to improve efficiency. The following analysis sets forth the
significant components of the restructuring charge included in other accrued
liabilities at December 31, 1996 and 1995:
<TABLE>
<CAPTION>
SEVERANCE
AND WRITE OFF FACILITY
BENEFITS OF ASSETS CHARGES OTHER TOTAL
----------- ----------- ----------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Restructuring................................................. $ 1,623 $ 2,205 $ 1,029 $ 493 $ 5,350
Less: Non-cash costs.......................................... -- (2,205) -- -- (2,205)
----------- ----------- ----------- --------- ---------
Accrued liability at December 31, 1995........................ 1,623 -- 1,029 493 3,145
Less: payments applied........................................ (1,400) -- (466) (493) (2,359)
Reversal of reserve........................................... (223) -- -- -- (223)
----------- ----------- ----------- --------- ---------
Accrued liability at December 31, 1996........................ $ -- $ -- $ 563 $ -- $ 563
----------- ----------- ----------- --------- ---------
----------- ----------- ----------- --------- ---------
</TABLE>
Severance and related costs represented the reduction of 59 employees on a
worldwide basis primarily impacting sales and marketing. Asset charges included
a write-off of purchased technology and prepaid license fees associated with the
discontinuation of the Company's bundling of Novell's NetWare Run-Time
F-10
<PAGE>
CENTURA SOFTWARE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 4. RESTRUCTURING CHARGES (CONTINUED)
product with the Company's SQLBase Server. Facility charges included early
termination costs associated with the closing of certain domestic and
international sales offices. Other restructuring costs consist primarily of
costs associated with the cancellation of distribution agreements. The 1996
results of operations include the reversal of $223,000 of restructuring reserves
due to a change in estimated headcount.
NOTE 5. LONG-TERM DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
1996 1995
---------- ----------
(IN THOUSANDS)
<S> <C> <C>
Subordinated note payable....................................................... $ 10,000 $ 10,000
Other note payable.............................................................. 368 695
Capital lease obligations....................................................... -- 32
---------- ----------
10,368 10,727
less: current portion........................................................... (336) (397)
---------- ----------
Long-term debt.................................................................. $ 10,032 $ 10,330
</TABLE>
During the first quarter of 1995 the Company issued a $10,000,000 floating
rate convertible subordinated note to Computer Associates International, Inc.
The note matures in 1998 and is convertible into common stock at the Company's
option on the maturity date with the number of shares based on the market price
at the time of conversion. Interest on the note is the one-month LIBOR plus
1.25% and is payable quarterly. The LIBOR rate at December 31, 1996 was
5.53125%. The agreement also requires the Company to maintain a minimum market
capitalization of $40.0 million commencing on (and including) November 1, 1997,
and continuing through the duration of the note. At the Company's option
interest payments may be deferred until the principal is due. At December 31,
1996 and 1995, accrued interest totaled $1,300,000 and $559,000, respectively,
and is included in other long-term liabilities.
In December 1994, the Company signed a $1 million promissory note payable
with a bank. The note is collateralized by a certificate of deposit (classified
as a long term investment) in the amount of $354,000, until certain
profitability levels have been achieved, and bears interest at a rate of
approximately 4.76% per annum. The note is due in 36 monthly installments of
$32,000 through January 1, 1998. The Company must meet certain covenants in
connection with this note, with which it was in compliance as of December 31,
1996.
F-11
<PAGE>
CENTURA SOFTWARE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 6. COMMITMENTS AND CONTINGENCIES:
The Company has long-term noncancelable lease commitments for office space
and equipment. At December 31, 1996, future minimum rental payments under
noncancelable operating leases are as follows (in thousands):
<TABLE>
<S> <C>
1997............................................... $ 2,068
1998............................................... 2,501
1999............................................... 2,533
2000............................................... 2,642
2001............................................... 2,749
2002 and thereafter................................ 1,359
---------
$ 13,852
---------
---------
</TABLE>
Rent expense for the years ended December 31, 1996, 1995 and 1994, amounted
to $3,235,000, $3,524,000, and $3,317,000, respectively.
On May 2, 1994, a lawsuit was filed against the Company and certain of its
officers and directors, by a holder of the Company's common stock, on his own
behalf and purportedly on behalf of a class of others similarly situated. The
lawsuit was subsequently amended, and alleged that the Company made false and
misleading statements and failed to disclose material information relating to
existing business conditions and the Company's prospects and that officers and
directors violated the insider trading laws. The plaintiff was seeking damages
of an unstated amount.
The Company reached a binding settlement agreement with plaintiffs' counsel
in this lawsuit, and gained court approval on September 30, 1996. Under the
terms of the agreement, the Company would provide $3 million and 1,875,000
shares to a fund to be distributed among the members of the plaintiff class. The
Company also agreed to supplement this payment with up to 625,000 additional
shares in the event the value of its common stock is less than $6.00 per share
at certain dates in the future. The Company's directors and officers' liability
insurer paid approximately $2 million of the cash contribution to the settlement
fund. The Company paid the remaining cash settlement during 1996. The 1995
financial statements include $15.3 million in litigation expense for the
agreement and associated legal expenses.
As of December 31, 1996, to the best of the Company's knowledge there were
no other pending actions, potential actions, claims or proceedings against the
Company that were likely to result in potential damages that would have a
material adverse impact on the Company's financial statements. As noted in "Part
I, Item 1. Business - Risk Factors - Legal Proceedings", the Company exists in a
volatile legal and regulatory environment and it is not possible to anticipate
or estimate the potential adverse impact of unknown claims or liabilities
against the Company, its officers and directors, and as such no estimate is made
in the Company's financial statements for such unknown claims or liabilities.
NOTE 7. CAPITAL STOCK:
INCENTIVE STOCK OPTION PLAN: Under the Company's 1986 Incentive Stock
Option Plan, as amended, (the "86 ISOP"), 6,000,000 shares of common stock have
been reserved for issuance to eligible employees, directors and consultants.
Under the ISOP, incentive stock options or nonstatutory stock options may be
granted at prices not less than fair market value of the Company's common stock
at the date of grant (85% for nonstatutory options). The options generally vest
over a four year period, beginning one year after the
F-12
<PAGE>
CENTURA SOFTWARE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 7. CAPITAL STOCK: (CONTINUED)
date of grant. Unexercised options expire one to three months after termination
of employment with the Company.
Under the Company's 1995 Incentive Stock Option Plan, as amended, (the "95
ISOP"), 1,000,000 shares of common stock were initially reserved for issuance to
eligible employees, directors and consultants. In September, 1996, an additional
1,000,000 shares were reserved increasing the total to 2,000,0000 shares. Under
the ISOP, incentive stock options or nonstatutory stock options may be granted
at prices not less than fair market value of the Company's common stock at the
date of grant (85% for nonstatutory options). The options generally vest over a
four year period, beginning one year after the date of grant. Unexercised
options expire three months after termination of employment with the Company.
During 1996, 1995 and 1994, holders of stock options were granted the
opportunity to exchange previously granted stock options for new stock options
exercisable at $5.94, $9.00 and $10.75 per share, respectively, the fair market
value of common stock on the dates of exchange. The remaining original terms of
the stock options were not changed. Options to purchase 2,337,000, 904,100 and
882,750 shares of common stock were exchanged in the 1996, 1995 and 1994
repricing, respectively.
The following table summarizes the stock activity under the ISOP:
<TABLE>
<CAPTION>
OPTION PRICE
OPTION SHARES PER SHARE
-------------------------- --------------------
AVAILABLE OUTSTANDING LOW HIGH
----------- ------------- --------- ---------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
Balances, December 31, 1993.............................. 306 2,089 $ 0.250 $ 30.250
Shares authorized........................................ 1,000 --
Options granted.......................................... (1,819) 1,819 $ 10.750 $ 27.250
Options exercised........................................ -- (380) $ 0.250 $ 11.000
Options canceled......................................... 1,195 (1,195) $ 1.250 $ 30.250
----------- ------ --------- ---------
Balances, December 31, 1994.............................. 682 2,333 $ 0.250 $ 27.250
Shares authorized........................................ 1,000 --
Options granted.......................................... (3,606) 3,606 $ 6.625 $ 13.125
Options exercised........................................ -- (243) $ 0.500 $ 10.750
Options canceled......................................... 2,163 (2,163) $ 0.500 $ 20.000
----------- ------ --------- ---------
Balances, December 31, 1995.............................. 239 3,533 $ 0.250 $ 27.250
Shares authorized........................................ 1,000 --
Discontinued plan........................................ (689)
Options granted.......................................... (2,886) 2,886 $ 4.250 $ 6.625
Options exercised........................................ -- (198) $ 3.375 $ 6.500
Options canceled......................................... 3,536 (3,536) $ 1.250 $ 27.250
----------- ------ --------- ---------
Balances, December 31, 1996.............................. 1,200 2,685 $ 0.250 $ 12.062
----------- ------ --------- ---------
----------- ------ --------- ---------
</TABLE>
F-13
<PAGE>
CENTURA SOFTWARE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 7. CAPITAL STOCK: (CONTINUED)
The following table summarizes information regarding stock options
outstanding at December 31, 1996:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
----------------------------------- ------------------------------
NUMBER WEIGHTED-AVERAGE NUMBER
OUTSTANDING AT REMAINING WEIGHTED- EXERCISABLE WEIGHTED-
RANGE OF DECEMBER 31, CONTRACTUAL LIFE AVERAGE AT DECEMBER AVERAGE
EXERCISE PRICES 1996 (YEARS) EXERCISE PRICE 31, 1996 EXERCISE PRICE
- --------------------- -------------- ------------------- --------------- ------------- ---------------
<S> <C> <C> <C> <C> <C>
$0.25 to $5.50 690,075 8.05 $ 3.80 317,575 $ 3.54
$5.9375 1,743,599 9.02 $ 5.94 644,879 $ 5.94
$6.6250 to $12.062 251,439 8.40 $ 8.44 176,731 $ 9.21
-------------- --- ----- ------------- -----
2,685,113 8.63 $ 5.62 1,139,185 $ 5.78
</TABLE>
DIRECTORS' STOCK OPTION PLAN: Under the 1992 Directors' Stock Option Plan
(the "DSOP"), 100,000 shares of common stock have been reserved for issuance to
non-employee directors of the Company. The DSOP provides that each new
non-employee director initially will be granted a nonstatutory stock option to
purchase 20,000 shares of common stock. Thereafter, on each anniversary of the
effective date of the DSOP, each non-employee director may be granted an
additional option to purchase 5,000 shares of common stock if the director
served on the Board for at least six months. The options are generally
exercisable over a four-year period, beginning one year after the date of grant.
Options under the DSOP are granted at a price equal to the fair market value of
the Company's common stock on the date of grant. Options granted under the DSOP
have a term of ten years. 20,000 options were granted under the DSOP in 1994 and
no options were granted in 1995 and 1996.
Under the 1995 Directors' Stock Option Plan (the "95 DSOP"), 200,000 shares
of common stock have been reserved for issuance to non-employee directors of the
Company. The 95 DSOP provides that each outside Director will be automatically
granted a non-statutory stock option to purchase 25,000 shares of common stock
on the later of the following events occurring: (a) the effective date of the
plan, or (b) the date on which such person first becomes a non-employee
Director, provided that such Director agrees to cancel all options granted to
such Director from the Company's DSOP, other than the initial 20,000 shares
granted to the Director under such plan. The options are exercisable over four
years in installments of 25% on the anniversary of each of the four years.
Options are granted at a price equal to the fair market value of the Company's
common stock on the date of the grant. Options granted under the Plan have a
term of ten years. 125,000 options were granted in 1995 under the Plan and no
options were granted in 1996.
Under the 1996 Directors' Stock Option Plan (the "96 DSOP"), 500,000 shares
of common stock have been reserved for issuance to non-employee directors of the
Company. The 96 DSOP provides that each outside Director will be automatically
granted a non-statutory stock option to purchase 50,000 shares of common stock
on the later of the following events occurring: (a) the effective date of the
plan, or (b) the date on which such person first becomes a non-employee
Director, provided that such Director agrees to cancel all options granted to
such Director from the Company's DSOP, other than the initial 20,000 shares
granted to the Director under the Company's ISOP. The options become exercisable
in installments cumulatively as to 1/48 of the shares on each of the first
forty-eight monthly anniversaries of the grant date. The options will remain
exercisable for up to ninety days following the optionee's termination of
service as a director of the Company unless such termination is a result of
death, in which case the options will remain exercisable for up to 6 month
period. Options are granted at a price equal to the fair market value
F-14
<PAGE>
CENTURA SOFTWARE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 7. CAPITAL STOCK: (CONTINUED)
of the Company's common stock on the date of the grant. Options granted under
the Plan have a term of ten years. 250,000 options were granted in 1996 under
the Plan.
EMPLOYEE STOCK PURCHASE PLAN: Under the 1992 Employee Stock Purchase Plan
(the "ESPP"), 300,000 shares of common stock were initially reserved for
issuance to eligible employees. In 1996, 100,000 additional shares of common
stock were reserved for issuance to eligible employees increasing the total to
400,000. The ESPP permits employees to purchase common stock through payroll
deductions, which may not exceed 10% of an employee's compensation, at a price
equal to the lower of 85% of the fair market value of the Company's common stock
at the beginning or end of the offering period. The ESPP became effective upon
the Company's initial public offering and 100,000, 98,000 and 41,000 purchase
rights were issued in 1996, 1995 and 1994, respectively.
WARRANTS: Warrants to purchase 100,000 shares of common stock were issued
by the Company on November 22, 1996 in connection with the proposed acquisition
(see note 12) of InfoSpinner, Inc. These warrants were valued at $165,000, using
a risk-free rate of 5.97% and a volatility factor of 55%, and are included in
acquisition expenses.
SHARES RESERVED FOR FUTURE ISSUANCE: The following table summarizes shares
of common stock reserved for future issuance as of December 31, 1996 (in
thousands):
<TABLE>
<S> <C>
Incentive stock option plan.......................... 1,200
Directors' stock option plan......................... 405
Employee stock purchase plan......................... 125
---------
1,730
---------
---------
</TABLE>
PRO FORMA STOCK COMPENSATION DISCLOSURE: The Company applies the provisions
of APB 25 and related interpretations in accounting for compensation expense
under the ISOP, DSOP, 95 DSOP and ESPP. Had compensation expense under these
plans been determined pursuant to SFAS 123, the Company's net income (loss) and
net income (loss) per share for the years ended December 31, 1996 and 1995 would
have been as follows:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
---------------------
1996 1995
--------- ----------
(IN THOUSANDS, EXCEPT
PER SHARE DATA)
<S> <C> <C>
Net income (loss):
As reported........................................................ $ 2,027 $ (44,079)
Pro Forma.......................................................... $ (3,594) $ (46,548)
Net income (loss) per share:
As reported........................................................ $ .15 $ (3.62)
Pro Forma.......................................................... $ (.27) $ (3.82)
</TABLE>
The fair value of each stock option granted under the ISOP, DSOP 95 DSOP and
96 DSOP was estimated using the Black-Scholes model with the following
assumptions: zero dividend yield; an expected life of 48 months; expected
volatility of 63.54% in 1996 and 67.49% in 1995; and a risk-free interest rate
of 5.57% in 1996 and 6.21% in 1995. The weighted average fair value of stock
options granted under the
F-15
<PAGE>
CENTURA SOFTWARE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 7. CAPITAL STOCK: (CONTINUED)
ISOP, DSOP 95 DSOP and 96 DSOP for the years ended December 31, 1996 and 1995,
were $3.06 and $5.28, respectively.
The fair value of the shares granted under the ESPP is considered to have an
immaterial impact on this calculation.
The above pro forma amounts include compensation expense based on the fair
value of stock options granted and vesting during the years ended December 31,
1996 and 1995, and exclude the effects of stock options granted prior to January
1, 1995. Accordingly, the above pro forma net income and net income per share
are not representative of the effects of computing stock compensation expense
using the fair value method for future periods.
SHAREHOLDER RIGHTS PLAN: In August 1994, the Company adopted a Shareholder
Rights Plan pursuant to which one Preferred Share Purchase "Right" was
distributed for each outstanding share of common stock. Each Right entitles
shareholders to purchase a fraction of a share of Preferred Stock at an exercise
price of $60.00 upon certain events. The Rights expire on August 3, 2004, unless
earlier redeemed by the Company.
The Rights become exercisable if a person acquires 15% or more of the
Company's common stock or announces a tender offer that would result in such
person owning 15% or more of the Company's common stock. If the Rights become
exercisable, the holder of each Right (other than the person whose acquisition
triggered the exercisability of the Rights) will be entitled to purchase, at the
Right's then current exercise price, a number of shares of the Company's common
stock having a market value of twice the exercise price. In addition, if the
Company were to be acquired in a merger or the Company sells more than 50% of
its assets or earning power, each Right will entitle its holder to purchase, at
the Right's then current exercise price, common stock of the acquiring company
having a market value of twice the exercise price. The Rights are redeemable by
the Company at a price of $.01 per Right at any time within ten days after a
person has acquired 15% or more of the Company's common stock.
NOTE 8. INCOME TAXES:
Operating income (loss) before income taxes are attributable to the
following jurisdictions:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------
1996 1995 1994
---------- ---------- ----------
(IN THOUSANDS)
<S> <C> <C> <C>
Domestic.................................................. $ 2,882 $ (41,096) $ (34,787)
Foreign................................................... (398) (1,897) 1,806
---------- ---------- ----------
$ 2,484 $ (42,993) $ (32,981)
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
The provision for income taxes on income (loss) before income taxes
primarily consists of foreign withholding taxes.
The difference between income taxes at the statutory federal income tax rate
and income taxes reported in the income statement are primarily the result of
the reduction of deferred revenue and reserves, and foreign withholding taxes.
F-16
<PAGE>
CENTURA SOFTWARE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 8. INCOME TAXES: (CONTINUED)
Deferred income taxes result from temporary differences in the recognition
of certain expenses for financial and income tax reporting purposes. The net
deferred tax asset consisted of the following:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
--------------------
1996 1995
--------- ---------
(IN THOUSANDS)
--------------------
<S> <C> <C>
Deferred tax assets:
Net operating losses............................................... $ 21,414 $ 13,627
Nondeductible reserves............................................. 4,486 5,499
Credit carryforwards............................................... 3,756 2,700
Deferred revenue................................................... 8,379 9,760
Depreciation....................................................... 534 427
--------- ---------
Gross deferred tax asset......................................... 38,569 32,013
Less: valuation allowance............................................ (37,585) (31,785)
--------- ---------
Net deferred tax asset........................................... 984 228
--------- ---------
Deferred tax liabilities:
Software capitalization............................................ (984) (228)
--------- ---------
Total net deferred tax assets (liabilities).......................... $ -- $ --
--------- ---------
--------- ---------
</TABLE>
At December 31, 1996, the Company had net operating loss carryforwards of
approximately $57.9 million available to offset future federal taxable income
and $22.5 million available to offset future state taxes, which expire through
2010. The availability and timing of these carryforwards to offset future
taxable income may be limited due to the occurrence of certain events, including
certain changes in ownership interests. At December 31, 1996 and 1995, the
Company fully reserved its deferred tax assets due to the existence of
sufficient uncertainty with respect to its the ability to realize the deferred
tax assets.
F-17
<PAGE>
CENTURA SOFTWARE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 9. SEGMENT INFORMATION:
The Company participates in one industry segment: the development and
marketing of computer software and related services. No one customer has
accounted for more than 10% of consolidated annual revenues. The following table
presents a summary of operations by geographic region:
<TABLE>
<CAPTION>
NORTH AMERICA EUROPE REST OF WORLD TOTAL
-------------- --------- ------------- ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Year ended December 31, 1996:
Total revenues............................................ $ 25,332 $ 27,551 $ 10,350 $ 63,233
-------------- --------- ------------- ----------
Operating income (loss)................................... $ (4,472) $ 3,932 $ 3,024 2,484
-------------- --------- ------------- ----------
Identifiable assets at year end........................... $ 30,281 $ 5,443 $ 981 36,705
-------------- --------- ------------- ----------
Year ended December 31, 1995:
Total revenues............................................ $ 25,644 $ 28,679 $ 11,391 $ 65,714
-------------- --------- ------------- ----------
Operating income (loss)................................... (38,936) (4,061) 4 (42,993)
-------------- --------- ------------- ----------
Identifiable assets at year end........................... 40,482 7,124 498 48,104
-------------- --------- ------------- ----------
Year ended December 31, 1994:
Total revenues............................................ $ 24,933 $ 24,065 $ 7,534 $ 56,532
-------------- --------- ------------- ----------
Operating income (loss)................................... (34,076) (492) 1,587 (32,981)
-------------- --------- ------------- ----------
Identifiable assets at year end........................... 52,259 5,494 408 58,161
-------------- --------- ------------- ----------
-------------- --------- ------------- ----------
</TABLE>
Revenues have been allocated to geographic regions based primarily upon
destination of product shipment. Operating income (loss) represents total
revenue less operating expenses. In computing operating income (loss), all
general corporate expenses have been allocated to North American operations, and
cost of product revenues have been allocated based upon revenues attributable to
each region.
NOTE 10. EMPLOYEE BENEFIT PLAN:
The Company has a Savings Plan (the "Plan") as allowed under Section 401(k)
of the Internal Revenue Code. The Plan provides employees with tax deferred
salary deductions and a number of investment options. The Plan allows for
contributions by the Company as determined annually by the Board of Directors.
The Company has not contributed to the Plan since its inception.
NOTE 11. RELATED PARTY TRANSACTIONS:
In August 1992, the Company and Novell, which owns 7.70% of the Company's
common stock at December 31, 1996, entered into a reseller agreement under which
the Company agreed to pay Novell commissions and trademark license fees on
certain sales on a quarterly basis. In 1993, this agreement was extended until
September 1996. There were no outstanding balances at December 31, 1996 and
1995. In the fourth quarter of 1995, the Company as a result of the
restructuring plan, wrote off the remaining prepaid balance of $338,000, which
is included in restructuring charges described in Note 4. The amounts expensed
for the years ended December 31, 1996, 1995 and 1994, were $0, $666,000 and
$209,000, respectively.
F-18
<PAGE>
CENTURA SOFTWARE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 11. RELATED PARTY TRANSACTIONS: (CONTINUED)
The Company recognized revenue of $664,000 and $2,450,000 for the years
ended December 31, 1996 and 1995, respectively, from Computer Associates
International, Inc., the holder of the floating rate subordinated convertible
debenture.
The Company has the option to acquire 100% of the outstanding stock of one
of its independent foreign distributors, using a purchase price formula based on
net profits and revenues. At December 31, 1996 and 1995 the Company had no
outstanding receivables from this distributor. The Company recognized revenue of
$1,783,000 and $2,007,000 for the years ended December 31, 1996 and 1995, from
this distributor.
NOTE 12. SUBSEQUENT EVENTS:
On January 6, 1997, the Company entered into a definitive agreement to
acquire (the "Agreement") InfoSpinner, Inc. ("InfoSpinner") of Richardson Texas.
The completion of the transaction is expected to occur during the first quarter
of 1997 and is subject to approval of both companys' shareholders as well as
other legal requirements.
Under the Agreement, which was approved by the board of directors of both
companies, 4,500,000 shares of the Company stock will be exchanged for the
outstanding InfoSpinner common stock, and series A and series B convertible
preferred stock shares. It is anticipated that the transaction will be accounted
for as a pooling of interests. If consummated, the financial position and
results of operation of the Company and InfoSpinner will be combined for 1997
and all prior periods will be restated to give effect to the merger.
InfoSpinner is a privately held company that develops technologies which
uniquely address the challenges of open, scalable web computing. InfoSpinner has
developed and is marketing an application server, Foresite, that allows
companies to migrate existing applications to the Web, integrate with new Web
technologies such as Java and HTML, and scale the resulting application to
handle large transaction loads over the Web.
F-19
<PAGE>
CENTURA SOFTWARE CORPORATION
VALUATION AND QUALIFYING ACCOUNTS
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
BALANCE AT ADDITIONS BALANCE AT
BEGINNING CHARGED TO END OF THE
DESCRIPTION OF THE YEAR EXPENSES WRITE-OFFS YEAR
- ----------------------------------------------------------------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
1996 Allowance for doubtful accounts............................. $ 1,529 $ 406 $ (795) $ 1,140
Reserve for sales returns & allowances...................... 1,946 180 (440) 1,686
----------- ----------- ----------- -----------
$ 3,475 $ 586 $ (1,235) $ 2,826
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
1995 Allowance for doubtful accounts............................. $ 1,007 $ 1,708 $ (1,186) $ 1,529
Reserve for sales returns & allowances...................... 1,884 5,430 (5,368) 1,946
----------- ----------- ----------- -----------
$ 2,891 $ 7,138 $ (6,554) $ 3,475
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
1994 Allowance for doubtful accounts............................. $ 189 $ 2,470 $ (1,652) $ 1,007
Reserve for sales returns & allowances...................... 735 5,778 (4,629) 1,884
----------- ----------- ----------- -----------
$ 924 $ 8,248 $ (6,281) $ 2,891
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
</TABLE>
F-20
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders of InfoSpinner, Inc.:
In our opinion, the accompanying balance sheets and the related statements
of operations and stockholders' equity and cash flows present fairly, in all
material respects, the financial position of InfoSpinner, Inc. at December 31,
1996 and 1995, and the results of its operations and its cash flows for the year
ended December 31, 1996 and for the period from inception (November 1995)
through December 31, 1995, in conformity with generally accepted accounting
principles. These financial statements are the responsibility of the Company's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these statements in
accordance with generally accepted auditing standards which require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for the opinion expressed
above.
Price Waterhouse LLP
San Jose, California
January 31, 1997
F-21
<PAGE>
INFOSPINNER, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------
1996 1995
------------- ----------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents............................................................ $ 1,368,000 $ 13,000
Accounts receivable.................................................................. 71,000 --
Deferred compensation................................................................ 8,000 --
Other current assets................................................................. 20,000 --
------------- ----------
Total current assets........................................................... 1,467,000 13,000
Property and equipment, net............................................................ 140,000 10,000
Capitalized software, net.............................................................. 90,000 --
Other assets........................................................................... 3,000 --
------------- ----------
$ 1,700,000 $ 23,000
------------- ----------
------------- ----------
LIABILITIES, MANDATORILY REDEEMABLE PREFERRED STOCK
AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accrued compensation costs........................................................... $ 59,000 $ --
Accounts payable and accrued expenses................................................ 20,000 --
Deferred product revenue............................................................. 1,357,000 --
------------- ----------
Total current liabilities...................................................... 1,436,000 --
Commitments (Note 5)
Mandatorily redeemable convertible preferred stock, $.001 par value 1,000,000 shares
designated Series B, 683,265 in 1996................................................. 1,339,000 --
Stockholders' equity:
Convertible preferred stock, $.001 par value; 5,000,000 shares authorized; 900,000
shares designated series A; 510,000 and 125,000 shares issued and outstanding...... -- --
Common stock, $.001 par value, 15,000,000 shares authorized; 6,030,000 and 4,500,000
shares issued and outstanding...................................................... 6,000 5,000
Additional paid-in capital........................................................... 243,000 110,000
Accumulated deficit.................................................................. (1,324,000) (92,000)
------------- ----------
Total stockholders' equity (deficit)........................................... (1,075,000) 23,000
------------- ----------
$ 1,700,000 $ 23,000
------------- ----------
------------- ----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-22
<PAGE>
INFOSPINNER, INC.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
PERIOD FROM
INCEPTION
(NOVEMBER 1995)
YEAR ENDED THROUGH
DECEMBER 31, DECEMBER 31,
1996 1995
------------- ---------------
<S> <C> <C>
Net revenues:
Product........................................................................ $ 185,000 $ --
Service........................................................................ 125,000 --
------------- ---------------
Net revenues................................................................. 310,000 --
Cost of revenues:
Product........................................................................ 10,000 --
Service........................................................................ 100,000 --
------------- ---------------
Cost of revenues............................................................. 110,000 --
------------- ---------------
Gross margin............................................................... 200,000 --
Operating expenses:
General and administrative..................................................... 344,000 2,000
Sales and marketing............................................................ 511,000 --
Research and development....................................................... 599,000 90,000
------------- ---------------
Total operating expenses..................................................... 1,454,000 92,000
------------- ---------------
Loss from operations............................................................. (1,254,000) (92,000)
Interest income.................................................................. 22,000 --
------------- ---------------
Loss before income taxes......................................................... (1,232,000) (92,000)
Provision for income taxes (Note 3).............................................. -- --
------------- ---------------
Net loss......................................................................... $ (1,232,000) $ (92,000)
------------- ---------------
------------- ---------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-23
<PAGE>
INFOSPINNER, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
COMMON STOCK PREFERRED STOCK ADDITIONAL
---------------------- ---------------------- PAID-IN ACCUMULATED
SHARES AMOUNT SHARES AMOUNT CAPITAL DEFICIT TOTAL
--------- ----------- --------- ----------- ----------- ------------ ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Issuance of common stock.......... 4,500,000 $ 5,000 -- $ -- $ 85,000 $ -- $ 90,000
Issuance of preferred stock series
A............................... -- -- 125,000 -- 25,000 -- 25,000
Net loss.......................... -- -- -- -- -- (92,000) (92,000)
--------- ----------- --------- ----------- ----------- ------------ ----------
Balance at December 31, 1995...... 4,500,000 5,000 125,000 -- 110,000 (92,000) 23,000
Issuance of common stock.......... 1,530,000 1,000 -- -- 48,000 -- 49,000
Issuance of preferred stock series
A............................... -- -- 385,000 -- 77,000 -- 77,000
Deferred compensation for employee
stock purchase rights........... -- -- -- 8,000 -- 8,000
Net loss.......................... -- -- -- -- -- (1,232,000) (1,232,000)
--------- ----------- --------- ----------- ----------- ------------ ----------
Balance at December 31, 1996...... 6,030,000 $ 6,000 510,000 -- $ 243,000 $(1,324,000) $(1,075,000)
--------- ----------- --------- ----------- ----------- ------------ ----------
--------- ----------- --------- ----------- ----------- ------------ ----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-24
<PAGE>
INFOSPINNER, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
PERIOD FROM
INCEPTION
(NOVEMBER 1995)
YEAR ENDED THROUGH
DECEMBER 31, DECEMBER 31,
1996 1995
------------- ---------------
<S> <C> <C>
Cash flows from operating activities:
Net loss....................................................................... $ (1,232,000) $ (92,000)
Adjustments to reconcile net loss to net cash provided by (used in) operating
activities:
Depreciation and amortization................................................ 45,000 --
Issuance of common stock in exchange for contributed technology.............. -- 90,000
Issuance of common stock in exchange for contributed services................ 10,000 --
Deferred compensation for employee stock options issued...................... 8,000 --
Changes in assets and liabilities:
Accounts receivable........................................................ (71,000) --
Deferred compensation...................................................... (8,000) --
Other assets............................................................... (23,000) --
Accrued compensation costs................................................. 59,000 --
Accounts payable and other accrued expenses................................ 20,000 --
Income taxes payable....................................................... -- --
Deferred product revenue................................................... 1,357,000 --
------------- ---------------
Net cash provided by (used in) operating activities...................... 165,000 (2,000)
------------- ---------------
Cash flows from investing activities:
Acquisition of property and equipment........................................ (167,000) (10,000)
Capitalization of software costs............................................. (98,000) --
------------- ---------------
Net cash used in investing activities.................................... (265,000) (10,000)
------------- ---------------
Cash flows from financing activities:
Proceeds from issuance of common stock....................................... 39,000 --
Proceeds from issuance of preferred stock.................................... 1,416,000 25,000
------------- ---------------
Net cash provided by financing activities................................ 1,455,000 25,000
------------- ---------------
Net increase in cash and cash equivalents........................................ 1,355,000 13,000
Cash and cash equivalents at the beginning of the period......................... 13,000 --
------------- ---------------
Cash and cash equivalents at the end of the period............................... $ 1,368,000 $ 13,000
------------- ---------------
------------- ---------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-25
<PAGE>
INFOSPINNER, INC.
NOTES TO FINANCIAL STATEMENTS
1. THE COMPANY AND ITS SIGNIFICANT ACCOUNTING POLICIES
InfoSpinner, Inc. (the Company) was incorporated in Delaware in November
1995. The Company is engaged in developing and marketing internet/intranet
server software and software development tools for building and deploying web
sites.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. Additional capital may be required to
enable the Company to complete development and marketing activities and achieve
profitable operations.
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid investments purchased with an
original maturity of three months or less to be cash equivalents.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Depreciation is computed using
the straight-line method based upon the estimated useful lives of the assets,
ranging from three to five years.
REVENUE RECOGNITION
Revenue under product licensing agreements is recorded on a sell through
basis as reported by the reseller if collection of the receivable is probable
and there are no significant obligations remaining. Revenue from development
agreements is recognized as the services are provided.
SOFTWARE DEVELOPMENT COSTS
In accordance with Statement of Financial Accounting Standards No. 86,
"Accounting for the Costs of Computer Software to be Sold, Leased or Otherwise
Marketed", software development costs incurred prior to the establishment of
technological feasibility are expensed as incurred. Software development costs
incurred subsequent to the establishment of technological feasibility through
the period of general market availability of the product are capitalized, if
material. Capitalized costs are then amortized on a straight-line basis over the
estimated product life, or on the ratio of current revenues to total projected
product revenues, whichever is greater. Based upon the Company's product
development process, technological feasibility is established upon completion of
a working model. The costs capitalized and amortization taken for the period
ended December 31, 1996 was $98,000 and $8,000, respectively.
INCOME TAXES
The Company accounts for income taxes using the asset and liability method.
Under the asset and liability method, deferred income taxes and liabilities are
determined based on the differences between the financial reporting and the
income tax basis of assets and liabilities, which are measured using the
currently enacted tax rates and laws, as well as the expected future benefit to
be derived from tax loss and tax credit carryforwards.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the
F-26
<PAGE>
INFOSPINNER, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
1. THE COMPANY AND ITS SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
reported amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates.
CONCENTRATION OF CREDIT RISK
Financial instruments which potentially subject the Company to concentration
of credit risk consist primarily of cash equivalents and trade accounts
receivable. Cash equivalents, primarily composed of investments in money market
funds and certificates of deposit, are maintained with high quality institutions
and the composition and maturities are regularly monitored by management. The
carrying value of all financial instruments approximate their respective fair
value
At December 31, 1996, all revenue and accounts receivable were attributable
to one domestic customer.
2. PROPERTY AND EQUIPMENT
Property and equipment, net consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------
1996 1995
---------- ---------
<S> <C> <C>
Computer equipment and software........................................ $ 140,000 $ 10,000
Office furniture and fixtures.......................................... 37,000 --
---------- ---------
177,000 10,000
Less: accumulated depreciation......................................... (37,000) --
---------- ---------
$ 140,000 $ 10,000
---------- ---------
---------- ---------
</TABLE>
3. INCOME TAXES
Deferred income taxes result from temporary differences in the recognition
of deferred revenue and certain expenses for financial and income tax reporting
purposes. The net deferred tax asset consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------
1996 1995
---------- ---------
<S> <C> <C>
Deferred tax asset:
Deferred revenue..................................................... $ 461,000 $ --
Less: valuation allowance............................................ (428,000) --
---------- ---------
33,000 --
---------- ---------
Deferred tax liabilities:
Deferred compensation................................................ (3,000) --
Capitalized software................................................. (30,000) --
---------- ---------
(33,000) --
---------- ---------
Net deferred tax asset................................................. $ -- $ --
---------- ---------
---------- ---------
</TABLE>
4. CONVERTIBLE PREFERRED STOCK
A total of 5,000,000 shares of convertible preferred stock have been
authorized for issuance, of which 900,000 shares have been designated as series
A and 1,000,000 shares are designated as series B. In November 1995 and January
1996, the Company issued 125,000 and 385,000 shares of series A convertible
F-27
<PAGE>
INFOSPINNER, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
4. CONVERTIBLE PREFERRED STOCK (CONTINUED)
preferred stock (Series A), respectively, at $0.20 per share. In October and
November 1996, the Company issued a total of 683,265 shares of series B
convertible preferred stock (Series B) at $1.96 per share. The rights,
preferences and privileges with respect to Series A and B are as follows:
DIVIDENDS
Holders of Series A and B are entitled to receive noncumulative dividends
prior and in preference to any dividends on common stock, at the annual rate of
$0.012 and $0.12 per share, respectively, when, as, and if declared by the Board
of Directors. There have been no dividends paid or declared to date.
CONVERSION
Each share of Series A and B is convertible at the option of the holder into
shares of common stock based on a formula which currently results in a
one-for-one exchange ratio of common stock for preferred stock. This formula is
subject to adjustment, as defined, which essentially provides adjustments for
holders of the preferred stock in the event of stock splits or combinations.
Such conversion is automatic upon the effective date of a public offering of
common stock. A total of 510,000 and 683,265 shares of common stock have been
reserved for issuance upon conversion of Series A and B, respectively.
LIQUIDATION
In the event of liquidation, holders of Series A and B are entitled to a per
share distribution in preference to holders of common stock equal to the
original issue price of $0.20 and $1.82, respectively, plus any declared but
unpaid dividends. In the event funds are sufficient to make a complete
distribution to the holders of Series A and B as described above, the remaining
assets will be distributed ratably among the holders of Series A and B in
proportion to the preferential amount each such holder is otherwise entitled to
receive.
REDEMPTION
At any time after October 17, 2001, but within 60 days after receipt of
written notice from two-thirds of the then outstanding Series B that a majority
of the Series B be redeemed, the Company is required to redeem the shares
specified in the request at $1.82 per share, as adjusted, plus all declared but
unpaid dividends.
VOTING
The holders of Series A and B have one vote for each share of common stock
into which such preferred stock may be converted, and are entitled, as a
separate class, to elect one director to the Board.
5. COMMITMENTS
In March 1996, the Company leased an office space under a noncancelable
operating lease which expires in March 1998. Rent expense totaled $31,000 for
the year ended December 31, 1996.
F-28
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INFOSPINNER, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
5. COMMITMENTS (CONTINUED)
Future minimum lease payments under noncancelable leases at December 31,
1996 are as follows:
<TABLE>
<S> <C>
1997............................................................... $ 38,000
1998............................................................... 7,000
---------
$ 45,000
---------
---------
</TABLE>
6. RELATED PARTY TRANSACTIONS
The Company in connection with the employment of various individuals granted
stock purchase rights for shares of common stock. The rights, which were all
exercised, allowed each employee to purchase common stock at $.02 per share and
are subject to repurchase by the Company at the exercise price paid per share
with such repurchase right, generally lapsing each month over a forty-eight
month period. At December 31, 1996 shares subject to repurchase by the Company
were 1,430,000. In connection with the issuance of the rights the Company
recorded approximately $8,000 in deferred compensation for the excess of fair
market value over exercise price. The deferred compensation will be amortized
over the four year vesting period of the shares.
From the period of inception to December 31, 1995, the Company issued
4,500,000 shares of common stock at $0.02 per share to the founder in exchange
for technology.
7. SUBSEQUENT EVENTS
On January 6, 1997, the Company entered into a definitive agreement to merge
(the Agreement) with Centura Software Corporation (Centura), formerly Gupta
Corporation. The completion of the transaction is expected to occur during the
first quarter of 1997 and is subject to, among other requirements, approval of
the Company and Centura's shareholders.
Under the Agreement, which was approved by the board of directors of both
software companies, the Company will receive 4,500,000 shares of Centura common
stock in exchange for the outstanding common stock shares and Series A and B
shares. It is anticipated that the transaction will be accounted for as a
pooling of interests. If consummated, the financial position and results of
operation of the Company and Centura will be combined for 1997 and all prior
periods will be restated to give effect to the merger.
F-29
<PAGE>
ANNEX A
- --------------------------------------------------------------------------------
AGREEMENT AND
PLAN OF REORGANIZATION
BY AND AMONG
CENTURA SOFTWARE CORPORATION
IS ACQUISTION CORPORATION
AND
INFOSPINNER, INC.
DATED AS OF JANUARY 6, 1997
- --------------------------------------------------------------------------------
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TABLE OF CONTENTS
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ARTICLE I--THE MERGER...................................................................................... 1
1.1 The Merger..................................................................................... 1
1.2 Effective Time; Closing........................................................................ 2
1.3 Effect of the Merger........................................................................... 2
1.4 Certificate of Incorporation; Bylaws........................................................... 2
1.5 Directors and Officers......................................................................... 2
1.6 Effect on Capital Stock........................................................................ 2
1.7 Dissenting Shares.............................................................................. 4
1.8 Surrender of Certificates...................................................................... 5
1.9 No Further Ownership Rights in Company Stock................................................... 6
1.10 Lost, Stolen or Destroyed Certificates......................................................... 6
1.11 Company Stockholders' Approval................................................................. 6
1.12 Tax Consequences and Accounting Treatment...................................................... 7
1.13 Taking of Necessary Action; Further Action..................................................... 7
ARTICLE II--REPRESENTATIONS AND WARRANTIES OF THE COMPANY............................................... 7
2.1 Organization of the Company.................................................................... 7
2.2 Company Capital Structure...................................................................... 7
2.3 Subsidiaries................................................................................... 8
2.4 Authority...................................................................................... 8
2.5 Company Financial Statements................................................................... 8
2.6 No Undisclosed Liabilities..................................................................... 9
2.7 No Changes..................................................................................... 9
2.8 Taxes.......................................................................................... 10
2.9 Restrictions on Business Activities............................................................ 11
2.10 Title of Properties; Absence of Liens and Encumbrances; Condition of Equipment................. 12
2.11 Intellectual Property.......................................................................... 12
2.12 Agreements, Contracts and Commitments.......................................................... 13
2.13 Interested Party Transactions.................................................................. 14
2.14 Governmental Authorization..................................................................... 14
2.15 Litigation..................................................................................... 15
2.16 Accounts Receivable............................................................................ 15
2.17 Minute Books................................................................................... 15
2.18 Environmental and OSHA......................................................................... 15
2.19 Labor Matters.................................................................................. 16
2.20 Insurance...................................................................................... 16
2.21 Compliance With Laws........................................................................... 16
2.22 Complete Copies of Materials................................................................... 17
2.23 Proxy Statement................................................................................ 17
2.24 Employee Benefit Plans......................................................................... 17
2.25 No Commitments Regarding Future Products....................................................... 18
2.26 Third Party Consents........................................................................... 18
</TABLE>
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2.27 Brokers' and Finders' Fees..................................................................... 18
2.28 Warranties; Indemnities........................................................................ 19
2.29 Complete Copies of Materials................................................................... 19
2.30 Agreements..................................................................................... 19
2.31 Representations Complete....................................................................... 19
ARTICLE III--REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB.......................................
19
3.1 Organization; Standing and Power............................................................... 19
3.2 Capital Structure.............................................................................. 19
3.3 Authority...................................................................................... 20
3.4 SEC Documents; Parent Financial Statements..................................................... 21
3.5 Broker's and Finders' Fees..................................................................... 21
3.6 Proxy Statement................................................................................ 21
3.7 No Material Adverse Change..................................................................... 21
3.8 Litigation..................................................................................... 22
3.9 Trade Relations................................................................................ 22
3.10 Pooling Matters................................................................................ 22
3.11 Compliance with Laws........................................................................... 22
3.12 Agreements..................................................................................... 23
ARTICLE IV--CONDUCT PRIOR TO THE EFFECTIVE TIME......................................................... 23
4.1 Conduct of Business of the Company............................................................. 23
4.2 No Solicitation................................................................................ 24
4.3 Conduct of Business of Parent.................................................................. 25
ARTICLE V--ADDITIONAL AGREEMENTS........................................................................... 25
5.1 Stockholder Approval........................................................................... 25
5.2 Access to Information.......................................................................... 26
5.3 Confidentiality................................................................................ 26
5.4 Expenses....................................................................................... 26
5.5 Public Disclosure.............................................................................. 26
5.6 Pooling Accounting............................................................................. 26
5.7 Consents....................................................................................... 27
5.8 Affiliate Agreements........................................................................... 27
5.9 FIRPTA......................................................................................... 27
5.10 Legal Requirements............................................................................. 27
5.11 Blue Sky Laws.................................................................................. 27
5.12 Best Efforts; Additional Documents and Further Assurances...................................... 27
5.13 Updated Information Regarding Company Capitalization........................................... 27
5.14 Company Audit.................................................................................. 28
ARTICLE VI--CONDITIONS TO THE MERGER....................................................................... 28
6.1 Conditions to Obligations of Each Party to Effect the Merger................................... 28
6.2 Additional Conditions to Obligations of Company................................................ 29
6.3 Additional Conditions to the Obligations of Parent and Merger Sub.............................. 29
</TABLE>
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ARTICLE VII--SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ESCROW............................................ 30
7.1 Survival of Representations and Warranties..................................................... 30
7.2 Escrow Arrangements............................................................................ 30
7.3 Method of Asserting Claims..................................................................... 32
7.4 Agent of the Stockholders; Power of Attorney................................................... 32
7.5 Adjustment to Escrow Number.................................................................... 32
ARTICLE VIII--TERMINATION, AMENDMENT AND WAIVER......................................................... 32
8.1 Termination.................................................................................... 32
8.2 Effect of Termination.......................................................................... 33
8.3 Amendment...................................................................................... 33
8.4 Extension; Waiver.............................................................................. 33
ARTICLE IX--GENERAL PROVISIONS............................................................................. 34
9.1 Notices........................................................................................ 34
9.2 Interpretation................................................................................. 34
9.3 Counterparts................................................................................... 34
9.4 Miscellaneous.................................................................................. 34
9.5 Governing Law.................................................................................. 35
9.6 Rules of Construction.......................................................................... 35
Exhibit A - Forms of Affiliate Agreement
Exhibit B - Form of Employment Agreement
Exhibit C - Form of Escrow Agreement
Exhibit D - Form of Non-Competition Agreement
Exhibit E - Form of Legal Opinion of Venture Law Group
Exhibit F - Form of Legal Opinion of Gunderson Dettmer Stough Villeneuve Franklin & Hachigian, LLP
</TABLE>
A-iii
<PAGE>
ANNEX A
AGREEMENT AND PLAN OF REORGANIZATION
This AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement") is made and
entered into as of January 6, 1997, among Centura Software Corporation
California corporation ("PARENT"), IS Acquisition Corporation, a Delaware
corporation and a wholly owned subsidiary of Parent ("MERGER SUB"), and
InfoSpinner, Inc., a Delaware corporation (the "COMPANY").
RECITALS
A. The Boards of Directors of each of the Company, Parent and Merger Sub
believe it is in the best interests of each company and their respective
stockholders that the Company and Merger Sub combine into a single company
through the statutory merger of Merger Sub with and into the Company (the
"MERGER") and, in furtherance thereof, have approved the Merger.
B. Pursuant to the Merger, among other things, the outstanding shares of
Common Stock, $0.001 par value per share, of the Company, ("COMPANY COMMON
STOCK"), the Series A Preferred Stock, $0.001 par value per share ("COMPANY
SERIES A PREFERRED STOCK") of the Company and the Series B Preferred Stock,
$0.001 par value per share ("COMPANY SERIES B PREFERRED STOCK") of the Company
shall be converted into shares of Common Stock, $.01 par value per share, of
Parent ("PARENT COMMON STOCK"). Company Series A Preferred Stock and Company
Series B Preferred Stock are sometimes referred to herein collectively as
"COMPANY PREFERRED STOCK." Company Common Stock and Company Preferred Stock are
sometimes herein referred to collectively as "Company Stock."
C. A portion of the shares of Common Stock of Parent otherwise payable by
Parent in connection with the Merger shall be placed in escrow for the purposes
of satisfying damages, losses, expenses and other similar charges which result
from breaches of representations, warranties or covenants in the Articles of
this Agreement.
D. The Company, Parent and Merger Sub desire to make certain
representations, warranties, covenants and other agreements in connection with
the Merger.
E. The parties intend, by executing this Agreement, to adopt a plan of
reorganization within the meaning of Section 368 of the Internal Revenue Code of
1986, as amended (the "CODE").
F. The parties intend that the Merger be treated as a pooling of interests
for accounting purposes.
G. Immediately after the execution of this Agreement by the parties, Parent
and Company will execute a Distribution Agreement (the "Distribution Agreement")
which sets forth the terms and conditions of the grant of a license and
associated rights to certain products and technology of the Company to Parent.
NOW, THEREFORE, in consideration of the mutual covenants, premises,
warranties and representations set forth herein, and for other good and valuable
consideration, the parties agree as follows:
ARTICLE I
THE MERGER
1.1 THE MERGER. At the Effective Time (as defined in Section 1.2) and
subject to and upon the terms and conditions of this Agreement, the Certificate
of Merger to be prepared by the parties prior to the Effective Date (the
"CERTIFICATE OF MERGER") and the applicable provisions of the Delaware General
Corporation Law (the "DELAWARE LAW"), Merger Sub shall be merged with and into
the Company, the separate corporate existence of Merger Sub shall cease and the
Company shall continue as the surviving
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corporation. The Company as the surviving corporation after the Merger is
hereinafter sometimes referred to as the "SURVIVING CORPORATION."
1.2 EFFECTIVE TIME; CLOSING. As promptly as practicable after the
satisfaction or waiver of the conditions set forth in Article VI, the parties
hereto shall cause the Merger to be consummated by causing a properly executed
Certificate of Merger to be filed with the Secretary of State of the State of
Delaware in accordance with Delaware Law on the Closing Date (as defined below).
The Merger shall become effective upon such filing of the Certificate of Merger
(the time of such filing being hereinafter referred to as the "EFFECTIVE TIME").
The closing of the Merger (the "CLOSING") will take place as soon as practicable
on the first business day after satisfaction or waiver of the latest to occur of
the conditions set forth in Article VI hereto at the offices of Venture Law
Group, A Professional Corporation, 2800 Sand Hill Road, Menlo Park, California,
unless another place or time is agreed to in writing by Parent and the Company
(the "CLOSING DATE").
1.3 EFFECT OF THE MERGER. At the Effective Time, the effect of the Merger
shall be as provided in this Article I, the Certificate of Merger and the
applicable provisions of Delaware Law. Without limiting the generality of the
foregoing, and subject thereto, at the Effective Time all the property, rights,
privileges, powers and franchises of the Company and Merger Sub shall vest in
the Surviving Corporation, and all debts, liabilities and duties of the Company
and Merger Sub shall become the debts, liabilities and duties of the Surviving
Corporation.
1.4 CERTIFICATE OF INCORPORATION; BYLAWS.
(a) Unless otherwise determined by Parent prior to the Effective Time,
at the Effective Time, the Certificate of Incorporation of Merger Sub, as in
effect immediately prior to the Effective Time, shall be the Certificate of
Incorporation of the Surviving Corporation until thereafter amended as provided
by law and such Certificate of Incorporation; provided, however, that Article I
of the Certificate of Incorporation of the Surviving Corporation shall be
amended to read as follows: "The name of the corporation is InfoSpinner, Inc."
(b) The Bylaws of Merger Sub, as in effect immediately prior to the
Effective Time, shall be the Bylaws of the Surviving Corporation until
thereafter amended as provided by law, the Certificate of Incorporation of the
Surviving Corporation and such Bylaws.
1.5 DIRECTORS AND OFFICERS. The directors of Merger Sub immediately prior
to the Effective Time shall be the initial directors of the Surviving
Corporation, each to hold office in accordance with the Certificate of
Incorporation and Bylaws of the Surviving Corporation, and the officers of
Merger Sub immediately prior to the Effective Time shall be the initial officers
of the Surviving Corporation, in each case until their respective successors are
duly elected or appointed and qualified.
1.6 EFFECT ON CAPITAL STOCK. At the Effective Time, by virtue of the Merger
and without any action on the part of Merger Sub, the Company or the holders of
any of the outstanding shares of the Company or Merger Sub:
(a) CONVERSION OF COMPANY COMMON STOCK. Each share of Company Common
Stock issued and outstanding immediately prior to the Effective Time (other than
any shares of Company Common Stock to be canceled pursuant to Section 1.6(d) and
any Dissenting Shares (as defined and to the extent provided in Section 1.7(a))
will be canceled and extinguished and be converted automatically into the right
to receive a number of shares of Parent Common Stock equal to the Common Stock
Conversion Ratio.
(b) CONVERSION OF COMPANY SERIES A PREFERRED STOCK. Each share of
Company Series A Preferred Stock issued and outstanding immediately prior to the
Effective Time (other than shares of Company Series A Preferred Stock to be
canceled pursuant to Section 1.6(d) and any Dissenting Shares (as defined and to
the extent provided in Section 1.7(a)) will be canceled and extinguished and be
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<PAGE>
converted automatically into the right to receive a number of shares of Parent
Common Stock equal to the Series A Preferred Stock Conversion Ratio.
(c) CONVERSION OF COMPANY SERIES B PREFERRED STOCK. Each share of
Company Series B Preferred Stock issued and outstanding immediately prior to the
Effective Time (other than shares of Company Series B Preferred Stock to be
canceled pursuant to Section 1.6(d) and any Dissenting Shares (as defined and to
the extent provided in Section 1.7(a)) will be canceled and extinguished and
converted automatically into the right to receive a number of shares of Parent
Common Stock equal to the Series B Preferred Stock Conversion Ratio.
(d) CANCELLATION OF PARENT-OWNED AND MERGER SUB-OWNED STOCK. Each share
of Company Stock owned by Merger Sub, Parent or any direct or indirect wholly
owned subsidiary of Parent or of the Company immediately prior to the Effective
Time shall be canceled and extinguished without any conversion thereof.
(e) CAPITAL STOCK OF MERGER SUB. Each share of Common Stock, $0.001 par
value, of Merger Sub issued and outstanding immediately prior to the Effective
Time shall be converted into and exchanged for one validly issued, fully paid
and nonassessable share of Common Stock, $0.001 par value, of the Surviving
Corporation. Each stock certificate of Merger Sub evidencing ownership of any
such shares shall continue to evidence ownership of such shares of capital stock
of the Surviving Corporation.
(f) ADJUSTMENTS TO CONVERSION RATIOS. The Conversion Ratios shall be
adjusted to reflect fully the effect of any stock split, reverse split, stock
dividend, reorganization, recapitalization or other like change (a
"Recapitalization Event") with respect to Parent Common Stock or Company Stock
occurring after the date hereof and prior to the Effective Time.
(g) FRACTIONAL SHARES. No fraction of a share of Parent Common Stock
will be issued, but in lieu thereof each holder of shares of Company Stock who
would otherwise be entitled to a fraction of a share of Parent Common Stock
(after aggregating all fractional shares of Parent Common Stock to be received
by such holder) shall receive from Parent an amount of cash (rounded to the
nearest whole cent) equal to the product of (i) such fraction, multiplied by
(ii) the average last sale price of a share of Parent Common Stock during the
thirty (30) day period ending three days prior to the Effective Time, as
reported on the Nasdaq National Market.
(h) DEFINITIONS. For purposes of this Agreement, the following terms
shall have the definitions set forth below:
"AGGREGATE STOCK NUMBER" means 4,500,000 shares.
"CERTIFICATE AVERAGE STOCK PRICE" means the average of the closing
sale prices of Parent Common Stock reported in the WALL STREET JOURNAL, on
the basis of information provided by the Nasdaq Stock Market during the
thirty day period ending three days prior to the Effective Time.
"CONVERSION RATIOS" means the Common Stock Conversion Ratio and the
Series A and Series B Preferred Stock Conversion Ratios.
"COMMON STOCK CONVERSION RATIO" means the amount equal to the
quotient obtained by dividing (i) the Aggregate Stock Number by (ii) the
Total Pre-Merger Common Stock Equivalents; provided, however, that for
purposes of calculating the Common Stock Conversion Ratio, the Aggregate
Stock Number shall be reduced by the total number of shares of Parent Common
Stock to be issued upon conversion of the Company Series A Preferred Stock
pursuant to Section 1.6(b) above if the Series A Preferred Stock Conversion
Ratio is determined to be equal to the Series A Liquidation Ratio and shall
be reduced by the total number of shares of Parent Common Stock to be issued
upon conversion of the Company Series B Preferred Stock pursuant to Section
1.6(c) above if the Series B Preferred Stock Conversion Ratio is determined
to be equal to the Series B Liquidation Ratio.
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"COMPANY CERTIFICATE OF INCORPORATION" means the Certificate of
Incorporation of the Company, as amended and restated, immediately prior to
the Effective Time.
"ESCROW NUMBER" means an amount equal to the product of (a) 0.1 and
(b) an amount equal to (i) the total number of shares of Company Common
Stock outstanding immediately prior to the Effective Time multiplied by the
Common Stock Conversion Ratio plus (ii) the total number of shares of
Company Series A Preferred Stock outstanding immediately prior to the
Effective Time multiplied by the Series A Preferred Stock Conversion Ratio
plus (iii) the total number of shares of Company Series B Preferred Stock
outstanding immediately prior to the Effective Time multiplied by the Series
B Preferred Stock Conversion Ratio; provided that the Escrow Number is
subject to adjustment pursuant to Section 7.5 hereof.
"SERIES A PREFERRED STOCK CONVERSION RATIO" means an amount equal to
the greater of (A) the quotient (such quotient, "the Series A Liquidation
Ratio") obtained by dividing (i) the sum of $0.20 (appropriately adjusted to
reflect the occurrence prior to the Closing Date of any stock split or
combination or the like of the Company Series A Preferred Stock or dividend
of the Company Series A Preferred Stock, or the like) and the declared but
unpaid dividends on one share of Series A Preferred Stock computed as of the
Closing Date (such sum the "Series A Liquidation Preference") by (ii) the
Certificate Average Stock Price or (B) the product of (i) the Common Stock
Conversion Ratio (assuming no reduction in the Total Pre-Merger Common Stock
Equivalents), and (ii) $0.20 divided by the then applicable conversion price
for the Company Series A Preferred Stock (as determined in accordance with
Section 4 of Article III of the Company Certificate of Incorporation).
"SERIES B PREFERRED STOCK CONVERSION RATIO" means an amount equal to
the greater of (A) the quotient (such quotient, the "Series B Liquidation
Ratio") obtained by dividing (i) the sum of $1.82 (appropriately adjusted to
reflect the occurrence prior to the Closing Date of any stock split or
combination of the Company Series B Preferred Stock, dividend of Company
Series B Preferred Stock, or the like) and the declared but unpaid dividends
on one share of Series B Preferred Stock computed as of the Closing Date
(such sum, the "Series B Liquidation Preference") by (ii) the Certificate
Average Stock Price or (B) the product of (i) the Common Stock Conversion
Ratio (assuming no reduction in the Total Pre-Merger Common Stock
Equivalents), and (ii) $1.82 divided by the then applicable conversion price
for the Company Series B Preferred Stock (as determined in accordance with
Section 4 of Article III of the Company Certificate of Incorporation).
"TOTAL PRE-MERGER COMMON STOCK EQUIVALENTS" means the total number
of shares of outstanding Company Common Stock immediately prior to the
Effective Time. For purposes of this definition, all shares of Company
Common Stock issuable upon exercise of options or upon conversion, exchange
or exercise of other securities or other rights outstanding immediately
prior to the Effective Time (regardless of whether then exercisable,
convertible or exchangeable), shall be deemed outstanding; provided,
however, that for purposes of calculating Total Pre-Merger Common Stock
Equivalents, the shares of Company Common Stock issuable upon conversion of
the Company Series A Preferred Stock shall not be deemed to be outstanding
if the Series A Conversion Ratio is determined to be equal to the Series A
Liquidation Ratio and the shares of Company Common Stock issuable upon
conversion of the Company Series B Preferred Stock shall not be deemed to be
outstanding if the Series B Conversion Ratio is determined to be equal to
the Series B Liquidation Ratio.
1.7 DISSENTING SHARES.
(a) Notwithstanding any provision of this Agreement to the contrary,
any shares of capital stock of the Company held by a holder who has demanded and
perfected appraisal rights for such shares in accordance with Delaware Law and
who, as of the Effective Time, has not effectively withdrawn or lost such
appraisal rights ("DISSENTING SHARES"), shall not be converted into or represent
a right to receive Parent Common Stock pursuant to Section 1.6, but the holder
thereof shall only be entitled to such rights as are granted by Delaware Law.
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(b) Notwithstanding the provisions of subsection (a), if any holder of
Company Common Stock who demands fair value and seeks appraisal of such shares
under Delaware Law shall effectively withdraw or lose (through failure to
perfect or otherwise) the right to appraisal, then, as of the later of the
Effective Time or the occurrence of such event, such holder's shares shall
automatically be converted into and represent only the right to receive the
shares of Parent Common Stock to which such stockholder would otherwise be
entitled under Section 1.6 (less the number of shares allocable to such
stockholder that have been deposited in the Escrow Fund in respect of such
shares of Company Stock pursuant to Section 1.8(a) and Article VII hereof) and
payment for fractional shares as provided in Section 1.6, without interest
thereon, upon surrender of the certificate representing such shares.
(c) The Company shall give Parent (i) prompt notice of any written
demand received by the Company to require the Company to purchase shares of
Company Stock pursuant to Delaware Law and (ii) the opportunity to participate
in all negotiations and proceedings with respect to such demands. The Company
shall not, except with the prior written consent of Parent, voluntarily make any
payments with respect to any such demands or offer to settle or settle any such
demands.
1.8 SURRENDER OF CERTIFICATES.
(a) EXCHANGE AGENT. Chemical Trust Company of California shall act as
exchange agent (the "EXCHANGE AGENT") in the Merger.
(b) PARENT TO PROVIDE COMMON STOCK. Promptly after the Effective Time,
Parent shall make available to the Exchange Agent for exchange in accordance
with this Article I the shares of Parent Common Stock issuable pursuant to
Section 1.6 in exchange for shares of Company Stock outstanding immediately
prior to the Effective Time, less such number of shares of Parent Common Stock
as are to be deposited into the Escrow Fund pursuant to the requirements of
Article VII hereof.
(c) EXCHANGE PROCEDURES. Promptly after the Effective Time, the
Surviving Corporation shall cause to be mailed to each holder of record of a
certificate or certificates (the "Certificates") which immediately prior to the
Effective Time represented outstanding shares of Company Stock whose shares were
converted into the right to receive shares of Parent Common Stock pursuant to
Section 1.6, (i) a letter of transmittal (which shall specify that delivery
shall be effected, and risk of loss and title to the Certificates shall pass,
only upon delivery of the Certificates to the Exchange Agent and shall be in
such form and have such other provisions as Parent may reasonably specify) and
(ii) instructions for use in effecting the surrender of the Certificates in
exchange for certificates representing shares of Parent Common Stock. Upon
surrender of a Certificate for cancellation to the Exchange Agent or to such
other agent or agents as may be appointed by Parent, together with such letter
of transmittal, duly completed and validly executed in accordance with the
instructions thereto, the holder of such Certificate shall be entitled to
receive in exchange therefor a certificate representing the number of whole
shares of Parent Common Stock (less the number of shares of Parent Common Stock
to be deposited in the Escrow Fund on such holder's behalf pursuant to Article
VII hereof) and payment in lieu of fractional shares which such holder has the
right to receive pursuant to Section 1.6, and the Certificate so surrendered
shall forthwith be canceled. As soon as practicable after the Effective Time,
and subject to and in accordance with the provisions of Article VII hereof,
Parent shall cause to be distributed to the Escrow Agent (as defined in Article
VII) a certificate or certificates representing that number of shares of Parent
Common Stock equal to the Escrow Number that shall be registered in the name of
the Escrow Agent. Such shares shall be beneficially owned by the holders on
whose behalf such shares were deposited in the Escrow Fund and shall be
available to compensate Parent for certain damages as provided in Article VII.
Until so surrendered, each outstanding certificate that, prior to the Effective
Time, represented shares of Company Stock will be deemed from and after the
Effective Time, for all corporate purposes, other than the payment of dividends
(except to the extent provided in Section 1.8(d) below), to evidence the
ownership of the number of full shares of Parent Common Stock into which such
shares of Company Stock shall have
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been so converted and the right to receive an amount in cash in lieu of the
issuance of any fractional shares in accordance with Section 1.6.
(d) DISTRIBUTIONS WITH RESPECT TO UNEXCHANGED SHARES. No dividends or
other distributions declared or made after the Effective Time with respect to
Parent Common Stock with a record date after the Effective Time will be paid to
the holder of any unsurrendered Certificate with respect to the shares of Parent
Common Stock represented thereby until the holder of record of such Certificate
shall surrender such Certificate. Subject to applicable law, following surrender
of any such Certificate, there shall be paid to the record holder of the
certificates representing whole shares of Parent Common Stock issued in exchange
therefor, without interest, at the time of such surrender, the amount of
dividends or other distributions with a record date after the Effective Time
theretofore paid with respect to such whole shares of Parent Common Stock.
(e) TRANSFERS OF OWNERSHIP. If any certificate for shares of Parent
Common Stock is to be issued in a name other than that in which the certificate
surrendered in exchange therefor is registered, it will be a condition of the
issuance thereof that the certificate so surrendered will be properly endorsed
and otherwise in proper form for transfer and that the person requesting such
exchange will have paid to Parent or any agent designated by it any transfer or
other taxes required by reason of the issuance of a certificate for shares of
Parent Common Stock in any name other than that of the registered holder of the
certificate surrendered, or established to the satisfaction of Parent or any
agent designated by it that such tax has been paid or is not payable.
(f) NO LIABILITY. Notwithstanding anything to the contrary in this
Section 1.8, none of the Exchange Agent, the Surviving Corporation or any party
hereto shall be liable to a holder of shares of Parent Common Stock or Company
Stock for any amount properly paid to a public official pursuant to any
applicable abandoned property, escheat or similar law.
1.9 NO FURTHER OWNERSHIP RIGHTS IN COMPANY STOCK. All shares of Parent
Common Stock issued upon the surrender for exchange of shares of Company Stock
in accordance with the terms hereof (including any cash for Dissenting
Shareholders and fractional shares paid in respect thereof) shall be deemed to
have been issued in full satisfaction of all rights pertaining to such shares of
Company Stock, and there shall be no further registration of transfers on the
records of the Surviving Corporation of shares of Company Stock which were
outstanding immediately prior to the Effective Time. If, after the Effective
Time, Certificates are presented to the Surviving Corporation for any reason,
they shall be canceled and exchanged as provided in this Article I.
1.10LOST, STOLEN OR DESTROYED CERTIFICATES. In the event any Certificates
shall have been lost, stolen or destroyed, the Exchange Agent shall issue in
exchange for such lost, stolen or destroyed certificates, upon the making of an
affidavit of that fact by the holder thereof, such shares of Parent Common Stock
and cash for fractional shares, if any, as may be required pursuant to Section
1.6; provided, however, that Parent may, in its discretion and as a condition
precedent to the issuance thereof require the owner of such lost, stolen or
destroyed certificates to deliver a bond in such sum as it may reasonably direct
as indemnity against any claim that may be made against Parent or the Exchange
Agent with respect to the certificates alleged to have been lost, stolen or
destroyed.
1.11APPROVAL OF COMPANY AND PARENT STOCKHOLDERS. Each of the Company and
Parent shall call a meeting of its stockholders to consider and vote upon the
approval of this Agreement, the Certificate of Merger and the Merger
contemplated hereby, all in accordance with the provisions of California Law,
with respect to Parent, and Delaware Law, with respect to the Company, and in
accordance with the provisions of the Securities Exchange Act of 1934, as
amended (the "EXCHANGE ACT"), as soon as practicable after Parent's registration
statement on Form S-4 relating to the shares of Parent Common Stock to be issued
in connection with the Merger (the "S-4") shall have been declared effective by
the Securities and Exchange Commission (the "SEC") and the Proxy Statement, as
defined in Section 5.1 shall have been cleared by the SEC.
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1.12TAX CONSEQUENCES AND ACCOUNTING TREATMENT. It is intended by the
parties hereto that the Merger shall constitute a reorganization within the
meaning of Section 368 of the Internal Revenue Code of 1986, as amended, and
that the transaction be accounted for as a pooling of interests.
1.13TAKING OF NECESSARY ACTION; FURTHER ACTION. If, at any time after the
Effective Time, any further action is necessary or desirable to carry out the
purposes of this Agreement and to vest the Surviving Corporation with full
right, title and possession to all assets, property, rights, privileges, powers
and franchises of the Company and Merger Sub, the officers and directors of the
Company and Merger Sub are fully authorized in the name of their respective
corporations or otherwise to take, and will take, all such lawful and necessary
action, so long as such action is consistent with this Agreement.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Parent and Merger Sub, subject to
such qualifications and exceptions as are set forth in a disclosure letter
delivered and dated as of the date hereof (which disclosure letter shall
specifically identify the sections or subsections which are qualified by the
information set forth therein) signed by the Company (the "COMPANY DISCLOSURE
LETTER"), as follows:
2.1 ORGANIZATION OF THE COMPANY. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware. The Company has the corporate power to own its property and to carry
on its business as now being conducted and as proposed to be conducted by the
Company. The Company is duly qualified to do business and in good standing as a
foreign corporation in each jurisdiction in which the failure to be so qualified
would have a material adverse effect on the business, assets (including
intangible assets), liabilities, financial condition, results of operations or
prospects of the Company (hereinafter referred to as a "MATERIAL ADVERSE
EFFECT"). The Company has delivered a true and correct copy of its Certificate
of Incorporation and Bylaws (or similar governing instruments), each as amended
to date, to Parent or its counsel.
2.2 COMPANY CAPITAL STRUCTURE. The authorized capital stock of the Company
consists of Fifteen Million (15,000,000) shares of Common Stock, $0.001 par
value per share and Five Million (5,000,000) shares of Preferred Stock, $0.001
par value per share, Nine Hundred Thousand (900,000) shares of which are
designated Series A Preferred Stock, $0.001 par value per share and One Million
(1,000,000) shares of which are designated Series B Preferred Stock, $0.001 par
value per share. The Series A Conversion Price (as such term is defined in the
Company Certificate of Incorporation) is $0.20, the Series B Conversion Price
(as such term is defined in the Company Certificate of Incorporation) is $1.96,
and each share of Company Preferred Stock is convertible into one share of
Company Common Stock. As of the date hereof, there are 6,030,000, 510,000 and
683,265 shares of the Company Common Stock, Series A Preferred Stock and Series
B Preferred Stock, respectively, issued and outstanding held by the persons, and
in the amounts, set forth under Section 2.2 of the Company Disclosure Letter.
Such list of holders of Company Stock in the Company Disclosure Letter also
indicates how many shares of each holder were subject to repurchase upon
termination of employment as of the date hereof. All outstanding shares of
Company Stock are duly authorized, validly issued, fully paid and non-assessable
and not subject to preemptive rights or rights of first refusal created by
statute, the Certificate of Incorporation or Bylaws of the Company or any
agreement to which the Company is a party or by which it is bound. All
outstanding shares of Company Stock and all outstanding options or other rights
to purchase Company Stock have been issued in compliance with all federal and
state securities laws. Section 2.2 of the Company Disclosure Letter also sets
forth a true, correct and complete list of all outstanding options, if any, for
Company Stock (which, for each outstanding option, sets forth the name of the
holder of such option, the number of shares subject to such option, the exercise
price of such option, the number of shares as to which such option is
exercisable and, if the exercisability of such option will be or is required to
be accelerated in any way by the transactions contemplated by this Agreement or
for any other reason, an indication of the extent of such
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acceleration). Such list also describes any repricing of options which has taken
place since the date of the Company's incorporation. Except as set forth in
Section 2.2 of the Company Disclosure Letter, there are no options, warrants,
calls, rights, commitments or agreements of any character to which the Company
is a party or by which it is bound obligating the Company to issue, deliver,
sell, repurchase or redeem, or cause to be issued, delivered, sold, repurchased
or redeemed, any shares of the capital stock of the Company or obligating the
Company to grant, extend, accelerate the vesting of, change the price of, or
otherwise amend or enter into any such option, warrant, call, right, commitment
or agreement.
2.3 SUBSIDIARIES. The Company does not have and has never had any
subsidiaries or affiliated Companies and does not otherwise own and has never
otherwise owned any shares of stock or any interest in, or control of, directly
or indirectly, any other corporation, partnership, association, joint venture or
entity.
2.4 AUTHORITY. Subject only to the approval of the Merger and the other
transactions contemplated hereby by the Company's stockholders as contemplated
by Section 6.1(a), the Company has all requisite corporate power and authority
to enter into this Agreement, the Distribution Agreement, the Escrow Agreement
and the Affiliates Agreements and to consummate the transactions contemplated
hereby and thereby. In order for the Company's stockholders to duly approve the
Merger and this Agreement, the vote of the holders of a majority of the Company
Common Stock and the Company Preferred Stock, voting together, is required. The
execution and delivery of this Agreement, the Distribution Agreement, the Escrow
Agreement and the Affiliates Agreements and the consummation of the transactions
contemplated hereby and thereby have been duly authorized by all necessary
corporate action on the part of the Company, subject only to the approval of the
Merger and the other transactions contemplated hereby by the Company's
stockholders as contemplated by Section 6.1(a). The Company's Board of Directors
has unanimously approved the Merger and this Agreement. This Agreement, the
Distribution Agreement, the Escrow Agreement and the Affiliates Agreements have
been duly executed and delivered by the Company and constitute the valid and
binding obligation of the Company enforceable in accordance with their terms
except as such enforceability may be limited by principles of public policy and
subject to the laws of general application relating to bankruptcy, insolvency
and the relief of debtors and rules of law governing specific performance,
injunctive relief or other equitable remedies. The execution and delivery of
this Agreement, the Distribution Agreement, the Escrow Agreement and the
Affiliates Agreements by the Company does not, and, as of the Effective Time,
the consummation of the transactions contemplated hereby and thereby will not,
conflict with, or result in any violation of, or default under (with or without
notice or lapse of time, or both), or give rise to a right of termination,
cancellation or acceleration of any obligation or loss of any benefit under (any
such event, a "CONFLICT") (i) any provision of the Certificate of Incorporation,
as amended, or Bylaws of the Company or (ii) any mortgage, indenture, lease,
contract or other agreement or instrument, permit, concession, franchise,
license, judgment, order, decree, statute, law, ordinance, rule or regulation
applicable to the Company or its properties or assets. No consent, approval,
order or authorization of, or registration, declaration or filing with, any
court, administrative agency or commission or other governmental entity or
instrumentality ("GOVERNMENTAL ENTITY") or any third party (so as not to trigger
any Conflict), is required by or with respect to the Company in connection with
the execution and delivery of this Agreement or the consummation of the
transactions contemplated hereby, except for (i) the filing of the Certificate
of Merger with the Secretary of State of the State of Delaware, (ii) such
consents, approvals, orders, authorizations, registrations, declarations and
filings as may be required under applicable federal and state securities laws
and the laws of any foreign country, and (iii) such other consents, waivers,
authorizations, filings, approvals and registrations which are set forth in
Section 2.4 of the Company Disclosure Letter.
2.5 COMPANY FINANCIAL STATEMENTS. Section 2.5(a) of the Company Disclosure
Letter includes a true, correct and complete copy of the Company's unaudited
financial statements (balance sheets, income statements and statements of cash
flow) as of and for the period from inception through September 30,
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1996 (collectively, the "Financial Statements"). Except for the absence of notes
to the Financial Statements, the Financial Statements have been prepared in
accordance with generally accepted accounting principles applied on a basis
consistent throughout the periods indicated, and revenues presented on the
Financial Statements have been recognized in accordance with GAAP. The Financial
Statements present fairly the financial condition and operating results of the
Company as of the date and during the period indicated therein. The unaudited
balance sheet of the Company as of September 30, 1996 is hereinafter referred to
as the "Company Balance Sheet."
2.6 NO UNDISCLOSED LIABILITIES. Except as set forth in Section 2.6 of the
Company Disclosure Letter, there are no liabilities of the Company of any kind
whatsoever, whether accrued, contingent, absolute, determined, determinable or
otherwise, and there is no existing condition, situation or set of circumstances
which could reasonably be expected to result in such a liability, other than:
(i) liabilities disclosed or provided for in the Company Balance Sheet; (ii)
operating expenses, trade payables or obligations for the purchase of capital
assets consistent with Section 4.1(b); and (iii) reasonable expenses incurred in
connection with the negotiation, documentation, and consummation of the
transactions contemplated hereby.
2.7 NO CHANGES. Except as set forth in Section 2.7 of the Company
Disclosure Letter, since the date of the Company Balance Sheet there has not
been, occurred or arisen any:
(a) transaction by the Company except in the ordinary course of
business as conducted on that date and consistent with past practices;
(b) amendments or changes to the Certificate of Incorporation or Bylaws
of the Company;
(c) capital expenditure or commitment by the Company, in any individual
amount exceeding $20,000, or in the aggregate, exceeding $50,000;
(d) destruction of, damage to, or loss of any assets (including,
without limitation, intangible assets), business or customer of the Company
(whether or not covered by insurance) which would constitute a Material Adverse
Effect;
(e) change in accounting methods or practices (including any change in
depreciation or amortization policies or rates, any change in policies in making
or reversing accruals, or any change in capitalization of software development
costs) by the Company;
(f) declaration, setting aside, or payment of a dividend or other
distribution in respect to the capital stock of the Company, or any direct or
indirect redemption, purchase or other acquisition by the Company of any of its
capital stock, except repurchases of Company Common Stock from terminated
Company employees at the original per share purchase price of such shares;
(g) increase in the salary or other compensation payable or to become
payable by the Company to any of its officers, directors, employees or advisors,
or the declaration, payment, or commitment or obligation of any kind for the
payment by the Company of a bonus or other additional salary or compensation to
any such person except as otherwise contemplated by this Agreement;
(h) sale, lease, license of other disposition of any of the assets or
properties of the Company, except in the ordinary course of business and not in
excess of $20,000;
(i) termination or material amendment of any material contract,
agreement or license (including any distribution agreement) to which the Company
is a party or by which it is bound;
(j) loan by the Company to any person or entity, or guaranty by the
Company of any loan, other than travel or similar advances made to employees in
connection with their employment duties;
(k) waiver or release of any right or claim of the Company, including
any write-off or other compromise of any account receivable of the Company, in
excess of $20,000 in the aggregate;
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(l) the commencement or notice or threat of commencement of any lawsuit
or proceeding against or, to the Company's or the Company's officers' or
directors' knowledge, investigation of the Company or its affairs;
(m) notice of any claim of ownership by a third party of the Company's
Intellectual Property (as defined in Section 2.11 below) or of infringement by
the Company of any third party's Intellectual Property rights;
(n) issuance or sale by the Company of any of its shares of capital
stock, or securities exchangeable, convertible or exercisable therefor, or of
any other of its securities;
(o) change in pricing or royalties set or charged by the Company to its
customers or licensees or in pricing or royalties set or charged by persons who
have licensed Intellectual Property to the Company;
(p) any event or condition of any character that has or could
reasonably be expected to have a Material Adverse Effect on the Company; or
(q) agreement by the Company or any officer or employee thereof on
behalf of the Company to do any of the things described in the preceding clauses
(a) through (p) (other than negotiations with Parent and its representatives
regarding the transactions contemplated by this Agreement).
2.8 TAXES.
(a) For purposes of this Section 2.8 and other provisions of this
Agreement relating to Taxes, the following definitions shall apply:
(i) The term "TAXES" shall mean all taxes, however denominated,
including any interest, penalties or other additions to tax that may become
payable in respect thereof, (A) imposed by any federal, territorial, state,
local or foreign government or any agency or political subdivision of any
such government, which taxes shall include, without limiting the generality
of the foregoing, all income or profits taxes (including but not limited to,
federal, state and foreign income taxes), payroll and employee withholding
taxes, unemployment insurance contributions, social security taxes, sales
and use taxes, ad valorem taxes, excise taxes, franchise taxes, gross
receipts taxes, business license taxes, occupation taxes, real and personal
property taxes, stamp taxes, environmental taxes, transfer taxes, workers'
compensation, Pension Benefit Guaranty Corporation premiums and other
governmental charges, and other obligations of the same or of a similar
nature to any of the foregoing, which are required to be paid, withheld or
collected, (B) any liability for the payment of amounts referred to in (A)
as a result of being a member of any affiliated, consolidated, combined or
unitary group, or (C) any liability for amounts referred to in (A) or (B) as
a result of any obligations to indemnify another person.
(ii) The term "RETURNS" shall mean all reports, estimates,
declarations of estimated tax, information statements and returns required
to be filed in connection with any Taxes, including information returns with
respect to backup withholding and other payments to third parties.
(b) All Returns required to be filed by or on behalf of Company for
which the failure to file would have a Material Adverse Effect have been duly
filed on a timely basis and such Returns are true, complete and correct, except
to the extent reserved on the Company Balance Sheet. All Taxes shown to be
payable on such Returns or on subsequent assessments with respect thereto, and
all payments of estimated Taxes required to be made by or on behalf of Company
under Section 6655 of the Code or comparable provisions of state, local or
foreign law, have been paid in full on a timely basis or have been accrued on
the Financial Statements, and except to the extent reserved on the Company
Balance Sheet, no other Taxes are payable by Company with respect to items or
periods covered by such Returns (whether or not shown on or reportable on such
Returns). Company has withheld and paid over all Taxes required to have been
withheld and paid over, and complied with all information reporting and backup
withholding in connection with amounts paid or owing to any employee, creditor,
independent contractor, or other third party. There
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are no liens on any of the assets of Company with respect to Taxes, other than
liens for Taxes not yet due and payable or for Taxes that Company is contesting
in good faith through appropriate proceedings. Company has no subsidiaries and
has not at any time been a member of an affiliated group of corporations filing
consolidated, combined or unitary income or franchise tax returns for a period
for which the statute of limitations for any Tax potentially applicable as a
result of such membership has not expired.
(c) The amount of Company's liability for unpaid Taxes for all periods
through the date of the Financial Statements does not, in the aggregate, exceed
the amount of the current liability accruals for Taxes reflected on the
Financial Statements, and the Financial Statements properly accrue in accordance
with GAAP all liabilities for Taxes of Company payable after the date of the
Financial Statements attributable to transactions and events occurring prior to
such date. No liability for Taxes of Company has been incurred (or prior to
Closing will be incurred) since such date other than in the ordinary course of
business.
(d) Parent has been furnished by Company or Company has made available
true and complete copies of (i) relevant portions of income tax audit reports,
statements of deficiencies, closing or other agreements received by or on behalf
of Company relating to Taxes, and (ii) all federal, state and foreign income or
franchise tax returns and state sales and use tax Returns for or including
Company for all periods since the Company's inception.
(e) No audit of the Returns of or including Company by a government or
taxing authority is in process, threatened or, to Company's knowledge, pending
(either in writing or verbally, formally or informally). No deficiencies exist
or have been asserted (either in writing or verbally, formally or informally) or
are expected to be asserted with respect to Taxes of Company, and Company has
not received notice (either in writing or verbally, formally or informally) nor
does it expect to receive notice that it has not filed a Return or paid Taxes
required to be filed or paid. Company is not a party to any action or proceeding
for assessment or collection of Taxes, nor has such event been asserted or
threatened (either in writing or verbally, formally or informally) against
Company or any of its assets. No waiver or extension of any statute of
limitations is in effect with respect to Taxes or Returns of Company. Company
has disclosed on its federal and state income and franchise tax returns all
positions taken therein that could give rise to a substantial understatement
penalty within the meaning of Code Section 6662 or comparable provisions of
applicable state tax laws.
(f) Company is not (nor has it ever been) a party to any tax sharing
agreement.
(g) Company is not, nor has it been, a United States real property
holding corporation within the meaning of Section 897(c)(2) of the Code during
the applicable period specified in Section 897(c)(1)(A)(ii) of the Code. Company
is not a "consenting corporation" under Section 341(f) of the Code. Company has
not entered into any compensatory agreements with respect to the performance of
services which payment thereunder would result in a nondeductible expense to
Company pursuant to Section 280G of the Code or an excise tax to the recipient
of such payment pursuant to Section 4999 of the Code. Company has not agreed to,
nor is it required to make, other than by reason of the Merger, any adjustment
under Code Section 481(a) by reason of, a change in accounting method, and
Company will not otherwise have any income reportable for a period ending after
the Closing Date attributable to a transaction or other event (e.g., an
installment sale) occurring prior to the Closing Date with respect to which
Company received the economic benefit prior to the Closing Date. Company is not,
nor has it been, a "reporting corporation" subject to the information reporting
and record maintenance requirements of Section 6038A and the regulations
thereunder.
2.9 RESTRICTIONS ON BUSINESS ACTIVITIES. There is no agreement (noncompete
or otherwise), commitment, judgment, injunction, order or decree to which the
Company is a party or otherwise binding upon the Company which has or reasonably
could be expected to have the effect of prohibiting or impairing any business
practice of the Company, any acquisition of property (tangible or intangible) by
the Company or the conduct of business by the Company as currently conducted or
as currently proposed to be conducted.
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The Company has not entered into any agreement under which the Company is
restricted from selling, licensing or otherwise distributing any of its products
to any class of customers, in any geographic area, during any period of time or
in any segment of the market.
2.10TITLE OF PROPERTIES; ABSENCE OF LIENS AND ENCUMBRANCES; CONDITION OF
EQUIPMENT.
(a) The Company owns no real property. Section 2.10(a) of the Company
Disclosure Letter sets forth a true, correct and complete list of all real
property leased by the Company, the name of the lessor, the date of the lease
and each amendment thereto and the aggregate annual rental and/or other fees
payable under any such lease. To the best knowledge of the Company, all such
leases are in good standing, valid and effective in accordance with their
respective terms, and there is not, under any of such leases any existing
default or event of default (or event which with notice or lapse of time, or
both, would constitute a default).
(b) The Company holds good and valid title to, or, in the case of
leased properties and assets, valid leasehold interests in, or in the case of
licensed property and assets, valid licenses covering, all of its tangible
properties and assets, real, personal and mixed, used or held for use in its
business, free and clear of any liens, charges, pledges, security interests or
other encumbrances, except as reflected in the Company Financial Statements,
except for liens for current taxes not yet due and payable and except for such
imperfections of title and encumbrances, if any, which are not substantial in
character, amount or extent, and which do not materially detract from the value,
or interfere with the present use, of the property subject thereto or affected
thereby.
(c) Section 2.10(c) of the Company Disclosure Letter sets forth a true,
correct and complete list of all material items of equipment (the "EQUIPMENT")
owned or leased by the Company, and such Equipment is, taken as a whole, (i)
adequate for the conduct of the business of the Company as currently conducted,
and (ii) in good operating condition except for ordinary wear and tear.
2.11INTELLECTUAL PROPERTY.
(a) The Company owns, or is licensed or otherwise possesses legally
enforceable rights to use, all trademarks, trade names, service marks,
copyrights, and any applications therefor, trade secrets, proprietary rights,
processes, technology, know-how, computer software programs or applications (in
source code and/or object code form, as applicable) and tangible or intangible
proprietary information or material (the "Group A Rights") and, to the Company's
knowledge, all patents and any applications therefor (the "Group B Rights") that
are used in the business of the Company as currently conducted (the Group A
Rights and the Group B Rights are sometimes hereinafter referred to collectively
as the "COMPANY INTELLECTUAL PROPERTY RIGHTS").
(b) Section 2.11(a) of the Company Disclosure Letter sets forth a true,
correct and complete list of all patents registered and unregistered,
trademarks, registered and material unregistered copyrights, trade names and
service marks, and any applications therefor, included in the Company
Intellectual Property Rights, and specifies the jurisdictions in which each such
Company Intellectual Property Right has been issued or registered or in which an
application for such issuance and registration has been filed, including the
respective registration or application numbers and the names of all registered
owners. Section 2.11(b) of the Company Disclosure Letter sets forth a true,
correct and complete list of (i) any pending requests the Company has received
to make any such registration, including the identity of the requestor and the
item requested to be so registered, and the jurisdiction for which such request
has been made and (ii) all licenses, sublicenses and other agreements as to
which the Company is a party and pursuant to which the Company or any other
person is authorized to use any Company Intellectual Property Right or other
trade secret material to the Company, and includes the identity of all parties
thereto, a description of the nature and subject matter thereof, the applicable
royalty and the term thereof.
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The Company is not, nor will it be as a result of the execution and delivery of
this Agreement or the performance of its obligations hereunder, in material
violation of or material default under any license, sublicense or agreement
described on such list in the Company Disclosure Letter. The Company is the sole
and exclusive owner or licensee of, with all right, title and interest in and to
(free and clear of any liens or encumbrances), the Group A Rights and, to the
Company's knowledge, the Group B Rights, and has sole and exclusive rights (and
is not contractually obligated to pay any compensation to any third party in
respect thereof) to the use of the Group A Rights and, to the Company's
knowledge, the Group B Rights or the material covered thereby in connection with
the existing services or products of the Company in respect of which the Company
Intellectual Property Rights are being used.
(c) Neither the operation of the business of the Company as the same
currently is conducted, nor the use in any way of the Group A Rights in a manner
as currently conducted, nor the manufacture, sale, licensing or use of any of
the products of the Company as now manufactured, sold or licensed or used, nor
the use in any way of the Group A Rights in the manufacture, use, sale or
licensing by the Company of any products currently proposed, infringes on any
copyright, trade mark, service mark, trade secret or other intellectual property
or other proprietary rights of any third party or, to the best knowledge of the
Company, on any patent of any third party. To the best knowledge of the Company,
neither the operation of the business of the Company as the same currently is
conducted, nor the use in any way of the Group B Rights in a manner as currently
conducted, nor the manufacture, sale, licensing or use of any of the products of
the Company as now manufactured, sold or licensed or used, nor the use in any
way of the Group B rights in the manufacture, use, sale or licensing by the
Company of any products currently proposed, infringes on any copyright,
trademark, service mark, trade secret or other intellectual property or other
proprietary rights of any third party or on any patent of any third party. No
claims with respect to the Company Intellectual Property Rights have been
asserted or are, to the best knowledge of the Company, threatened by any person.
All registered trademarks, service marks and copyrights held by the Company are
valid and subsisting. To the best knowledge of the Company, there is no
unauthorized use, infringement or misappropriation of any of the Company
Intellectual Property Rights by any third party, including any employee or
former employee of the Company. The Company has not been sued or charged as a
defendant in any claim, suit, action or proceeding that involves a claim of
infringement of any patents, trademarks, service marks, copyrights or violation
of any trade secret or other proprietary right of any third party, nor does it
have any knowledge of any such charge or claim. There is no outstanding order,
judgment, decree or stipulation on the Company, and the Company is not party to
any agreement, restricting in any manner the licensing of the Company's products
by the Company. The Company has not entered into any agreement to indemnify any
other person against any charge of infringement of any Company Intellectual
Property Right other than intellectual property indemnity provided in the
ordinary course to purchasers, distributors, OEMs or resellers of the Company's
products. Each current and former employee of and consultant to the Company has
signed a Proprietary Rights and Confidentiality Agreement in substantially the
Company's standard form, a copy of which has been provided to the Parent or its
counsel. The Company has full, complete and unrestricted rights to use, copy,
create derivative works from, sell, distribute and otherwise exploit, to the
extent it chooses to do so, all Group A Rights, including any computer source
code in the possession of the Company. To the best knowledge of the Company, the
Company has full, complete and unrestricted rights to use, copy, create
derivative works from, sell, distribute and otherwise exploit, to the extent it
chooses to do so, all Group B Rights, including any computer source code in the
possession of the Company. The Company is neither required to develop, sell,
distribute, or otherwise exploit, nor, to the best knowledge of the Company,
restricted from developing, selling, distributing or otherwise exploiting, any
software or other product in any manner whatsoever.
2.12AGREEMENTS, CONTRACTS AND COMMITMENTS. Except as set forth in Section
2.12 of the Company Disclosure Letter, the Company does not have and is not a
party to:
(a) any collective bargaining agreements,
(b) any agreements that contain any severance pay or post-employment
liabilities or obligations,
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(c) any bonus, deferred compensation, incentive compensation, pension,
profit-sharing or retirement plans, or any other employee benefit plans or
arrangements,
(d) any employment or consulting agreement, contract or commitment with
an employee or individual consultant or salesperson or consulting or sales
commission agreement, contract or commitment with a firm or other organization,
(e) agreement or plan, including, without limitation, any stock option
plan, stock appreciation rights plan or stock purchase plan, any of the benefits
of which will be increased, or the vesting of benefits of which will be
accelerated (including the lapsing of repurchase rights under restricted stock
purchase agreements), by the occurrence of any of the transactions contemplated
by this Agreement or the value of any of the benefits of which will be
calculated on the basis of any of the transactions contemplated by this
Agreement,
(f) any fidelity or surety bond or completion bond,
(g) any lease of personal property having a value individually in
excess of $20,000,
(h) any agreement of indemnification or guaranty not entered into in
the ordinary course of business,
(i) any agreement, contract or commitment relating to capital
expenditures and involving future obligations in excess of $20,000,
(j) any agreement, contract or commitment relating to the disposition
or acquisition of assets or any interest in any corporation, partnership, joint
venture or other business enterprise,
(k) any mortgages, indentures, loans or credit agreements, security
agreements or other agreements or instruments relating to the borrowing of money
or extension of credit, including guaranties referred to in clause (h) hereof,
(l) any purchase order or contract for the purchase of raw materials
involving $20,000 or more or acquisition of assets other than inventory
involving $20,000 or more,
(m) any distribution, joint marketing or development agreement,
(n) any other agreement, contract or commitment which involves $20,000
or more and is not cancelable without penalty within thirty (30) days.
The Company has not breached, violated or defaulted under, or received any
claim or threat that it has breached, violated or defaulted under, any of the
terms or conditions of any such agreement, contract or commitment to which it is
a party or by which it is bound (any such agreement, contract or commitment, a
"CONTRACT"). Each Contract listed or identified in the Company Disclosure Letter
(under any section or subsection thereof) is in full force and effect and, to
the best of the Company's knowledge, is a legal, binding and enforceable
obligation for or against the Company and, except as otherwise disclosed or
defaults fully remedied or resolved, is not subject to any default thereunder of
which the Company has knowledge by any party obligated to the Company pursuant
thereto.
2.13INTERESTED PARTY TRANSACTIONS. No officer, director or shareholder of
the Company has or has had, directly or indirectly, (i) an interest in any
entity which furnished or sold, or furnishes or sells, services or products
which the Company furnishes or sells, or proposes to furnish or sell, or (ii) a
greater than ten percent (10%) interest in any entity which purchases from or
sells or furnishes to, the Company, any goods or services, or (iii) a beneficial
interest in any Contract; provided, that ownership of no more than one percent
(1%) of the outstanding voting stock of a publicly traded corporation shall not
be deemed an "interest in any entity" for purposes of this Section 2.13.
2.14GOVERNMENTAL AUTHORIZATION. Section 2.14 of the Company Disclosure
Letter sets forth a true, correct and complete list of each federal, state,
county, local or foreign governmental consent, license,
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permit, grant, or other authorization issued to the Company (i) pursuant to
which the Company currently operates or holds any interest in any of its
properties or (ii) which, to the best knowledge of the Company, is required for
the operation of its business or the holding of any such interest (herein
collectively called "COMPANY AUTHORIZATIONS"), which Company Authorizations are
in full force and effect and constitute, to the best knowledge of the Company,
all Company Authorizations required to permit the Company to operate or conduct
its business or hold any interest in its properties or assets.
2.15LITIGATION. There is no action, suit or proceeding of any nature
pending or to the Company's knowledge threatened against the Company, its
properties or any of its officers or directors, nor, to the knowledge of the
Company, is there any reasonable basis therefor. There is no investigation
pending or, to the Company's knowledge, threatened against the Company, its
properties or any of its officers or directors (nor, to the best knowledge of
the Company, is there any reasonable basis therefor) by or before any
governmental entity. No governmental entity has at any time challenged or
questioned the legal right of the Company to manufacture, offer or sell any of
their products or services in the present manner or style thereof. Section 2.15
of the Company Disclosure Letter sets forth a true, correct and complete list of
all suits and legal actions initiated by the Company.
2.16ACCOUNTS RECEIVABLE.
(a) The Company has made available to Parent a list of all accounts
receivable of the Company reflected on the Company Balance Sheet ("ACCOUNTS
RECEIVABLE") along with a range of days elapsed since invoice.
(b) All Accounts Receivable of the Company arose in the ordinary course
of business, are carried at values determined in accordance with GAAP
consistently applied. No person has any lien or encumbrance on any of such
Accounts Receivable and no request or agreement for deduction or discount has
been made with respect to any of such Accounts Receivable.
(c) All of the inventories of the Company reflected on the Financial
Statements and the Company's books and records on the date hereof were
purchased, acquired or produced in the ordinary and regular course of business
and in a manner consistent with the Company's regular inventory practices and
are set forth on the Company's books and records in accordance with the
practices and principles of the Company consistent with the method of treating
said items in prior periods. None of the inventory of the Company reflected on
the Financial Statements or on the Company's books and records as of the date
hereof (in either case net of the reserve therefor) is obsolete, defective or in
excess of the needs of the business of the Company reasonably anticipated for
the normal operation of the business consistent with past practices and
outstanding customer contracts. The presentation of inventory on the Financial
Statements conforms to GAAP and such inventory is stated at the lower of cost
(determined using the first-in, first-out method) or net realizable value.
2.17MINUTE BOOKS. The minute books of the Company made available to counsel
for Parent contain complete and accurate minutes of all meetings of directors
(and any committee thereof) and stockholders or actions by written consent since
the time of incorporation of the Company.
2.18ENVIRONMENTAL AND OSHA.
(a) HAZARDOUS MATERIAL. The Company has not: (i) operated any
underground storage tanks at any property that the Company has at any time
owned, operated, occupied or leased; or (ii) illegally released any material
amount of any substance that has been designated by any Governmental Entity or
by applicable federal, state or local law to be radioactive, toxic, hazardous or
otherwise a danger to health or the environment, including, without limitation,
PCBs, asbestos, petroleum, urea-formaldehyde and all substances listed as
hazardous substances pursuant to the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980, as amended, or defined as a hazardous
waste pursuant to the United States Resource Conversation and Recovery Act of
1976, as amended, and the regulations promulgated pursuant to said laws, (a
"HAZARDOUS MATERIAL"), but excluding office and janitorial supplies
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properly and safely maintained. No Hazardous Materials are present as a result
of the deliberate actions of the Company or, to the Company's knowledge, as a
result of any actions of any third party or otherwise, in, on or under any
property, including the land and the improvements, ground water and surface
water thereof, that the Company has at any time owned, operated, occupied or
leased.
(b) HAZARDOUS MATERIALS ACTIVITIES. The Company has not transported,
stored, used, manufactured, disposed of, released or exposed its employees or
others to Hazardous Materials in violation of any law in effect on or before the
Closing Date, nor has the Company disposed of, transferred, sold or manufactured
any product containing a Hazardous Material (any or all of the foregoing being
collectively referred to as "HAZARDOUS MATERIALS ACTIVITIES") in violation of
any rule, regulation, treaty or statute promulgated by any Governmental Entity
in effect prior to or as of the date hereof to prohibit, regulate or control
Hazardous Materials or any Hazardous Material Activity.
(c) PERMITS. The Company currently holds all environmental approvals,
permits, licenses, clearances and consents (the "ENVIRONMENTAL PERMITS")
necessary for the conduct of the Company's Hazardous Material Activities and
other business of the Company as such activities and business are currently
being conducted.
(d) ENVIRONMENTAL LIABILITIES. No action, proceeding, revocation
proceeding, amendment procedure, writ, injunction or claim is pending, or to the
Company's knowledge, threatened concerning any Environmental Permit, Hazardous
Material or any Hazardous Materials Activity of the Company. The Company is not
aware of any fact or circumstance that could involve the Company in any
environmental litigation or impose upon the Company any environmental liability.
2.19LABOR MATTERS. The Company has not received any notice from any
Governmental Entity, and to the best knowledge of the Company, there has not
been asserted before any Governmental Entity, any claim, action or proceeding to
which the Company is a party or involving the Company, and there is neither
pending nor, to the best knowledge of the Company, threatened any investigation
or hearing concerning the Company arising out of or based upon any currently
applicable laws and regulations respecting employment, discrimination in
employment, terms and conditions of employment and wages and hours and
occupational safety and health employment practices. There are no pending claims
against the Company under any workers compensation plan or policy or for long
term disability. The Company has complied in all material respects with all
applicable provisions of the Consolidated Omnibus Budget Reconciliation Act of
1985 ("COBRA") and has no obligations with respect to any former employees or
qualifying beneficiaries thereunder. Section 2.19 of the Company Disclosure
Letter sets forth a true, correct and complete list of all current employees of
the Company and their current salary and vacation accruals.
2.20INSURANCE. Section 2.20 of the Company Disclosure Letter sets forth a
true, correct and complete list of all insurance policies and fidelity bonds
covering the assets, business, equipment, properties operations, software errors
and omissions, employees, officers and directors of the Company and all claims
made under any insurance policy since the Company's incorporation. There is no
claim by the Company pending under any of such policies or bonds as to which
coverage has been questioned, denied or disputed by the underwriters of such
policies or bonds. All premiums payable under all such policies and bonds have
been paid and the Company is otherwise in compliance with the terms of such
policies and bonds (or other policies and bonds providing substantially similar
insurance coverage). Such policies of insurance and bonds are of the type and in
amounts customarily carried by persons conducting businesses similar to those of
the Company. The Company has no knowledge of any threatened termination of, or
material premium increase with respect to, any of such policies.
2.21COMPLIANCE WITH LAWS. To the best knowledge of the Company, the Company
has complied in all material respects with, is not in violation in any material
respect of, and has not received any notices of violation with respect to, any
federal, state or local statute, law or regulation.
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2.22COMPLETE COPIES OF MATERIALS. The Company has delivered or made
available true and complete copies of each document (or summaries of same that
are accurate and complete in all material respects) which has been requested by
Parent or its counsel and which is referenced in the Company Disclosure Letter.
2.23PROXY STATEMENT. None of the information (including financial data)
relating to the Company or its Affiliates (as defined in Section 5.8) supplied
by the Company to Parent to be included in (a) the Proxy Statement (as defined
in Section 5.1) at the time the Proxy Statement is mailed to holders of Company
Stock in connection with the solicitation of written consents with respect to
the Merger and the other transactions contemplated hereby, and at all times
subsequent to such dates up to and including the date of the stockholder meeting
and the date of the Effective Time, or (b) the S-4 at the time the S-4 becomes
effective or at the Effective Date of the Merger, will contain any statement
which, at the time and in light of the circumstances under which it is made, is
false or misleading with respect to any material fact or omits to state any
material fact required to be stated therein or necessary in order to make the
statements therein not misleading. The Proxy Statement as it relates to the
Company will comply as to form in all material respects with the requirements of
the Exchange Act and the rules and regulations thereunder in effect at the time
the Proxy Statement is mailed.
2.24EMPLOYEE BENEFIT PLANS.
(a) Section 2.24(a) of the Company Disclosure Letter sets forth a true,
correct and complete list of all employee benefit plans (as defined in Section
3(3) of the Employee Retirement Income Act of 1974, as amended ("ERISA")) and
all bonus, stock option, stock purchase, incentive, deferred compensation,
supplemental retirement, severance and other similar fringe or employee benefit
plans, programs or arrangements, and any current or former employment or
executive compensation or severance agreements, written or otherwise, for the
benefit of, or relating to, any current or former employee of the Company or any
trade or business (whether or not incorporated) which is a member or which is
under common control with the Company (an "ERISA AFFILIATE") within the meaning
of Section 414 of the Code, or any subsidiary of the Company (together, the
"EMPLOYEE PLANS"), and a copy of each Employee Plan has been provided to Parent.
(b)(i)(A) None of the Employee Plans promises or provides retiree
medical or other retiree welfare benefits to any person except as required by
applicable law, including but not limited to COBRA;
(B) All Employee Plans are in compliance in all material respects
with the requirements prescribed by any and all applicable statutes
(including ERISA and the Code), orders, or governmental rules and
regulations currently in effect with respect thereto (including all
applicable requirements for notification to participants or beneficiaries or
the Department of Labor, Internal Revenue Service (the "IRS") or Secretary
of the Treasury), and the Company has performed all obligations required to
be performed by it under, is not in default under or violation of, and has
no knowledge of any default or violation by any other party to, any of the
Employee Plans;
(C) Each Employee Plan intended to qualify under Section 401(a) of
Code and each trust intended to qualify under Section 501(a) of the Code
either has received a favorable determination letter with respect to each
such Employee Plan from the IRS (and nothing has occurred since the date of
the determination to cause the loss of such Employee Plan's qualification),
has pending before the IRS an application for such determination letter for
each such Employee Plan or still has a remaining period of time under
applicable Treasury Regulations or IRS pronouncements in which to apply for
such a determination letter and to make any amendments necessary to obtain a
favorable determination;
(D) No Employee Plan is or has been since the date of the
Company's incorporation subject to, and the Company has not incurred or does
not expect to incur any liability under, Title IV of ERISA or Section 412 of
the Code; and
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(E) Nothing in any Employee Plan precludes or interferes with
Parents' ability to cause the Company to terminate (or consolidate, at
Parent's option) any Employee Plan after the Closing.
(ii) None of the following now exists or has existed since the date of
the Company's incorporation with respect to any Employee Plan:
(A) Any act or omission by the Company constituting a violation of
Section 402, 403, 404 or 405 of ERISA;
(B) Any act or omission by the Company which constitutes a
violation of Sections 406 and 407 of ERISA and is not exempted by Section
408 of ERISA or which constitutes a violation of Section 4975(c) of the Code
and is not exempted by Section 4975(d) of the Code;
(C) Any act or omission by the Company constituting a violation of
Section 503, 510 or 511 of ERISA.
(D) Any act or omission by the Company which could give rise to
liability under Section 502 of ERISA or under Sections 4972 or 4975 through
4980 of the Code; or
(E) Any failure to file any Forms 5500 in a timely manner.
(iii) Each Employee Plan has been maintained in substantial compliance
with its terms, and all contributions, premiums or other payments due from the
Company or any of its subsidiaries to (or under) any such Employee Plan have
been fully paid or adequately provided for on the Financial Statements. All
accruals thereon (including, where appropriate, proportional accruals for
partial periods) have been made in accordance with generally accepted accounting
principles consistently applied on a reasonable basis. There has been no
amendment, written interpretation or announcement (whether or not written) by
the Company with respect to, or change in employee participation or coverage
under, any Employee Plan that would increase materially the expense of
maintaining such plans or arrangements, individually or in the aggregate, above
the level of expense incurred with respect thereto for the period from inception
of the Company through October 31, 1996.
(iv) The Company has furnished to Parent or its counsel complete,
accurate and current copies of all Employee Plans and all amendments, documents,
correspondence and filings relating thereto, including but not limited to any
statements, filings, reports or returns filed with any governmental agency
and/or distributed to Employee Plan participants and their beneficiaries with
respect to the Employee Plans at any time within the three-year period ending on
the date hereof.
2.25NO COMMITMENTS REGARDING FUTURE PRODUCTS. The Company has made no sales
to customers that are contingent upon providing future enhancements of existing
products, to add features not presently available on existing products or to
otherwise enhance the performance of its existing products (other than beta or
similar arrangements pursuant to which the Company's customers from time to time
test or evaluate the Company's products). The products the Company has delivered
to customers substantially comply with published specifications for such
products and the Company has not received material complaints from customers
about its products that remain unresolved. Section 2.25 of the Company
Disclosure Letter accurately sets forth a complete list of the Company's
products in development (exclusive of mere enhancements to and additional
features for existing products).
2.26THIRD PARTY CONSENTS. Except as set forth in Section 2.26 of the
Company Disclosure Letter, no consent or approval is needed from any third party
in order to effect the Merger, this Agreement or any of the transactions
contemplated hereby.
2.27BROKERS' AND FINDERS' FEES. The Company has not incurred, nor will it
incur, directly or indirectly, any liability for brokerage or finders' fees or
agents' commissions or any similar charges in connection with this Agreement or
any transaction contemplated hereby.
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2.28WARRANTIES; INDEMNITIES. Section 2.28 of the Company Disclosure Letter
sets forth a summary of all warranties and indemnities relating to products sold
or services rendered by the Company, and no warranty or indemnity has been given
by the Company which differs therefrom in any respect. Section 2.28 of the
Company Disclosure Letter indicates all warranty and indemnity claims in excess
of $20,000 currently pending against the Company.
2.29COMPLETE COPIES OF MATERIALS. The Company has delivered or made
available true and complete copies of each document (or summaries of same) or
has indicated that no such document exists with respect to all documents
relating to the Company which Parent or its counsel have requested in writing to
review in connection with this Agreement, the Merger and transactions
contemplated hereby and thereby.
2.30AGREEMENTS. Each officer, director and affiliate of the Company has
executed and delivered to Parent a Stockholders' Agreement and Irrevocable
Proxy, and the Affiliate Agreement.
2.31REPRESENTATIONS COMPLETE. None of the representations or warranties
made by the Company, nor any statement made in the Company Disclosure Letter, or
any certificate furnished by the Company pursuant to this Agreement, or
furnished in or in connection with documents mailed or delivered to stockholders
of the Company in connection with soliciting their consent to this Agreement and
the Merger, when read together in their entirety, contains or will contain at
the Effective Time any untrue statement of a material fact, or omits or will
omit at the Effective Time to state any material fact necessary in order to make
the statements contained herein or therein, in the light of the circumstances
under which made, not misleading.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
The Parent and Merger Sub jointly and severally represent and warrant to the
Company, subject to such qualifications and exceptions as are set forth in a
disclosure letter delivered prior to the date hereof (which disclosure letter
shall specifically identify the sections or subsections which are qualified by
the information set forth therein) signed by the Parent and Merger Sub and
acknowledged by the Company (the "PARENT DISCLOSURE LETTER"), as follows:
3.1 ORGANIZATION; STANDING AND POWER. Parent is a corporation duly
organized, validly existing and in good standing under the laws of the State of
California. Merger Sub is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware. Each of Parent and Merger
Sub has the corporate power to own its properties and to carry on its business
as now being conducted and is duly qualified to do business and is in good
standing in each jurisdiction in which the failure to be so qualified would have
a material adverse effect on the ability of Parent and Merger Sub to consummate
the transactions contemplated hereby. Parent has delivered a true and correct
copy of its Articles of Incorporation and of the Certificate of Incorporation of
Merger Sub and of the Bylaws of each of Parent and Merger Sub, as amended to
date, to the Company and its counsel.
3.2 CAPITAL STRUCTURE.
(a) The authorized stock of Parent consists of 60,000,000 shares of
Common Stock, $0.01 par value per share, of which 13,725,836 shares were issued
and outstanding as of December 4, 1996, and 2,000,000 shares of Preferred Stock,
$0.01 par value per share, none of which are issued or outstanding. The
authorized capital stock of Merger Sub consists of 1,000 shares of Common Stock,
$0.001 par value per share, 1000 shares of which, as of the date hereof, are
issued and outstanding and are held by Parent. All such shares have been duly
authorized, and all such issued and outstanding shares have been validly issued,
are fully paid and nonassessable, are not subject to any preemptive rights or
rights of first refusal under applicable law, the Articles of Incorporation or
Bylaws of Parent or any agreement to which Parent is a party or by which it is
bound and are free of any liens or encumbrances other than any liens or
encumbrances created by or imposed upon the holders thereof. Parent has also
reserved (i) an aggregate of
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2,000,000 shares of Common Stock issuable to employees and consultants pursuant
to Parent's 1995 Stock Option Plan, of which 907,199 shares are issuable upon
exercise of outstanding options under such plan, (ii) an aggregate of 2,118,835
shares of Common Stock issuable to employees and consultants pursuant to
Parent's 1986 Stock Option Plan, of which 2,118,835 shares are issuable upon
exercise of outstanding options under such plan, (iii) an aggregate of 400,000
shares of Common Stock issuable to employees pursuant to Parent's 1992 Employee
Stock Purchase Plan, of which 138,230 shares are issuable upon exercise of
outstanding options under such plan, (iv) 500,000 shares of Common Stock
issuable to non-employee directors pursuant to Parent's 1996 Directors' Stock
Option Plan, of which 250,000 shares are issuable upon exercise of outstanding
options under such plan, (v) an aggregate of 1,451,704 shares of Common Stock
issuable to certain third parties in settlement of certain litigation, (vi) an
aggregate of 100,000 shares of Common Stock issuable upon the exercise of
warrants to be granted to Hambrecht & Quist LLC and (vii) up to 300,000 shares
of Common Stock issuable upon exercise of warrants granted or to be granted to
certain vendors and suppliers of the Company. Other than pursuant to or under
such Plans, there are no options, warrants, calls, rights, commitments or
agreements of any character to which Parent is a party or by which it is bound
obligating Parent to issue, deliver, sell, repurchase or redeem, or cause to be
issued, delivered, sold, repurchased or redeemed, any shares of the capital
stock of Parent or obligating Parent to grant, extend or enter into any such
option, warrant, call, right, commitment or agreement.
(b) The shares of Parent Common Stock to be issued pursuant to the
Merger will be duly authorized, validly issued, fully paid, and nonassessable,
and free of, and not subject to any preemptive rights or rights of first refusal
created by statute or the Articles of Incorporation or Bylaws of Parent or any
agreement to which Parent prior to the Merger is a party or by which prior to
the Merger it is bound.
3.3 AUTHORITY. Subject only to the approval of the Merger and the other
transactions contemplated hereby by the Parent's shareholders as contemplated by
Section 1(a), Parent and Merger Sub have all requisite corporate power and
authority to enter into this Agreement, the Employment Agreements, the
Non-Competition Agreements, the Distribution Agreement, the Escrow Agreement and
the Affiliates Agreements and to consummate the transactions contemplated hereby
and thereby. The execution and delivery of this Agreement, the Employment
Agreements, the Non-Competition Agreements, the Distribution Agreement, the
Escrow Agreement and the Affiliates Agreements and the consummation of the
transactions contemplated hereby and thereby have been duly authorized by all
necessary corporate action on the part of Parent and Merger Sub, subject only to
the approval of the Merger and the other transactions contemplated hereby by the
Parent's shareholders as contemplated by Section 1(a). This Agreement, the
Employment Agreements, the Non-Competition Agreements, the Distribution
Agreement, the Escrow Agreement and the Affiliates Agreements have been duly
executed and delivered by Parent and Merger Sub and constitute the valid and
binding obligation of Parent and Merger Sub, enforceable in accordance with
their terms except as such enforceability may be limited by principles of public
policy and subject to the laws of general application relating to bankruptcy,
insolvency and the relief of debtors and rules of law governing specific
performance, injunctive relief or other equitable remedies. The execution and
delivery of this Agreement, the Employment Agreements, the Non-Competition
Agreements, the Distribution Agreement, the Escrow Agreement and the Affiliates
Agreements do not, and the consummation of the transactions contemplated hereby
and thereby will not, conflict with, or result in any violation of, or default
(with or without notice or lapse of time, or both), or give rise to a right of
termination, cancellation or acceleration of any obligation or to loss of a
benefit under (i) any provision of the Articles of Incorporation of Parent, the
Certificate of Incorporation of Merger Sub or Bylaws of Parent or Merger Sub or
(ii) any contract or agreement filed as an exhibit to the SEC Documents (as
defined below) or any other contract or agreement material to Parent or on which
Parent's business, financial condition, operations or prospects is substantially
dependent, the breach, violation, default, termination or forfeiture of which
would result in a material adverse effect upon the ability of Parent or Merger
Sub to consummate the Merger. No consent, approval, order or authorization of,
or registration, declaration or filing with, any Governmental Entity, is
required by or with respect to Parent or Merger Sub
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in connection with the execution and delivery of this Agreement by Parent and
Merger Sub or the consummation by Parent and Merger Sub of the transactions
contemplated hereby except for (i) the filing of the Certificate of Merger with
the Secretary of State of the State of Delaware, (ii) such consents, approvals,
orders, authorizations, registrations, declarations and filings (including
without limitation the filing of the Proxy Statement and the S-4 with the SEC)
as may be required under applicable state and federal securities laws.
3.4 SEC DOCUMENTS; PARENT FINANCIAL STATEMENTS. Parent has furnished the
Company with a true and complete copy of all filings with the SEC since January
1, 1995 (the "SEC Documents"). The SEC documents contain an audited consolidated
balance sheet of Parent as of December 31, 1995 and the related audited
consolidated statements of operations and cash flows for the year then ended and
the Parent's unaudited consolidated balance sheet as of September 30, 1996, and
the related unaudited consolidated statements of operations and cash flows for
the nine-month period then ended (collectively, the "PARENT FINANCIALS"). The
Parent Financials, and notes thereto, are correct in all material respects and
have been prepared in accordance with GAAP applied on a basis consistent
throughout the periods indicated and consistent with each other. The Parent
Financials present fairly the financial condition and operating results and cash
flows of the Parent as of the dates and during the periods indicated therein,
subject, in the case of the unaudited statements, to normal year-end
adjustments, which will not be material in amount or significance. Since October
1, 1996, there has been no material change in Parent's accounting policies,
except as described in the notes to the Parent Financials. As of their
respective filing dates, the SEC Documents complied in all material respects
with the requirements of the Exchange Act and none of the SEC Documents
contained any untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary to make the statements made
therein, in light of the circumstances in which they were made, not misleading,
except to the extent corrected by a document subsequently filed with the SEC and
provided to the Company prior to the date hereof.
3.5 BROKER'S AND FINDERS' FEES. Parent has not incurred, and will not
incur, directly or indirectly, any liability for brokerage or finders' fees or
agents' commissions or any similar charges in connection with this Agreement,
the Merger or any transaction contemplated hereby, except the fees payable by
Parent to Hambrecht & Quist LLP, as set forth in the agreement between Parent
and Hambrecht & Quist LLP dated November 22, 1996.
3.6 PROXY STATEMENT. None of the information relating to Parent or its
Affiliates (as defined in Section 5.8) supplied by Parent to be included in (a)
the Proxy Statement (as defined in Section 5.1) at the time the Proxy Statement
shall be mailed to the holders of Company Stock, and at all times subsequent to
such dates up to and including the dates of the stockholder meeting of the
Company and the Effective Time, or (b) the S-4 at the time the S-4 becomes
effective or at the Effective Date of the Merger, will contain any statement
which, at the time and in light of the circumstances under which it is made, is
false or misleading with respect to any material facts or omits to state any
material fact required to be stated therein or necessary in order to make the
statements therein not misleading. The Proxy Statement as its relates to Parent
will comply as to form in all material respects with the requirements of the
Exchange Act and the rules and regulations thereunder in effect at the time the
Proxy Statement is mailed.
3.7 NO MATERIAL ADVERSE CHANGE. Since October 1, 1996, Parent has conducted
its business in the ordinary course and there has not occurred, other than as
has been disclosed prior to the execution of this Agreement in reports filed by
the Parent with the Securities and Exchange Commission or press releases
(including the press release to be issued by Parent immediately after the
execution of this Agreement, which such press release shall relate solely to the
announcement of the transactions contemplated by this Agreement): (i) any
material adverse change in the business, assets (including intangible assets),
liabilities, financial condition, results of operations or prospects of Parent
and its subsidiaries, taken as a whole ("Material Adverse Effect on Parent");
(ii) any amendments or changes in the Articles of Incorporation or Bylaws of
Parent; (iii) any damage, destruction or loss, whether covered by insurance or
not, materially and adversely affecting the properties or business of Parent;
(iv) except in the ordinary course of business, any
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sale of a material amount of real or personal property (tangible or intangible)
of Parent; (v) any declaration, setting aside, or payment of a dividend or other
distribution in respect to the capital stock of Parent, or any direct or
indirect redemption, purchase or other acquisition by Parent of any of its
capital stock, except repurchases of shares of Parent Common Stock from
terminated Parent employees at the original per share purchase price of such
shares; (vi) the commencement or notice or threat of commencement of any lawsuit
or proceeding against or, to Parent's or Parent's officers' or directors'
knowledge, investigation of Parent or its affairs which could reasonably be
expected to result in a Material Adverse Effect on Parent; (vii) notice of any
claim of ownership by a third party of Parent's Intellectual Property or of
infringement by Parent of any third party's Intellectual Property rights which
could reasonably be expected to result in a Material Adverse Effect on Parent;
or (viii) issuance or sale by Parent of any of its shares of capital stock, or
securities exchangeable, convertible or exercisable therefor, or of any other of
its securities, except the issuance of shares of capital stock issuable upon
conversion or exercise of shares of capital stock or other securities
outstanding as of the date of this Agreement.
3.8 LITIGATION. There is no action, suit or proceeding of any nature
pending or to Parent's knowledge threatened against Parent, its properties or
any of its officers or directors, nor, to the knowledge of Parent, is there any
reasonable basis therefor which could reasonably be expected to result in a
Material Adverse Effect on Parent. There is no investigation pending or, to
Parent's knowledge, threatened against Parent, its properties or any of its
officers or directors (nor, to the best knowledge of Parent, is there any
reasonable basis therefor) by or before any Governmental Entity. No Governmental
Entity has at any time challenged or questioned the legal right of Parent to
manufacture, offer or sell any of its products or services in the present manner
or style thereof. Section 3.8 of the Parent Disclosure Letter sets forth a true,
correct and complete list of all suits and legal actions initiated by Parent.
3.9 TRADE RELATIONS. Parent has not received any written or oral notice
from any material customer of Parent, or any material supplier to Parent, that
such customer or supplier intends to terminate, cancel or limit or adversely
modify or change its business relationship with Parent in a manner that would
have a Material Adverse Effect on Parent and its subsidiaries, taken as a whole.
No such termination, cancellation or limitation or any adverse modification or
change by reason of the terms of any existing written agreement, which
modification or change would have a Material Adverse Effect on Parent, will
arise as a result of the execution, delivery or performance of this Agreement,
the Distribution Agreement, the Employment Agreements, the Non-Competition
Agreements, the Escrow Agreement or the Affiliates Agreements by Parent.
3.10POOLING MATTERS. Neither Parent nor any of the affiliates has to the
knowledge of Parent and based solely upon consultation with Parent's independent
auditors, taken any action that (without giving effect to this Agreement, the
transactions contemplated hereby or actions related thereto) would affect the
ability of Parent to account for the business combination to be effected by the
Merger as a pooling of interests. Parent has not failed to bring to the
attention of the Company any actions or written agreements known to Parent that
to the best knowledge of Parent based solely upon consultation with Parent's
auditors would be reasonably likely to prevent Parent from accounting for the
Merger as a "pooling of interests."
3.11COMPLIANCE WITH LAWS. To the Parent's knowledge, Parent and Merger Sub
have complied in all material respects with, are not in violation in any
material respect of, and have not received any notices of violation with respect
to, any federal, state or local statute, law or regulation. Except as disclosed
in the Parent Disclosure Letter, Parent or Merger Sub has not been notified by
any Governmental Entity that any investigations or review with respect to Parent
or Merger Sub is pending or threatened, nor has any Governmental Entity notified
Parent or Merger Sub of its intention to conduct the same. Each of Parent or
Merger Sub has all material consents, licenses, permits, grants, or other
authorizations ("PERMITS") from Governmental Entities required to conduct its
business as being conducted. All of Parent's and Merger Sub's Permits are in
full force and effect and no violations thereunder have been recorded.
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3.12AGREEMENTS. Each officer and director of Parent has executed and
delivered to Company a Shareholders' Agreement and Irrevocable Proxy, and the
Affiliate Agreement.
ARTICLE IV
CONDUCT PRIOR TO THE EFFECTIVE TIME
4.1 CONDUCT OF BUSINESS OF THE COMPANY. During the period from the date of
this Agreement and continuing until the earlier of the termination of this
Agreement or the Effective Time, the Company agrees (except to the extent that
Parent shall otherwise consent in writing), to carry on its business in the
usual, regular and ordinary course in substantially the same manner as
heretofore conducted, to pay its debts and Taxes when due, to pay or perform
other obligations when due, and, to the extent consistent with such business,
use all reasonable efforts consistent with past practice and policies to
preserve intact the Company's present business organization, keep available the
services of its present officers and key employees and preserve their
relationships with customers, suppliers, distributors, licensors, licensees, and
others having business dealings with it, to the end that the Company's goodwill
and ongoing businesses shall be unimpaired at the Effective Time. The Company
shall promptly notify Parent of any event or occurrence or emergency not in the
ordinary course of business of the Company, and any material event involving the
Company. Without limiting the generality of the foregoing, except as expressly
contemplated by this Agreement, the Company shall not, without the prior consent
of Parent, which consent shall not be unreasonably withheld:
(a) Except as required pursuant to existing contractual provisions of
options and restricted stock outstanding on the date hereof that are listed in
Section 2.2 of the Company Disclosure Letter, accelerate, amend or change the
period of exercisability of options or restricted stock granted under the
employee stock plans of the Company (including restricted stock purchase
agreements);
(b) Enter into any commitment or transaction not in the ordinary course
of business or any commitment or transaction of the type described in Sections
2.7(c), (h) or (o) hereof;
(c) Grant any severance or termination pay (i) to any director or
officer or (ii) to any other employee except payments made pursuant to standard
written agreements in effect on the date hereof and as disclosed in Section
2.12(b) of the Company Disclosure Letter;
(d) Except for licenses granted to end-users pursuant to the Company's
standard license agreements (which form of license agreement is attached in
Section 4.1(a) of the Company Disclosure Letter), make a material transfer to
any person or entity any rights to the Company's Intellectual Property Rights or
other transfer not in the ordinary course of business;
(e) Enter into or amend any agreements pursuant to which any other
party is granted marketing, distribution or other rights of any type or scope
with respect to any products of the Company;
(f) Violate, amend or otherwise modify in any material respect the
terms of any of the contracts or agreements set forth or described in the
Company Disclosure Letter;
(g) Commence any litigation, except to enforce its rights under or to
interpret this Agreement or any other agreement, obligation or arrangement
contemplated hereby or entered into or established in connection herewith;
(h) Declare, set aside or pay any dividends on or make any other
distributions (whether in cash, stock or property) in respect of any of its
capital stock or options to acquire capital stock, or split, combine or
reclassify any of its capital stock or issue or authorize the issuance of any
other securities in respect of, in lieu of or in substitution for shares of
capital stock of the Company, or repurchase or otherwise acquire, directly or
indirectly, any shares of its capital stock or options to acquire capital stock;
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(i) Issue, deliver or sell or authorize or propose the issuance,
delivery or sale of, or purchase or propose the purchase of, any shares of its
capital stock or securities convertible into, or subscriptions, rights, warrants
or options to acquire, or other agreements or commitments of any character
obligating it to issue any such shares or other convertible securities (the
"Company Securities"), other than the issuance of shares of the Company Common
Stock pursuant to the conversion of Company Preferred Stock and issuances of
Company Common Stock to employees of the Company;
(j) Cause or permit any amendments to its Certificate of Incorporation
or Bylaws;
(k) Acquire or agree to acquire by merging or consolidating with, or by
purchasing a substantial portion of the assets of, or by any other manner, any
business or any corporation, partnership, association or other business
organization or division thereof, or otherwise acquire or agree to acquire any
assets that are material, individually or in the aggregate, to the business of
the Company;
(l) Sell, lease, license or otherwise dispose of any of its properties
or assets except in the ordinary course of business and consistent with past
practices;
(m) Incur any indebtedness for borrowed money or issue or sell any debt
securities of the Company or guarantee any debt securities of others;
(n) Adopt or amend any employee benefit plan, or enter into any
employment contract or relationship, pay any special bonus or special
remuneration to any director or employee, or increase the salaries or wage rates
of its employees other than regularly scheduled increases for employees other
than officers in the ordinary course of business;
(o) Revalue any of its assets, including, without limitation, writing
down the value of inventory or writing off notes or accounts receivable other
than in the ordinary course of business consistent with past business practices;
(p) Take any action which could be reasonably expected to jeopardize
the tax-free reorganization hereunder;
(q) Pay, discharge or satisfy in an amount in excess of $20,000 (in any
one case) or $50,000 (in the aggregate) any claim, liability or obligation
(absolute, accrued, asserted or unasserted, contingent or otherwise), other than
the payment, discharge or satisfaction in the ordinary course of business of
liabilities reflected or reserved against in the Company Financial Statements
(or the notes thereto) or constituting a trade payable or operating expense
incurred in the ordinary course of business consistent with past practices since
the last date of the Company Financial Statements or otherwise permitted to be
incurred pursuant to this Section 4.1;
(r) Make or change any election in respect of Taxes, adopt or change
any accounting method in respect of Taxes, file any material Return or any
amendment to a material Return, the approval of which Return or amendment shall
not be unreasonably withheld by Parent, enter into any closing agreement, settle
any claim or assessment in respect of Taxes, or consent to any extension or
waiver of the limitation period applicable to any claim or assessment in respect
of Taxes; or
(s) Take, or agree in writing or otherwise to take, any of the actions
described in Sections 4.1(a) through (r) above, or any action that would make
any of the representations, warranties or covenants of the Company contained in
this Agreement untrue or incorrect in any material respect or prevent the
Company from performing or cause the Company not to perform its covenants
hereunder.
4.2 NO SOLICITATION. Prior to the Effective Time, the Company will not (nor
will the Company permit any of the Company's officers, directors, stockholders
affiliated with any officer or director or the
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Company's agents, representatives or affiliates to) directly or indirectly, take
any of the following actions with any party other than Parent and its designees:
(a) solicit, encourage, initiate or participate (except to the extent
reasonably required by fiduciary obligations under existing law and set forth in
a written opinion from the Company's outside legal counsel) in any negotiations
or discussions with respect to, any offer or proposal to acquire all or
substantially all of the Company's business and properties or to purchase or
acquire capital stock of the Company whether by merger, purchase of assets,
tender offer or otherwise (an "Acquisition"),
(b) except to the extent reasonably required by fiduciary obligations
under existing law and set forth in a written opinion from the Company's outside
legal counsel, (i) disclose any information not customarily disclosed to any
person other than its attorneys or financial advisors or existing lenders or
lessors under existing contractual arrangements concerning the Company's
business and properties or afford to any person or entity access to its
properties, books or records, or
(c) assist or cooperate with any person to make any proposal to
purchase all or any part of the Company's capital stock or assets, other than
licensing of software in the ordinary course of business.
In the event the Company shall receive any such offer or proposal, directly
or indirectly, of the type referred to in clause (a) or (b)(ii) above, or any
request for disclosure or access pursuant to clause (b)(i) above, the Company
shall immediately inform Parent as to all material facts relating to any such
offer or proposal (including the identity of the party making such offer or
proposal and the specific terms thereof) and will cooperate with Parent by
furnishing any information it may reasonably request.
4.3 CONDUCT OF BUSINESS OF PARENT. During the period from the date of this
Agreement and continuing until the earlier of the termination of this Agreement
or the Effective Time, the Parent agrees (except to the extent that the Company
shall otherwise consent in writing) that Parent shall promptly notify the
Company of any event or occurrence or emergency that is not in the ordinary
course of business of Parent and that is material and adverse to the business of
Parent. Parent shall not without the prior consent of the Company (i) amend its
Articles of Incorporation in any manner that would materially adversely affect
the rights of holders of Parent Common Stock, (ii) issue, deliver or sell or
authorize or propose the issuance, delivery or sale of, or purchase or propose
the purchase of, any shares of its capital stock of any class or securities
convertible into, or subscriptions, rights, warrants or options to acquire, or
other agreements or commitments of any character obligating it to issue any such
shares or other convertible securities, except for the issuance of shares of its
capital stock or options to purchase shares of its capital stock (A) in
connection with privately negotiated sales of stock pursuant to corporate
partnering arrangements in effect on the date hereof, or (B) pursuant to stock
option grants or exercises or other employee stock benefit plans, (iii) take, or
agree in writing or otherwise take, any action that would make any of the
representations, warranties or covenants of the Parent contained in this
Agreement untrue or incorrect or prevent the Parent from performing or cause the
Parent not to perform its covenants hereunder, or (iv) declare or pay any cash
dividends or make any other cash distributions in respect of any of its capital
stock, or repurchase or otherwise acquire, directly or indirectly any shares of
its capital stock (other than in connection with the repurchase of stock from
terminated employees), (v) take any action that would materially adversely
affect the ability of Parent to account for the business combination to be
effected by the Merger as a pooling of interests, or (vi) take any action which
could be reasonably expected to jeopardize the tax-free reorganization
hereunder.
ARTICLE V
ADDITIONAL AGREEMENTS
5.1 STOCKHOLDER APPROVAL. Each of the Company and Parent will duly call and
hold a meeting of its stockholders for the purpose of approving the Merger or,
in the case of the Company, may obtain approval of the Merger by written consent
of its stockholders, and the other transactions contemplated by the
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Agreement on the terms and conditions set forth in this Agreement and the
Certificate of Merger, and in connection therewith will comply fully with the
pertinent provisions of the applicable federal and state laws relating to the
calling and holding of such meetings of stockholders for such purpose. It is
contemplated that such stockholders meeting will take place on or before March
31, 1997 or as soon as practicable thereafter. The Parent will prepare as
promptly as practicable (i) an information statement for use in connection with
the solicitation of proxies from the stockholders of the Company with respect to
approval of the Merger (the "Proxy Statement") and (ii) the S-4. The Company
shall cooperate with Parent to the best of the Company's ability in the
preparation of the Proxy Statement and the S-4. In this regard, the Company from
time to time will furnish to Parent, and be responsible for, all information
regarding the Company required for the proper preparation of such Proxy
Statement and S-4 and shall promptly furnish Parent with information with
respect to any event as a result of which the S-4, if such information were not
disclosed therein, would include an untrue statement of a material fact relating
to the Company or omit a material fact required to be included therein or
necessary to make the statements therein relating to the Company not misleading;
and will not at any time make any filing with the SEC that shall not have been
previously submitted to Parent a reasonable time prior to the filing or as to
which Parent shall reasonably object or which is not in compliance with the
Securities Act and the rules and regulations thereunder. Neither the Company nor
Parent shall distribute or use such Proxy Statement and S-4 other than for
internal review unless the other party shall have consented in writing to the
information set forth in such document relating to it and until such documents
have been filed with the SEC. The Proxy Statement shall include the
recommendation of the Board of Directors of the Company and of Parent in favor
of the Merger. The Company shall use its best efforts to solicit from
stockholders of the Company proxies in favor of the Merger and shall take all
other action necessary or advisable to secure the vote or consent of its
stockholders required by Delaware Law to effect the Merger. Parent shall use its
best efforts to solicit from shareholders of Parent proxies in favor of the
Merger and shall take all other action necessary or advisable to secure the vote
or consent of its stockholders required by California Law to effect the Merger.
5.2 ACCESS TO INFORMATION. The Company shall afford Parent and its
accountants, counsel and other representatives, reasonable access during normal
business hours during the period prior to the Effective Time to (a) all of the
Company's properties, books, contracts, commitments and records, and (b) all
other information concerning the business, properties and personnel of the
Company as Parent may reasonably request. The Company agrees to provide to
Parent and its accountants, counsel and other representatives copies of internal
financial statements promptly upon request. No information or knowledge obtained
in any investigation pursuant to this Section 5.2 shall affect or be deemed to
modify any representation or warranty contained herein or the conditions to the
obligations of the parties to consummate the Merger.
5.3 CONFIDENTIALITY. The parties acknowledge that Parent and the Company
have previously executed a Confidential Nondisclosure Agreement, which agreement
shall continue in effect in accordance with its terms.
5.4 EXPENSES. In the event the Merger is not consummated, all fees and
expenses incurred in connection with this Agreement and the Merger, including,
without limitation, all legal, accounting, financial advisory, consulting and
all other fees and expenses of third parties ("THIRD PARTY EXPENSES") shall be
paid by the party incurring such fees or expenses.
5.5 PUBLIC DISCLOSURE. Unless otherwise required by law, prior to the
Effective Time no disclosure (whether or not in response to an inquiry) of the
subject matter of this Agreement shall be made by any party hereto unless
approved by Parent and the Company prior to release; provided that such approval
shall not be unreasonably withheld; provided further that the foregoing
restriction shall be subject, in the case of Parent, to Parent's obligation to
comply with applicable securities laws.
5.6 POOLING ACCOUNTING. Parent and the Company shall each use its best
efforts to cause the business combination to be effected by the Merger to be
accounted for as a pooling of interests. Each of Parent and the Company shall
use its best efforts to cause its Affiliates (as defined in Section 5.8) not to
take any
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action that would adversely affect the ability of Parent to account for the
business combination to be effected by the Merger as a pooling of interests.
5.7 CONSENTS. Each of Parent and the Company shall promptly apply for or
otherwise seek, and use its best efforts to obtain, all consents and approvals
required to be obtained by it for the consummation of the Merger, and the
Company shall use its best efforts to obtain all consents, waivers and approvals
under any of the Company's agreements, contracts, licenses or leases in order to
preserve the benefits thereunder for the Surviving Corporation and otherwise in
connection with the Merger.
5.8 AFFILIATE AGREEMENTS. Prior to the Closing Date, the Company shall
deliver to Parent a written statement setting forth those persons who are, in
the Company's reasonable judgment, "affiliates" of the Company within the
meaning of Rule 145 ("RULE 145") (each such person, an "AFFILIATE") promulgated
under the Securities Act of 1933 as amended (the "SECURITIES ACT"). The Company
shall provide Parent such information and documents as Parent shall reasonably
request for purposes of reviewing such list. The Company shall use its best
efforts to deliver or cause to be delivered to Parent prior to the Closing Date
from each of the Affiliates of Company, an executed Affiliate Agreement in the
form attached hereto as EXHIBIT A. Parent and Merger Sub shall be entitled to
place appropriate legends on the certificates evidencing any Parent Common Stock
to be received by such Affiliates of the Company pursuant to the terms of this
Agreement, and to issue appropriate stop transfer instructions to the transfer
agent for Parent Common Stock, consistent with the terms of such Affiliate
Agreements.
5.9 FIRPTA. At the Closing, the Company shall deliver to Parent a properly
executed statement conforming to the requirements of Treasury Regulation
Sections 1.897-2(h)(1)(i) and 1.445-2(c)(3) and the Company further agrees to
provide the notification to the Internal Revenue Service required pursuant to
Treasury Regulation Section 1.897-2(h)(2).
5.10LEGAL REQUIREMENTS. Each of Parent, Merger Sub and the Company will
take all reasonable actions necessary to comply promptly with all legal
requirements that may be imposed on them with respect to the consummation of the
transactions contemplated by this Agreement and will promptly cooperate with and
furnish information to any party hereto in connection with any such requirements
imposed upon such other party in connection with the consummation of the
transactions, contemplated by this Agreement and will take all reasonable
actions necessary to obtain (and will cooperate with the other parties hereto in
obtaining) any consent, approval, order or authorization of, or any
registration, declaration or filing with, any Governmental Entity or other
person, required to be obtained or made in connection with the taking of any
action contemplated by this Agreement.
5.11BLUE SKY LAWS. Parent shall use its best efforts to comply with the
securities and blue sky laws of all jurisdictions that are applicable to the
issuance of the Parent Common Stock pursuant hereto. The Company shall use its
reasonable efforts to assist Parent to comply with the securities and blue sky
laws of all jurisdictions that are applicable in connection with the issuance of
Parent Common Stock pursuant hereto.
5.12BEST EFFORTS; ADDITIONAL DOCUMENTS AND FURTHER ASSURANCES. Each of the
parties to this Agreement shall use its best efforts to effectuate the
transactions contemplated hereby and cause to fulfill and cause to be fulfilled
the conditions to closing under this Agreement. Each party hereto, at the
request of another party hereto, shall execute and deliver such other
instruments and do and perform such other acts and things as may be reasonably
necessary or desirable for effecting completely the consummation of this
Agreement and the transactions contemplated hereby. Parent will use its best
efforts to file all reports required to be filed under Section 13 or 15(d) of
the Exchange Act for the two years subsequent to the Effective Time.
5.13UPDATED INFORMATION REGARDING COMPANY CAPITALIZATION. Immediately prior
to the Effective Time, the Company shall furnish to Parent true, correct and
complete information with respect to all of the matters covered by Section 2.2
of this Agreement and Section 2.2 of the Company Disclosure Letter
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updated through the delivery of such information, which information shall be
certified by the President and Chief Financial Officer of the Company on behalf
of the Company, and shall be in such detail as Parent shall reasonably request.
The certificate and information delivered pursuant to this Section 5.13 shall be
deemed for all purposes of this Agreement to be representations and warranties
made pursuant to this Agreement to the same extent as if set forth herein.
5.14COMPANY AUDIT. The Company shall use reasonable commercial efforts and
fully cooperate with Parent in the prompt completion of an audit of the
Company's financial statements for all periods for which financial statements
are required to be included in the S-4 and the Proxy Statement.
ARTICLE VI
CONDITIONS TO THE MERGER
6.1 CONDITIONS TO OBLIGATIONS OF EACH PARTY TO EFFECT THE MERGER. The
respective obligations of each party to this Agreement to effect the Merger
shall be subject to the satisfaction at or prior to the Effective Time of the
following conditions:
(a) STOCKHOLDER APPROVAL. This Agreement and the Merger and other
transactions contemplated hereby (including, without limitation, the Affiliate
Agreements, the Non-Competition Agreements and the Employment Agreements), taken
together, shall have been approved and adopted by the requisite vote of the
stockholders of the Company, the sole stockholder of Merger Sub and the
requisite vote of the shareholders of Parent.
(b) NO INJUNCTIONS OR RESTRAINTS; ILLEGALITY. No temporary restraining
order, preliminary or permanent injunction or other order issued by any court of
competent jurisdiction or other legal restraint or prohibition preventing the
consummation of the Merger or limiting or restricting the operation of the
business of the Company following the Merger shall be in effect; nor shall any
proceeding brought by an administrative agency or commission or other
governmental authority or instrumentality, domestic or foreign, seeking any of
the foregoing be pending; nor shall there be any action taken, or any statute,
rule, regulation or order enacted, entered, enforced or deemed applicable to the
Merger, which makes the consummation of the Merger illegal.
(c) EMPLOYMENT AGREEMENTS. Parent shall have entered into an employment
agreement with Keith A. Lowery, Ronnie Howell and Andy Levine in the form
attached hereto as EXHIBIT B (collectively, the "EMPLOYMENT AGREEMENTS").
(d) APPROVAL; SECURITIES LAW REQUIREMENTS. Parent, Company and Merger
Sub shall have timely obtained all necessary approvals from Governmental
Entities. All permits, licenses, consents and approvals necessary under any laws
relating to the sale of securities shall have been issued or given, and all
restrictions or registration statements filed under any laws relating to the
sale of securities for the issuance of Parent Common Stock issuable pursuant to
this Agreement or the Certificate of Merger, including the S-4, shall have
become effective, and no such permit, license, consent, approval, registration
or registration statement shall have been revoked, canceled, terminated,
suspended or made the subject of any stop order or proceeding therefor.
(e) AFFILIATE AGREEMENTS. The Company and Parent shall have received an
executed Affiliate Agreement from each Affiliate of the Company.
(f) ESCROW AGREEMENT. Parent, Merger Sub, the Agent, as agent for the
former stockholders of the Company, and a financial entity or other entity
mutually agreed to by the parties (who the parties agree may be Exchange Agent,
as Escrow Agent (as defined below) shall have entered into an Escrow Agreement
substantially in the form attached hereto as Exhibit C (the "ESCROW AGREEMENT")
hereto.
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(g) NASDAQ LISTING. The shares of Parent Common Stock to be issued in
the Merger shall have been listed on the Nasdaq National Market.
(h) TAX OPINIONS. Parent and the Company shall have received
substantially identical written opinions of Venture Law Group, A Professional
Corporation, and Gunderson Dettmer Stough Villeneuve Franklin & Hachigian, LLP,
in form and substance reasonably satisfactory to them, to the effect that the
Merger will constitute a reorganization within the meaning of Section 368(a) of
the Code. In rendering such opinions counsel shall be entitled to rely on
reasonable assumptions and representations of Parent and the Company and certain
stockholders of the Company.
6.2 ADDITIONAL CONDITIONS TO OBLIGATIONS OF COMPANY. The obligations of the
Company to consummate and effect this Agreement and the transactions
contemplated hereby shall be subject to the satisfaction at or prior to the
Effective Time of each of the following conditions, any of which may be waived,
in writing, exclusively by the Company:
(a) REPRESENTATIONS, WARRANTIES AND COVENANTS. The representations and
warranties of Parent in this Agreement shall be true and correct in all material
respects on and as of the Effective Time as though such representations and
warranties were made on and as of such time and Parent shall have performed and
complied in all material respects with all covenants, obligations and conditions
of this Agreement required to be performed and complied with by it as of the
Effective Time.
(b) CERTIFICATE OF PARENT. The Company shall have been provided with a
certificate executed on behalf of Parent by its President and its Chief
Financial Officer to the effect that, as of the Effective Time:
(i) all representations and warranties made by Parent and Merger Sub
under this Agreement are true and correct in all material respects; and
(ii) all covenants, obligations and conditions of this Agreement to
be performed by Parent and Merger Sub on or before such date have been so
performed in all material respects.
(c) LEGAL OPINION. The Company shall have received a legal opinion from
Venture Law Group, A Professional Corporation, counsel to Parent, substantially
in the form attached hereto as EXHIBIT E.
(d) NO MATERIAL ADVERSE CHANGE. There shall not have occurred any
material adverse change in the business, properties, liabilities, results of
operations or financial condition of Parent and its subsidiaries, taken as a
whole.
(e) CLAIMS. There shall not have occurred any claims (whether or not
asserted in litigation) which may materially and adversely affect the
consummation of the transactions contemplated hereby or the business, assets
(including intangible assets), financial condition or results of operations of
Parent.
(f) OPINION OF ACCOUNTANTS. Parent shall have received the opinion of
Price Waterhouse LLP, in the form previously delivered to the Parent, and no
conditions shall exist which preclude Parent's accounting for the Merger as of
the Closing Date as a pooling of interests.
6.3 ADDITIONAL CONDITIONS TO THE OBLIGATIONS OF PARENT AND MERGER SUB. The
obligations of Parent and Merger Sub to consummate and effect this Agreement and
the transactions contemplated hereby shall be subject to the satisfaction at or
prior to the Effective Time of each of the following conditions, any of which
may be waived, in writing, exclusively by Parent:
(a) REPRESENTATIONS, WARRANTIES AND COVENANTS. The representations and
warranties of the Company in this Agreement shall be true and correct in all
material respects on and as of the Effective Time as though such representations
and warranties were made on and as of such time and the Company shall have
performed and complied in all material respects with all covenants, obligations
and conditions of this Agreement required to be performed and complied with by
it as of the Effective Time.
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(b) CERTIFICATE OF THE COMPANY. Parent shall have been provided with a
certificate executed on behalf of the Company by its President and Chief
Financial Officer to the effect that, as of Effective Time:
(i) all representations and warranties made by the Company under
this Agreement are true and correct in all material respects;
(ii) all covenants, obligations and conditions of this Agreement to
be performed by the Company on or before such date have been so performed
in all material respects.
(c) THIRD PARTY CONSENTS. Parent shall have been furnished with
evidence satisfactory to it of the consent or approval of those persons whose
consent or approval shall be required in order to assign the agreements listed
in the Company Disclosure Letter pursuant to Section 5.7 of this Agreement or
otherwise required by the Company to consummate the transactions contemplated by
this Agreement.
(d) LEGAL OPINION. Parent shall have received a legal opinion from
Gunderson Dettmer Stough Villeneuve Franklin & Hachigian, LLP, legal counsel to
the Company, substantially in the form attached hereto as EXHIBIT F.
(e) NO MATERIAL ADVERSE CHANGE. There shall not have occurred any
material adverse change in the business, properties, liabilities, results of
operations or financial condition of the Company.
(f) DISSENTERS. Holders of not more than 5% of the outstanding Company
Common Stock, not more than 5% of the outstanding Company Series A Preferred
Stock and not more than 5% of the outstanding Company Series B Preferred Stock
shall have exercised, or shall continue to have the right to exercise, appraisal
rights with respect to the transactions contemplated by this Agreement.
(g) NON-COMPETITION AGREEMENTS. Keith A. Lowery, Ronnie Howell and Andy
Levine shall each have entered into and delivered a duly executed and binding
Non-Competition Agreement in the form attached hereto as EXHIBIT D, (the
"NON-COMPETITION AGREEMENTS").
(h) OPINION OF ACCOUNTANTS. Parent shall have received the opinion of
Price Waterhouse LLP, in the form previously delivered to the Parent, and no
conditions shall exist which preclude Parent's accounting for the Merger as of
the Closing Date as a pooling of interests.
(i) FAIRNESS OPINION. The Board of Directors of Parent shall have
received from Hambrecht & Quist LLP a written opinion dated prior to the date of
this Agreement and an updated written opinion dated the Closing Date, in form
and substance satisfactory to Parent stating that the terms of the Merger are
fair to the shareholders of Parent from a financial point of view.
ARTICLE VII
SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ESCROW
7.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All representations and
warranties in this Agreement or in any instrument delivered pursuant to this
Agreement shall survive the consummation of the Merger and continue until the
earlier of (i) the expiration of one year from the Effective Time or (ii) the
date the audit of Parent's financial statements for the year ended December 31,
1997 has been completed and Parent has received a signed opinion from its
independent auditors certifying such financial statements (the "1997 COMBINED
FINANCIALS DATE"); provided that if any claims for indemnification have been
asserted with respect to any such representations and warranties prior to the
1997 Combined Financials Date, the representations and warranties on which any
such claims are based shall continue in effect until final resolution of any
claims. All covenants to be performed after the Effective Time shall continue
indefinitely.
7.2 ESCROW ARRANGEMENTS.
(a) ESCROW FUND. As soon as practicable after the Effective Time, a
portion of the shares of the Parent Common Stock to be issued in the Merger
equal to the Escrow Number (as defined in 1.6(h)) (plus
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<PAGE>
any additional New Shares (as defined below) as may be issued in respect thereof
after the Closing) (collectively, the "ESCROW SHARES"), without any act of any
stockholder of the Company, will be registered in the name of and will be
deposited with the Escrow Agent, such deposit to constitute an escrow fund (the
"ESCROW FUND") to be governed by the terms set forth herein and the Escrow
Agreement attached hereto as EXHIBIT C and at Parent's sole cost and expense.
The Escrow Fund shall be available to compensate Parent and its affiliates for
any claim, loss, expense, liability or other damage, including reasonable
attorneys' fees that Parent or any of its affiliates has incurred or reasonably
anticipates incurring by reason of the breach at any time after the Effective
Date by the Company of any representation, warranty, covenant or agreement of
the Company contained herein (collectively, "LOSSES"), PROVIDED, HOWEVER, that
no such compensation shall be payable unless and until the amount of all Losses
exceeds $250,000 in the aggregate, upon which event Parent will be permitted to
exercise all such claims against the Escrow Fund, including those which
comprised any portion of the threshold amount. Nothing herein shall limit the
liability of the Company for any breach of any representation, warranty or
covenant if the Merger does not close. Resort to the Escrow Fund shall be the
exclusive remedy of Parent and its affiliates for any such breaches and
misrepresentations if the Merger does close; provided, however, that nothing
herein shall limit any noncontractual remedy for intentional misrepresentation.
(b) ESCROW PERIOD; DISTRIBUTION UPON TERMINATION OF ESCROW
PERIODS. Subject to the following requirements, the Escrow Fund shall remain in
existence until the earlier of (i) the expiration of one year from the Effective
Time or (ii) the 1997 Combined Financials Date (the "ESCROW PERIOD"). Upon the
expiration of such Escrow Period, the Escrow Fund shall terminate with respect
to all Escrow Shares; provided, however, that the number of Escrow Shares,
which, in the reasonable judgment of Parent, subject to the objection of the
Escrow Agent and the subsequent arbitration of the claim in the matter in the
manner provided in the Escrow Agreement, are necessary to satisfy any
unsatisfied claims specified in any Officer's Certificate delivered to the
Escrow Agent prior to the expiration of such Escrow Period with respect to facts
and circumstances existing on or prior to the 1997 Combined Financials Date
shall remain in the Escrow Fund (and the Escrow Fund shall remain in existence)
until such claims have been resolved. As soon as all such claims have been
resolved, the Escrow Agent shall deliver to the stockholders of the Company all
Parent Common Stock and other property remaining in the Escrow Fund and not
required to satisfy such claims. Deliveries of Parent Common Stock and other
property to the stockholders of the Company pursuant to this Section 7.2(b) and
the Escrow Agreement shall be made in proportion to their respective original
contributions to the Escrow Fund.
(c) DISTRIBUTIONS; VOTING.
(i) Any shares of Parent Common Stock or other equity securities
issued or distributed by Parent (including shares issued upon a stock
split) ("New Shares") in respect of Parent Common Stock in the Escrow
Fund which have not been released from the Escrow Fund shall be added to
the Escrow Fund and become a part thereof. New Shares issued in respect
of Parent Common Stock which have been released from the Escrow Fund
shall not be added to the Escrow Fund, but shall be distributed to the
holders thereof. When and if cash dividends on Parent Common Stock in the
Escrow Fund shall be declared and paid, they shall not be added to the
Escrow Fund, but shall be distributed to the record holders thereof.
(ii) Each stockholder of the Company shall have voting rights with
respect to the shares of Parent Common Stock contributed to the Escrow
Fund on behalf of such stockholder (and on any voting securities added to
the Escrow Fund in respect of such shares of Parent Common Stock) so long
as such shares of Parent Common Stock or other voting securities are held
in the Escrow Fund. As the record holder of such shares, the Escrow Agent
shall vote such shares in accordance with the instructions of the
stockholders of the Company having the beneficial interest therein and
shall promptly deliver copies of all proxy solicitation materials to such
stockholders. Parent shall show the Parent Common Stock contributed to
the Escrow Fund as issued and outstanding on its balance sheet.
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<PAGE>
7.3 METHOD OF ASSERTING CLAIMS. All claims for indemnification by the
Company and its Affiliates pursuant to this Article VII shall be made in
accordance with the provisions of the Escrow Agreement.
7.4 AGENT OF THE STOCKHOLDERS; POWER OF ATTORNEY. In the event that the
Merger is approved, effective upon such vote, and without further act of any
stockholder, Keith A. Lowery and Robert L. West shall be appointed as agents and
attorneys-in-fact (collectively, the "AGENT") for each stockholder of the
Company (except such stockholders, if any, as shall have perfected their
appraisal rights under Delaware Law), for and on behalf of stockholders of the
Company, to give and receive notices and communications, to enter into and
perform the Escrow Agreement, to authorize delivery to Parent of Parent Common
Stock or other property from the Escrow Fund in satisfaction of claims by
Parent, to object to such deliveries, to agree to, negotiate, enter into
settlements and compromises of, and demand arbitration and comply with orders of
courts and awards of arbitrators with respect to such claims, and to take all
actions necessary or appropriate in the judgment of Agent for the accomplishment
of the foregoing.
7.5 ADJUSTMENT TO ESCROW NUMBER. In the event that Parent pays out any
amounts to holders of Dissenting Shares with respect to such shares, the Escrow
Number shall be automatically reduced by the number of shares of Parent Common
Stock allocable to such Dissenting Shares. Upon certification by the Parent to
the Escrow Agent of such event, the shares of Parent Stock allocable to such
Dissenting Shares and any New Shares with respect thereto shall be promptly
returned to Parent.
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
8.1 TERMINATION. This Agreement may be terminated and the Merger abandoned
at any time prior to the Effective Time:
(a) by mutual written consent of the Company, Parent and Merger Sub;
(b) by Parent if there has been a material breach of any
representation, warranty, covenant or agreement contained in this Agreement on
the part of the Company and such breach has not been cured within five business
days after written notice to the Company or by the Closing Date;
(c) by the Company if there has been a material breach of any
representation, warranty, covenant or agreement contained in this Agreement on
the part of Parent or Merger Sub and such breach has not been cured within five
business days after written notice to Parent or by the Closing Date;
(d) by any party hereto if (i) the Closing has not occurred by April
30, 1997; provided that the right to terminate this Agreement pursuant to this
paragraph (d)(i) shall not be available to any party if the failure of the
Closing to occur by such date was caused by a failure of such party to satisfy a
condition to closing set forth in Article VI hereof the satisfaction of which is
within the control of such party or the control of such party's shareholders or
stockholders; (ii) there shall be a final, non-appealable order of a federal or
state court in effect preventing consummation of the Merger; (iii) there shall
be any final action taken, or any statute, rule, regulation or order enacted,
promulgated or issued or deemed applicable to the Merger by any Governmental
Entity which would prohibit Parent's, the Company's or Surviving Corporation's
ownership or operation of all or a material portion of the business of the
Company, or Parent's, the Company's or the Surviving Corporation's right to
dispose of or hold separate all or a material portion of the business or assets
of the Company or Parent as a result of the Merger, or make consummation of the
Merger illegal; (iv) the Company's stockholders do not approve the Merger at the
Company stockholder meeting or by written consent pursuant to Section 5.1
hereinabove; or (v) the Parent's shareholders do not approve the Merger at the
Parent shareholders' meeting pursuant to Section 5.1 hereinabove.
Where action is taken to terminate this Agreement pursuant to this Section
8.1, it shall be sufficient for such action to be authorized by the Board of
Directors (as applicable) of the party taking such action.
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<PAGE>
8.2 EFFECT OF TERMINATION. In the event of termination of this Agreement as
provided in Section 8.1, this Agreement shall forthwith become void and there
shall be no liability or obligation on the part of Parent, Merger Sub, the
Company or their respective officers, directors or stockholders, provided that
each party shall remain liable for any breaches of this Agreement prior to its
termination; provided further that, the provisions of Section 5.3
(Confidentiality), Section 5.4 (Expenses) and Article IX of this Agreement and
the Nondisclosure Agreement shall remain in full force and effect and survive
any termination of this Agreement.
8.3 AMENDMENT. This Agreement may be amended by the parties hereto at any
time by execution of an instrument in writing signed on behalf of each of the
parties hereto; provided that following approval of the Merger by the
stockholders of the Company, no amendment shall be made that by law requires the
further approval of such stockholders without obtaining such approval.
8.4 EXTENSION; WAIVER. At any time prior to the Effective Time any party
hereto may, to the extent legally allowed, (i) extend the time for the
performance of any of the obligations or other acts of other parties hereto,
(ii) waive any inaccuracies in the representations and warranties made to such
party contained herein or in any document delivered pursuant hereto and (iii)
waive compliance with any of the agreements or conditions for the benefit of
such party contained herein. Any agreement on the part of a party hereto to any
such extension or waiver shall be valid only if set forth in an instrument in
writing signed on behalf of such party.
A-33
<PAGE>
ARTICLE IX
GENERAL PROVISIONS
9.1 NOTICES. All notices and other communications hereunder shall be in
writing and shall be deemed given if delivered personally or by commercial
delivery service, or mailed by registered or certified mail (return receipt
requested) or sent via telecopy to the parties at the following addresses (or at
such other address for a party as shall be specified by like notice) provided,
however, that notices sent by mail will not be deemed given until received.
(a) If to Parent or Merger Sub, to:
Centura Software Corporation
1060 Marsh Road
Menlo Park, CA 94025
with a copy to:
Venture Law Group,
A Professional Corporation
2800 Sand Hill Road
Menlo Park, CA 94025
Attention: Mark A. Medearis
(b) if to the Company, to:
InfoSpinner, Inc
1222 E. Arapaho Road
Suite 320
Richardson, TX 75081
with a copy to:
Gunderson Dettmer Stough Villeneuve
Franklin & Hachigian, LLP
155 Constitution Drive
Menlo Park, CA 94025
Attention: Scott C. Dettmer
9.2 INTERPRETATION. When a reference is made in this Agreement to Exhibits,
such reference shall be to an Exhibit to this Agreement unless otherwise
indicated. The words "include," "includes" and "including" when used herein
shall be deemed in each case to be followed by the words "without limitation."
The table of contents and headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement.
9.3 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other party, it being understood that all
parties need not sign the same counterpart.
9.4 MISCELLANEOUS. This Agreement and the documents and instruments and
other agreements among the parties hereto including all lists and statements
separately certified in writing by the Company or Parent (a) constitute the
entire agreement among the parties with respect to the subject matter hereof and
supersede all prior agreements and understandings, both written and oral, among
the parties with respect to the subject matter hereof, except for the
Confidential Nondisclosure Agreement between Parent and the Company, which shall
continue in full force and effect until the Closing and shall survive any
termination of this Agreement; (b) are not intended to confer upon any other
person any rights or
A-34
<PAGE>
remedies hereunder; and (c) shall not be assigned by operation of law or
otherwise except as otherwise specifically provided.
9.5 GOVERNING LAW. This Agreement shall be governed in all respects,
including validity, interpretation and effect, by the laws of the State of
California. All parties hereto agree to submit to the jurisdiction of the
federal and state courts of the State of California, and further agree that
service of documents commencing any suit therein may be made as provided in
Section 9.1.
9.6 RULES OF CONSTRUCTION. The parties hereto agree that they have been
represented by counsel during the negotiation and execution of this Agreement
and, therefore, waive the application of any law, regulation, holding or rule of
construction providing that ambiguities in an agreement or other document will
be construed against the party drafting such agreement or document.
IN WITNESS WHEREOF, Parent, Merger Sub and the Company have caused this
Agreement to be signed by themselves or their duly authorized respective
officers, all as of the date first written above.
CENTURA SOFTWARE CORPORATION
By: /s/ S. M. INMAN III
--------------------------------------------
Name: S. M. Inman III
Title: Chief Executive Officer
INFOSPINNER, INC.
By: /s/ ROBERT L. WEST
--------------------------------------------
Name: Robert L. West
Title: President and Chief Executive Officer
IS ACQUISITION CORPORATION
By: /s/ RICHARD J. HEAPS
--------------------------------------------
Name: Richard J. Heaps
Title: President
SIGNATURE PAGE TO AGREEMENT AND PLAN OF REORGANIZATION
A-35
<PAGE>
EXHIBIT A-1
AFFILIATE AGREEMENT
January 6, 1997
Centura Software Corporation
1060 Marsh Road
Menlo Park, CA 94025
Ladies and Gentlemen:
Pursuant to the terms of the Agreement and Plan of Reorganization, dated as
of January 6, 1997 (the "Agreement") among Centura Software Corporation, a
California corporation ("Parent"), IS Acquisition Corporation, a Delaware
corporation and wholly owned subsidiary of Parent ("Merger Sub"), and
InfoSpinner, Inc., a Delaware corporation (the "Company"), Parent will acquire
the Company through the merger of Merger Sub with and into the Company (the
"Merger"). The Merger will be treated for accounting purposes as a pooling of
interest transaction, which requires certain limitations on the sale, transfer,
or other disposition of Parent Common Stock held by affiliates.
The undersigned has been advised that as of the date hereof it may be deemed
to be an "affiliate" of Parent, as the term "affiliate" is (i) defined in Rule
144 ("Rule 144") of the Securities and Exchange Commission (the "Commission")
under the Securities Act of 1933, as amended (the "Act"), and/or (ii) used in
and for purposes of Accounting Series, Releases 130 and 135, as amended, of the
Commission.
The undersigned understands that the representations, warranties and
covenants set forth herein will be relied upon by Parent, other shareholders of
Parent, the Company, stockholders of the Company and their respective counsel
and accounting firms.
The undersigned represents and warrants to and agrees with Parent that:
1. The undersigned has full power to execute and deliver this letter and to
make the representations and warranties herein and to perform its obligations
hereunder.
2. The undersigned has carefully read this letter and the Agreement and
discussed its requirements and other applicable limitations upon its ability to
sell, transfer or otherwise dispose of Parent Common Stock, to the extent the
undersigned felt necessary, with its counsel or counsel for Parent.
3. The undersigned is the beneficial owner of all the shares of Parent
Common Stock and options to purchase Parent Common Stock (the "Parent
Securities") listed on the last page of this Agreement. Except for the Company
Securities, the undersigned does not beneficially own any shares of Parent
Common Stock or any other equity securities of Parent or any options, warrants
or other rights to acquire any equity securities of Parent.
4. Notwithstanding any other provision hereof to the contrary, during the
period commencing on the date hereof and ending at such time as results covering
at least 30 days of combined operations of the Company and Parent have been
published by Parent, in the form of a quarterly earnings report, an effective
registration statement filed with the Commission, a report to the Commission on
Form 10-K, 10-Q or 8-K, or any other public filing or announcement which
includes the combined results of operations, the undersigned will not sell,
transfer or otherwise dispose of, or offer or agree to sell, transfer
AA1-1
<PAGE>
or otherwise dispose of, or in any other way reduce the risk of the
undersigned's ownership of or investment in, any of the following:
(a) any shares of Parent Common Stock, or any securities that may be
paid as a dividend or otherwise distributed thereon or with respect thereto
or issued or delivered in exchange or substitution therefor (all such shares
and other securities being referred to herein, collectively, as "Restricted
Securities"), or any option, right or other interest with respect to any
Restricted Securities;
(b) any Parent Securities; or
(c) any shares of Parent Common Stock or other Parent equity securities
that the undersigned purchases or otherwise acquires after the execution of
this Agreement.
5. As promptly as practicable following the Merger, Parent shall publish
results covering at least 30 days of combined operations of the Company and
Parent in the form of a quarterly earnings report, an effective registration
statement filed with the Commission, a report to the Commission on Form 10-K,
10-Q or 8-K, or any other public filing or announcement which includes the
combined results of operations; PROVIDED, HOWEVER, that Parent shall be under no
obligation to publish any such financial information other than with respect to
a fiscal quarter of Parent.
[SIGNATURE PAGE FOLLOWS]
AA1-2
<PAGE>
NUMBER OF SHARES OF PARENT COMMON STOCK
BENEFICIALLY OWNED BY THE UNDERSIGNED:
------------------------
NUMBER OF SHARES OF PARENT COMMON STOCK SUBJECT TO
OPTIONS BENEFICIALLY OWNED BY THE UNDERSIGNED:
------------------------
Very truly yours,
--------------------------------------
(print name of shareholder above)
By:
--------------------------------------
Title:
--------------------------------------
Accepted as of
- ------------------------------------------------------------- ,
1997
CENTURA SOFTWARE CORPORATION
By:
- --------------------------------------
Name:
- --------------------------------------------------------------------------------
Title:
- --------------------------------------
AA1-3
<PAGE>
EXHIBIT A-2
AFFILIATE AGREEMENT
[TO BE EXECUTED BY COMPANY'S OFFICERS, DIRECTORS AND AFFILIATES]
January 6, 1997
Centura Software Corporation
1060 Marsh Road
Menlo Park, CA 94025
Ladies and Gentlemen:
Pursuant to the terms of the Agreement and Plan of Reorganization, dated as
of January 6, 1997 (the "Agreement") among Centura Software Corporation, a
California corporation ("Parent"), IS Acquisition Corporation, a Delaware
corporation and wholly owned subsidiary of Parent ("Merger Sub"), and
InfoSpinner, Inc., a Delaware corporation (the "Company"), Parent will acquire
the Company through the merger of Merger Sub with and into the Company (the
"Merger"). Subject to the terms and conditions of the Agreement, at the
Effective Time (as defined in the Agreement), outstanding shares of the Common
Stock of the Company (the "Company Common Stock") and the Series A and Series B
Preferred Stock of the Company (the "Company Preferred Stock") will be converted
into the right to receive shares of Common Stock of Parent (the "Parent Common
Stock") on the basis described in the Agreement.
The undersigned has been advised that as of the date hereof it may be deemed
to be an "affiliate" of the Company, as the term "affiliate" is (i) defined for
purposes of paragraphs (c) and (d) of Rule 145 of the Rules and Regulations (the
"Rules and Regulations") of the Securities and Exchange Commission (the
"Commission") under the Securities Act of 1933, as amended (the "Act"), and/or
(ii) used in and for purposes of Accounting Series, Releases 130 and 135, as
amended, of the Commission. The execution and delivery to you of this letter
shall not be deemed an admission that the undersigned is an "affiliate" of the
Company for purposes of Rule 144 or Rule 145 promulgated by the Commission under
the Act or for any other purpose under federal or state securities or other
laws.
The undersigned understands that the representations, warranties and
covenants set forth herein will be relied upon by Parent, shareholders of
Parent, the Company, other stockholders of the Company and their respective
counsel and accounting firms.
The undersigned represents and warrants to and agrees with Parent that:
1. The undersigned has full power to execute and deliver this letter and to
make the representations and warranties herein and to perform its obligations
hereunder.
2. The undersigned has carefully read this letter and the Agreement and
discussed its requirements and other applicable limitations upon its ability to
sell, transfer or otherwise dispose of Parent Common Stock, to the extent the
undersigned felt necessary, with its counsel or counsel for the Company.
3. The undersigned shall not make any sale, transfer or other disposition
of Parent Common Stock in violation of the Act or the Rules and Regulations.
4. The undersigned has been advised that the issuance of shares of Parent
Common Stock to the undersigned in connection with the Merger is expected to be
registered by Parent with the Commission under the Act on a Registration
Statement on Form S-4 (the "S-4"). However, the undersigned has also been
advised that, since, at the time the Merger is submitted for a vote of the
stockholders of the Company the undersigned may be deemed to have been an
affiliate of the Company and the distribution by the
AA2-1
<PAGE>
undersigned of any Parent Common Stock has not been registered under the Act
(the S-4 not satisfying this registration requirement), the undersigned may not
sell, transfer or otherwise dispose of Parent Common Stock issued to the
undersigned in the Merger unless (i) such sale, transfer or other disposition
has been registered under the Act, (ii) such sale, transfer or other disposition
is made in conformity with the requirements of Rule 145 promulgated by the
Commission under the Act, or (iii) in the opinion of counsel reasonably
acceptable to Parent, such sale, transfer or other disposition is otherwise
exempt from registration under the Act.
5. Parent agrees that it shall make available adequate current public
information as required by Rule 144(c) promulgated by the Commission under the
Act.
6. Stop transfer instructions will be given to Parent's transfer agents
with respect to the Parent Common Stock and there will be placed on the
certificates for the Parent Common Stock issued to the undersigned, or any
substitutions therefor, a legend stating in substance:
"The shares represented by this certificate were issued in a
transaction to which Rule 145 promulgated under the Securities Act of
1933, as amended, applies. The shares represented by this certificate may
only be transferred in accordance with the terms of an agreement, dated
January 6, 1997, between the registered holder hereof and Parent, a copy
of which agreement is on file at the principal offices of Parent."
7. Unless the transfer by the undersigned of its Parent Common Stock has
been registered under the Act or is a sale made in conformity with the
provisions of Rule 145, Parent reserves the right to put the following legend on
the certificates issued to any transferee of the undersigned:
"The shares represented by this certificate have not been registered
under the Securities Act of 1933, as amended, and were acquired from a
person who received such shares in a transaction to which Rule 145
promulgated under the Securities Act of 1933, as amended, applies. The
shares have been acquired by the holder not with a view to, or for resale
in connection with, any distribution thereof within the meaning of the
Securities Act of 1933, as amended, and may not be sold, pledged or
otherwise transferred except in accordance with an exemption from the
registration requirements of the Securities Act of 1933, as amended."
8. The legends set forth in paragraphs 6 and 7 above shall be removed by
delivery of substitute certificates without such legend if such legend is not
required for purposes of the Act. Such legends and the stop orders referred to
above will be removed if (i) two years shall have elapsed from the date the
undersigned acquired Parent Common Stock received in the Merger and the
provisions of Rule 145(d)(2) are then available to the undersigned, (ii) three
years shall have elapsed from the date the undersigned acquired Parent Common
Stock received in the Merger and the provisions of Rule 145(d)(3) are then
available to the undersigned, or (iii) Parent has received either an opinion of
counsel, which opinion shall be reasonable satisfactory to Parent, or a copy of
a letter obtained by the undersigned from the staff of the Commission, to the
effect that such legend is not required for purposes of the Act.
9. The undersigned is the beneficial owner of all the shares of Company
Common Stock, Company Preferred Stock and options to purchase Company Common
Stock (the "Company Securities") listed on the last page of this Affiliate
Agreement. Except for the Company Securities, the undersigned does not
beneficially own any shares of Company Common Stock or any other equity
securities of the Company or any options, warrants or other rights to acquire
any equity securities of the Company.
10. Notwithstanding any other provision hereof to the contrary, during the
period commencing on the date hereof and ending at such time as results covering
at least 30 days of combined operations of the Company and Parent have been
published by Parent, in the form of a quarterly earnings report, an effective
registration statement filed with the Commission, a report to the Commission on
Form 10-K, 10-Q or 8-K, or any other public filing or announcement which
includes the combined results of operations, the undersigned will not sell,
transfer or otherwise dispose of, or offer or agree to sell, transfer
AA2-2
<PAGE>
or otherwise dispose of, or in any other way reduce the risk of the
undersigned's ownership of or investment in, any of the following:
(a) any shares of Parent Common Stock which the undersigned may acquire
in connection with the Merger, or any securities that may be paid as a
dividend or otherwise distributed hereon or with respect thereto or issued
or delivered in exchange or substitution therefor (all such shares and other
securities being referred to herein, collectively, as "Restricted
Securities"), or any option, right or other interest with respect to any
Restricted Securities;
(b) any Company Securities; or
(c) any shares of Company Common Stock, Company Preferred Stock or other
Company equity securities that the undersigned purchases or otherwise
acquires after the execution of this Affiliate Agreement.
11. As promptly as practicable following the Merger, Parent shall publish
results covering at least 30 days of combined operations of the Company and
Parent in the form of a quarterly earnings report, an effective registration
statement filed with the Commission, a report to the Commission on Form 10-K,
10-Q or 8-K, or any other public filing or announcement which includes the
combined results of operations (the date of which is referred to herein as the
"Financial Results Publication Date"); PROVIDED, HOWEVER, that Parent shall be
under no obligation to publish any such financial information other than with
respect to a fiscal quarter of Parent.
12. (a) The undersigned has, and as of the Effective Time will have, no
present plan or intention (a "Plan") to sell, transfer, exchange, pledge or
otherwise dispose of (other than a distribution by a partnership to its
partners, see subsection (b), below) (any of the foregoing, other than excluded
items, a "Sale") more than fifty percent (50%) of the shares of Parent Common
Stock that the undersigned may acquire in connection with the Merger. The
undersigned is not aware of, nor participating in, any Plan on the part of
stockholders of the Company to engage in Sales of the shares of Parent Common
Stock to be issued in the Merger such that the aggregate fair market value, as
of the Effective Time, of the shares subject to such Sales would exceed fifty
percent (50%) of the aggregate fair market value of all shares of outstanding
Company Common Stock and Company Preferred Stock immediately prior to the
Merger. For purposes of the preceding sentence, shares of Company Common Stock
and Company Preferred Stock (i) with respect to which dissenters' rights are
exercised, (ii) that are exchanged for cash in lieu of fractional shares of
Parent Common Stock or (iii) with respect to which a pre-Merger Sale occurs or
has occurred in a Related Transaction (as defined below), shall be considered to
be shares of Company Common Stock or Company Preferred Stock that are exchanged
for Parent Common Stock in the Merger and then disposed of pursuant to a Plan.
(b) If the undersigned is a partnership, the undersigned is not aware
of any present plan or intention on the part of its partners to engage in a Sale
or Sales of any of the shares of Parent Common Stock, if any, to be distributed
by the undersigned. If all of the shares of Parent Common Stock to be received
by the undersigned in the Merger were distributed to its partners in accordance
with their partnership interests, no such partner would receive shares of Parent
Common Stock having a value greater than one percent (1%) of the fair market
value of the shares of the Company's capital stock outstanding immediately prior
to the Merger.
(c) For purposes of this Section 12, a "Related Transaction" shall mean
a transaction that is in contemplation of, or related or pursuant to, the Merger
or Agreement. If any one of the undersigned's representations in this Section 12
ceases to be true at any time prior to the Effective Time, the undersigned will
deliver to each of the Company and Parent, prior to the Effective Time, a
written statement to that effect, signed by the undersigned. The undersigned
understands and acknowledges that the Company, Parent and their respective
stockholders and shareholders, as well as legal counsel (in connection with
rendering an opinion that the Merger will qualify as a "reorganization"
described in Section 368(a) of the
AA2-3
<PAGE>
Internal Revenue Code of 1986, as amended), are entitled to rely on (i) the
truth and accuracy of the undersigned's representations and covenants herein and
(ii) the undersigned's performance of the obligations set forth herein.
NUMBER OF SHARES OF COMPANY COMMON STOCK
BENEFICIALLY OWNED BY THE UNDERSIGNED:
------------------------
NUMBER OF SHARES OF COMPANY SERIES A PREFERRED
STOCK BENEFICIALLY OWNED BY THE UNDERSIGNED:
------------------------
NUMBER OF SHARES OF COMPANY SERIES B PREFERRED STOCK
BENEFICIALLY OWNED BY THE UNDERSIGNED:
------------------------
NUMBER OF SHARES OF COMPANY COMMON STOCK SUBJECT TO
OPTIONS BENEFICIALLY OWNED BY THE UNDERSIGNED:
------------------------
Very truly yours,
--------------------------------------
(print name of stockholder above)
By:
--------------------------------------
Title:
--------------------------------------
Accepted as of January 6, 1997
CENTURA SOFTWARE CORPORATION
By:
- --------------------------------------
Name:
- --------------------------------------------------------------------------------
Title:
- --------------------------------------
AA2-4
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EXHIBIT B
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT (this "AGREEMENT") is made as of the Effective
Date indicated below by and between Centura Software Corporation, a California
corporation ("Parent") and ((Name)) ("EMPLOYEE").
BACKGROUND
This Agreement is entered into in connection with and is ancillary to an
Agreement and Plan of Reorganization (the "PLAN") dated as of January , 1997
among Parent, IS Acquisition Corporation, a Delaware corporation and wholly
owned subsidiary of Parent ("MERGER SUB"), and InfoSpinner, Inc., a Delaware
corporation ("COMPANY"), pursuant to which Merger Sub is to merge with and into
Company, Company will continue as the surviving corporation in the merger and
will become a wholly owned subsidiary of Parent, and the shares of Company
capital stock outstanding immediately prior to the effective time of the merger
will be converted into shares of Parent Common Stock, all as set forth in the
Plan (the "MERGER"). The date on which the Merger becomes effective will be the
effective date of this Agreement (the "EFFECTIVE DATE").
Employee is ((OldTitle)) of the Company and has been actively involved in
the development and/or marketing of Company's products. Parent intends to
continue the business of Company after the Merger and integrate such business
into Parent's ongoing business as a subsidiary of Parent. To preserve and
protect the assets of Company, including Company's goodwill, customers and trade
secrets of which Employee has and will have knowledge in Employee's role as an
employee of Parent and to preserve and protect Parent's goodwill and business
interests going forward, and in consideration for Parent's entering into and
performing under the Plan, Employee has agreed to enter into this Agreement.
In addition, as required by and defined in Section 7 below, Employee is
concurrently herewith entering into a Proprietary Information Agreement in favor
of Parent designed to protect Parent's proprietary rights.
NOW, THEREFORE, in consideration of the foregoing and the mutual agreements
of the parties contained herein, Parent and Employee hereby agree as follows:
1. EMPLOYMENT. Parent will employ Employee and Employee accepts employment
with Parent for a period of thirty-six (36) months from the Effective Date (the
"INITIAL PERIOD"), unless Employee's employment is terminated during the Initial
Period in accordance with this Agreement. Employee's employment may continue
after this Initial Period but will then be terminable by either party at will,
with or without cause. The obligations of Parent and Employee set forth in the
"Proprietary Information Agreement" (referring to confidentiality) and in
Section 8 hereof (referring to termination) and, to the extent specifically
provided therein, the obligations of Parent and Employee set forth in Section 5
(referring to employee benefits) and Section 6 (referring to reimbursement of
expenses), will survive the termination of Employee's employment, regardless of
cause.
2. DUTIES. Employee will be employed as a full-time employee of Parent and
initially will serve as ((NewTitle)). Employee agrees that, to the best of
Employee's ability and experience, Employee will at all times conscientiously
perform all of the duties and obligations assigned to Employee in accordance
with this Agreement, provided that Employee will not be required to travel in
the exercise of his employment duties under this Agreement more than six (6)
days per quarter where such travel requires Employee to spend the night away
from Employee's home in , Texas.
3. FULL-TIME EMPLOYMENT. Employee's employment will be on a full-time
basis, in accordance with standard employee policies for Parent. Except for such
activities, if any, as may be set forth in SCHEDULE A attached hereto or as may
hereafter be consented to by Parent in its sole discretion, Employee will not
AB-1
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engage in any other business or render any commercial or professional services,
directly or indirectly, to any other person or organization, whether for
compensation or otherwise, provided that Employee may (i) provide incidental
assistance to family members on matters of family business, and (ii) sit on the
boards of charitable and nonprofit organizations which do not, at the time of
Employee's appointment or election, to Employee's knowledge, compete with
Parent, provided in each case that such activities do not conflict with or
interfere with Employee's obligations to Parent. Employee may make personal
investments in nonpublicly traded corporations, partnerships or other entities,
which, to the knowledge of Employee, designs, researches, distributes, develops,
markets, sells, licenses or supports software (whether or not such software is
the principal product of such business) that provides centralized application
integration or management software or any other software that manages or
integrates applications, structured or unstructured data (including, without
limitation, software currently known to constitute database or application
servers) (the foregoing description of business activities shall be referred to
in this Agreement as "COMPETITIVE BUSINESSES"). Notwithstanding anything to the
contrary contained in this Agreement, Employee may make personal investments in
publicly traded corporations regardless of the business they are engaged in,
provided that Employee does not at any time own in excess of 1% of the issued
and outstanding stock of any such publicly traded corporation that is engaged in
any Competitive Businesses.
4. COMPENSATION.
(a) SALARY. Employee's salary from the date hereof through December 31,
1997 will be ((Salary)) per month, pro rated from the date hereof through
December 31, 1997. Employee's base salary for calendar year 1998 will be
determined by Parent on or before January 1, 1998; PROVIDED, HOWEVER, to the
extent this Agreement is in effect during calendar years 1998 and 1999,
respectively, Employee's monthly base salary during calendar years 1998 and 1999
will be no less than ((Salary)) per month.
(b) BONUS. Beginning in calendar year 1997, Employee will be eligible
for participation in any management bonus plan adopted by Parent's Board of
Directors in amounts as may be determined in accordance with Parent's standard
practice.
(c) STOCK OPTIONS. Employee will be granted stock options to purchase
((OptionNumber)) shares of Parent's Common Stock at a price equal to the closing
sales price per share of such Common Stock on the closing date of the Merger, as
quoted on the Nasdaq National Market and as reported in the Wall Street Journal.
The stock options will be granted as incentive stock options. If and when the
Employee sells any shares issued upon exercise of any stock options, the
Employee will promptly notify Parent of such sale in writing. The stock options
will vest 25% on the first anniversary of the Effective Date and will vest
1/48th per month thereafter, so that they will be fully vested on the fourth
anniversary of the Effective Date. The stock options will have a term of ten
years and will be subject to the terms and conditions set forth on the form of
stock option agreement approved by the Board of Directors of Parent.
5. EMPLOYEE BENEFITS. Employee will be entitled to insurance, vacation and
other benefits ("Employee Benefits") commensurate with Employee's position in
accordance with Parent's standard employee policies in effect from time to time
(taking into account Employee's past services rendered to Parent). Employee has
received a summary of Parent's standard employee benefits policies in effect as
of the date hereof.
6. REIMBURSEMENT OF BUSINESS EXPENSES. Parent will, in accordance with
Parent's policies in effect from time to time, reimburse Employee for all
reasonable business expenses incurred by Employee in connection with the
performance of Employee's duties under this Agreement, including, without
limitation, reasonable expenditures for office space, supplies, equipment and
expenses and for business entertainment and travel, upon submission of the
required documentation required pursuant to Parent's standard policies and
record keeping procedures.
7. CONFIDENTIALITY. Simultaneously with the execution of this Agreement,
Employee is executing and delivering and hereby adopts and agrees to be bound by
Parent's standard Proprietary Information and
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Inventions Agreement, a copy of which is attached to this Agreement as
Attachment A (the "Proprietary Information Agreement") and deemed a part of this
Agreement for the purposes hereof.
8. TERMINATION.
(a) BY PARENT WITHOUT CAUSE. Parent may terminate Employee's employment
at will, at any time without cause upon written notice to Employee.
(b) BY PARENT WITH CAUSE. Parent may terminate Employee's employment at
any time for "cause" upon written notice to Employee.
(c) BY EMPLOYEE FOR GOOD REASON. Employee may terminate Employee's
employment at any time for Good Reason upon written notice to Parent.
(d) BY EMPLOYEE FOR OTHER REASONS. Employee may terminate Employee's
employment at any time for any reason other than as set forth in Section 8(c)
upon written notice to Parent.
(e) DEFINITION OF "CAUSE". As used in Section 8(b) of this Agreement,
the term "cause" shall mean:
(i) Employee personally engaging in knowing and intentional illegal
conduct that is seriously injurious to Parent or the Company;
(ii) Employee being convicted of a felony, or committing an act of
dishonesty or fraud against, or theft of property belonging to, Parent or
its affiliates;
(iii) Employee knowingly and intentionally breaching in a material and
substantial respect the terms of the Proprietary Information Agreement or
the terms of this Agreement, which breach continues uncured for 30 days
following notice thereof; or
(iv) Employee's commencement of full-time employment with another
employer while employed by Parent.
(f) DEFINITION OF "GOOD REASON". As used in Section 8(c) of this
Agreement, the term "Good Reason" shall mean:
(i) a material and permanent reduction in Employee's duties from
those initially established in connection with Employee's position described
in Section 2 hereof; or
(ii) the relocation of Employee to an office that is more than
thirty-seven and one half (37.5) miles away from the Company's office at
which the Employee was based immediately prior to the execution hereof,
without the Employee's consent, provided however that required business
travel consistent with the Employee's position described in Section 2 hereof
without such a relocation shall not constitute Good Reason.
(g) TERMINATION PAYMENTS. Upon termination of Employee's employment
pursuant to Section 8(a) or 8(c), Parent will continue to pay Employee on a
monthly basis and at a monthly rate based on Employee's annualized base salary
at the time of termination, for the period beginning on the date of such
termination and continuing for a period of six (6) months thereafter (the
"Severance Period"), regardless of whether Employee has found new employment
(the "TERMINATION PAYMENTS"), subject to applicable tax withholding. Parent's
obligation to make the Termination Payments pursuant to this Section 8(g) is in
lieu of any damages or any other payment or benefits, if any, that Parent might
otherwise be obligated to pay Employee as a result of Employee's termination of
employment. Parent and Employee agree that, in view of the nature of the issues
likely to arise in the event of such a termination, it would be impracticable or
extremely difficult to fix the actual damages resulting from such termination,
and proving actual damages, causation and foreseeability in the case of such
termination would be costly, inconvenient and difficult. In requiring Parent to
make the Termination Payments as set forth herein, it is the intent of the
parties to provide, as of the date of this Agreement, for a liquidated amount of
damages to be paid by Parent to
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Employee. Such liquidated amount shall be deemed full and adequate damages for
such termination and is not intended by either party to be a penalty.
(h) CONTINUED BENEFITS. Upon termination of Employee's employment
pursuant to Section 8(a) or 8(c), Parent will continue to pay for Employee's
health and medical benefits to Employee to the extent that Parent is required to
continue making such benefits available to former employees under the
Consolidated Omnibus Budget Reconciliation Act of 1985, as amended, for the
period beginning on the date of such termination and continuing until the
earlier of (i) the last day of the Severance Period or (ii) Employee's
commencement of full-time employment with another employer.
(i) UPON DEATH. If Employee dies during (i) the term of this Agreement
or (ii) the Severance Period, Parent will pay Employee's estate an amount equal
to all salary, bonuses and benefits accrued as of the date of Employee's death.
(j) SURVIVAL. Employee's and Parent's obligations under Sections 5, 6,
7, 8 and 9(i) of this Agreement will survive the termination of Employee's
employment by Parent.
9. MISCELLANEOUS.
(a) NOTICES. Any and all notices permitted or required to be given
under this Agreement must be in writing. Notices will be deemed given (i) when
personally received or when sent by facsimile transmission (to the receiving
party's facsimile number), (ii) on the first business day after having been sent
by commercial overnight courier with written verification of receipt, or (iii)
on the third business day after having been sent by registered or certified mail
from a location on the United States mainland, return receipt requested, postage
prepaid, whichever occurs first, at the address set forth below or at any new
address, notice of which will have been given in accordance with this Section
9(a):
If to Parent: CENTURA SOFTWARE CORPORATION
1060 Marsh Road
Menlo Park, CA 94025
Attn: President
If to Employee: c/o INFOSPINNER, INC.
1222 E. Arapaho Road
Suite 320
Richardson, TX 75081
Attn: ((Name))
(b) AMENDMENTS. This Agreement, including the Exhibits hereto, contains
the entire agreement and supersedes and replaces all prior agreements between
Parent and Employee or Company and Employee concerning Employee's employment.
This Agreement may not be changed or modified in whole or in part except by a
writing signed by the party against whom enforcement of the change or
modification is sought.
(c) SUCCESSORS AND ASSIGNS. This Agreement will not be assignable by
either Employee or Parent, except that the rights and obligations of Parent
under this Agreement may be assigned to a corporation which becomes the
successor to Parent as the result of a merger or other corporate reorganization
and which continues the business of Parent, or any subsidiary of Parent,
provided that Parent guarantees the performance by such subsidiary of Parent's
obligations hereunder.
(d) GOVERNING LAW. This Agreement will be governed by and interpreted
according to the substantive laws of the State of California without regard to
such state's conflicts law.
(e) NO WAIVER. The failure of either party to insist on strict
compliance with any of the terms of this Agreement in any instance or instances
will not be deemed to be a waiver of any term of this
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Agreement or of that party's right to require strict compliance with the terms
of this Agreement in any other instance.
(f) SEVERABILITY. Employee and Parent recognize that the limitations
contained herein are reasonably and properly required for the adequate
protection of the interests of Parent. If for any reason a court of competent
jurisdiction or binding arbitration proceeding finds any provision of this
Agreement, or the application thereof, to be unenforceable, the remaining
provisions of this Agreement will be interpreted so as best to reasonably effect
the intent of the parties. The parties further agree that the court or
arbitrator shall replace any such invalid or unenforceable provisions with valid
and enforceable provisions designed to achieve, to the extent possible, the
business purposes and intent of such unenforceable provisions.
(g) COUNTERPARTS. This Agreement may be executed in counterparts which
when taken together will constitute one instrument. Any copy of this Agreement
with the original signatures of all parties appended will constitute an
original.
(h) EFFECT OF AGREEMENT. This Agreement will be void and have no effect
if the Effective Date does not occur on or before April 30, 1997.
(i) DISPUTE RESOLUTION; PAYMENT OF COSTS. In the event that a dispute
between Parent and Employee arises under this Agreement resulting in legal
action between the parties, all costs and expenses, including reasonable
expenses of attorneys, accountants and other professionals, incurred by the
prevailing party shall be borne by the losing party.
IN WITNESS WHEREOF, this Agreement is made and effective as of the Effective
Date.
<TABLE>
<S> <C>
CENTURA SOFTWARE CORPORATION EMPLOYEE
By:
Name: ((Name))
Title:
</TABLE>
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<TABLE>
<CAPTION>
LIST OF
EXHIBITS:
- ----------------
<S> <C>
Attachment A Proprietary Information Agreement
</TABLE>
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ATTACHMENT A
PROPRIETARY INFORMATION AGREEMENT
AB-7
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EXHIBIT C
ESCROW AGREEMENT
This ESCROW AGREEMENT (the "Agreement") is entered into as of ,
1997, by and among Centura Software Corporation, a California corporation (the
"Parent"), InfoSpinner, Inc., a Delaware corporation (the "Company"), the
stockholders (collectively, the "Holders") of Company listed in ATTACHMENT A
hereto, a committee (the "Committee) of Keith A. Lowery and Robert West as
representatives of the Holders (collectively, the "Agent") and Chemical Trust
Company of California, a California corporation (the "Escrow Agent").
RECITALS
A. The Parent, IS Acquisition Corp., a Delaware corporation (the "Merger
Sub") and the Company have entered into an Agreement and Plan of Reorganization
dated as of January , 1997 (the "Reorganization Agreement"), as amended,
pursuant to which Parent will acquire the Company through the statutory merger
of Merger Sub with and into the Company (the "Merger").
B. The Reorganization Agreement provides that the escrow fund provided for
hereby will secure the indemnification obligations to the Parent and Merger Sub
under the Reorganization Agreement, on the terms and conditions set forth
herein.
C. Pursuant to the Merger, among other things, the shares of outstanding
capital stock of the Company are to be converted into shares of capital stock of
Parent.
D. Pursuant to the Reorganization Agreement, a portion of the shares of
Parent Common Stock to be received by the stockholders of the Company in
exchange for their Company Stock is to be deposited into the escrow fund
provided for hereby.
E. The parties hereto desire to establish the terms and conditions pursuant
to which such escrow fund will be established and maintained.
NOW, THEREFORE, the parties hereto hereby agree as follows:
1. DEFINED TERMS. Capitalized terms used in this Agreement and not
otherwise defined shall have the meanings given them in the Reorganization
Agreement.
2. CONSENT OF COMPANY STOCKHOLDERS. By virtue of the approval by the
stockholders of the Company prior to the Effective Time ("Company Stockholders")
of the Reorganization Agreement, the Company Stockholders have, without any
further act of any Company Stockholder, consented to: (a) the establishment of
the Escrow Fund (as defined below) to secure the indemnification obligations of
the Company and the Company Stockholders under Article VII of the Reorganization
Agreement in the manner set forth therein, (b) the appointment of the Agent as
their representative for purposes of this Agreement and as attorney-in-fact and
agent for and on behalf of each Company Stockholder with respect to the subject
matter hereof, and the taking by the Agent of any and all actions and the making
of any decisions required or permitted to be taken or made by them under this
Agreement and (c) all of the other terms, conditions and limitations set forth
in this Agreement.
3. ESCROW AND INDEMNIFICATION.
(a) ESCROW FUND. On the Closing Date, the Parent shall deposit with the
Escrow Agent, a stock certificate or certificates representing the number of
shares of Parent Common Stock equal to the Escrow Number as provided by Section
1.6(h) of the Reorganization Agreement (the "Initial Escrow Shares"). In
addition, from time to time thereafter, the Parent shall deposit with the Escrow
Agent, additional amounts of New Shares (together with the Initial Escrow
Shares, the "Escrow Shares") subject to and in accordance with Section 7.2(c) of
the Reorganization Agreement. Such Escrow Shares are referred to herein as the
"Escrow Fund." The Escrow Fund shall consist of ten percent (10%) of the shares
of Parent Common Stock that each holder of Company Common Stock and Company
Preferred Stock is entitled to receive in
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the Merger pursuant to Section 1.6 of the Merger Agreement. Schedule A hereto
sets forth the name of each holder of Company Common Stock and Company Preferred
Stock immediately prior to the Merger and the number of shares each such
stockholder contributed to the Escrow Fund pursuant to Section 7.2 of the
Reorganization Agreement. Each stock certificate representing Escrow Shares
shall be registered in the name of the Company Stockholders who contributed such
shares to the Escrow Fund, but the Escrow Shares shall be held in Escrow by the
Escrow Agreement. The value of the shares as determined in accordance with
Section 4(b)(ii) below contributed by each stockholder divided by the aggregate
value of the shares as determined in accordance with Section 4(b)(ii) below
contributed by all Company Stockholders to the Escrow Fund shall be each such
stockholder's "proportionate interest" in the Escrow Shares. The Escrow Fund
shall be held as a trust fund and shall not be subject to any lien, attachment,
trustee process or any other judicial process of any creditor of any party
hereto. The Escrow Agent agrees to accept delivery of the Escrow Fund and to
hold such Escrow Fund in escrow subject to the terms and conditions of this
Agreement and Article VII of the Reorganization Agreement.
(b) INDEMNIFICATION. The Company and the Company Stockholders have
agreed in Article VII of the Reorganization Agreement to indemnify and hold
harmless the Parent and its affiliates from and against specified Losses. The
Escrow Fund shall be security for this indemnity obligation of the Company,
subject to the limitations, and in the manner provided, in this Agreement and
the Reorganization Agreement.
4. ADMINISTRATION OF ESCROW FUND. The Escrow Agent shall administer the
Escrow Fund as follows:
(a) The Escrow Agent shall hold and safeguard the Escrow Fund during
the Escrow Period, shall treat such fund as a trust fund in accordance with the
terms of this Agreement and Article VII of the Reorganization Agreement and not
as the property of Parent and shall hold and dispose of the Escrow Fund only in
accordance with the terms hereof.
(b) (i) Upon receipt by the Escrow Agent at any time on or before the
last day of the Escrow Period of a certificate signed by any officer of Parent
(an "Officer's Certificate"):
A. stating that Parent has paid or reasonably anticipates that it
will have to pay or incur Losses which on a cumulative basis with all
prior Losses exceed $250,000, and
B. specifying in reasonable detail the individual items of Losses
included in the amount so stated, the date each such item was paid or
incurred, or the basis for such anticipated liability, and the nature of
the misrepresentation, breach of warranty or claim to which such item is
related, the Escrow Agent shall, subject to the provisions of Section
4(c) hereof, deliver to Parent out of the Escrow Fund, as promptly as
practicable, shares of Parent Common Stock or other assets held in the
Escrow Fund in an amount equal to such Losses.
(ii) For the purposes of determining the number of shares of Parent
Common Stock to be delivered to Parent out of the Escrow Fund pursuant to
Section 4(b)(i), the shares of Parent Common Stock shall be valued at the
average of the closing sale prices of Parent Common Stock reported in the
WALL STREET JOURNAL, on the basis of information provided by the Nasdaq
National Market during the thirty (30) day period ending three days prior
to (but not including) the Effective Time of the Reorganization
Agreement.
(c) OBJECTIONS TO CLAIMS. At the time of delivery of any Officer's
Certificate to the Escrow Agent, a duplicate copy of such certificate shall be
delivered to the Agent and for a period of thirty (30) days after receipt of the
Officer's Certificate, the Escrow Agent shall make no delivery to Parent from
the Escrow Fund pursuant to Section 4(b) hereof unless the Escrow Agent shall
have received written authorization from the Agent to make such delivery. After
the expiration of such thirty (30) day period, the Escrow Agent shall make
delivery from the Escrow Fund in accordance with Section 4(b) hereof, provided
that no such payment or delivery may be made if the Agent shall object in a
written statement to the claim made in the Officer's Certificate, and such
statement shall have been delivered to the Escrow Agent prior to the expiration
of such thirty (30) day period.
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(d) RESOLUTION OF CONFLICTS; ARBITRATION.
(i) In case the Agent shall so object in writing to any claim or
claims made in any Officer's Certificate, the Agent and Parent shall attempt in
good faith to agree upon the rights of the respective parties with respect to
each of such claims. If the Agent and Parent should so agree, a memorandum
setting forth such agreement shall be prepared and signed by both parties and
shall be furnished to the Escrow Agent. The Escrow Agent shall be entitled to
rely on any such memorandum and distribute shares of Parent Common Stock or
other property from the Escrow Fund in accordance with the terms thereof.
(ii) If no such agreement can be reached after good faith negotiation,
either Parent or the Agent may demand arbitration of the matter unless the
amount of the damage or loss is at issue in pending litigation with a third
party, in which event arbitration shall not be commenced until such amount is
ascertained or both parties agree to arbitration; and in either such event the
matter shall be finally settled by binding arbitration in Palo Alto, California
in accordance with the then current Commercial Arbitration Rules of the American
Arbitration Association (the "AAA") or such other mediation or arbitration
service as shall be mutually agreeable to the parties, and judgment upon the
award rendered by the arbitrator shall be final and binding on the parties and
may be entered in any court having jurisdiction thereof; PROVIDED, HOWEVER, that
any party shall be entitled to appeal a question of law or determination of law
to a court of competent jurisdiction; and provided, further, however, that the
parties may first seek appropriate injunctive relief prior to, and/or in
addition to, pursuing negotiation or arbitration. Parent and the Agent shall
each select one arbitrator, and the two arbitrators so selected shall select a
third arbitrator. There shall be limited discovery prior to the arbitration
hearing as follows: (a) exchange of witness lists and copies of documentary
evidence and documents related to or arising out of the issues to be arbitrated,
(b) depositions of all party witnesses, and (c) such other depositions as may be
allowed by the arbitrators upon a showing of good cause. Depositions shall be
conducted in accordance with the California Code of Civil Procedure and
questions of evidence in any hearings shall be resolved in accordance with the
Federal Rules of Evidence. A court reporter shall record all hearings (unless
otherwise agreed to by the parties), with such record constituting the official
transcript of such proceedings. The decision of a majority of the three
arbitrators as to the validity and amount of any claim in such Officer's
Certificate shall be binding and conclusive upon the parties to this Agreement,
and notwithstanding anything in Section 4(c) hereof, the Escrow Agent shall be
entitled to act in accordance with such decision and make or withhold payments
out of the Escrow Fund in accordance therewith. Such decision shall be written
and shall be supported by written findings of fact and conclusions which shall
set forth the award, judgment, decree or order awarded by the arbitrators.
(iii) For purposes of this Section 4(d), in any arbitration hereunder
in which any claim or the amount thereof stated in the Officer's Certificate is
at issue, the Non-Prevailing Party will be that party who may be fairly said by
the arbitrators to have not prevailed on the major disputed issues. The Non-
Prevailing Party to an arbitration shall pay its own expenses, the fees of each
arbitrator, the administrative fee of the American Arbitration Association, and
the expenses, including without limitation, reasonable attorneys' fees and
costs, incurred by the other party to the arbitration.
5. THIRD-PARTY CLAIMS.
(a) If any third party shall notify Parent or its affiliates hereto
with respect to any matter (hereinafter referred to as a "Third Party Claim"),
which may give rise to a claim by Parent against the Escrow Fund, then Parent
shall give notice to the Agent within 30 days of Parent becoming aware of any
such Third Party Claim or of facts upon which any such Third Party Claim will be
based setting forth such material information with respect to the Third Party
Claim as is reasonably available to Parent; PROVIDED, HOWEVER, that no delay or
failure on the part of Parent in notifying the Agent shall relieve the Agent and
the Company Stockholders from any obligation hereunder unless the Agent and the
Company Stockholders are thereby materially prejudiced (and then solely to the
extent of such prejudice). The Agent and the Company Stockholders shall not be
liable for any attorneys fees and expenses incurred by Parent prior to Parent's
giving notice to the Agent of a Third Party Claim. The notice from Parent to the
Agent shall set
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forth such material information with respect to the Third Party Claim as is then
reasonably available to Parent.
(b) In case any Third Party Claim is asserted against Parent or its
affiliates, and Parent notifies the Agent thereof pursuant to Section 5(a)
hereinabove, the Agent and the Company Stockholders will be entitled, if Agent
so elects by written notice delivered to Parent within 30 days after receiving
Parent's notice, to assume the defense thereof with counsel reasonably
satisfactory to Parent so long as:
(1) Parent has reasonably determined that Losses which may be
incurred as a result of the Third Party Claim do not exceed
either individually, or when aggregated with all other Third
Party Claims, the total dollar value of the Escrow Fund
determined in accordance with Section 4(b)(ii) hereof;
(2) the Third Party Claim involves only money damages and does not
seek an injunction or other equitable relief; and
(3) settlement of, or an adverse judgment with respect to, the
Third Party Claim is not, in the good faith judgment of Parent,
likely to establish a precedential custom or practice adverse
to the continuing business interests of Parent which could have
a material adverse effect on the business or operations of
Parent.
If the Agent and the Company Stockholders so assume any such defense, the
Agent and the Company Stockholders shall conduct the defense of the Third Party
Claim actively and diligently. The Agent and the Company Stockholders shall not
compromise or settle such Third Party Claim or consent to entry of any judgment
in respect thereof without the prior written consent of Parent and/or its
affiliates, as applicable, which consent shall not be unreasonably withheld,
provided, however, Parent and/or its affiliates shall be deemed to have
reasonably withheld such consent if such settlement, compromise, or consent does
not include as an unconditional term thereof the giving by the claimant or the
plaintiff to Parent and its affiliates of a release from all liability in
respect of the Third Party Claim.
(c) In the event that the Agent assumes the defense of the Third Party
Claim in accordance with Section 5(b) above, Parent or its affiliates may retain
separate counsel and participate in the defense of the Third Party Claim, but
the fees and expenses of such counsel shall be at the expense of Parent unless
Parent or its affiliates shall reasonably determine that there is a material
conflict of interest between or among Parent or its affiliates and the Agent and
the Company Stockholders with respect to such Third Party Claim, in which case
the reasonable fees and expenses of such counsel will be borne by the Agent and
the Company Stockholders out of the Escrow Fund. Parent or its affiliates will
not consent to the entry of any judgment or enter into any settlement with
respect to the Third Party Claim without the prior written consent of the Agent.
Parent will cooperate in the defense of the Third Party Claim and will provide
full access to documents, assets, properties, books and records reasonably
requested by Agent and material to the claim and will make available all
officers, directors and employees reasonably requested by Agent for
investigation, depositions and trial.
(d) In the event that the Agent fails or elects not to assume the
defense of Parent or its affiliates against such Third Party Claim, which Agent
had the right to assume under Section 5(b) above, (i) Parent or its affiliates
shall have the right to undertake the defense and (ii) Parent shall not
compromise or settle such Third Party Claim or consent to entry of any judgment
in respect thereof without the prior written consent of Agent, which consent
shall not be unreasonably withheld. In the event that the Agent is not entitled
to assume the defense of Parent or its affiliates against such Third Party Claim
pursuant to Section 5(b) above, Parent or its affiliates shall have the right to
undertake the defense, consent to the entry of any judgment or enter into any
settlement with respect to the Third Party Claim in any manner it may deem
appropriate (and Parent or its affiliates need not consult with, or obtain any
consent from, the Agent or the Company Stockholders in connection therewith);
provided, however, that except with the written consent of the Agent, no
settlement of any such claim or consent to the entry of any judgment with
respect to such Third Party Claim shall alone be determinative of the validity
of the claim against the Escrow Fund. In each case, Parent or its affiliates
shall conduct the defense of the Third party Claim
AC-4
<PAGE>
actively and diligently, and the Agent and the Company Stockholders will
cooperate with Parent or its affiliates in the defense of that claim and will
provide full access to documents, assets, properties, books and records
reasonably requested by Parent and material to the claim and will make available
all individuals reasonably requested by Parent for investigation, depositions
and trial.
6. RELEASE OF ESCROW FUND. Subject to the following requirements, the
Escrow Fund shall remain in existence until the earlier of (i) one year
following the Closing of the Merger and (ii) the 1997 Combined Financials Date
(the "Escrow Period"). Upon the expiration of such Escrow Period, the Escrow
Fund shall terminate with respect to all Escrow Shares, and all such Escrow
Shares shall be delivered to the Company Stockholders upon receipt by the Escrow
Agent of written directions or instructions; provided, however, that the number
of Escrow Shares, which, in the reasonable judgment of Parent, subject to the
objection of the Agent and the subsequent arbitration of the matter in the
manner provided in Section 4 hereof, are necessary to satisfy any unsatisfied
claims specified in any Officer's Certificate delivered to the Escrow Agent
prior to the expiration of such Escrow Period with respect to facts and
circumstances existing on or prior to the 1997 Combined Financials Date shall
remain in the Escrow Fund (and the Escrow Fund shall remain in existence) until
such claims have been resolved. As soon as all such claims have been resolved,
the Escrow Agent shall deliver to the Company Stockholders all Parent Common
Stock and other property remaining in the Escrow Fund and not required to
satisfy such claims. Deliveries of Parent Common Stock and other property to the
Company Stockholders pursuant to this Section 6 shall be made in accordance with
each Company Stockholder's proportionate interest in the Escrow Shares.
7. AGENT OF THE STOCKHOLDERS.
(a) The Agent may be changed by the Company Stockholders from time to
time upon not less than ten (10) days prior written notice to Parent; provided
that the Agent may not be removed unless holders of a majority in interest of
the Escrow Fund agree to such removal and to the identity of the substituted
agent. No bond shall be required of the Agent, and the Agent shall not receive
compensation for his or her services. Notices or communications to or from the
Agent shall constitute notice to or from each of the Company Stockholders. The
Agent shall be entitled to submit a claim and receive reimbursement from the
Escrow Fund for all reasonable, documented out-of-pocket expenses incurred by
the Agent as a result of his acting as the Agent; provided, however, that such
right to reimbursement shall be subordinate to Parent's claims on the Escrow, if
any, and shall be paid only after all such claims have been satisfied. Any such
reimbursement shall be paid in shares of Parent Common Stock out of the Escrow
Fund. For purposes of such reimbursement of the Agent only, such shares shall be
valued at the average of the closing prices of Parent Common Stock Time as
quoted on the Nasdaq National Market and as reported in THE WALL STREET JOURNAL
for the ten trading days ending on the fifth day prior to the date the Escrow
Agent pays such reimbursement amount. The Escrow Agent shall be provided with
written directions or instructions for such reimbursement.
(b) The Agent shall not be liable for any act done or omitted hereunder
as Agent while acting in good faith and in the exercise of reasonable judgment.
The Company Stockholders on whose behalf shares of Parent Common Stock were
contributed to the Escrow Fund shall severally indemnify the Agent and hold the
Agent harmless against any loss, liability or expense incurred without gross
negligence or bad faith on the part of the Agent and arising out of or in
connection with the acceptance or administration of the Agent's duties
hereunder, including the reasonable fees and expenses of any legal counsel
retained by the Agent.
(c) The Agent shall act by vote or written action or consent of a
majority of the members of the Committee. A decision, act, consent or
instruction of the Agent shall constitute a decision of all Company Stockholders
and shall be final, binding and conclusive upon each of such stockholders, and
the Escrow Agent and Parent may rely upon any such decision, act, consent or
instruction of the Agent as being the decision, act, consent or instruction of
each and every such Company Stockholder. The Escrow Agent and Parent are hereby
relieved from any liability to any person for any acts done by them in
accordance with such decision, act, consent or instruction of the Agent.
AC-5
<PAGE>
8. ESCROW AGENT'S DUTIES. The Escrow Agent undertakes to perform only such
duties as are expressly set forth herein.
(a) The Escrow Agent may rely on and shall be protected in acting or
refraining from acting upon any written notice, instruction or request furnished
to it hereunder and believed by it to be genuine and to have been signed or
presented by the party or parties. The Escrow Agent shall be under no duty to
inquire into or investigate the validity, accuracy or content of any such
document. The Escrow Agent shall have no duty to solicit any payments which may
be due it hereunder.
(b) The Escrow Agent shall not be liable for any action taken or
omitted by it in good faith unless a court of competent jurisdiction determines
that the Escrow Agent's willful misconduct was the primary cause of any loss to
Parent or the Company Stockholders. In the administration of the escrow account
hereunder, the Escrow Agent may execute any of its powers and perform its duties
hereunder directly or through agents or attorneys and may consult with counsel,
accountants and other skilled persons to be selected and retained by it. The
Escrow Agent shall not be liable for anything done, suffered or omitted in good
faith by it in accordance with the advice or opinion of any such counsel,
accountants or other skilled persons.
(c) The Escrow Agent may resign and be discharged from its duties or
obligations hereunder by giving notice in writing of such resignation specifying
a date when such resignation shall take effect. The Escrow Agent shall have the
right to withhold an amount equal to the amount due and owing to the Escrow
Agent, plus any costs and expenses the Escrow Agent shall reasonably believe may
be incurred by the Escrow Agent in connection with the termination of the Escrow
Agreement.
(d) In the event that the Escrow Agent shall be uncertain as to its
duties or rights hereunder or shall receive instructions, claims or demands from
any party hereto which, in its opinion, conflict with any of the provisions of
this Agreement, it shall be entitled to refrain from taking any action and its
sole obligation shall be to keep safely all property held in escrow until it
shall be directed otherwise in writing by all of the other parties hereto or by
a final order or judgment of a court of competent jurisdiction.
(e) Parent and the Company Stockholders hereby agree to jointly and
severally indemnify the Escrow Agent for, and to hold it harmless against any
loss, liability or expense arising out of or in connection with the Agreement
and carrying out its duties hereunder, including the costs and expenses of
defending itself against any claim of liability, except in those cases where the
Escrow Agent has been guilty of gross negligence or willful misconduct. Anything
in this agreement to the contrary notwithstanding, in no event shall the Escrow
Agent be liable for special, indirect or consequential loss or damage of any
kind whatsoever (including but not limited to lost profits), even if the Escrow
Agent has been advised of the likelihood of such loss or damage and regardless
of the form of action.
(f) Each party hereto, except the Escrow Agent, shall, in the notice
section of this agreement, provide the Escrow Agent with their Tax
Identification Number (TIN) as assigned by the Internal Revenue Service. All
interest or other income earned under the Escrow Agreement shall be allocated
and paid as provided herein and reported by the recipient to the Internal
Revenue Service as having been so allocated and paid.
(g) The duties and responsibilities of the Escrow Agent hereunder shall
be determined solely by the express provisions of this Escrow Agreement, and no
other or further duties or responsibilities shall be implied. The Escrow Agent
shall not have any liability under, nor duty to inquire into the terms and
provisions of any agreement or instructions, other than outlined in the
Agreement.
(h) The Escrow Agent shall not incur any liability for following the
instructions herein contained or expressly provided for, or written instructions
given by the parties hereto.
9. FEES, EXPENSES AND TAXES. Parent and the Company Stockholders hereby
agree to jointly and severally (i) pay the Escrow Agent upon execution of this
Agreement reasonable compensation for the services to be rendered hereunder, as
described in the Fee Schedule attached hereto, and (ii) pay or reimburse the
Escrow Agent upon request for all expenses, disbursement and advances, including
AC-6
<PAGE>
reasonable attorney's fees, incurred or made by it in connection with the
preparation, execution, performance, delivery modification and termination of
this Agreement. Taxes incurred with respect to the earnings of the Escrow Fund
and payments made hereunder shall be borne by the party to whom such earnings
are distributed (or to be distributed) or to whom such payment is made.
10. NOTICES. All notices and other communications hereunder shall be in
writing and shall be deemed given if delivered personally or by commercial
delivery service (return receipt requested), or mailed by registered or
certified mail (return receipt requested) or sent via telecopy (with facsimile
confirmation of delivery) to the parties at the following addresses (or at such
other address for a party as shall be specified by like notice) provided,
however, that notices sent by mail will not be deemed given until received and,
with respect to the Escrow Agent, such notices shall be deemed to have been
given on the date received by the Escrow Agent. In the event that the Escrow
Agent, in its sole discretion, shall determine that an emergency exists, the
Escrow Agent may use such other means of communications as the Escrow Agent
deems advisable.
If to the Parent or the Merger Sub:
Centura Software Corporation (TIN #94-2874178)
1060 Marsh Road
Menlo Park, CA 94025
Attention: President
Telephone Number: (415) 321-9500
Facsimile Number: (415) 617-4681
with a copy to:
Venture Law Group, A Professional Corporation
2800 Sand Hill Road
Menlo Park, CA 94025
Attention: Mark A. Medearis, Esq.
Telephone Number: (415) 854-4488
Facsimile Number: (415) 854-1121
If to the Company:
InfoSpinner, Inc. (TIN #75-2621295)
1222 E. Arapaho Road
Suite 320
Richardson, TX 75081
Attention: Keith Lowery
Telephone Number: (972) 479-0135
Facsimile Number: (972) 479-0137
with a copy to:
Gunderson Dettmer Stough Villeneuve
Franklin & Hachigian, LLP
155 Constitution Drive
Menlo Park, CA 94025
Attention: Scott Dettmer, Esq.
Telephone Number: (415) 321-2400
Facsimile Number: (415) 321-2800
AC-7
<PAGE>
If to the Agent:
Robert L. West
19920 Buckhaven Lane
Saratoga, CA 95070
Telephone Number: (408) 741-1873
Facsimile Number: (408) 867-1503
If to the Escrow Agent:
Chemical Trust Company of California
101 California Street
Suite 2725
San Francisco, CA 94111
Attn: Corporate Trust Department
Telephone Number: (415) 954-9561
Facsimile Number: (415) 693-8850
11. GENERAL.
(a) GOVERNING LAW, ASSIGNS. This Agreement shall be governed in all
respects, including validity, interpretation and effect, by the laws of the
State of California without regard to its principles of conflicts of laws and
any action brought hereunder shall be brought in the courts of the State of
California. Each party hereto irrevocably waives any objection on the grounds of
venue, forum non-conveniens or any similar grounds and irrevocably consents to
service of process by mail or in any other manner permitted by applicable law
and consents to the jurisdiction of said courts. All parties hereto further
agree that service of documents commencing any suit therein may be made as
provided in Section 10. This Agreement shall be binding upon, and inure to the
benefit of, the parties hereto and their respective successors and assigns. Any
corporation into which the Escrow Agent in its individual capacity may be merged
or converted or with which it may be consolidated, or any corporation resulting
from any merger, conversion or consolidation to which the Escrow Agent in its
individual capacity shall be a party, or any corporation to which substantially
all the corporate trust business of the Escrow Agent in its individual capacity
may be transferred, shall be the Escrow Agent under this Escrow Agreement
without further act.
(b) COUNTERPARTS. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other party, it being understood that all
parties need not sign the same counterpart.
(c) ENTIRE AGREEMENT. Except as set forth in Article VII of the
Reorganization Agreement, this Agreement constitutes the entire understanding
and agreement of the parties with respect to the subject matter of this
Agreement and supersedes all prior agreement or understandings, written or oral,
between the parties with respect to the subject matter hereof.
(d) WAIVERS. No waiver by any party hereto of any condition or of any
breach of any provision of this Escrow Agreement shall be effective unless in
writing. No waiver by any party of any such condition or breach, in any one
instance, shall be deemed to be a further or continuing waiver of any such
condition or breach or a waiver of any other condition or breach of any other
provision contained herein.
(e) AMENDMENT. This Agreement may be amended only with the written
consent of the Parent, the Merger Sub, the Escrow Agent and the Agent.
AC-8
<PAGE>
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the
day and year first above written.
<TABLE>
<S> <C>
CENTURA SOFTWARE CORPORATION
By: ----------------------------------------
Name: -------------------------------------
Title: --------------------------------------
INFOSPINNER, INC.
By: ----------------------------------------
Name: -------------------------------------
Title: --------------------------------------
CHEMICAL TRUST COMPANY
By: ----------------------------------------
Name: -------------------------------------
Title: --------------------------------------
AGENT
By: ----------------------------------------
By: ----------------------------------------
By: ----------------------------------------
</TABLE>
SIGNATURE PAGE TO ESCROW AGREEMENT
AC-9
<PAGE>
FEE SCHEDULE
ANNUAL ESCROW FEE
$2,000 per annum administrative fee.
$25 per claim.
$15 per wire transfer.
Covers the performance of administrative duties defined in the Escrow
Agreement, periodic statements of account showing transaction activity and
assets held.
INVESTMENT TRANSACTION FEE (IF APPLICABLE)
A per transaction charge to cover the purchase and sale of investments held
in account under administration.
EXTRAORDINARY ADMINISTRATIVE EXPENSES
Fees for services not specifically set forth in this schedule will be
determined by appraisal. Such services may include, but are not limited to,
additional responsibilities and services incurred in case of default.
OUT OF POCKET EXPENSES
Out of pocket expenses such as counsel fees and expenses, telephone,
postage, insurance, shipping charges, outside investment charges and supplies
will be charged at cost.
AC-10
<PAGE>
EXHIBIT D
NONCOMPETITION AGREEMENT
This NONCOMPETITION AGREEMENT (this "AGREEMENT") is made as of the Effective
Date indicated below by and between Centura Software Corporation, a California
corporation ("PARENT"), and ((Name)) ("KEY EMPLOYEE").
BACKGROUND
This Agreement is entered into in connection with and is ancillary to an
Agreement and Plan of Reorganization (the "PLAN") dated as of January , 1997
among Parent, IS Acquisition Corporation, a Delaware corporation and wholly
owned subsidiary of Parent ("Merger Sub"), and InfoSpinner, Inc., a Delaware
corporation ("Company"), pursuant to which Merger Sub is to merge with and into
Company, Company will continue as the surviving corporation in the merger and
will become a wholly owned subsidiary of Parent, and the shares of Company
capital stock outstanding immediately prior to the effective time of the merger
will be converted into shares of Parent Common Stock, all as set forth in the
Plan (the "MERGER"). The date on which the Merger becomes effective will be the
effective date of this Agreement (the "EFFECTIVE DATE").
Key Employee is ((Title)) of Company and has been actively involved in the
development and/or marketing of Company's products. Company is engaged in the
Restricted Business, as defined below. Parent intends to continue the business
of Company after the Merger and integrate such business into Parent's ongoing
business as a subsidiary of Parent. To preserve and protect the assets of
Company, including Company's goodwill, customers and trade secrets of which Key
Employee has and will have knowledge in his or her role as an employee of Parent
and to preserve and protect Parent's goodwill and business interests going
forward, and in consideration for Parent's entering into and performing under
the Plan, Key Employee has agreed to enter into this Agreement. Parent and Key
Employee have entered into an Employment Agreement (the "EMPLOYMENT AGREEMENT")
concurrently with execution of this Agreement.
Key Employee and Parent believe the limitations as to time, geographical
area and scope of activity contained in this Agreement hereof are reasonably
necessary to, and no greater than that required to, protect the goodwill and
business interests of Company.
1. For a period ending on the earlier of (i) the third anniversary of the
Effective Date, (ii) the end of the Severance Period (as defined in the
Employment Agreement), if a Severance Period is initiated pursuant to the
Employment Agreement and the Severance Period ends prior to the third
anniversary of the Effective Date, (iii) the sale of all or substantially all of
the assets of Parent or the occurrence of any change in control of Parent due to
a merger, consolidation, tender offer or other corporate transaction in which
more than 50% of the voting power of Parent is transferred to a third party or
parties, or (iv) the last day of any consecutive sixty (60) day period (the
"MEASUREMENT PERIOD") during which the average closing sales price of Parent's
Common Stock as quoted on the Nasdaq National Market for such Measurement Period
is less than $2.50 per share, provided, however, that the last day of the
Measurement Period shall not be prior to a date which is eighteen (18) months
after the Effective Date, Key Employee will not (except to the extent permitted
in Section 3 of the Employment Agreement) individually or as an employee,
partner, officer, director or shareholder or in any other capacity whatsoever of
or for any person, firm, partnership, company or corporation other than Parent
or its subsidiaries:
(a) Own, manage, operate, sell, control or participate in the
ownership, management, operation, sales or control, be employed by or act as a
consultant, contractor or advisor to any business engaged in the geographical
areas referred to in Section 2 below that designs, researches, distributes,
develops, markets, sells, licenses or supports software (whether or not such
software is the principal product of such
AD-1
<PAGE>
business) that provides centralized application integration or management
software or any other software that manages or integrates applications,
structured or unstructured data (including, without limitation, software
currently known to constitute database or application servers) (the "Restricted
Business"); or
(b) Recruit, attempt to hire, solicit, assist others in recruiting or
hiring, or refer to others concerning employment, in or with respect to the
geographical areas referred to in Section 2 below, any person who is an employee
of Parent or any of its subsidiaries or induce or attempt to induce any such
employee to terminate such employee's employment with Parent or any of its
subsidiaries.
2. The geographical areas in which the restrictions provided for in this
Agreement apply include all cities, counties and states of the United States,
and all other countries in which Parent or Company has engaged in sales or
otherwise conducted business or selling or licensing efforts at any time during
the two years prior to the Effective Date hereof or during the term of this
Agreement. Key Employee acknowledges that the scope and period of restrictions
and the geographical area to which the restrictions imposed in this Section 2
applies are fair and reasonable and are reasonably required for the protection
of Parent and that this Agreement accurately describes the business to which the
restrictions are intended to apply.
3. It is the intent of the parties that the provisions of this Agreement
will be enforced to the fullest extent permissible under applicable law. If any
particular provision or portion of this Section is adjudicated to be invalid or
unenforceable, this Agreement will be deemed amended to revise that provision or
portion to the minimum extent necessary to render it enforceable. Such amendment
will apply only with respect to the operation of this paragraph in the
particular jurisdiction in which such adjudication was made.
4. Key Employee acknowledges that any breach of the covenants of this
Agreement will result in immediate and irreparable injury to Parent and,
accordingly, consents to the application of injunctive relief and such other
equitable remedies for the benefit of Parent as may be appropriate in the event
such a breach occurs or is threatened. The foregoing remedies will be in
addition to all other legal remedies to which Parent may be entitled hereunder,
including, without limitation, monetary damages.
5. MISCELLANEOUS.
(a) NOTICES. Any and all notices permitted or required to be given
under this Agreement must be in writing. Notices will be deemed given (i) when
personally received or when sent by facsimile transmission (to the receiving
party's facsimile number), (ii) on the first business day after having been sent
by commercial overnight courier with written verification of receipt, or (iii)
on the third business day after having been sent by registered or certified mail
from a location on the United States mainland, return receipt requested, postage
prepaid, whichever occurs first, at the address set forth below or at any new
address, notice of which will have been given in accordance with this Section
5(a):
If to Parent: CENTURA SOFTWARE CORPORATION
1060 Marsh Road
Menlo Park, CA 94025
Attn: President
If to Employee: c/o INFOSPINNER, INC.
1222 E. Arapaho Road
Suite 320
Richardson, TX 75081
Attn: ((Name))
(b) AMENDMENTS. This Agreement contains the entire agreement and
supersedes and replaces all prior agreements between Parent and Key Employee or
Company and Key Employee concerning the subject matter hereof. This Agreement
may not be changed or modified in whole or in part except by a writing signed by
the party against whom enforcement of the change or modification is sought.
AD-2
<PAGE>
(c) SUCCESSORS AND ASSIGNS. This Agreement will not be assignable by
either Key Employee or Parent, except that the rights and obligations of Parent
under this Agreement may be assigned to a corporation which becomes the
successor to Parent as the result of a merger or other corporate reorganization
and which continues the business of Parent, or any subsidiary of Parent,
provided that Parent guarantees the performance by such subsidiary of Parent's
obligations hereunder.
(d) GOVERNING LAW. This Agreement will be governed by and interpreted
according to the substantive laws of the State of California without regard to
such state's conflicts law.
(e) NO WAIVER. The failure of either party to insist on strict
compliance with any of the terms of this Agreement in any instance or instances
will not be deemed to be a waiver of any term of this Agreement or of that
party's right to require strict compliance with the terms of this Agreement in
any other instance.
(f) SEVERABILITY. Key Employee and Parent recognize that the
limitations contained herein are reasonably and properly required for the
adequate protection of the interests of Parent. If for any reason a court of
competent jurisdiction or binding arbitration proceeding finds any provision of
this Agreement, or the application thereof, to be unenforceable, the remaining
provisions of this Agreement will be interpreted so as best to reasonably effect
the intent of the parties. The parties further agree that the court or
arbitrator shall replace any such invalid or unenforceable provisions with valid
and enforceable provisions designed to achieve, to the extent possible, the
business purposes and intent of such unenforceable provisions.
(g) COUNTERPARTS. This Agreement may be executed in counterparts which
when taken together will constitute one instrument. Any copy of this Agreement
with the original signatures of all parties appended will constitute an
original.
(h) EFFECT OF AGREEMENT. This Agreement will be void and have no effect
if the Effective Date does not occur on or before April 30, 1997.
(i) DISPUTE RESOLUTION; PAYMENT OF COSTS. In the event that a dispute
between Parent and Employee arises under this Agreement resulting in legal
action between the parties, all costs and expenses, including reasonable
expenses of attorneys, accountants and other professionals, incurred by the
prevailing party shall be borne by the losing party.
IN WITNESS WHEREOF, this Agreement is made and effective as of the Effective
Date.
<TABLE>
<S> <C>
CENTURA SOFTWARE CORPORATION KEY EMPLOYEE
By: ----------------------------------------
--------------------------------------------
Name: ------------------------------------- ((Name))
Title: --------------------------------------
</TABLE>
AD-3
<PAGE>
EXHIBIT E
___________, 1997
[Target]
[Address]
Ladies and Gentlemen:
Reference is made to that certain Agreement and Plan of Reorganization dated
as of ___________, 1997, (the "Reorganization Agreement"), complete with all
listed exhibits thereto, by and among ____________, a California corporation
("Acquiror"), ____ Acquisition Corp., a Delaware corporation and wholly-owned
subsidiary of Acquiror ("Sub"), and ____________, a Delaware corporation
("Target"), the Certificate of Merger to be filed with the Secretary of State of
the State of Delaware (the "Certificate of Merger") and that certain Escrow
Agreement between Acquiror, Target, a committee of ____________ and
____________, and Chemical Trust Company of California dated ___________, 1997
(the "Escrow Agreement," and, collectively with the Reorganization Agreement,
the "Agreements"). The Reorganization Agreement provides for the merger of Sub
into Target (the "Merger"). This opinion is rendered to you pursuant to Section
6.2(c) of the Reorganization Agreement, and all terms used herein have the
meanings defined for them in the Reorganization Agreement unless otherwise
defined herein.
We have acted as counsel for Acquiror and Sub in connection with the
negotiation of the Merger and related transactions contemplated by the
Agreements. As such counsel, we have made such legal and factual examinations
and inquiries as we have deemed advisable or necessary for the purpose of
rendering this opinion. We have relied on the accuracy of the representations
and warranties as to factual matters by all of the parties contained in the
Agreements, as well as the truth and accuracy of all of the representations and
warranties as to factual matters made by Acquiror in the Officers' Certificate
dated as of the date hereof delivered pursuant to Section 6.2(b) of the
Reorganization Agreement and the Certificate of Secretary of Acquiror dated as
of the date hereof (collectively, the "Acquiror Certificates"); by Sub in the
Certificate of Secretary of Sub dated as of the date hereof; and by Target in
the Officers' Certificate dated as of the date hereof delivered pursuant to
Section 6.3(b) of the Reorganization Agreement and the Certificate of Secretary
of Target dated as of the date hereof in connection with the Merger and this
opinion. In addition, we have examined, among other things, originals or copies
of such corporate records of Acquiror and Sub, certificates of public officials
and of officers of Acquiror and such other documents that we consider necessary
or advisable for the purpose of rendering this opinion. In such examination, we
have assumed the genuineness of all signatures on original documents, the
authenticity of all documents submitted to us as originals, the conformity to
original documents of all copies submitted to us as copies thereof, the legal
capacity of natural persons, and the due execution and delivery of all documents
(except for the due execution and delivery of the Agreements by Acquiror and
Sub) where due execution and delivery are a prerequisite to the effectiveness
thereof. We have made no independent examination of any of the statements
contained in the Acquiror Certificates given by officers or representatives of
Acquiror or Sub in connection with the Merger or this opinion.
Statements based on our knowledge in this letter are limited to the actual
knowledge of individual attorneys within the firm principally responsible for
handling current matters for Acquiror and/or Sub. To the extent that the
opinions herein with respect to the existence or absence of facts are indicated
to be based on our knowledge or belief, such indication is intended to signify
that, during the course of our representation of Acquiror and Sub in connection
with the transactions described in the first paragraph hereof, no information
has come to our attention that would give us actual knowledge of the existence
or absence of such facts. However, we have not undertaken any independent
investigation to determine the
AE-1
<PAGE>
existence or absence of such facts, and no inference as to our knowledge of the
existence or absence of such facts should be drawn from our representation of
Acquiror or Sub.
For purposes of this opinion, we have also assumed: (i) that Target and the
stockholders of Target (the "Target Stockholders") have all requisite power and
authority, and have taken any and all necessary action, to execute and deliver
the Agreements and certificates executed by them, and we are assuming that the
representations and warranties made by Target and the Target Stockholders
pursuant thereto are true and correct; (ii) that Target has filed any required
state franchise, income or similar tax returns and has paid any required state
franchise, income or similar taxes; (iii) that there are no extrinsic agreements
or understandings among the parties to the Agreements that would modify or
interpret the terms of the Agreements or the respective rights or obligations of
the parties thereunder; and (iv) that no Target Stockholder has a relationship
with another Target Stockholder which relationship would constitute a group of
persons as defined in Section 13 or 14 of the Securities Exchange Act of 1934.
The opinions hereinafter expressed are subject to the following
qualifications:
(a) We express no opinion as to the effect of applicable bankruptcy,
insolvency, reorganization, moratorium or other similar laws affecting the
rights of creditors generally, including, without limitation, laws relating to
fraudulent transfers or conveyances, preferences and equitable subordination, on
the enforceability of the Agreements;
(b) We express no opinion as to the effect or availability of rules of
law governing specific performance, injunctive relief or other equitable
remedies (regardless of whether any such remedy is considered in a proceeding at
law or in equity);
(c) We express no opinion as to compliance with applicable anti-fraud
provisions of federal or state securities laws;
(d) We express no opinion as to the enforceability of any of the
agreements (other than the Escrow Agreement), attached as exhibits to the
Reorganization Agreement;
(e) We express no opinion as to the enforceability of the
non-solicitation provision of Section 4.2 of the Reorganization Agreement to the
extent that the provisions thereof may be subject to limitations of public
policy and the effect of applicable statutes and administrative and judicial
decisions;
(f) We express no opinion as to the enforceability of a requirement
that provisions of the Agreements may only be waived in writing to the extent
that an oral agreement has been executed modifying provisions of the Agreements,
and we express no opinion as to the effect of judicial decisions that may permit
the introduction of extrinsic evidence to modify the terms or interpretation of
the Agreements;
(g) We express no opinion as to the enforceability of the
indemnification provisions of the Agreements to the extent the provisions hereof
may be subject to limitations of public policy and the effect of applicable
statutes and judicial decisions;
(h) We express no opinion with respect to the enforceability of
provisions in the Agreements providing for arbitration of disputes to the extent
that arbitration of a particular dispute would be against public policy;
(i) We express no opinion as to the effect of court decisions invoking
statutes or principles of equity, that have held that certain covenants and
provisions of agreements are unenforceable where (i) the enforcement of such
covenants or provisions under the circumstances would violate a party's implied
covenant of good faith and fair dealing or (ii) the breach of such covenants or
provisions is not a material breach of a material covenant or provision;
(j) We express no opinion as to the enforceability of provisions in the
Agreements which purport to establish evidentiary standards or to make
determinations conclusive;
AE-2
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(k) We express no opinion with respect to the enforceability of
provisions of the Agreements providing that rights or remedies are not
exclusive, that every right or remedy is cumulative, or that the election of a
particular remedy or remedies does not preclude recourse to one or more other
remedies;
(l) With respect to the opinion rendered in paragraph 1 below as to the
good standing of Acquiror and Sub, we have relied exclusively on certificates of
public officials in the State of California and the State of Delaware,
respectively;
(m) We are members of the Bar of the State of California, and we are
not expressing any opinion as to any matter relating to the laws of any
jurisdiction other than the federal laws of the United States of America, the
laws of the State of California and the General Corporation Law of the State of
Delaware. Special rulings of authorities administering such laws or opinions of
other counsel have not been sought or obtained.
Based upon and subject to the foregoing, we are of the opinion that:
1. Acquiror is a corporation validly existing and in good standing under
the laws of the State of California and Sub is a corporation validly existing
and in good standing under the laws of the State of Delaware. Each of Acquiror
and Sub has the corporate power to own, lease and operate its properties and to
carry on its business as now being conducted.
2. The Shares to be issued in the Merger are duly authorized, and, when
issued and delivered pursuant to the terms of the Reorganization Agreement, will
be validly issued, fully paid, and non-assessable.
3. The authorized capital stock of Sub consists of 1,000 shares of Common
Stock, $0.001 par value per share ("Merger Common Stock"), 1,000 shares of
which, as of the date hereof, are issued and outstanding and are held of record
by Acquiror. All such shares of Merger Common Stock have been duly authorized,
and all such issued and outstanding shares have been validly issued, and are
fully paid and non-assessable.
4. Acquiror has all requisite corporate power and authority to enter into
the Reorganization Agreement, the Certificate of Merger and the Escrow Agreement
and to consummate the transactions contemplated thereby. The execution and
delivery of the Reorganization Agreement, the Certificate of Merger and the
Escrow Agreement and the consummation of the transactions contemplated thereby
have been duly authorized by all necessary corporate and shareholder action on
the part of Acquiror. The Agreements have been duly executed and delivered by
Acquiror and constitute valid and binding obligations of Acquiror. Sub has all
requisite corporate power and authority to enter into the Reorganization
Agreement and the Certificate of Merger and to consummate the transactions
contemplated thereby. The execution and delivery of the Reorganization Agreement
and the Certificate of Merger and the consummation of the transactions
contemplated thereby have been duly authorized by all necessary corporate and
stockholder action on the part of Sub. The Reorganization Agreement has been
duly executed and delivered by Sub and constitutes the valid and binding
obligation of Sub.
5. No consent, approval, order or authorization of, or registration,
declaration or filing with, any federal or Delaware state or California state
government authority is required by or with respect to Acquiror and Sub in
connection with the execution and delivery of the Reorganization Agreement, and
the Escrow Agreement by Acquiror, or the Reorganization Agreement and the
Certificate of Merger by Sub, or the consummation by Acquiror and Sub of the
transactions contemplated thereby, except for (i) the filing of the Certificate
of Merger with the Secretary of State of the State of Delaware, (ii) any filings
as may be required under applicable state or federal securities laws and the
laws of any foreign country and (iii) such other consents, authorizations,
filings, approvals and registrations, which if not obtained or made would not
have a Material Adverse Effect on Acquiror.
AE-3
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6. Except as set forth in the Acquiror Disclosure Letter, neither the
execution or delivery of the Reorganization Agreement, the Escrow Agreement by
Acquiror nor the execution or delivery of the Reorganization Agreement and the
Certificate of Merger by Sub, nor the consummation of the transactions
contemplated thereby (i) will result in a violation of the Amended and Restated
Articles of Incorporation or Bylaws of Acquiror or the Amended and Restated
Certificate of Incorporation or Bylaws of Sub or in any violation of or conflict
with any agreement in full force and effect as of the date hereof that is
attached as an exhibit as a material contract under Item 601(4), (9) or (10) of
Regulation S-K promulgated under the Securities Act of 1933, as amended, (the
"Act") to Acquiror's Annual Report on Form 10-K for the fiscal year ended
December 31, 1995, to Acquiror's Quarterly Reports on Form 10-Q for the quarters
ended March 31, 1996, June 30, 1996 and September 30, 1996, respectively, to
Acquiror's Registration Statement on Form S-8 dated July 31, 1996, or to
Acquiror's Registration Statement on Form S-8 dated November 26, 1996 filed by
Acquiror with the Securities and Exchange Commission or (ii) to our knowledge,
conflicts or will conflict with, or result in any violation of (x) any existing
federal, California state, or Delaware corporate statute, law, ordinance, rule
or regulation applicable to Acquiror or Sub or any of their respective
properties or assets; or (y) any judgment, order or decree, of any Governmental
Entity having jurisdiction over Acquiror or Sub or any of their respective
properties or assets.
7. Upon the filing of the Certificate of Merger with the Secretary of State
of Delaware, assuming Target has complied with all requirements of applicable
law and the Reorganization Agreement, Target shall be merged with Sub.
8. To our knowledge, the registration statement on Form S-4 and all
post-effective amendments, if any, (the "S-4") filed by Acquiror with the
Securities and Exchange Commission (the "SEC") has become effective under the
Act and to our knowledge, no stop order suspending the effectiveness of the S-4
or preventing the use of the Proxy Statement has been issued and, to our
knowledge, no proceedings for that purpose have been instituted or are pending
or are threatened by the SEC.
9. The S-4 (except for the financial statements and the notes thereto and
the schedules and other financial and statistical data derived therefrom, as to
which we do not express any opinion) complies as to form in all material
respects with the requirements for registration statements on Form S-4 under the
Act.
10. Except as set forth on the Acquiror Disclosure Letter, to our knowledge,
there is no action, suit, proceeding, claim, arbitration or governmental
investigation pending, or as to which Acquiror or Sub has received any notice of
assertion, against Acquiror or Sub by or before any Governmental Entity which in
any manner challenges or seeks to prevent, enjoin, alter or materially delay any
of the transactions contemplated by the Reorganization Agreement, the Escrow
Agreement and the Certificate of Merger, or the consummation of the Merger or
which could reasonably be anticipated to have a Material Adverse Effect on
Acquiror.
This opinion is furnished to Target and its stockholders solely for their
benefit in connection with the Merger, and may not be relied upon by any other
person or for any other purpose without our prior written consent.
Very truly yours,
VENTURE LAW GROUP
MAM
AE-4
<PAGE>
EXHIBIT F
___________, 1997
[Acquiror]
[Address]
Ladies and Gentlemen:
We have acted as counsel for [Target], a Delaware corporation (the
"Target"), in connection with that certain Agreement and Plan of Reorganization
(the "Reorganization Agreement"), dated as of ___________, 1997 by and among
Target, [Acquiror], a California corporation (the "Acquiror"), and
Acquisition Corp., a Delaware corporation and a wholly owned subsidiary of
Acquiror (the "Sub"). This opinion is being rendered to you pursuant to Section
6.3(d) of the Reorganization Agreement. Capitalized terms not otherwise defined
in this opinion have the meaning given them in the Reorganization Agreement.
In connection with this opinion, we have made such examination of matters of
law and of fact as we considered appropriate or advisable for purposes hereof.
As to matters of fact material to the opinions expressed herein, we have relied
upon the representations and warranties as to factual matters contained in and
made by each of the parties to the Reorganization Agreement and upon
certificates and statements of government officials and of officers of Target.
We have relied as well on the truth and accuracy of all of the representations
and warranties as to factual matters made by Target in the Officers' Certificate
dated as of the date hereof delivered pursuant to Section 6.3(b) of the
Reorganization Agreement and the Certificate of Secretary of Target dated as of
the date hereof. We have also examined originals or copies of such corporate
documents or records of Target as we have considered appropriate for the
opinions expressed herein, including those relating to the authorization,
execution, and delivery of the Reorganization Agreement. In addition, we have
reviewed the following agreements entered into in connection with the aforesaid
transaction:
(i) the Reorganization Agreement;
(ii) the Certificate of Merger to be filed with the Secretary of State of
the State of Delaware ("Certificate of Merger"); and
(iii) the Escrow Agreement, dated as of ___________, 1997, between Target,
Acquiror and the parties thereto (the "Escrow Agreement").
The agreements described in (i) and (iii) above are collectively referred to
as the "Transaction Documents."
We have assumed for the purposes of this opinion that the signatures on
documents and instruments examined by us are authentic, that each document is
what it purports to be, and that all documents submitted to us as copies conform
with the originals, which facts we have not independently verified. As to any
facts material to the opinions hereinafter expressed that we did not
independently establish or verify, we have relied without investigation upon
certificates, statements, representations and warranties of representatives of
Target. With respect to any Transaction Documents entered into, signed and
delivered by persons or entities other than Target, including, without
limitation, the Escrow Agreement, we have assumed that such persons or entities
are authorized to deliver, execute and perform such agreements and have the
capacity to enter and perform the Transaction Documents to which they are a
party.
In rendering this opinion we have also assumed: (i) that Acquiror and the
shareholders of Acquiror ("Acquiror Shareholders") have all requisite power and
authority, and have taken any and all necessary action, to execute and deliver
the Transaction Documents and certificates executed by them; and we are
AF-1
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assuming that the representations and warranties made by Acquiror and the
Acquiror Shareholders pursuant thereto are true and correct; (ii) that Acquiror
and Sub have filed any required state franchise, income or similar tax returns
and have paid any required state franchise, income or similar taxes; and (iii)
that there are no extrinsic agreements or understandings among the parties to
the Transaction Documents that would modify or interpret the terms of the
Transaction Documents or the respective rights or obligations of the parties
thereunder.
In connection with the opinion expressed in paragraph 2 below, we have
examined the Restated Certificate of Incorporation, the Bylaws, the stock
records of Target, including the stock register provided to us by Target,
Target's stock certificate books and Target's minute books in our possession.
Target has represented to us, and we have assumed, that these records constitute
all Target's documents with respect to the issuance of shares of its capital
stock. In rendering our opinion in paragraph 2 that any shares are "fully paid,"
we have relied solely on Target's representations to us as to the nature and
amount of the consideration received for such shares. The information provided
in paragraph 2 as to rights to acquire securities is derived from factual
representations of Target and the documents referred to above.
As used in this opinion, the expression "we are not aware" or the phrase "to
our knowledge" means as to matters of fact that, based on the actual knowledge
of individual attorneys within the firm principally responsible for handling
current matters for Target and after an examination of documents referred to
herein and after inquiries of one or more officers of Target, we find no reason
to believe that the opinions expressed herein are factually incorrect; but
beyond that we have made no factual investigation for the purposes of rendering
this opinion. Specifically, but without limitation, we have made no inquiries of
securities holders or nonofficer employees of Target.
This opinion relates solely to the Federal laws of the United States, the
laws of the State of California and the General Corporation Law of the State of
Delaware, and we express no opinion with respect to the effect or application of
any other laws. Special rulings of authorities administering such laws or
opinions of other counsel have not been sought or obtained.
Based upon our examination of and reliance upon the foregoing and subject to
the limitations, exceptions, qualifications and assumptions set forth below and
except as set forth in the Reorganization Agreement and the Company Disclosure
Letter, we are of the opinion that as of the date hereof:
1. Target is a corporation validly existing and in good standing under the
laws of the State of Delaware. Target has the corporate power to own its
properties and to carry on its business as now being conducted.
2. The authorized stock of Target consists of 15,000,000 shares of Common
Stock, $0.001 par value per share ("Common Stock"), of which 6,025,000 shares
were issued and outstanding as of the date hereof, and 5,000,000 shares of
Preferred Stock, $0.001 par value per share ("Preferred Stock"), 900,000 shares
of which have been designated Series A Preferred Stock, of which 510,000 shares
are issued and outstanding, and 1,000,000 of which have been designated Series B
Preferred Stock, of which 683,265 shares are issued and outstanding. All such
shares of Common Stock and Preferred Stock have been duly authorized, and all
such issued and outstanding shares have been validly issued, are fully paid and
nonassessable. To our knowledge, Target has reserved no shares of Common Stock
for issuance to employees and consultants pursuant to any employee option or
benefit plan. To our knowledge, except for the redemption provisions in Article
IV, Section B, Subsection 3 of Target's Restated Certificate of Incorporation,
there are no other options, warrants, calls, rights, commitments or agreements
of any character to which Target is a party or by which it is bound obligating
Target to issue, deliver, sell, repurchase or redeem or cause to be issued,
delivered, sold, repurchased or redeemed any shares of the capital stock of
Target or obligating Target to grant, extend or enter into any such option,
warrant, call, right, commitment or agreement.
3. Target has all requisite corporate power and authority to enter into the
Transaction Documents and to consummate the transactions contemplated thereby.
The execution and delivery of the Transaction
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Documents and the consummation of the transactions contemplated thereby have
been duly authorized by all necessary corporate and stockholder action on the
part of Target. The Transaction Documents have been duly executed and delivered
by Target and constitute the valid and binding obligations of Target.
4. No consent, approval, order or authorization of, or registration,
declaration or filing with, any federal or Delaware state or California state
governmental authority, is required by or with respect to Target in connection
with the execution and delivery of the Transaction Documents by Target or the
consummation by Target of the transactions contemplated thereby, except for (i)
the filing of the Certificate of Merger with the Secretary of State of the State
of Delaware, (ii) any filings as may be required under applicable state or
federal securities laws and the laws of any foreign country and (iii) such other
consents, authorizations, filings, approvals and registrations which if not
obtained or made would not have a Material Adverse Effect on Target.
5. Except as set forth in the Target Disclosure Letter, neither the
execution nor delivery of the Transaction Documents by Target nor the
consummation of the transactions contemplated thereby will result in a violation
of the Restated Certificate of Incorporation or Bylaws of Target or conflicts or
will conflict with, or result in any violation of, or default (with or without
notice or lapse of time, or both), or give rise to a right of termination,
cancellation or acceleration of any obligation or to loss of a benefit under (i)
any material mortgage, indenture, lease, contract or other agreement or
instrument, permit, concession, franchise or license to which Target is a party
or by which Target is bound or to which any of its properties is subject and
which is listed on the Target Disclosure Letter, (ii) to our knowledge, any
existing provisions of any federal, California state, or Delaware corporate
statute, law, ordinance, rule or regulation applicable to Target or any of its
properties or assets or (iii) to our knowledge, any judgment, order or decree of
any Governmental Entity having jurisdiction over Target or any of its properties
or assets and which is listed on the Target Disclosure Letter.
6. To our knowledge, there is no action, suit, proceeding, claim,
arbitration or governmental investigation pending, or as to which Target has
received any notice of assertion, against Target by or before any Governmental
Entity which in any manner challenges or seeks to prevent, enjoin, alter or
materially delay any of the transactions contemplated by the Transaction
Documents or which could reasonably be anticipated to have a Material Adverse
Effect on Target.
7. To our knowledge, the only stockholders of Target who have delivered to
Target written demands pursuant to Section 262 of the Delaware General
Corporation Law exercising their appraisal rights under such Section 262 in
connection with the Merger and their respective holdings of Target capital stock
are as set forth on Schedule I to this opinion.
8. Upon the filing of the Certificate of Merger with the Secretary of the
State of the State of Delaware, assuming Acquiror and Sub have complied with all
requirements of applicable law and the Reorganization Agreement necessary to
effect the Merger, Target shall be merged with Sub.
Our opinions expressed above are specifically subject to the following
limitations, exceptions, qualifications and assumptions:
A. the effect of bankruptcy, insolvency, reorganization, moratorium and
other similar laws relating to or affecting the relief of debtors or the
rights and remedies of creditors generally, including without limitation
the effect of statutory or other law regarding fraudulent conveyances and
preferential transfers;
B. limitations imposed by state law, federal law or general equitable
principles upon the specific performance of any applicable agreement and
upon the availability of injunctive relief or other equitable remedies,
regardless of whether enforcement of any such agreement is considered a
proceeding in equity or at law;
AF-3
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C. the unenforceability under certain circumstances of provisions
indemnifying a party against, or requiring contributions toward, that
party's liability for its own wrongful or negligent acts, or where
indemnification or contribution is contrary to public policy, including
without limitation Article VII of the Reorganization Agreement;
D. We express no opinion as to the compliance or noncompliance with
applicable federal or state anti-fraud or antitrust statutes, laws,
rules, and regulations, including without limitation the Hart-
Scott-Rodino Act of 1976, as amended;
E. we express no opinion as to the enforceability of any of the agreements
(other than the Escrow Agreement) attached as exhibits to the
Reorganization Agreement, including without limitation the
Non-Competition Agreements;
F. we express no opinion as to the enforceability of the non-solicitation
provisions of Section 4.2 of the Reorganization Agreement to the extent
that the provisions thereof may be subject to limitations of public
policy and the effect of applicable statutes and administrative and
judicial decisions;
G. we express no opinion as to the effect of court decisions that have held
that certain covenants and provisions of agreements are unenforceable
where (i) the enforcement of such covenants or provisions under the
circumstances would violate a party's implied covenant of good faith and
fair dealing or (ii) the breach of such covenants or provisions is not a
material breach of a material covenant or provision;
H. we express no opinion as to the enforceability of provisions in the
Transaction Documents that purport to establish evidentiary standards or
to make determinations conclusive; and
I. with respect to the opinion rendered in paragraph 1 above as to the good
standing of Target, we have relied exclusively on certificates of public
officials in the State of Delaware.
This opinion is rendered as of the date first written above solely for your
benefit in connection with satisfying the conditions set forth in Section 6.3(d)
of the Reorganization Agreement and may not be delivered to, quoted or relied
upon by any person other than you, or for any other purpose, without our prior
written consent. Our opinion is expressly limited to the matters set forth above
and we render no opinion, whether by implication or otherwise, as to any other
matters relating to Target. We assume no obligation to advise you of facts,
circumstances, events or developments which hereafter may be brought to our
attention and which may alter, affect or modify the opinions expressed herein.
Very truly yours,
GUNDERSON DETTMER STOUGH
VILLENEUVE FRANKLIN & HACHIGIAN, LLP
AF-4
<PAGE>
ANNEX B
January 6, 1997
Confidential
The Board of Directors
Centura Software Corporation
1060 Marsh Road
Menlo Park, CA 94025
Gentlemen:
You have requested our opinion as to the fairness from a financial point of
view to Centura Software Corporation ("Centura" or the "Company") of the
consideration to be paid by the Company in connection with the proposed
acquisition by Centura of all of the outstanding capital stock, options and
warrants of InfoSpinner, Inc. ("InfoSpinner") (the "Proposed Transaction") under
the terms of the Agreement and Plan of Reorganization, dated as of December ,
1996, among Centura and InfoSpinner and the related Exhibits and Schedules
thereto (the "Agreement"). The Agreement provides, among other things, that
Centura will pay to InfoSpinner, upon consummation of the Proposed Transaction,
4.5 million shares of Centura Common Stock in exchange for all of the
outstanding capital stock, options and warrants of InfoSpinner.
Hambrecht & Quist LLC ("Hambrecht & Quist"), as part of its investment
banking services, is regularly engaged in the valuation of businesses and their
securities in connection with mergers and acquisitions, strategic transactions,
corporate restructurings, negotiated underwritings, secondary distributions of
listed and unlisted securities, private placements and valuations for corporate
and other purposes. We have acted as a financial advisor to the Board of
Directors of Centrua in connection with the Proposed Transaction, and we will
receive a fee for our services, which include the rendering of this opinion.
In the past, we have provided investment banking and other financial
advisory services to Centura and have received fees for rendering these
services. In the ordinary course of business, Hambrecht & Quist acts as a market
maker and broker in the publicly traded securities of Centura and receives
customary compensation in connection therewith, and has provided research
coverage for Centura. In the ordinary course of business, Hambrecht & Quist
actively trades in the equity and derivative securities of Centura for its own
account and for the accounts of its customers and, accordingly, may at any time
hold a long or short position in such securities. Hambrecht & Quist may in the
future provide additional investment banking or other financial advisory
services to Centura.
In connection with our review of the Proposed Transaction, and in arriving
at our opinion, we have, among other things:
(i) reviewed the publicly available financial statements of Centura for
recent years and interim periods to date and certain other relevant financial
and operating data of Centura made available to us from published sources and
from the internal records of Centura;
(ii) reviewed certain internal financial and operating information,
including certain projections, relating to Centura prepared by the management of
Centura;
(iii) discussed the business, financial condition and prospects of Centura
with certain of its officers;
(iv) reviewed the financial statements of InfoSpinner for recent years and
interim periods to date and certain other relevant financial and operating data
of InfoSpinner made available to us from published sources and from the internal
records of InfoSpinner;
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(v) reviewed certain internal financial and operating information, including
certain projections, relating to InfoSpinner prepared by the management of
InfoSpinner;
(vi) discussed the business, financial condition and prospects of the
InfoSpinner with certain of its officers;
(vii) reviewed the recent reported prices and trading activity for the common
stock of Centura and compared such information and certain financial information
for Centura with similar information for certain other companies engaged in
businesses we consider comparable;
(viii) reviewed the financial terms, to the extent publicly available, of
certain comparable merger and acquisition transactions;
(ix) reviewed the Agreement;
(x) discussed the tax and accounting treatment of the Proposed Transaction
with Centura; and
(xi) performed such other analyses and examinations and considered such
other information, financial studies, analyses and investigations and financial,
economic and market data as we deemed relevant.
In rendering our opinion, we have assumed and relied upon the accuracy and
completeness of all of the information concerning Centura or InfoSpinner
considered in connection with our review of the Proposed Transaction, and we
have not assumed any responsibility for independent verification of such
information or any independent valuation or appraisal of any of the assets or
liabilities of Centura or InfoSpinner nor have we conducted a physical
inspection of the properties and facilities of either company. With respect to
the financial forecasts and projections made available to us and used in our
analysis, we have assumed that they reflect the best currently available
estimates and judgments of the expected future financial performance of Centura
and InfoSpinner. For purposes of this Opinion, we have assumed that neither
Centura nor InfoSpinner is a party to any pending transactions, including
external financings, recapitalizations or material merger discussions, other
than the Proposed Transaction and those activities undertaken in the ordinary
course of conducting their respective businesses. Our opinion is necessarily
based upon market, economic, financial and other conditions as they exist and
can be evaluated as of the date of this letter and any change in such conditions
would require a reevaluation of this opinion.
It is understood that this letter is for the information of the Board of
Directors only and may not be used for any other purpose without our prior
written consent; provided, however, that this letter may be reproduced in full
in the Proxy Statement. This letter does not constitute a recommendation to any
stockholder as to how such stockholder should vote on the Proposed Transaction.
Based upon and subject to the foregoing and after considering such other
matters as we deem relevant, we are of the opinion that as of the date hereof
the consideration to be paid by Centura in the Proposed Transaction is fair to
the Company from a financial point of view.
Very truly yours,
HAMBRECHT & QUIST LLC
By: /s/ James A. Davidson
-----------------------------------
James A. Davidson
Managing Director
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ANNEX C
DELAWARE GENERAL CORPORATION LAW
SECTION 262
SECTION 262. APPRAISAL RIGHTS.
(a) Any stockholder of a corporation of this State who holds shares of
stock on the date of the making of a demand pursuant to subsection (d) of this
section with respect to such shares, who continuously holds such shares through
the effective date of the merger or consolidation, who has otherwise complied
with subsection (d) of this section and who has neither voted in favor of the
merger or consolidation nor consented thereto in writing pursuant to Section 228
of this title shall be entitled to an appraisal by the Court of Chancery of the
fair value of his shares of stock under the circumstances described in
subsection (b) and (c) of this section. As used in this section, the word
"stockholder" means a holder of record of stock in a stock corporation and also
a member of record of a nonstock corporation; the words "stock" and "share" mean
and include what is ordinarily meant by those words and also membership or
membership interest of a member of a nonstock corporation; and the words
"depository receipt" mean a receipt or other instrument issued by a depository
representing an interest in one or more shares, or fractions thereof, solely of
stock of a corporation, which stock is deposited with the depository.
(b) Appraisal rights shall be available for the shares of any class or
series of stock of a constituent corporation in a merger or consolidation to be
effected pursuant to SectionSection 251, 252, 254, 257, 258, 263 or 264 of this
title:
(1) Provided, however, that no appraisal rights under this section shall
be available for the shares of any class or series of stock, which stock, or
depository receipts in respect thereof, at the record date fixed to
determine the stockholders entitled to receive notice of and to vote at the
meeting of stockholders to act upon the agreement of merger or
consolidation, were either (i) listed on a national securities exchange or
designated as a national market system security on an interdealer quotation
system by the National Association of Securities Dealers, Inc. or (ii) held
of record by more than 2,000 holders; and further provided that no appraisal
rights shall be available for any shares of stock of the constituent
corporation surviving a merger if the merger did not require for its
approval the vote of the holders of the surviving corporation as provided in
(1) subsections (f) or (g) of Section 251 of this title.
(2) Notwithstanding paragraph (1) of this subsection, appraisal rights
under this section shall be available for the shares of any class or series
of stock of a constituent corporation if the holders thereof are required by
the terms of an agreement of merger or consolidation pursuant to
SectionSection 251, 252, 254, 257, 258, 263 and 264 of this title to accept
for such stock anything except:
a. Shares of stock of the corporation surviving or resulting from
such merger or consolidation, or depository receipts in respect thereof;
b. Shares of stock of any other corporation, or depository receipts
in respect thereof, which shares of stock or depository receipts at the
effective date of the merger or consolidation will be either listed on a
national securities exchange or designated as a national market system
security on an interdealer quotation system by the National Association
of Securities Dealers, Inc. or held of record by more than 2,000 holders;
c. Cash in lieu of fractional shares or fractional depository
receipts described in the foregoing subparagraphs a. and b. of this
paragraph; or
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d. Any combination of the shares of stock, depository receipts and
cash in lieu of fractional shares or fractional depository receipts
described in the foregoing subparagraphs a., b. and c. of this paragraph.
(3) In the event all of the stock of a subsidiary Delaware corporation
party to a merger effected under Section 253 of this title is not owned by
the parent corporation immediately prior to the merger, appraisal rights
shall be available for the shares of the subsidiary Delaware corporation.
(c) Any corporation may provide in its certificate of incorporation that
appraisal rights under this section shall be available for the shares of any
class or series of its stock as a result of an amendment to its certificate of
incorporation, any merger or consolidation in which the corporation is a
constituent corporation or the sale of all or substantially all of the assets of
the corporation. If the certificate of incorporation contains such a provision,
the procedures of this section, including those set forth in subsections (d) and
(e) of this section, shall apply as nearly as is practicable.
(d) Appraisal rights shall be perfected as follows:
(1) If a proposed merger or consolidation for which appraisal rights are
provided under this section is to be submitted for approval at a meeting of
stockholders, the corporation, not less than 20 days prior to the meeting,
shall notify each of its stockholders who was such on the record date for
such meeting with respect to shares for which appraisal rights are available
pursuant to subsections (b) or (c) hereof that appraisal rights are
available for any or all of the shares of the constituent corporations, and
shall include in such notice a copy of this section. Each stockholder
electing to demand the appraisal of his shares shall deliver to the
corporation, before the taking of the vote on the merger or consolidation, a
written demand for appraisal of his shares. Such demand will be sufficient
if it reasonably informs the corporation of the identity of the stockholder
and that the stockholder intends thereby to demand the appraisal of his
shares. A proxy or vote against the merger or consolidation shall not
constitute such a demand. A stockholder electing to take such action must do
so by a separate written demand as herein provided. Within 10 days after the
effective date of such merger or consolidation, the surviving or resulting
corporation shall notify each stockholder of each constituent corporation
who has complied with this subsection and has not voted in favor of or
consented to the merger or consolidation of the date that the merger or
consolidation has become effective; or
(2) If the merger or consolidation was approved pursuant to
SectionSection 228 or 253 of this title, the surviving or resulting
corporation, either before the effective date of the merger or consolidation
or within 10 days thereafter, shall notify each of the stockholders entitled
to appraisal rights of the effective date of the merger or consolidation and
that appraisal rights are available for any or all of the shares of the
constituent corporation, and shall include in such notice a copy of this
section. The notice shall be sent by certified or registered mail, return
receipt requested, addressed to the stockholder at his address as it appears
on the records of the corporation. Any stockholder entitled to appraisal
rights may, within 20 days after the date of mailing of the notice, demand
in writing from the surviving or resulting corporation the appraisal of his
shares. Such demand will be sufficient if it reasonably informs the
corporation of the identity of the stockholder and that the stockholder
intends thereby to demand the appraisal of his shares.
(e) Within 120 days after the effective date of the merger or consolidation,
the surviving or resulting corporation or any stockholder who has complied with
subsections (a) and (d) hereof and who is otherwise entitled to appraisal
rights, may file a petition in the Court of Chancery demanding a determination
of the value of the stock of all such stockholders. Notwithstanding the
foregoing, at any time within 60 days after the effective date of the merger or
consolidation, any stockholder shall have the right to withdraw his demand for
appraisal and to accept the terms offered upon the merger or consolidation.
Within 120 days after the effective date of the merger or consolidation, any
stockholder who has complied with the requirements of subsections (a) and (d)
hereof, upon written request, shall be entitled to receive from the
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corporation surviving the merger or resulting from the consolidation a statement
setting forth the aggregate number of shares not voted in favor of the merger or
consolidation and with respect to which demands for appraisal have been received
and the aggregate number of holders of such shares. Such written statement shall
be mailed to the stockholder within 10 days after his written request for such a
statement is received by the surviving or resulting corporation or within 10
days after expiration of the period for delivery of demands for appraisal under
subsection (d) hereof, whichever is later.
(f) Upon the filing of any such petition by a stockholder, service of a copy
thereof shall be made upon the surviving or resulting corporation, which shall
within 20 days after such service file in the office of the Register in Chancery
in which the petition was filed a duly verified list containing the names and
addresses of all stockholders who have demanded payment for their shares and
with whom agreements as to the value of their shares have not been reached by
the surviving or resulting corporation. If the petition shall be filed by the
surviving or resulting corporation, the petition shall be accompanied by such a
duly verified list. The Register in Chancery, if so ordered by the Court, shall
give notice of the time and place fixed for the hearing of such petition by
registered or certified mail to the surviving or resulting corporation and to
the stockholders shown on the list at the addresses therein stated. Such notice
shall also be given by 1 or more publications at least 1 week before the day of
the hearing, in a newspaper of general circulation published in the City of
Wilmington, Delaware or such publication as the Court deems advisable. The forms
of the notices by mail and by publication shall be approved by the Court, and
the costs thereof shall be borne by the surviving or resulting corporation.
(g) At the hearing on such petition, the Court shall determine the
stockholders who have complied with this section and who have become entitled to
appraisal rights. The Court may require the stockholders who have demanded an
appraisal for their shares and who hold stock represented by certificates to
submit their certificates of stock to the Register in Chancery for notation
thereon of the pendency of the appraisal proceedings; and if any stockholder
fails to comply with such direction, the Court may dismiss the proceedings as to
such stockholder.
(h) After determining the stockholders entitled to an appraisal, the Court
shall appraise the shares, determining their fair value exclusive of any element
of value arising from the accomplishment or expectation of the merger or
consolidation, together with a fair rate of interest, if any, to be paid upon
the amount determined to be the fair value. In determining such fair value, the
Court shall take into account all relevant factors. In determining the fair rate
of interest, the Court may consider all relevant factors, including the rate of
interest which the surviving or resulting corporation would have had to pay to
borrow money during the pendency of the proceeding. Upon application by the
surviving or resulting corporation or by any stockholder entitled to participate
in the appraisal proceeding, the Court may, in its discretion, permit discovery
or other pretrial proceedings and may proceed to trial upon the appraisal prior
to the final determination of the stockholder entitled to an appraisal. Any
stockholder who's name appears on the list filed by the surviving or resulting
corporation pursuant to subsection (f) of this section and who has submitted his
certificates of stock to the Register in Chancery, if such is required, may
participate fully in all proceedings until it is finally determined that he is
not entitled to appraisal rights under this section.
(i) The court shall direct the payment of the fair value of the shares,
together with interest, if any, by the surviving or resulting corporation to the
stockholders entitled thereto. Interest may be simple or compound, as the Court
may direct. Payment shall also be made to each such stockholder, in the case of
holders of uncertificated stock forthwith, and the case of holders of shares
represented by certificates upon the surrender to the corporation of the
certificates representing such stock. The Court's decree may be enforced as
other decrees in the Court of Chancery may be enforced, whether such surviving
or resulting corporation be a corporation of this State or of any state.
(j) The cost of the proceeding may be determined by the Court and taxed upon
the parties as the Court deems equitable in the circumstances. Upon application
of a stockholder, the Court may order all or a portion of the expenses incurred
by any stockholder in connection with the appraisal proceeding,
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including, without limitation, reasonable attorney's fees and the fees and
expenses of experts, to be charged pro rata against the value of all the shares
entitled to an appraisal.
(k) From and after the effective date of the merger or consolidation, no
stockholder who has demanded his appraisal rights as provided in subsection (d)
of this section shall be entitled to vote such stock for any purpose or to
receive payment of dividends or other distributions on the stock (except
dividends or other distributions payable to stockholders of record at a date
which is prior to the effective date of the merger or consolidation); provided,
however, that if no petition for an appraisal shall be filed within the time
provided in subsection (e) of this section, or if such stockholder shall deliver
to the surviving or resulting corporation a written withdrawal of his demand for
an appraisal and an acceptance of the merger or consolidation, either within 60
days after the effective date of the merger or consolidation as provided in
subsection (e) of this section or thereafter with the written approval of the
corporation, then the right of such stockholder to an appraisal shall cease.
Notwithstanding the foregoing, no appraisal proceeding in the Court of Chancery
shall be dismissed as to any stockholder without the approval of the Court, and
such approval may be conditioned upon such terms as the Court deems just.
(l) The shares of the surviving or resulting corporation to which the shares
of such objecting stockholders would have been converted had they assented to
the merger or consolidation shall have the status of authorized and unissued
shares of the surviving or resulting corporation.
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ANNEX D
CALIFORNIA GENERAL CORPORATION LAW
CHAPTER 13
DISSENTERS' RIGHTS
SECTION1300. RIGHT TO REQUIRE PURCHASE--"DISSENTING SHARES" AND "DISSENTING
SHAREHOLDER" DEFINED.
(a) If the approval of the outstanding shares (Section 152) of a
corporation is required for a reorganization under subdivisions (a) and (b) or
subdivision (e) of Section 1201, each shareholder of the corporation is entitled
to vote on the transaction and each shareholder of a subsidiary corporation in a
short-form merger may, by complying with this chapter, require the corporation
in which the shareholder holds shares to purchase for cash at their fair market
value the shares owned by the shareholder which are dissenting shares as defined
in subdivision (b). The fair market value shall be determined as of the day
before the first announcement of the terms of the proposed reorganization or
short-form merger, excluding any appreciation or depreciation in consequence of
the proposed action, but adjusted for any stock split, reverse stock split or
share dividend which becomes effective thereafter.
(b) As used in this chapter, "dissenting shares" means shares which
come within all of the following descriptions:
(1) Which were not immediately prior to the reorganization or
short-form merger either (i) listed on any national securities exchange
certified by the Commissioner of Corporations under subdivision (o) of Section
25100 or (ii) listed on the list of OTC margin stocks issued by the Board of
Governors of the Federal Reserve System, and the notice of meeting of
shareholders to act upon the reorganization summarizes this section and Sections
1301, 1302, 1303 and 1304; provided, however, that this provision does not apply
to any shares with respect to which there exists any restriction on transfer
imposed by the corporation or by any law or regulation; and provided, further,
that this provision does not apply to any class of shares described in clause
(i) or (ii) if demands for payment are filed with respect to 5 percent or more
of the outstanding shares of that class.
(2) Which were outstanding on the date for the determination of
shareholders entitled to vote on the reorganization and (i) were not voted in
favor of the reorganization or, (ii) if described in clause (i) or (ii) or
paragraph (1) (without regard to the provisos in that paragraph), were voted
against the reorganization, or which were held of record on the effective date
of a short-form merger; provided, however, that clause (i) rather than clause
(ii) of this paragraph applies in any case where the approval required by
Section 1201 is sought by written consent rather than at a meeting.
(3) Which the dissenting shareholder has demanded that the
corporation purchase at their fair market value, in accordance with Section
1301.
(4) Which the dissenting shareholder has submitted for
endorsement, in accordance with Section 1302.
(c) As used in this chapter, "dissenting shareholder" means the
record holder of dissenting shares and includes a transferee of record.
SECTION1301. DEMAND FOR PURCHASE.
(a) If, in the case of a reorganization, any shareholders of a
corporation have a right under Section 1300, subject to compliance with
paragraphs (3) and (4) of subdivision (b) thereof, to require the corporation to
purchase their shares for cash, such corporation shall mail to each such
shareholder a notice of the approval of the reorganization by its outstanding
shares (Section 152) within 10 days after the date of such approval, accompanied
by a copy of Sections 1300, 1302, 1303, 1304 and this section, a statement of
the price determined by the corporation to represent the fair market value of
the dissenting shares, and a brief description of the procedure to be followed
if the shareholder desires to exercise the shareholder's right under such
sections. The statement of price constitutes an offer by the corporation to
purchase at the
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price stated any dissenting shares as defined in subdivision (b) of Section
1300, unless they lose their status as dissenting shares under Section 1309.
(b) Any shareholder who has a right to require the corporation to
purchase the shareholder's shares for cash under Section 1300, subject to
compliance with paragraphs (3) and (4) of subdivision (b) thereof, and who
desires the corporation to purchase such shares shall make written demand upon
the corporation for the purchase of such shares and payment to the shareholder
in cash of their fair market value. The demand is not effective for any purpose
unless it is received by the corporation or any transfer agent thereof (1) in
the case of shares described in clause (i) or (ii) of paragraph (1) of
subdivision (b) of Section 1300 (without regard to the provisos in the
paragraph), not later than the date of the shareholders' meeting to vote upon
the reorganization, or (2) in any other case within 30 days after the date on
which the notice of the approval by the outstanding shares pursuant to
subdivision (a) or the notice pursuant to subdivision (i) of Section 1110 was
mailed to the shareholder.
(c) The demand shall state the number and class of the shares held
of record by the shareholder which the shareholder demands that the corporation
purchase and shall contain a statement of what such shareholder claims to be the
fair market value of those shares as of the day before the announcement of the
proposed reorganization or short-form merger. The statement of fair market value
constitutes an offer by the shareholder to sell the shares at such price.
SECTION1302. ENDORSEMENT OF SHARES. Within 30 days after the date on which
notice of the approval by the outstanding shares or the notice pursuant to
subdivision (i) of Section 1110 was mailed to the shareholder, the shareholder
shall submit to the corporation at its principal office or at the office of any
transfer agent thereof, (a) if the shares are certificated securities, the
shareholder's certificates representing any shares which the shareholder demands
that the corporation purchase, to be stamped or endorsed with a statement that
the shares are dissenting shares or to be exchanged for certificates of
appropriate denomination so stamped or endorsed or (b) if the shares are
uncertificated securities, written notice of the number of shares which the
shareholder demands that the corporation purchase. Upon subsequent transfers of
the dissenting shares on the books of the corporation, the new certificates,
initial transaction statement, and other written statements issued therefor
shall bear a like statement, together with the name of the original dissenting
holder of the shares.
SECTION1303. AGREED PRICE--TIME FOR PAYMENT.
(a) If the corporation and the shareholder agree that the shares are
dissenting shares and agree upon the price of the shares, the dissenting
shareholder is entitled to the agreed price with interest thereon at the legal
rate on judgments from the date of the agreement. Any agreements fixing the fair
market value of any dissenting shares as between the corporation and the holders
thereof shall be filed with the secretary of the corporation.
(b) Subject to the provisions of Section 1306, payment of the fair
market value of dissenting shares shall be made within 30 days after the amount
thereof has been agreed or within 30 days after any statutory or contractual
conditions to the reorganization are satisfied, whichever is later, and in the
case of certified securities, subject to surrender of the certificates therefor,
unless provided otherwise by agreement.
SECTION1304. DISSENTER'S ACTION TO ENFORCE PAYMENT.
(a) If the corporation denies that the shares are dissenting shares,
or the corporation and the shareholder fail to agree upon the fair market value
of the shares, then the shareholder demanding purchase of such shares as
dissenting shares or any interested corporation, within six months after the
date on which notice of the approval by the outstanding shares (Section 152) or
notice pursuant to subdivision (i) of Section 1110 was mailed to the
shareholder, but not thereafter, may file a complaint in the superior court of
the proper county praying the court to determine whether the shares are
dissenting shares or the fair market value of the dissenting shares or both or
may intervene in any action pending on such a complaint.
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(b) Two or more dissenting shareholders may join as plaintiffs or be
joined as defendants in any such action and two or more such actions may be
consolidated.
(c) On the trial of the action, the court shall determine the
issues. If the status of the shares as dissenting shares is an issue, the court
shall first determine that issue. If the fair market value of the dissenting
shares is in issue, the court shall determine, or shall appoint one or more
impartial appraisers to determine, the fair market value of the shares.
SECTION1305. APPRAISER'S REPORT--PAYMENT--COSTS.
(a) If the court appoints an appraiser or appraisers, they shall
proceed forthwith to determine the fair market value per share. Within the time
fixed by the court, the appraisers, or a majority of them, shall make and file a
report in the office of the clerk of the court. Thereupon, on the motion of any
party, the report shall be submitted to the court and considered on such
evidence as the court considers relevant. If the court finds the report
reasonable, the court may confirm it.
(b) If a majority of the appraisers appointed fail to make and file
a report within 10 days from the date of their appointment or within such
further time as may be allowed by the court or the report is not confirmed by
the court, the court shall determine the fair market value of the dissenting
shares.
(c) Subject to the provisions of Section 1306, judgment shall be
rendered against the corporation for payment of an amount equal to the fair
market value of each dissenting share multiplied by the number of dissenting
shares which any dissenting shareholder who is a party, or who has intervened,
is entitled to require the corporation to purchase, with interest thereon at the
legal rate from the date on which judgment was entered.
(d) Any such judgment shall be payable forthwith with respect to
uncertificated securities and, with respect to certificate securities, only upon
the endorsement and delivery to the corporation of the certificates for the
shares described in the judgment. Any party may appeal from the judgment.
(e) The costs of the action, including reasonable compensation to
the appraisers to be fixed by the court, shall be assessed or apportioned as the
court considers equitable, but, if the appraisal exceeds the price offered by
the corporation, the corporation shall pay the costs (including in the
discretion of the court attorneys' fees, fees of expert witnesses and interest
at the legal rate on judgments from the date of compliance with Sections 1300,
1301 and 1302 if the value awarded by the court for the shares is more than 125
percent of the price offered by the corporation under subdivision (a) of Section
1301).
SECTION1306. DISSENTING SHAREHOLDER'S STATUS AS CREDITOR. To the extent
that the provisions of Chapter 5 prevent the payment to any holders of
dissenting shares of their fair market value, they shall become creditors of the
corporation for the amount thereof together with interest at the legal rate on
judgments until the date of payment, subordinate to all other creditors in any
liquidation proceeding, such debt to be payable when permissible under the
provisions of Chapter 5.
SECTION1307. DIVIDENDS PAID AS CREDIT AGAINST PAYMENT. Cash dividends
declared and paid by the corporation upon the dissenting shares after the date
of approval of the reorganization by the outstanding shares (Section 152) and
prior to payment for the shares by the corporation shall be credited against the
total amount to be paid by the corporation therefor.
SECTION1308. CONTINUING RIGHTS AND PRIVILEGES OF DISSENTING
SHAREHOLDERS. Except as expressly limited in this chapter, holders of
dissenting shares continue to have all the rights and privileges incident to
their shares, until the fair market value of their shares is agreed upon or
determined. A dissenting shareholder may not withdraw a demand for payment
unless the corporation consents thereto.
SECTION1309. TERMINATION OF DISSENTING SHAREHOLDER STATUS. Dissenting
shares lose their status as dissenting shares and the holders thereof cease to
be dissenting shareholders and cease to be entitled to require the corporation
to purchase their shares upon the happening of any of the following:
(a) The corporation abandons the reorganization. Upon abandonment of
the reorganization, the corporation shall pay on demand to any dissenting
shareholder who has initiated proceeding in
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good faith under this chapter all necessary expenses incurred in such
proceedings and reasonable attorney's fees.
(b) The shares are transferred prior to their submission for
endorsement in accordance with section 1302 or are surrendered for conversion
into shares of another class in accordance with the articles.
(c) The dissenting shareholder and the corporation do not agree upon
the status of the shares as dissenting shares or upon the purchase price of the
shares, and neither files a complaint or intervenes in a pending action as
provided in Section 1304, within six months after the date on which notice of
the approval by the outstanding shares or notice pursuant to subdivision (i) of
Section 1110 was mailed to the shareholder.
(d) The dissenting shareholder, with the consent of the corporation,
withdraws the shareholder's demand for purchase of the dissenting shares.
SECTION1310. SUSPENSION OF PROCEEDING FOR PAYMENT PENDING LITIGATION. If
litigation is instituted to test the sufficiency or regularity of the votes of
the shareholders in authorizing a reorganization, any proceeding under Section
1304 and 1305 shall be suspended until final determination of such litigation.
SECTION1311. EXEMPT SHARES. This chapter, except Section 1312, does not
apply to classes or shares whose terms and provisions specifically set forth the
amount to be paid in respect to such shares in the event of a reorganization or
merger.
SECTION1312. ATTACKING VALIDITY OF REORGANIZATION OR MERGER.
(a) No shareholder of a corporation who has a right under this
chapter to demand payment of cash for the shares held by the shareholder shall
have any right at law or in equity to attack the validity of the reorganization
or short-form merger, or to have the reorganization or short-form merger set
aside or rescinded, except in an action to test whether the number of shares
required to authorize or approve the reorganization have been legally voted in
favor thereof; but any holder of shares of a class whose terms and provisions
specifically set forth the amount to be paid in respect to them in the event of
a reorganization or short-form merger is entitled to payment in accordance with
those terms and provisions or, if the principal terms of the reorganization are
approved pursuant to subdivision (b) of Section 1202, is entitled to payment in
accordance with the terms and provisions of the approved reorganization.
(b) If one of the parties to a reorganization of short-form merger
is directly or indirectly controlled by, or under common control with, another
party to the reorganization or short-form merger, subdivision (a) shall not
apply to any shareholder of such party who has not demanded payment of cash for
such shareholder's shares pursuant to this chapter; but if the shareholder
institutes any action to attack the validity of the reorganization or short-form
merger or to have the reorganization or short-form merger set aside or
rescinded, the shareholder shall not thereafter have any right to demand payment
of cash for the shareholder's shares pursuant to this chapter. The court in any
action attacking the validity of the reorganization or short-form merger or to
have the reorganization or short-form merger set aside or rescinded shall not
restrain or enjoin the consummation of the transaction except upon 10 days'
prior notice to the corporation and upon a determination by the court that
clearly no other remedy will adequately protect the complaining shareholder or
the class of shareholders of which such shareholder is a member.
(c) If one of the parties to a reorganization or short-form merger
is directly or indirectly controlled by, or under common control with, another
party to the reorganization or short-form merger, in any action to attack the
validity of the reorganization rescinded, (1) a party to a reorganization or
short-form merger shall have the burden of proving that the transaction is just
and reasonable as to the shareholders of the controlled party, and (2) a person
who controls two or more parties to a reorganization shall have the burden of
proving that the transaction is just and reasonable as to the shareholders of
any party so controlled.
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PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF OFFICERS AND DIRECTORS
Centura's Articles of Incorporation limit the liability of directors for
monetary damages arising from breach of their fiduciary duty to the maximum
extent permitted by the California Corporations Code ("California Law"). Such
limitation of liability does not affect the availability of equitable remedies
such as injunctive relief or recession. The limitation on monetary liability
also does not apply to liabilities arising under the federal securities laws.
Centura's Bylaws provide that Centura shall indemnify its directors and
officers to the fullest extent permitted by California law, including
circumstances in which indemnification is otherwise discretionary under
California law. The Company has entered into indemnification agreements with its
officers and directors containing provision which are in some respects broader
than the specific indemnification provisions contained in the California
Corporations Code. The indemnification agreements may require Centura, among
other things, to indemnify its directors against certain liabilities that may
arise by reason of their status or service as directors (other than liabilities
arising from willful misconduct of a culpable nature), to advance their expenses
incurred as a result of any proceeding against them as to which they could be
indemnified, and to obtain director's insurance if available on reasonable
terms.
Centura believes that the limitation provision in its Articles of
Incorporation and the indemnification provisions in its Articles of
Incorporation, Bylaws and indemnification agreements will facilitate Centura's
ability to continue to attract and retain qualified individuals to serve as
directors of Centura. It is the opinion of the Commission that indemnification
provisions such as those contained in the Bylaws and these agreements have no
effect on a director's or officer's liability under the federal securities laws.
Centura has also obtained directors and officers' liability insurance
covering, subject to certain exceptions, actions taken by Centura's directors
and officers in their capacities as such.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) EXHIBITS
The following exhibits are filed herewith or incorporated herein by
reference.
<TABLE>
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EXHIBIT PAGE OR
NUMBER DESCRIPTION FOOTNOTE
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<C> <S> <C>
2.1 (13) Agreement and Plan of Reorganization dated January 6, 1997 by and among the
Registrant, IS Acquisition Corporation and InfoSpinner, Inc. (included as ANNEX A
to the Proxy Statement/Prospectus included as part of this Registration Statement).
2.2 (13) Form of Certificate of Merger among the Registrant, IS Acquisition Corporation and
InfoSpinner, Inc.
3(i) (11) Articles of Incorporation of the Registrant.
3(ii)(11) Bylaws of the Registrant.
4.1 (12) Preferred Shares Rights Agreement, dated as of August 3, 1994, between Gupta
Corporation and Chemical Trust Company of California, including the Certificate of
Determination of Rights, Preferences and Privileges of Series A Participating
Preferred Stock, the form of Rights Certificate and the Summary of Rights, attached
thereto as Exhibits A, B and C, respectively.
</TABLE>
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EXHIBIT PAGE OR
NUMBER DESCRIPTION FOOTNOTE
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<C> <S> <C>
5.1 Opinion of Venture Law Group, A Professional Corporation, as to the legality of the
Registrant's Common Stock being registered hereby.
8.1 Tax opinion of Venture Law Group, A Professional Corporation.
8.2 Tax opinion of Gunderson Dettmer Stough Villeneuve Franklin & Hachigian, LLP.
10.1 (1) Form of Indemnification Agreement with the Registrant's officers and directors.
10.2 (2)(4) 1986 Stock Option Plan, as amended, and forms of option agreement thereunder.
10.3 (1) 1991 United Kingdom Sub Plan and forms of agreement thereunder.
10.4 (11) 1992 Employee Stock Purchase Plan, as amended, and form of purchase agreement
thereunder.
10.5 (1) 1992 Directors' Option Plan and forms of agreements thereunder.
10.8 (1) Lease Agreement dated February 4, 1992 between Registrant and Bohannon Associates.
10.9 (10) 1996 Executive Officers Compensation Plan
10.12(1) Forms of License Agreements.
10.14(11) 1995 Stock Option Plan and form of option agreement thereunder.
10.16(7) Note Purchase Agreement dated March 31, 1995 between the Company and Computer
Associates International, Inc.
10.17(8) Executive Employment Agreement dated April 10, 1995 between the Company and Sam M.
Inman, III.
10.18(9) Loan Agreement Secured by Property and Securities dated August 31, 1995 between the
Company and Earl and Ann Stahl
10.19(11) 1996 Director's Option Plan and form of option agreement thereunder.
10.20(11) Stipulation of Settlement dated July 19, 1996 in re the Registrant's Securities
Litigation between Plaintiff's Settlement Counsel and the Registrant's Counsel,
including exhibits thereto, and related Final Judgment and Order of Dismissal dated
September 30, 1996.
10.21 Distribution Agreement dated January 6, 1997 between Centura Software Corporation and
InfoSpinner, Inc.
11.1 Statement re Computation of Pro Forma Net Income (Loss) Per Share.
16.1 (3)(5)(6) Letter regarding change in Certifying Accountant.
21.1 (13) Subsidiaries of the Registrant.
23.1 Consent of Venture Law Group, A Professional Corporation, with respect to the
legality of securities being registered (contained in Exhibit 5.1).
23.2 Consent of Venture Law Group, A Professional Corporation, with respect to certain tax
matters (contained in Exhibit 8.1).
23.3 Consent of Gunderson Dettmer Stough Villeneuve Franklin & Hachigian, LLP, with
respect to certain tax matters (contained in Exhibit 8.2).
</TABLE>
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EXHIBIT PAGE OR
NUMBER DESCRIPTION FOOTNOTE
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<C> <S> <C>
23.4 Consent of Price Waterhouse LLP, Independent Accountants, with respect to financial
statements of Registrant.
23.5 Consent of Price Waterhouse LLP, Independent Accountants, with respect to financial
statements of InfoSpinner.
23.6 (13) Consent of Hambrecht & Quist LLC with respect to its fairness opinion.
24.1 (13) Power of Attorney.
99.1 (13) Form of Shareholder Agreement and Irrevocable Proxy and Stockholder Agreement and
Irrevocable Proxy dated as of January 6, 1997, entered into among Registrant,
InfoSpinner and certain affiliates of Registrant and InfoSpinner.
</TABLE>
- ------------------------
(1) Incorporated by reference from the Company's Registration Statement on Form
S-1 (No. 33-55566), declared effective by the Commission on February 4,
1993.
(2) Incorporated by reference from the Company's Registration Statement on Form
S-8 (No. 33-62194) filed with the Commission on May 5, 1993.
(3) Incorporated by reference from the Company's Current Report on Form 8-K
dated July 2, 1993 ("Form 8-K").
(4) Incorporated by reference from the Company's Registration Statement on Form
S-8 (No. 33-83850) filed with the Commission on September 9, 1994.
(5) Incorporated by reference from the Company's Current Report on Form 8-K
dated October 11, 1995 as amended by Amendment No.1 dated October 25, 1995
("Form 8-K/A").
(6) Incorporated by reference from the Company's Current Report on Form 8-K
dated January 8, 1996 ("Form 8-K").
(7) Incorporated by reference from the Company's Quarterly Report on Form 10-Q
for the quarter ended March 31, 1995.
(8) Incorporated by reference from the Company's Quarterly Report on Form 10-Q
for the quarter ended June 30, 1995.
(9) Incorporated by reference from the Company's Quarterly Report on Form 10-Q
for the quarter ended September 30, 1995.
(10) Incorporated by reference from the Company's Annual Report on Form 10-K for
the year ended December 31, 1995.
(11) Incorporated by reference from the Company's Quarterly Report on Form 10-Q
for the quarter ended September 30, 1996.
(12) Incorporated by reference from the Company's Registration Statement on Form
8-A filed with the Commission on August 10, 1994.
(13) Incorporated by reference from the Company's Registration Statement on Form
S-4 (No. 333-20491) filed with the Commission on January 27, 1997.
ITEM 22. UNDERTAKINGS
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
II-3
<PAGE>
(ii) To reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
registration statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high and of the estimated maximum offering range
may be reflected in the form of prospectus filed with the Commission
pursuant to Rule 424(b) if, in the aggregate, the changes in volume and
price represent no more than 20 percent change in the maximum aggregate
offering price set forth in the "Calculation of Registration Fee" table in
the effective registration statement.
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to
be the initial BONA FIDE offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(4) If the registrant is a foreign private issuer, to file a
post-effective amendment to the registration statement to include any
financial statements required by Rule 3-19 of this chapter at the start of
any delayed offering or throughout a continuous offering. Financial
statements and information otherwise required by Section 10(a)(3) of the Act
need not be furnished, PROVIDED, that the registrant includes in the
prospectus, by means of a post-effective amendment, financial statements
required pursuant to this paragaph (a)(4) and other information necessary to
ensure that all other information in the prospectus is at least as current
as the date of those financial statements. Notwithstanding the foregoing,
with respect to registration statements on Form F-3, a post-effective
amendment need not be filed to include financial statements and information
required by Section 10(a)(3) of the Act or Rule 3-19 of this chapter if such
financial statements and information are contained in periodic reports filed
with or furnished to the Commission by the registrant pursuant to Section 13
or Section 15(d) of the Securities Exchange Act of 1934 that are
incorporated by reference in the Form F-3.
(b) The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Item 4, 10(b), 11, or 13 of this form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through the
date of responding to the request.
(c) The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment No. 1 to the Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Menlo Park, State of California, on March 7, 1997.
CENTURA SOFTWARE CORPORATION
By: /s/ RICHARD A. GELHAUS
-----------------------------------------
Richard A. Gelhaus
CHIEF FINANCIAL OFFICER AND
SENIOR VICE PRESIDENT OF FINANCE AND
OPERATION
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS AMENDMENT
NO. 1 TO THE REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN
THE CAPACITIES AND ON THE DATES INDICATED:
SIGNATURE TITLE DATE
- ------------------------------ -------------------------- -------------------
President, Chief Executive
/s/ SAMUEL M. INMAN* Officer, Chairman of the
- ------------------------------ Board and Director March 7, 1997
Samuel M. Inman (Principal Executive
Officer)
Chief Financial Officer
/s/ RICHARD A. GELHAUS (Principal Financial and
- ------------------------------ Accounting Officer) and March 7, 1997
Richard A. Gelhaus Senior Vice President of
Finance and Operations
/s/ WILLIAM O. GRABE*
- ------------------------------ Director March 7, 1997
William O. Grabe
/s/ MAX D. HOPPER*
- ------------------------------ Director March 7, 1997
Max D. Hopper
/s/ D. BRUCE SCOTT*
- ------------------------------ Director March 7, 1997
D. Bruce Scott
/s/ ANTHONY SUN*
- ------------------------------ Director March 7, 1997
Anthony Sun
By /s/ RICHARD A. GELHAUS
-------------------------
Richard A. Gelhaus March 7, 1997
ATTORNEY-IN-FACT
II-5
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT PAGE OR
NUMBER DESCRIPTION FOOTNOTE
- ------------------ ------------------------------------------------------------------------------------- -----------
<C> <S> <C>
2.1 (13) Agreement and Plan of Reorganization dated January 6, 1997 by and among the
Registrant, IS Acquisition Corporation and InfoSpinner, Inc. (included as ANNEX A
to the Proxy Statement/Prospectus included as part of this Registration
Statement).........................................................................
2.2 (13) Form of Certificate of Merger among the Registrant, IS Acquisition Corporation and
InfoSpinner, Inc...................................................................
3(i) (11) Articles of Incorporation of the Registrant..........................................
3(ii)(11) Bylaws of the Registrant.............................................................
4.1 (12) Preferred Shares Rights Agreement, dated as of August 3, 1994, between Gupta
Corporation and Chemical Trust Company of California, including the Certificate of
Determination of Rights, Preferences and Privileges of Series A Participating
Preferred Stock, the form of Rights Certificate and the Summary of Rights, attached
thereto as Exhibits A, B and C, respectively.
5.1 Opinion of Venture Law Group, A Professional Corporation, as to the legality of the
Registrant's Common Stock being registered hereby..................................
8.1 Tax opinion of Venture Law Group, A Professional Corporation.........................
8.2 Tax opinion of Gunderson Dettmer Stough Villeneuve Franklin & Hachigian, LLP.........
10.1 (1) Form of Indemnification Agreement with the Registrant's officers and directors.......
10.2 ( (4) 1986 Stock Option Plan, as amended, and forms of option agreement thereunder.........
10.3 (1) 1991 United Kingdom Sub Plan and forms of agreement thereunder.......................
10.4 (11) 1992 Employee Stock Purchase Plan, as amended, and form of purchase agreement
thereunder.........................................................................
10.5 (1) 1992 Directors' Option Plan and forms of agreements thereunder.
10.8 (1) Lease Agreement dated February 4, 1992 between Registrant and Bohannon Associates....
10.9 (10) 1996 Executive Officers' Compensation Plan...........................................
10.12 (1) Forms of License Agreements..........................................................
10.14 (11) 1995 Stock Option Plan and form of option agreement thereunder.......................
10.16 (7) Note Purchase Agreement dated March 31, 1995 between the Company and Computer
Associates International, Inc......................................................
10.17 (8) Executive Employment Agreement dated April 10, 1995 between the Company and Sam M.
Inman, III.........................................................................
10.18 (9) Loan Agreement Secured by Property and Securities dated August 31, 1995 between the
Company and Earl and Ann Stahl.....................................................
10.19 (11) 1996 Director's Option Plan and form of option agreement thereunder..................
10.20 (11) Stipulation of Settlement dated July 19, 1996 in re the Registrant's Securities
Litigation between Plaintiff's Settlement Counsel and the Registrant's Counsel,
including exhibits thereto, and related Final Judgment and Order of Dismissal dated
September 30, 1996.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT PAGE OR
NUMBER DESCRIPTION FOOTNOTE
- ------------------ ------------------------------------------------------------------------------------- -----------
<C> <S> <C>
10.21 Distribution Agreement dated January 6, 1997 between Centura Software Corporation and
InfoSpinner, Inc...................................................................
11.1 Statement re Computation of Pro Forma Net Income (Loss) Per Share....................
16.1 (3)(5)(6) Letter regarding change in Certifying Accountant.....................................
21.1 (13) Subsidiaries of the Registrant.......................................................
23.1 Consent of Venture Law Group, A Professional Corporation, with respect to the
legality of securities being registered (contained in Exhibit 5.1).................
23.2 Consent of Venture Law Group, A Professional Corporation, with respect to certain tax
matters (contained in Exhibit 8.1).................................................
23.3 Consent of Gunderson Dettmer Stough Villeneuve Franklin & Hachigian, LLP, with
respect to certain tax matters (contained in Exhibit 8.2)..........................
23.4 Consent of Price Waterhouse LLP, Independent Accountants, with respect to financial
statements of Registrant...........................................................
23.5 Consent of Price Waterhouse LLP, Independent Accountants, with respect to financial
statements of InfoSpinner..........................................................
23.6 (13) Consent of Hambrecht & Quist LLC with respect to its fairness opinion................
24.1 (13) Power of Attorney....................................................................
99.1 (13) Form of Shareholder Agreement and Irrevocable Proxy and Stockholder Agreement and
Irrevocable Proxy dated as of January 6, 1997, entered into among Registrant,
InfoSpinner and certain affiliates of Registrant and InfoSpinner...................
</TABLE>
- ------------------------
(1) Incorporated by reference from the Company's Registration Statement on Form
S-1 (No. 33-55566), declared effective by the Commission on February 4,
1993.
(2) Incorporated by reference from the Company's Registration Statement on Form
S-8 (No. 33-62194) filed with the Commission on May 5, 1993.
(3) Incorporated by reference from the Company's Current Report on Form 8-K
dated July 2, 1993 ("Form 8-K").
(4) Incorporated by reference from the Company's Registration Statement on Form
S-8 (No. 33-83850) filed with the Commission on September 9, 1994.
(5) Incorporated by reference from the Company's Current Report on Form 8-K
dated October 11, 1995 as amended by Amendment No.1 dated October 25, 1995
("Form 8-K/A").
(6) Incorporated by reference from the Company's Current Report on Form 8-K
dated January 8, 1996 ("Form 8-K").
(7) Incorporated by reference from the Company's Quarterly Report on Form 10-Q
for the quarter ended March 31, 1995.
(8) Incorporated by reference from the Company's Quarterly Report on Form 10-Q
for the quarter ended June 30, 1995.
(9) Incorporated by reference from the Company's Quarterly Report on Form 10-Q
for the quarter ended September 30, 1995.
(10) Incorporated by reference from the Company's Annual Report on Form 10-K for
the year ended December 31, 1995.
<PAGE>
(11) Incorporated by reference from the Company's Quarterly Report on Form 10-Q
for the quarter ended September 30, 1996.
(12) Incorporated by reference from the Company's Registration Statement on Form
8-A filed with the Commission on August 10, 1994.
(13) Incorporated by reference from the Company's Registration Statement on Form
S-4 (No. 333-20491) filed with the Commission on January 27, 1997.
<PAGE>
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
OF CENTURA SOFTWARE CORPORATION FOR THE
SPECIAL MEETING OF SHAREHOLDERS TO BE HELD MARCH 31, 1997
The undersigned shareholder of Centura Software Corporation, a California
corporation, hereby acknowledges receipt of the Notice of Special Meeting of
Shareholders and Joint Proxy Statement, each dated March 18, 1997, and hereby
appoints Sam Inman and Richard Gelhaus or either of them, proxies and
attorneys-in-fact, with full power to each of substitution, on behalf and in
the name of the undersigned, to represent the undersigned at the Special
Meeting of Shareholders of Centura Software Corporation to be held on Monday,
March 31, 1997 at 1:30 p.m., local time, at Hotel Sofitel, located at 223
Twin Dolphin Drive, Redwood Shores, California 94065 and at any adjournment
or postponement thereof, and to vote all shares of Common Stock which the
undersigned would be entitled to vote if then and there personally present,
on the matters set forth below:
PLEASE SIGN ON REVERSE SIDE AND RETURN IMMEDIATELY
_______________________________________________________________________________
-arrow- FOLD AND DETACH HERE -arrow-
<PAGE>
<TABLE>
<C> <C> <C> <C> <C>
FOR AGAINST ABSTAIN
1. PROPOSAL TO APPROVE AND ADOPT / / / / / /
THE AGREEMENT AND PLAN OF and, in their discretion, upon such other
REORGANIZATION DATED JANUARY matter or matters that may properly come
6, 1997 (THE "MERGER before the meeting and any postponement(s) or
AGREEMENT") BY AND AMONG THE adjournment(s) thereof.
COMPANY, IS ACQUISITION
CORPORATION, A DELAWARE THIS PROXY WILL BE VOTED AS DIRECTOR OR, IF
CORPORATION AND WHOLLY OWNED NO CONTRARY DIRECTION IS INDICATED, WILL BE
SUBSIDIARY OF THE COMPANY VOTED AS FOLLOWS: (1) FOR APPROVAL AND
("MERGER SUB") AND ADOPTION OF THE AGREEMENT AND PLAN OF
INFOSPINNER, INC., A DELAWARE REORGANIZATION DATED JANUARY 6, 1997 (THE
CORPORATION ("INFOSPINNER"), "MERGER AGREEMENT") BY AND AMONG THE COMPANY,
AND TO APPROVE THE MERGER OF IS ACQUISITION CORPORATION, A DELAWARE
MERGER SUB WITH AND INTO CORPORATION AND WHOLLY OWNED SUBSIDIARY OF
INFOSPINNER PURSUANT TO THE THE COMPANY ("MERGER SUB") AND INFOSPINNER,
MERGER AGREEMENT: INC., A DELAWARE CORPORATION ("INFOSPINNER"),
AND FOR APPROVAL OF THE MERGER OF MERGER SUB
WITH AND INTO INFOSPINNER PURSUANT TO THE
MERGER AGREEMENT, AND AS SAID PROXIES DEEM
ADVISABLE ON SUCH OTHER MATTERS AS MAY COME
BEFORE THE MEETING.
__ __ __ (This Proxy should be marked, dated, signed
| by the shareholder(s) exactly as his or her
| name appears hereon, and returned promptly in
| the enclosed envelope. Persons signing in a
fiduciary capacity should so indicate. If
shares are held by joint tenants or as
community property, both should sign.)
</TABLE>
Signature(s)________________________________________________ Dated ___________
Signature(s)________________________________________________ Dated ___________
_______________________________________________________________________________
-arrow- FOLD AND DETACH HERE -arrow-
<PAGE>
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
OF INFOSPINNER, INC. FOR THE
SPECIAL MEETING OF STOCKHOLDERS TO BE HELD MARCH 31, 1997
The undersigned stockholder of InfoSpinner, Inc., a Delaware corporation
(the "Company"), hereby acknowledges receipt of the Notice of Special Meeting of
Stockholders and Joint Proxy Statement, each dated March 18, 1997, and hereby
appoints Keith Lowery and Robert West or either of them, proxies and
attorneys-in-fact, with full power to each of substitution, on behalf and in the
name of the undersigned, to represent the undersigned at the Special Meeting of
Stockholders of InfoSpinner, Inc. to be held on Monday, March 31, 1997 at 1:30
p.m., local time, at the Company(1)s executive offices, located at 1222 E.
Arapaho Road, Suite 320, Richardson, Texas 75081 and at any adjournment or
postponement thereof, and to vote all shares of Common and Preferred Stock which
the undersigned would be entitled to vote if then and there personally present,
on the matters set forth below:
1. PROPOSAL TO APPROVE AND ADOPT THE AGREEMENT AND PLAN OF REORGANIZATION
DATED JANUARY 6, 1997 (THE "MERGER AGREEMENT") BY AND AMONG THE COMPANY, CENTURA
SOFTWARE CORPORATION, A CALIFORNIA CORPORATION ("CENTURA") AND IS ACQUISITION
CORPORATION, A DELAWARE CORPORATION AND WHOLLY OWNED SUBSIDIARY OF CENTURA
("MERGER SUB"), AND TO APPROVE THE MERGER OF MERGER SUB WITH AND INTO THE
COMPANY PURSUANT TO THE MERGER AGREEMENT:
/ / FOR / / AGAINST / / ABSTAIN
and, in their discretion, upon such other matter or matters that may properly
come before the meeting and any postponement(s) or adjournment(s) thereof.
PLEASE SIGN ON REVERSE SIDE AND RETURN IMMEDIATELY
<PAGE>
THIS PROXY WILL BE VOTED AS DIRECTED OR, IF NO CONTRARY DIRECTION IS
INDICATED, WILL BE VOTED AS FOLLOWS: (1) FOR APPROVAL AND ADOPTION OF THE
AGREEMENT AND PLAN OF REORGANIZATION DATED JANUARY 6, 1997 (THE "MERGER
AGREEMENT") BY AND AMONG THE COMPANY, CENTURA SOFTWARE CORPORATION, A CALIFORNIA
CORPORATION ("CENTURA") AND IS ACQUISITION CORPORATION, A DELAWARE CORPORATION
AND WHOLLY OWNED SUBSIDIARY OF CENTURA ("MERGER SUB"), AND FOR APPROVAL OF THE
MERGER OF MERGER SUB WITH AND INTO THE COMPANY PURSUANT TO THE MERGER AGREEMENT,
AND AS SAID PROXIES DEEM ADVISABLE ON SUCH OTHER MATTERS AS MAY COME BEFORE THE
MEETING.
Signature ____________________
Date: ____________________________
Signature ____________________
Date: ____________________________
(This Proxy should be marked,
dated, signed by the
shareholder(s) exactly as his or
her name appears hereon, and
returned promptly in the enclosed
envelope. Persons signing in a
fiduciary capacity should so
indicate. If shares are held by
joint tenants or as community
property, both should sign.)
<PAGE>
EXHIBIT 5.1
March 10, 1997
Centura Software Corporation
1060 Marsh Road
Menlo Park, CA 94025
REGISTRATION STATEMENT ON FORM S-4 (FILE NO. 333-20491)
Ladies and Gentlemen:
We have examined the Registration Statement on Form S-4 (No. 333-20491)
filed by you with the Securities and Exchange Commission (the "Commission") on
January 27, 1997, as amended by Amendment No. 1 thereto filed with the
Commission on March 10, 1997 (the "Registration Statement"), in connection with
the registration under the Securities Act of 1933, as amended, of 4,500,000
shares of your Common Stock (the "Shares"). As your counsel in connection with
this transaction, we have examined the proceedings taken and are familiar with
the proceedings proposed to be taken by you in connection with the issuance of
the Shares.
It is our opinion that upon conclusion of the proceedings being taken or
contemplated by us, as your counsel, to be taken prior to the issuance of the
shares, and upon completion of the proceedings being taken in order to permit
such transactions to be carried out in accordance with the securities laws of
the various states where required, the Shares when issued in the manner
described in the Registration Statement will be legally and validly issued,
fully paid and non-assessable.
We consent to the use of this opinion as an exhibit to said Registration
Statement, and further consent to the use of our name wherever appearing in said
Registration Statement, including the Prospectus/Joint Proxy Statement
constituting a part thereof, and in any amendment thereto.
Very truly yours,
/s/ Venture Law Group
VENTURE LAW GROUP
<PAGE>
EXHIBIT 8.1
March 7, 1997
Centura Software Corporation
1060 Marsh Road
Menlo Park, CA 94025
Ladies and Gentlemen:
This opinion is being delivered to you pursuant to Section 6.1(h) of the
Agreement and Plan of Reorganization (the "Agreement") among Centura Software
Corporation, a California corporation ("Centura"), its wholly owned subsidiary,
IS Acquisition Corporation, a Delaware corporation ("Sub"), InfoSpinner, Inc., a
Delaware corporation ("InfoSpinner"), dated as of January 6, 1997. Pursuant to
the Agreement and the related Agreement of Merger (collectively, the "Merger
Agreements"), Sub will merge with and into InfoSpinner (the "Merger"), and
InfoSpinner will become a wholly owned subsidiary of Centura.
Except as otherwise provided, capitalized terms referred to herein have the
meanings set forth in the Merger Agreements. All section references, unless
otherwise indicated, are to the Internal Revenue Code of 1986, as amended (the
"Code").
We have acted as legal counsel to Centura and Sub in connection with the
Merger. As such, and for the purpose of rendering this opinion, we have examined
(or will examine on or prior to the Effective Time) and are relying (or will
rely) upon (without any independent investigation or review thereof) the truth
and accuracy, at all relevant times, of the statements, covenants,
representations and warranties contained in the following documents (including
all schedules and exhibits thereto):
1. The Merger Agreements (including Exhibits);
2. Representations made (or to be made prior to the Effective Time) to
us by Centura and Sub in a letter reproduced as Exhibit A hereto;
3. Representations made (or to be made prior to the Effective Time) to
us by InfoSpinner in a letter reproduced as Exhibit B hereto;
4. Representations made (or to be made prior to the Effective Time) to
us by certain stockholders of InfoSpinner in the Affiliates Agreements and
the Continuity of Interest Certificates;
5. An opinion of counsel, received by InfoSpinner from Gunderson
Dettmer Stough Villeneuve Franklin & Hachigian, LLP identical in form and
substance to this opinion (the "GDSVF&H Tax Opinion");
6. The Centura Information Statement relating to the Merger; and
7. Such other instruments and documents related to the formation,
organization and operation of Centura, InfoSpinner and Sub or to the
consummation of the Merger and the transactions contemplated thereby as we
have deemed necessary or appropriate.
In connection with rendering this opinion, we have assumed or obtained
representations (and are relying thereon, without any independent investigation
or review thereof) that:
A. Original documents (including signatures) are authentic, documents
submitted to us as copies conform to the original documents, and there has
been (or will be by the Effective Time) due execution and delivery of all
documents where due execution and delivery are prerequisites to
effectiveness thereof;
<PAGE>
B. Any representation or statement made "to the best knowledge of" or
otherwise similarly qualified is correct without such qualification. As to
all matters in which a person or entity making a representation has
represented that such person or entity either is not a party to, does not
have, or is not aware of any plan, intention, understanding or agreement to
take an action, there is in fact no plan, intention, understanding or
agreement and such action will not be taken;
C. The Merger will be consummated pursuant to the Merger Agreements and
will be effective under the laws of the states of Delaware and California;
D. The stockholders of InfoSpinner do not, and will not on or before the
Effective Time, have an existing plan or intent to dispose of an amount of
Centura Common Stock to be received in the Merger (or to dispose of
InfoSpinner capital stock in anticipation of the Merger) such that the
stockholders of InfoSpinner will not receive and retain a meaningful
continuing equity ownership in Centura that is sufficient to satisfy the
continuity of interest requirement as specified in Treas. Reg.
Section1.368-1(b) and as interpreted in certain Internal Revenue Service
rulings and federal judicial decisions;
E. After the Merger, InfoSpinner will hold "substantially all" of its
and Sub's properties within the meaning of Section 368(a)(2)(E)(i) of the
Code and the regulations promulgated thereunder and will continue its
historic business or use a significant portion of its historic business
assets in a business;
F. To the extent any expenses relating to the Merger (or the "plan of
reorganization" within the meaning of Treas. Reg. Section1.368-1(c) with
respect to the Merger) are funded directly or indirectly by a party other
than the incurring party, such expenses will be within the guidelines
established in Revenue Ruling 73-54, 1973-1 C.B. 187; any expenses paid on
behalf of InfoSpinner stockholders will not exceed one percent (1%) of the
total consideration that will be issued in the Merger to InfoSpinner
stockholders in exchange for their shares of InfoSpinner capital stock;
G. No InfoSpinner stockholder guaranteed any InfoSpinner indebtedness
outstanding during the period immediately prior to the Merger, and at all
relevant times, including as of the Effective Time, (i) no outstanding
indebtedness of InfoSpinner, Centura or Sub has or will represent equity for
tax purposes; (ii) no outstanding equity of InfoSpinner, Centura or Sub has
or will represent indebtedness for tax purposes; and (iii) no outstanding
security, instrument, agreement or arrangement that provides for, contains,
or represents either a right to acquire InfoSpinner capital stock or to
share in the appreciation thereof constitutes or will constitute "stock" for
purposes of Section 368(c) of the Code; and
H. The GDSVF&H Tax Opinion has been delivered and will not be withdrawn
prior to the consummation of the Merger.
Based on our examination of the foregoing items and subject to the
assumptions, exceptions, limitations and qualifications set forth herein, we are
of the opinion that, for federal income tax purposes, the Merger will be a
"reorganization" as defined in Section 368(a) of the Code.
In addition to the assumptions set forth above, this opinion is subject to
the exceptions, limitations and qualifications set forth below.
1. This opinion represents and is based upon our best judgment regarding
the application of federal income tax laws arising under the Code, existing
judicial decisions, administrative regulations and published rulings and
procedures. Our opinion is not binding upon the Internal Revenue Service or the
courts, and there is no assurance that the Internal Revenue Service will not
successfully assert a contrary position. Furthermore, no assurance can be given
that future legislative, judicial or administrative changes, on either a
prospective or retroactive basis, would not adversely affect the accuracy of the
conclusions stated herein. Nevertheless, we undertake no responsibility to
advise you of any new developments in the application or interpretation of the
federal income tax laws.
2
<PAGE>
2. This opinion addresses only the classification of the Merger as a
reorganization under Section 368(a) of the Code, and does not address any other
federal, state, local or foreign tax consequences that may result from the
Merger or any other transaction (including any transaction undertaken in
connection with the Merger). In particular, but without limitation, we express
no opinion regarding, (i) whether and the extent to which any InfoSpinner
stockholder who has provided or will provide services to InfoSpinner, Centura or
Sub will have compensation income under any provision of the Code; (ii) the
effects of such compensation income, including but not limited to the effect
upon the basis and holding period of the Centura Common Stock received by any
such stockholder in the Merger; (iii) the potential application of the "golden
parachute" provisions (Sections 280G, 3121(v)(2) and 4999) of the Code, the
alternative minimum tax provisions (Sections 55, 56 and 57) of the Code or
Sections 305, 306, 357, 424, and 708, or the regulations promulgated thereunder;
(iv) the corporate level tax consequences of the Merger to Centura, Sub or
InfoSpinner, including without limitation the recognition of any gain and the
survival and/ or availability, after the Merger, of any of the federal income
tax attributes or elections of InfoSpinner, after application of any provision
of the Code, as well as the regulations promulgated thereunder and judicial
interpretations thereof; (v) the basis of any equity interest in InfoSpinner
acquired by Centura in the Merger; (vi) the tax consequences of any transaction
in which InfoSpinner capital stock or a right to acquire InfoSpinner capital
stock was received; (vii) the tax consequences to any InfoSpinner stockholder or
to InfoSpinner, Centura or Sub of a forfeiture to Centura of all or any part of
the Escrow Shares; and (viii) the tax consequences of the Merger (including the
opinion set forth above) as applied to stockholders of InfoSpinner and/or
holders of options or warrants for InfoSpinner capital stock or that may be
relevant to particular classes of InfoSpinner stockholders and/or holders of
options or warrants for InfoSpinner capital stock such as dealers in securities,
corporate stockholders subject to the alternative minimum tax, foreign persons,
and holders of shares acquired upon exercise of stock options or in other
compensatory transactions.
3. No opinion is expressed as to any transaction other than the Merger as
described in the Merger Agreements or to any transaction whatsoever, including
the Merger, if all the transactions described in the Merger Agreements are not
consummated in accordance with the terms of such Merger Agreements and without
waiver or breach of any material provision thereof or if all of the
representations, warranties, statements and assumptions upon which we relied are
not true and accurate at all relevant times. In the event any one of the
statements, representations, warranties or assumptions upon which we have relied
to issue this opinion is incorrect, our opinion might be adversely affected and
may not be relied upon. In addition, in the event that executed copies of the
letters and agreements referred to in 2, 3 or 4 of the third paragraph of this
letter are not furnished to us at or prior to the Effective Time, this opinion
shall be void and of no further effect, and may not be relied upon.
4. This opinion has been delivered to you for the purpose of satisfying the
condition set forth in Section 6.1(h) of the Agreement and is intended solely
for your benefit; it may not be relied upon for any other purpose or by any
other person or entity, and may not be made available to any other person or
entity without our prior written consent, except that we hereby consent to the
filing of this opinion as an exhibit to the Form S-4 Registration Statement to
be filed with the Securities and Exchange Commission with respect to the
securities described herein and to the references to this form in the section
entitled "Certain Federal Income Tax Consequences of the Merger" thereof. This
consent is not to be construed as an admission that we are a person whose
consent is required to be filed with the registration statement under the
provisions of the Securities Act of 1933.
Very truly yours,
/S/ VENTURE LAW GROUP
VENTURE LAW GROUP,
A PROFESSIONAL CORPORATION
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EXHIBIT 8.2
March 7, 1997
InfoSpinner, Inc.
1222 E. Arapaho Road, Suite 320
Richardson, Texas 75081
Ladies and Gentlemen:
This opinion is being delivered to you pursuant to Section 6.1(h) of the
Agreement and Plan of Reorganization (the "Agreement") among Centura Software
Corporation, a California corporation ("Centura"), its wholly owned subsidiary,
IS Acquisition Corporation, a Delaware corporation ("Sub"), and InfoSpinner,
Inc., a Delaware corporation ("InfoSpinner"), dated as of January 6, 1997.
Pursuant to the Agreement and the related Agreement of Merger (collectively, the
"Merger Agreements"), Sub will merge with and into InfoSpinner (the "Merger"),
and InfoSpinner will become a wholly owned subsidiary of Centura.
Except as otherwise provided, capitalized terms referred to herein have the
meanings set forth in the Merger Agreements. All section references, unless
otherwise indicated, are to the Internal Revenue Code of 1986, as amended (the
"Code").
We have acted as legal counsel to InfoSpinner in connection with the Merger.
As such, and for the purpose of rendering this opinion, we have examined (or
will examine on or prior to the Effective Time) and are relying (or will rely)
upon (without any independent investigation or review thereof) the truth and
accuracy, at all relevant times, of the statements, covenants, representations
and warranties contained in the following documents (including all schedules and
exhibits thereto):
1. The Merger Agreements (including Exhibits);
2. Representations made (or to be made prior to the Effective Time) to
us by Centura and Sub in a letter reproduced as Exhibit A hereto;
3. Representations made (or to be made prior to the Effective Time) to
us by InfoSpinner in a letter reproduced as Exhibit B hereto;
4. Representations made (or to be made prior to the Effective Time) to
us by certain stockholders of InfoSpinner in the Affiliates Agreements and
the Continuity of Interest Certificates;
5. An opinion of counsel, received by Centura and Sub from Venture Law
Group, A Professional Corporation identical in form and substance to this
opinion (the "VGL Tax Opinion");
6. The Centura Information Statement relating to the Merger; and
7. Such other instruments and documents related to the formation,
organization and operation of Centura, InfoSpinner and Sub or to the
consummation of the Merger and the transactions contemplated thereby as we
have deemed necessary or appropriate.
In connection with rendering this opinion, we have assumed or obtained
representations (and are relying thereon, without any independent investigation
or review thereof) that:
A. Original documents (including signatures) are authentic, documents
submitted to us as copies conform to the original documents, and there has
been (or will be by the Effective Time) due execution and delivery of all
documents where due execution and delivery are prerequisites to
effectiveness thereof;
B. Any representation or statement made "to the best knowledge of" or
otherwise similarly qualified is correct without such qualification. As to
all matters in which a person or entity making a representation has
represented that such person or entity either is not a party to, does not
have, or is
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not aware of any plan, intention, understanding or agreement to take an
action, there is in fact no plan, intention, understanding or agreement and
such action will not be taken;
C. The Merger will be consummated pursuant to the Merger Agreements and
will be effective under the laws of the states of Delaware and California;
D. The stockholders of InfoSpinner do not, and will not on or before the
Effective Time, have an existing plan or intent to dispose of an amount of
Centura Common Stock to be received in the Merger (or to dispose of
InfoSpinner capital stock in anticipation of the Merger) such that the
stockholders of InfoSpinner will not receive and retain a meaningful
continuing equity ownership in Centura that is sufficient to satisfy the
continuity of interest requirement as specified in Treas. Reg.
Section1.368-1(b) and as interpreted in certain Internal Revenue Service
rulings and federal judicial decisions;
E. After the Merger, InfoSpinner will hold "substantially all" of its
and Sub's properties within the meaning of Section 368(a)(2)(E)(i) of the
Code and the regulations promulgated thereunder and will continue its
historic business or use a significant portion of its historic business
assets in a business;
F. To the extent any expenses relating to the Merger (or the "plan of
reorganization" within the meaning of Treas. Reg. Section1.368-1(c) with
respect to the Merger) are funded directly or indirectly by a party other
than the incurring party, such expenses will be within the guidelines
established in Revenue Ruling 73-54, 1973-1 C.B. 187; any expenses paid on
behalf of InfoSpinner stockholders will not exceed one percent (1%) of the
total consideration that will be issued in the Merger to InfoSpinner
stockholders in exchange for their shares of InfoSpinner capital stock;
G. No InfoSpinner stockholder guaranteed any InfoSpinner indebtedness
outstanding during the period immediately prior to the Merger, and at all
relevant times, including as of the Effective Time, (i) no outstanding
indebtedness of InfoSpinner, Centura or Sub has or will represent equity for
tax purposes; (ii) no outstanding equity of InfoSpinner, Centura or Sub has
or will represent indebtedness for tax purposes; and (iii) no outstanding
security, instrument, agreement or arrangement that provides for, contains,
or represents either a right to acquire InfoSpinner capital stock or to
share in the appreciation thereof constitutes or will constitute "stock" for
purposes of Section 368(c) of the Code; and
H. The VGL Tax Opinion has been delivered and will not be withdrawn
prior to the consummation of the Merger.
Based on our examination of the foregoing items and subject to the
assumptions, exceptions, limitations and qualifications set forth herein, we are
of the opinion that, for federal income tax purposes, the Merger will be a
"reorganization" as defined in Section 368(a) of the Code.
In addition to the assumptions set forth above, this opinion is subject to
the exceptions, limitations and qualifications set forth below.
1. This opinion represents and is based upon our best judgment regarding
the application of federal income tax laws arising under the Code, existing
judicial decisions, administrative regulations and published rulings and
procedures. Our opinion is not binding upon the Internal Revenue Service or the
courts, and there is no assurance that the Internal Revenue Service will not
successfully assert a contrary position. Furthermore, no assurance can be given
that future legislative, judicial or administrative changes, on either a
prospective or retroactive basis, would not adversely affect the accuracy of the
conclusions stated herein. Nevertheless, we undertake no responsibility to
advise you of any new developments in the application or interpretation of the
federal income tax laws.
2. This opinion addresses only the classification of the Merger as a
reorganization under Section 368(a) of the Code, and does not address any other
federal, state, local or foreign tax consequences that may result from the
Merger or any other transaction (including any transaction undertaken in
connection with the Merger). In particular, but without limitation, we express
no opinion regarding,
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(i) whether and the extent to which any InfoSpinner stockholder who has provided
or will provide services to InfoSpinner, Centura or Sub will have compensation
income under any provision of the Code; (ii) the effects of such compensation
income, including but not limited to the effect upon the basis and holding
period of the Centura Common Stock received by any such stockholder in the
Merger; (iii) the potential application of the "golden parachute" provisions
(Sections 280G, 3121(v)(2) and 4999) of the Code, the alternative minimum tax
provisions (Sections 55, 56 and 57) of the Code or Sections 305, 306, 357, 424,
and 708, or the regulations promulgated thereunder; (iv) the corporate level tax
consequences of the Merger to Centura, Sub or InfoSpinner, including without
limitation the recognition of any gain and the survival and/ or availability,
after the Merger, of any of the federal income tax attributes or elections of
InfoSpinner, after application of any provision of the Code, as well as the
regulations promulgated thereunder and judicial interpretations thereof; (v) the
basis of any equity interest in InfoSpinner acquired by Centura in the Merger;
(vi) the tax consequences of any transaction in which InfoSpinner capital stock
or a right to acquire InfoSpinner capital stock was received; (vii) the tax
consequences to any InfoSpinner stockholder or to InfoSpinner, Centura or Sub of
a forfeiture to Centura of all or any part of the Escrow Shares; and (viii) the
tax consequences of the Merger (including the opinion set forth above) as
applied to stockholders of InfoSpinner and/or holders of options or warrants for
InfoSpinner capital stock or that may be relevant to particular classes of
InfoSpinner stockholders and/or holders of options or warrants for InfoSpinner
capital stock such as dealers in securities, corporate stockholders subject to
the alternative minimum tax, foreign persons, and holders of shares acquired
upon exercise of stock options or in other compensatory transactions.
3. No opinion is expressed as to any transaction other than the Merger as
described in the Merger Agreements or to any transaction whatsoever, including
the Merger, if all the transactions described in the Merger Agreements are not
consummated in accordance with the terms of such Merger Agreements and without
waiver or breach of any material provision thereof or if all of the
representations, warranties, statements and assumptions upon which we relied are
not true and accurate at all relevant times. In the event any one of the
statements, representations, warranties or assumptions upon which we have relied
to issue this opinion is incorrect, our opinion might be adversely affected and
may not be relied upon. In addition, in the event that executed copies of the
letters and agreements referred to in 2, 3 or 4 of the third paragraph of this
letter are not furnished to us at or prior to the Effective Time, this opinion
shall be void and of no further effect, and may not be relied upon.
4. This opinion has been delivered to you for the purpose of satisfying the
condition set forth in Section 6.1(h) of the Agreement and is intended solely
for your benefit; it may not be relied upon for any other purpose or by any
other person or entity, and may not be made available to any other person or
entity without our prior written consent except that we hereby consent to the
filing of this opinion as an exhibit to the Form S-4 Registration Statement to
be filed with the Securities and Exchange Commission with regard to the
securities described herein and to the references to this form in the section
entitled "Certain Federal Income Tax Consequences of the Merger" thereof. This
consent is not to be construed as an admission that we are a person whose
consent is required to be filed with the registration statement under the
provisions of the Securities Act of 1933.
Very truly yours,
/s/ GUNDERSON DETTMER STOUGH
VILLENEUVE FRANKLIN & HACHIGIAN, LLP
GUNDERSON DETTMER STOUGH
VILLENEUVE FRANKLIN & HACHIGIAN, LLP
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EXHIBIT 10.21
DISTRIBUTORSHIP AGREEMENT
THIS DISTRIBUTORSHIP AGREEMENT (this "Agreement") is made this 6th day of
January, 1997 (the "Effective Date"), by and between Centura Software
Corporation, a California corporation, having its principal office at 1060 Marsh
Road, Menlo Park, California 94025 ("Distributor"), and InfoSpinner, Inc., a
Delaware corporation, having its principal office at 1702 Drake Drive,
Richardson, Texas 75081, U.S.A. ("INFO").
ARTICLE 1. GRANT OF DISTRIBUTORSHIP.
1.01 LICENSE GRANT. Subject to the terms and conditions of this
Agreement, INFO grants and Distributor accepts during the Term of this Agreement
an nonexclusive, nontransferable right to reproduce, market and license use of
the INFO products listed on Exhibit A (the "Products") but only to Customers (as
defined below) located in the territory set forth on the signature page hereto
(the "Territory"). For the avoidance of doubt, "Products" as used herein shall
not include any Kanji or other non-English language or localized version of any
INFO product. Distributor may appoint subdistributors provided that any such
subdistributor shall be bound by an enforceable writing for INFO's benefit to
all the limitations, disclaimers and restrictions of this Agreement. Except as
provided in Section 3.01, Distributor is not entitled to receive any source code
or source documentation with respect to the Products. "Customer" means any third
party which is granted a license by Distributor or a subdistributor to use (and
not to redistribute) internally on a single designated hardware and software
system any Product(s). A Customer's location shall be where the Product(s) are
installed.
1.02 OWNERSHIP.
Notwithstanding anything else, as between the parties, INFO retains (i) all
title to, and, except as expressly and unambiguously licensed herein, all rights
in and to the Products, all copies and derivative works therefore (by whomever
produced) and all related documentation and materials, (ii) all of their service
marks, trademarks, tradenames or any other designations (and notwithstanding
anything else herein, Distributor may not use any name, mark or designation used
by INFO, except for use in advertising or marketing the Products in accordance
with the terms and conditions contained herein) and (iii) all copyrights, patent
rights trade secret rights and other proprietary rights in the Products.
1.03 DISTRIBUTOR USE OF PRODUCTS. Distributor may use the Products solely
to fulfill its marketing, support, and maintenance responsibilities under this
Agreement.
1.04 STANDARD LICENSE AGREEMENT. Distributor shall license the Products
pursuant to Distributor's standard terms and conditions, which will be, and
shall whenever revised, be approved in writing by INFO, which approval shall not
be unreasonably withheld. Distributor shall assure that its standard License
Agreement with subdistributors and its standard End-User License Agreement with
Customers (the "License Agreements") conform to all requirements of this
Agreement. Specifically, but without limitation, the License Agreements shall
incorporate in substance the provisions herein regarding confidentiality,
limited warranty, limitation of liability/damages, and all restrictions upon
disclosure, reproduction, or duplication of the Products. In addition, if the
Product is distributed to Customers via the Internet or by other electronic
means, the Customer shall be required to affirmatively acknowledge acceptance of
the license by "clicking" on an acceptance button or other similar means.
Distributor shall not modify the substantive content of its License Agreements,
as approved by INFO without the further prior written approval of INFO.
Distributor and its subdistributors authorized hereunder may execute License
Agreements written in other than the English language. In the event of any
discrepancy between the non-English and the English versions, the latter shall
control. Distributor shall represent to INFO that such non-English version is an
accurate translation of the English version, and Distributor shall be
responsible for compliance of its distributors, affiliates, agents and customers
with the terms and conditions herein
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regarding confidentiality, limited warranty, limitation of liability, damages,
and all restrictions upon disclosure, reproduction, or duplication of the
Products.
1.05 PRODUCT ENHANCEMENTS.
(a) During the Term of this Agreement, INFO shall provide Distributor
with modifications, upgrades, or improvements to the Products, or any part
thereof, that INFO may from time to time make available that: (i) is
identified as a new release of a Product, (ii) contains a modification,
upgrade or improvement to the Product, (iii) is not a separately priced
software component (and does not include any software that INFO distributes
as a separate product) and (iv) is made commercially generally available by
INFO (a "Product Enhancement"). Each such Product Enhancement will be deemed
a "Product" for purposes of this Agreement, including royalty calculations.
(b) INFO shall in good faith (but with no further obligation) consider
any functionality changes or modifications to the Products specifically
requested by Distributor to facilitate integration with Distributor products
and/or exploitation of the Products in the Territory. Any such modifications
which INFO commits to undertake shall be the subject of a separate agreement
between the parties and shall not be deemed "Product Enhancements" for
purposes of this Agreement.
1.06 DELIVERY OF PRODUCT AND DOCUMENTATION.
INFO will provide Distributor with two production masters of each Product
and any Product Enhancement, and will provide two copies of the documentation
for each Product and any Product Enhancement. Distributor is responsible for
duplicating Products, any Product Enhancements and all documentation for
distribution to Customers.
ARTICLE 2. TERM AND RENEWAL.
2.01 TERM. This Agreement shall commence on the above date and shall
continue for three (3) years unless earlier terminated pursuant to Section
11.01.
2.02 RENEWAL. This Agreement shall automatically renew for an unlimited
number of successive one-year periods, unless terminated as provided in Section
11.01 or either party notifies the other party thirty (30) days prior to renewal
that it wishes to negotiate a change to this Agreement. In case of
renegotiation, renewal will not be effective unless the negotiated changes are
mutually agreed to in writing by the parties.
ARTICLE 3. ESCROW & SUPPORT.
3.01 ESCROW. Within 60 days after the Effective Date, INFO and
Distributor shall enter into a Software Source Code Escrow Agreement with a
reputable third party escrow agent that is reasonably acceptable to the parties
(the "Escrow Agreement"), which Escrow Agreement shall provide for the release
of the source code of the Products to Distributor in the event that INFO becomes
insolvent, whether voluntary or involuntary, or if any process or judicial
proceeding is instituted against INFO by attachment or levy or execution, in
insolvency or bankruptcy, or in receivership (and such process or proceeding is
not resolved within 120 days thereafter), or if any general assignment is made
or attempted to be made for the benefit of creditors by such party.
3.02 BACKLINE SUPPORT AND MAINTENANCE FEE. Distributor shall be
responsible for all Customer support for the Products. During the term of this
Agreement, INFO shall provide 20 hours of backline support (I.E., support that
requires access and manipulation of the Product source code) per month directly
to Distributor's designated INFO product support manager in exchange for an
annual backline support fee of $XXXXX. INFO's sole obligation with respect to
any Product or documentation errors will be to use all diligent efforts to
correct, at its expense, any reproducible error about which it receives written
notice within a reasonable period of time after discovery. INFO's support
obligations contained in this
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Section 3.03 are contingent upon proper use of the Product(s) and shall not
apply if a Product (i) is modified by Distributor or by any other party without
INFO's prior written approval; (ii) is otherwise tampered with; or (iii) if it
is used on or with a version of a hardware or software product which INFO does
not support at the time of such use.
ARTICLE 4. MARKETING AND ADVERTISING.
4.01 DISTRIBUTOR MARKETING EFFORTS AND SALES TARGETS.
(a) Distributor shall, during the Term of this Agreement, use its best
efforts to market, advertise, distribute and otherwise promote the
distribution, licensing and use of Products in the Territory on a continuing
basis.
(b) Distributor will provide nonbinding forecasts of monthly sales for
the upcoming six (6) months on a rolling basis, prior to the start of the
month. Such forecasts and updates shall include such information with
respect to future sales of the Products as INFO shall reasonably request.
4.02 DISTRIBUTOR STAFF COMMITMENT. Unless INFO agrees otherwise in
writing, all Distributor Customer support activities regarding the Product(s)
shall be performed by Distributor's employees. Distributor shall commit a
sufficient number of trained and qualified personnel to market and promote the
Product(s) and agrees to maintain at least an adequate number of trained staff
personnel.
4.03 USE OF INFO TRADEMARKS AND/OR TRADE NAMES. Distributor shall, at its
option and without separate charge, use INFO's service marks, trademarks and/or
trade names identified in Exhibit C hereto (to which INFO may add or delete from
time to time upon 60 days prior written notice to Distributor) in any
advertising, marketing, technical, or other materials produced or distributed by
Distributor pursuant to this Agreement. In using such service marks, trademarks
and/or trade names, Distributor shall clearly indicate INFO's ownership rights
to such service marks, trademarks and/or trade names. Distributor shall not
acquire any rights in or to such service marks, trademarks or trade names by
virtue of use, and shall immediately cease use upon termination of this
Agreement. Distributor shall promptly notify INFO of any third party use of the
same or similar service marks, trademarks or trade names which may infringe upon
INFO proprietary rights; and shall cooperate with INFO in prosecution of any
such infringement(s). Distributor will not contest the use by or authorized by
INFO of any trademark or application or registration therefor, whether during or
after the term of this Agreement. In connection with its use of INFO's service
marks, trademarks and/or trade names, Distributor will comply with INFO's
quality control standards then in effect. Upon notice from INFO that Distributor
has materially failed to comply with such standards, Distributor shall use its
best efforts to cure such non-compliance. In the event that Distributor does not
cure such noncompliance within a reasonable period of time (not to exceed 30
days) after first receipt of notice from INFO, INFO shall have the right to
suspend Distributor's use of the applicable service mark, trademark and/or trade
name until non-compliance has been cured to INFO's reasonable satisfaction.
ARTICLE 5. INSTALLATION, PRODUCT SUPPORT, TECHNICAL SERVICES.
Distributor shall be solely responsible for, and shall use its best efforts
to ensure, proper installation of the Product(s). Distributor shall be the sole
Customer contact regarding, and shall be responsible for, promptly providing
Customers with installation, technical services (i.e., maintenance), correction
of errors, current Product documentation (including appropriate translations
prepared at its expense), Product related training, and Product Enhancements
(including documentation appropriately translated at its expense). Distributor
may request INFO assistance if Distributor is reasonably unable to meet Customer
requests relating to the Product(s) as long as the Product(s) are installed on
hardware and software environments which INFO supports, and upon terms that are
mutually agreed upon by the parties.
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ARTICLE 6. FEES/ROYALTIES; TAXES.
6.01 RECOMMENDED LICENSE AND MAINTENANCE FEES.
(a) All royalties and maintenance fees due INFO hereunder shall be based
upon the then current U.S. Dollar Product License and Maintenance Fees
Schedule attached as Exhibit A (the "Fees Schedule"). INFO will advise
Distributor in writing of changes in the Fees Schedule at least thirty (30)
days prior to the effective date of such changes.
(b) Distributor shall have the right to determine the pricing of the
Products in the Territory (which may differ from the prices suggested on the
Fees Schedule), however, License Fee Royalties to be paid to INFO by
Distributor shall be based on the U.S. Dollar prices set forth in the Fees
Schedule.
6.02 PAYMENT OF ROYALTIES.
(a) Distributor shall pay to INFO the non-refundable (except as set
forth on Exhibit B) Advance Payment (the "Advance") in the amount and
according to the payment schedule set forth in Exhibit B. In addition,
Distributor will pay INFO royalties on each (i) copy of a Product
distributed and (ii) Product maintenance agreement in effect in accordance
with Exhibit B.
(b) Distributor shall report within forty-five days after the end of
each calendar quarter all Royalties due to INFO for Product licenses or
maintenance agreements for which Distributor directly or indirectly receives
payment pursuant to such Product license or maintenance agreement. Along
with such report, Distributor will pay the Royalties due to INFO, with an
offset for advance Royalty payments in accordance with the schedule set
forth in Exhibit B, if any are outstanding at such time.
6.03 DELINQUENT PAYMENT. If any payment provided in Section 6.02 shall
remain unpaid following the time prescribed therefor, Distributor shall pay
INFO, in addition to the payment then owing, interest thereon at 18% per annum,
or at the maximum interest rate allowed by law, if such rate is lower, for the
period such payment is delinquent.
6.04 TAXES AND DUTIES. In addition to all license and maintenance fees
due hereunder, Distributor shall pay all taxes, duties, import, customs and
export fees (including, but not limited to any withholding taxes imposed by any
government entity), and any other charges or assessments established by any
governmental agency, except taxes imposed on INFO based on its net income.
ARTICLE 7. CONFIDENTIALITY.
7.01 CONFIDENTIALITY OF PRODUCT(S). Unless expressly provided otherwise
herein, the Product(s), together with all Product Enhancements, materials and
knowledge related thereto and any other items identified by INFO as
"confidential", are provided to Distributor and any Customer, and their
respective employees, agents and representatives, in confidence and shall not be
duplicated or disclosed by any of them in any form for the use or benefit of any
other person or entity. Neither Distributor nor any Customer shall reproduce,
transcribe, imitate, reverse engineer, or decompile the Products. Provided that
the recipient has executed a confidentiality agreement that restricts his right
to use or disclose the Product or other confidential information that is at
least as restrictive as Distributor's obligation under this Section 7.01,
Distributor or any Customer may disclose relevant aspects of the Product(s) to
each other and to their respective employees, agents or representatives to the
extent that such disclosure is reasonably necessary to Distributor's use of the
Product(s) pursuant to this Agreement, or to Customer's use pursuant to the
applicable License Agreement, provided that Distributor shall take all
reasonable steps to ensure that the Product(s) are not disclosed or duplicated
in contravention of this Agreement including, but not limited to, execution of
written confidentiality agreements by appropriate persons.
7.02 CONFIDENTIALITY OF AGREEMENT. Distributor and INFO shall not
disclose the terms and conditions of this Agreement to anyone other than: (i)
its employees who reasonably acquire such knowledge in the ordinary course and
scope of their employment; (ii) its agents or representatives whose assigned
duties
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reasonably require that such disclosure be made, or to the extent that such
disclosure is reasonably necessary for use of the Products; (iii) Customers, to
the extent reasonably necessary to license the Product(s) or to comply with the
provisions hereof; and (iv) third parties in connection with a potential
financial transaction or similar arrangement.
7.03 DUTY TO ASSIST. In the event of any violation or suspected violation
of any provision of this Article 8, Distributor shall immediately notify INFO
and shall, at its expense, assist INFO in the enforcement of such provision
against any employee, agent or representative of Distributor or Customer.
7.04 DISCLOSURE REQUIRED BY LAW. Nothing in this Article 8 shall in any
way restrict disclosure by either party pursuant to any law, the order of any
court or governmental agency, or the rules or regulations of any governmental
agency having jurisdiction governing the installation location. However,
Distributor shall immediately notify INFO in writing of any attempt of
attachment, levy, or execution upon or against the Product(s) and provide INFO
with all reasonable assistance and cooperation to limit or suppress such
disclosure.
7.05 SURVIVAL. Provisions of this Article 8 shall survive termination of
this Agreement in accordance with Article 12.
ARTICLE 8. LIMITED WARRANTIES.
8.01 EXPRESS WARRANTIES. INFO warrants that it has the right to enter
into this Agreement and to grant Distributor the right to license or use the
Product(s) in accordance with this Agreement.
8.02 DISCLAIMER OF WARRANTIES. DISTRIBUTOR HEREBY EXPRESSLY AGREES AND
ACKNOWLEDGES THAT THE FOREGOING WARRANTIES CONTAINED IN SECTION 8.01 ARE IN LIEU
OF ANY AND ALL OTHER WARRANTIES. INFO DISCLAIMS ANY AND ALL OTHER
REPRESENTATIONS OR WARRANTIES OF ANY KIND WHATSOEVER, EITHER EXPRESS OR IMPLIED,
INCLUDING, BUT NOT LIMITED TO, ANY IMPLIED WARRANTY OF MERCHANTABILITY OR
FITNESS FOR A PARTICULAR PURPOSE REGARDING DISTRIBUTOR'S OR CUSTOMER'S
APPLICATION OR USE OF THE PRODUCTS, AND NONINFRINGEMENT.
8.03 LIMITATION OF LIABILITY/DAMAGES. Distributor agrees that
notwithstanding anything else in this agreement, INFO will not be liable with
respect to any subject matter of this Agreement under any contract, negligence,
strict liability or other legal or equitable theory (i) for any damages arising
out of use of Product, except those arising from patent or copyright
infringement as provided in Article 10, and including, but not limited to,
breach of any warranty, (ii) for any amount in excess of the lesser of actual
direct damages to Distributor or the total amount of payments paid by
Distributor to INFO pursuant to Section 6.02 during the twelve (12) months
preceding the events or occurrences giving rise to the damage, (iii) for the
cost of procurement of substitute goods, services or technology; and (iv) in any
event, for any damages incurred by Distributor, Customer, or by any other
person, organization or entity as a result of Distributor's, or its Customer's,
misuse of the Product(s), even if INFO had been advised of the possibility of
such damages. INFO shall not be liable for any consequential, special, or
incidental damages, lost proceeds, or for any claim or demand against
Distributor by any other person, organization, or entity, except for patent or
copyright infringement as provided in Article 10.
8.04 TIME LIMITATION. Any legal proceeding based upon or arising out of
this Agreement must be instituted within one (1) year from the date of
occurrence of the events upon which such legal proceeding is based.
ARTICLE 9. PATENT OR COPYRIGHT INFRINGEMENT.
If any alleged infringement of patent or copyright is asserted against
Distributor based upon its use or license of the Product(s), INFO will indemnify
Distributor in investigation of such claims, in preparation
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and defense against such claims, or in settlement thereof, provided that INFO
shall have received from Distributor notice of said claim within fifteen (15)
days of the assertion thereof; and further provided that INFO shall have the
exclusive right, if it so chooses, to control and direct the investigation,
defense, or settlement of such claims; and further provided that INFO shall
receive the complete cooperation and assistance of Distributor. In the event an
infringement is determined or, if required by settlement, INFO may substitute
for the Product and documentation substantially equivalent programs and
documentation, or, alternatively, INFO may procure for Distributor the right to
continue distributing the Product. If the claim is based on the fact that
Distributor or any third party has modified the Product without INFO
authorization, Distributor shall reimburse INFO for any and all costs associated
with its investigation and defense of said claim(s). The foregoing obligation of
INFO does not apply with respect to the Products or portions or components
thereof (i) made in whole or in part in accordance to Distributor's
specifications, (ii) which are modified after shipment by any party other INFO,
if the alleged infringement relates to such modification, (iii) combined with
other non-INFO products, processes or materials where the alleged infringement
relates to such combination, (iv) where Distributor continues allegedly
infringing activity after being notified thereof or after being informed of
modifications that would have avoided the alleged infringement, or (v) where
Distributor's use of the Products is incident to an infringement not resulting
primarily from the Product.
ARTICLE 10. RECORDS, REPORTS AND AUDITS.
10.01 REQUIRED RECORDS. Distributor shall prepare and maintain, at its
expense, complete and accurate books and records documenting its reproduction
and licensing of Product(s) and rendering of support and maintenance pursuant to
this Agreement; and its receipt of all fees in or relating thereto. Distributor
shall maintain such books and records for a minimum of three (3) years from the
later of the date of the last time of license granted hereunder or provision of
services, respectively.
10.02 REPORTS TO INFO. Distributor shall, at its expense, provide INFO a
quarterly written report of Distributor's marketing, licensing and support
activities pursuant to this Agreement. Such reports shall include, all fees due
INFO and confirm Distributor's receipt of fees from Customers upon which fees
are calculated; all taxes paid by Distributor applicable to the Product(s);
License Agreement terminations; a summary of Product support activities and
Product operational problems. Reports are due within a reasonable time after the
quarter end to which such report relates. In addition, Distributor shall
promptly provide INFO with such other reports and in such manner as INFO may
reasonably request from time to time. AUDIT. During the Term of this Agreement
and for one (1) year thereafter, INFO shall have the right, at its expense and
upon reasonable written notice to Distributor to have the relevant records of
Distributor reviewed by INFO's outside certified public accountant to verify
Distributor's performance hereunder. Provided, however, that such examination
shall take place at a place and time mutually convenient to Distributor and INFO
and no more than once per calendar year.
ARTICLE 11. TERMINATION AND REMEDIES.
11.01 TERMINATION. This Agreement may be terminated:
(a) upon 10 days notice, if Distributor fails to make any payments
required by this Agreement when due;
(b) in the event either party fails materially to fulfill its
obligations hereunder, the other party shall notify the non-complying party
in writing of the breach and the reasons therefor. If the non-complying
party fails to remedy the breach within thirty (30) days from the date of
receipt of such notice, or, in the event such breach cannot be remedied
within thirty (30) days, the breaching party has not undertaken substantial
efforts to cure the breach (and in any event, cured such breach within 60
days of first notice thereof), the other party may immediately terminate
this Agreement by giving written notice of termination to the non-complying
party; notwithstanding the foregoing, however,
6
<PAGE>
INFO may terminate this Agreement immediately upon notice if Distributor
violates any provision of Article 8; or if either party becomes insolvent,
whether voluntary or involuntary, or if any process or judicial proceeding
is instituted against such party by attachment or levy or execution, in
insolvency or bankruptcy, or in receivership, or if any general assignment
is made or attempted to be made for the benefit of creditors by such party,
this Agreement may be terminated by the other party immediately upon written
notice.
11.02 EFFECT OF TERMINATION. Neither the right to terminate nor the actual
termination of this Agreement as provided in this Article 12 shall limit the
non-breaching party from pursuing whatever relief it deems appropriate for such
breach in accordance with the provisions of this Agreement. Termination of this
Agreement for any reason shall not relieve Distributor of its obligation to make
full payment to INFO for any amounts due hereunder, as well as payment of taxes
then due or which shall become due hereunder subsequent to termination hereof,
pertaining to any License Agreement which is outstanding after termination.
Within a reasonable time of termination, which shall not occur prior to
Distributor's completion of its existing maintenance obligations to Customers
(and in no event, later than one year after the date of termination of this
Agreement), Distributor shall, at its expense, return to INFO all copies of the
Product(s) and related materials, and of other materials developed by or
belonging to INFO which are in Distributor's possession or control.
Concurrently, a duly authorized officer of Distributor shall certify in writing
to INFO that all such materials have been returned to INFO.
11.03 REMEDIES.
(a) Distributor acknowledges that, except for damages resulting from
breach of its monetary obligations to INFO hereunder, it would be difficult
for INFO to measure damages arising from Distributor's breach of any
provision of this Agreement; that injury to INFO from such breach would be
incalculable and irremediable; and that money damages would, therefore, be
an inadequate remedy for such breach. Accordingly, INFO shall have, in
addition to any other remedies available, the right to preliminary or
permanent injunctive relief enjoining such breach, or attempted breach, by
Distributor.
(b) Distributor shall indemnify and hold INFO harmless from any and all
claims, losses, liabilities and costs (including reasonable attorneys' fees)
resulting from Distributor's or its subdistributors, resellers, employees,
affiliates or other agents of any kind marketing, licensing, or servicing
the Product(s), including, but not limited to, inadequate installations,
maintenance, or Customer assistance, or breach of Distributor's other
obligations hereunder or under any License Agreement.
ARTICLE 12. GENERAL PROVISIONS.
12.01 RELATIONSHIP OF PARTIES. Neither party shall represent that it is an
agent of or for the other party. Both parties acknowledge that the relationship
of Distributor to INFO hereunder shall be, and at all times shall remain, that
of independent contractor. Except as otherwise provided herein, Distributor
shall have no right or authority to assume, create or enlarge any obligation or
commitment on behalf of INFO and shall not represent itself as having the
authority to bind INFO in any manner whatsoever.
12.02 ASSIGNMENT. Except as otherwise expressly provided herein, neither
party shall assign nor otherwise transfer its rights or obligations under this
Agreement without the prior written consent of the other party. However, (i)
either may assign and delegate this Agreement to a third party in connection
with a merger or sale of substantially all of its assets without the other
party's prior consent and (ii) this Agreement shall be binding on any successor
in interest to all or substantially all of INFO's assets or business or any
purchaser of the ownership rights of any of the Products.
12.03 GOVERNMENT APPROVAL AND REPORTS. Upon execution of this Agreement
and continuing while this Agreement is in effect, Distributor shall make all
required reports to and obtain all requisite approvals from governments in the
countries where Product(s) are licensed. INFO reserves the right to participate
7
<PAGE>
fully in the preparation of such reports or in obtaining such approvals,
including the examination of any and all documents prior to submission to
appropriate authorities. If the laws of any country require registration of this
Agreement, Distributor agrees to register or cause to be registered, at its sole
expense, this Agreement and any such agreements whereby licenses or other rights
are granted by Distributor to any of its Customers.
12.04 FORCE MAJEURE. Except for Distributor payments due to INFO pursuant
to this Agreement, neither party shall be liable for delays in its performance
hereunder due to causes beyond its reasonable control, including, but not
limited to, delays occasioned by acts of God, acts of public enemy, civil war,
insurrection or riots, fires, floods, explosions, earthquakes or other
casualties, or litigation initiated by third parties enjoining, modifying or in
any way restricting the performance under this Agreement by one or both of the
parties.
12.05 NOTICE. All notices or communications given or sent to either party,
except requests for routine technical support services and quarterly reports,
shall be by facsimile with confirming hardcopy by certified mail, postage
prepaid, and addressed as follows:
FOR DISTRIBUTOR: Centura Software Corporation
1060 Marsh Road
Menlo Park, CA 94025
FAX: (415) 617-4681
FOR INFO: InfoSpinner, Inc.
1702 Drake Drive
Richardson, Texas 75081, U.S.A.
FAX: (214) 231-4635
12.06 PROPRIETARY NOTICES. Distributor agrees not to delete, alter, add to
or fail to reproduce in and on any copy of the Products and media the name of
the Product and any copyright or other proprietary notices appearing in or on
any copy, media or master or package materials provided by INFO or which may be
reasonably required by INFO in the future. In addition, at the request of INFO,
INFO will receive reasonable credit in the initial display within the Product,
and all documentation and packaging for Products distributed hereunder.
12.07 PUBLICITY. The parties agrees that they will jointly develop and
announce through a press release the relationship established hereunder. The
information contained in the press release (or otherwise approved by a party
hereto) may be disseminated without regard to Section 7.02 above.
12.08 ENTIRE AGREEMENT. This Agreement, including Exhibits and Schedules
attached hereto, constitutes the entire agreement between the parties and
supersedes all previous communications, representations or agreements, either
written or oral, with respect to the subject matter hereof.
12.09 AMENDMENTS AND WAIVER. The provisions of this Agreement may be
waived, altered, amended or repealed, in whole or in part, only upon the written
consent of both parties. No waiver of a breach of any covenant shall be
construed as a waiver of any other or subsequent breach of the same or any other
covenant of this Agreement.
12.10 VALIDITY OF AGREEMENT. In the event any provision of this Agreement,
or portion thereof, is held by a court having proper jurisdiction to be for any
reason unenforceable or invalid, the remaining provisions, or portions thereof
shall continue to exist and shall remain in full force and effect.
12.11 APPLICABLE LAW. By adoption of the parties, the State of Texas,
U.S.A. is deemed to be the place of contracting and, by agreement of the
parties, any claim or controversy relating to this Agreement, its
interpretation, performance or validity shall be construed and adjusted in
accordance with the law of said State; (except for actions in equity or
injunctive relief), the sole jurisdiction and venue for actions related to the
subject matter hereof shall be the state and U.S. federal courts having within
their
8
<PAGE>
jurisdiction the city of Dallas, Texas. Both parties consent to the jurisdiction
of such courts and agree that process may be served in the manner provided
herein for giving of notices or otherwise as allowed by Texas state or U.S.
federal law.
IN WITNESS WHEREOF, the parties have executed this Agreement to be effective
on the date first written above.
INFOSPINNER, INC.
<TABLE>
<S> <C>
By: ---------------------------------
Name: ---------------------------------
Title: ---------------------------------
Date: ---------------------------------
DISTRIBUTOR:
- ----------------------------------------
By: ---------------------------------
Name: ---------------------------------
Title: ---------------------------------
Date: ---------------------------------
</TABLE>
DISTRIBUTOR'S TERRITORY: Worldwide
9
<PAGE>
EXHIBIT A
INFO PRODUCT LICENSE AND MAINTENANCE FEE SCHEDULE
<TABLE>
<CAPTION>
SUGGESTED
PRODUCT SUGGESTED LICENSE FEE MAINTENANCE FEE
-------------------------------- -----------------------
SINGLE CPU LIST MULTI-CPU LIST DISTRIBUTOR'S LIST
PACKAGES PRICE PRICE PRICES
- -------------------------------------------------------- --------------- --------------- -----------------------
<S> <C> <C> <C>
FORESITE................................................ $ XXX $ XXX
One PageBuilder
One PageDispatcher
One PageServer
Software Development Kit (SDK)
FORESITE ENTERPRISE..................................... $ XXX $ XXX
Two PageBuilders
Two PageDispatchers
Two PageServers
Software Development Kit (SDK)
</TABLE>
<TABLE>
<CAPTION>
SUGGESTED
PRODUCT SUGGESTED LICENSE FEE MAINTENANCE FEE
-------------------------------- -----------------------
SINGLE CPU LIST MULTI-CPU LIST DISTRIBUTOR'S LIST
OPTIONAL MODULES PRICE PRICE PRICES
- -------------------------------------------------------- --------------- --------------- -----------------------
<S> <C> <C> <C>
INTEGRATION MODULE
PageBuilder........................................... $ XXX $ XXX
EXTENSIBILITY MODULES (PRICED PER PAGESERVER)
Client/Server Extension............................... $ XXX $ XXX
3270 Extension........................................ $ XXX $ XXX
SQL Database Extension................................ $ XXX $ XXX
DEPLOYMENT MODULES
PageDispatcher........................................ $ XXX $ XXX
PageServer............................................ $ XXX $ XXX
APPLICATION MODULE
Discussion Forum...................................... $ XXX $ XXX
</TABLE>
EXAMPLE:
A customer implements a Web Commerce site that requires one Webmaster and two
end users to administer. The customer anticipates traffic that requires four
PageServers with support for SQL databases and client/server application data
sources and a spare PageDispatcher for availability.
<TABLE>
<CAPTION>
QUANTITY
---------------------------------------
SINGLE
CPU LIST MULTI- CPU
ITEM QUANTITY PRICE LIST PRICE
- ------------------------------------------------------------------------------- --------------- --------- -----------
<S> <C> <C> <C>
ForeSite Enterprise............................................................ 1 $ XXXX $ XXXX
Additional PageBuilders........................................................ 1 $ XXXX $ XXXX
Additional PageServers......................................................... 2 $ XXXX $ XXXX
SLQ Database Extension......................................................... 4 $ XXXX $ XXXX
Client/Server Extension........................................................ 4 $ XXXX $ XXXX
Total $ XXXX $ XXXX
</TABLE>
E-1
<PAGE>
EXHIBIT B
ROYALTY AND MAINTENANCE FEE AND
ADVANCE RECOVERY SCHEDULE
<TABLE>
<CAPTION>
CUMULATIVE PRODUCT AND
MAINTENANCE LICENSE FEES: PRODUCT ROYALTY RATE MAINTENANCE ROYALTY RATE
- ------------------------------------------------------------------- ----------------------- ---------------------------
<S> <C> <C>
$0 and above....................................................... XX% XX%
</TABLE>
CALCULATION:
ADVANCE PAYMENT. The total amount of the Advance Payment shall be One
Million Five Hundred Thousand Dollars ($1,500,000) which shall be paid according
to the following schedule:
<TABLE>
<CAPTION>
DATE: PAYMENT AMOUNT:
- ---------------------------------------------------------------------------- ----------------
<S> <C>
Effective Date.............................................................. $ XXXXX
March 31, 1997.............................................................. $ XXXXX
June 1, 1997................................................................ $ XXXXX
September 1, 1997........................................................... $ XXXXX
December 1, 1997............................................................ $ XXXXX
March 1, 1998............................................................... $ XXXXX
</TABLE>
provided, however, Distributor shall have the right to terminate this Agreement
in addition to its termination rights under Section 11.01 if Merger as set forth
in the Agreement and Plan of Reorganization entered into between the parties as
of the Effective Date (the "Reorganization Agreement") is not consummated solely
as a result of:
i) INFO not obtaining the approval of its stockholders required under
Sections 6.1(a) or 6.3(f) of the Reorganization Agreement,
ii) INFO not delivering fully executed agreements and/or certificates
required to be executed and delivered by INFO or its officers, directors,
affiliates or employees under Sections 6.1(c) (Employment Agreements),
6.1(e) (Affiliate Agreements), 6.1(f) (Escrow Agreement), 6.3(c) (Third
Party Consents), the certificate required under Section 6.3(b) of the
Reorganization Agreement, or the legal opinion required under Section 6.3(d)
of the Reorganization Agreement; or
iii) the termination of the current employment relationship between INFO
and Keith Lowery, Andrew Levine, or Ronald Howell,
iv) any claim of infringement of patent, copyright or other intellectual
property right of a third party is asserted in writing or filed (and not
dismissed within 30 days thereafter) in a state or federal court or other
court of competent jurisdiction anywhere in the world against Distributor or
INFO with respect to the Products and which claim, in the reasonable opinion
of Distributor's counsel, has a reasonable legal basis and is based on
determinable facts, or
v) Keith Lowery has not delivered a fully executed Non-Competition
Agreement as referenced in Section 6.3 (g) of the Reorganization Agreement.
If Distributor exercises its right to terminate this Agreement as set forth
above, INFO shall refund all unused royalty advances to Distributor and
Distributor shall have no obligation to make additional royalty advance payments
to INFO.
ROYALTY. The royalty ("Royalty") with respect to each Product copy
distributed or maintenance agreement with Distributor initiated or renewed is
calculated by multiplying the Royalty Rate by the
E-2
<PAGE>
Suggested License Fee or Suggested Maintenance Fee for the Product or
maintenance agreement as shown on Exhibit A.
The Advance Payment Balance is $XXXX as of the Effective Date. The Advance
Payment Balance shall be increased by the amount of each additional installment
of the Advance Payment paid to INFO and decreased by the amount of the Advance
Payment Balance credited against Distributor's Royalty payments to INFO.
Distributor's quarterly Royalty payments to INFO shall be reduced by the then
current Advance Payment Balance until such time as the current Advance Payment
Balance equals zero. When the current Advance Payment Balance equals zero, there
shall be no further reduction of any Royalty payments to INFO. Future Advance
Payments owing under this Agreement shall be reduced by any Royalty payments
paid and not credited against an available Advance Payment Balance.
E-3
<PAGE>
EXHIBIT C
TRADEMARKS
INFO has applications for trademarks pending with the United States Patent
and Trademark Office ("PTO") on the following, all of which have been
acknowledged as received by the PTO. The PTO has not yet examined the
applications or taken action thereon.
1. PAGEBUILDER
2. PAGESERVER
3. PAGEMONITOR
4. PAGETESTER
5. FORESITE
6. DYNABOT
7. PAGEDISPATCHER
8. PAGEADAPTOR
E-4
<PAGE>
EXHIBIT 11.1
CENTURA SOFTWARE CORPORATION
STATEMENT REGARDING COMPUTATION OF
NET INCOME (LOSS) PER SHARE (1)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, 1996
-----------------
<S> <C>
Net income..................................................................................... $ 2,027
-------
-------
Weighted average shares outstanding:
Common Stock................................................................................... 12,965
Common Stock issuable in relation to settlement of shareholder lawsuit......................... 370
-------
Weighted average common shares and equivalent.................................................. 13,335
-------
-------
Net income per share........................................................................... $ 0.15
-------
-------
</TABLE>
- ------------------------
(1) This exhibit should be read in conjunction with the Notes to Consolidated
Financial Statements.
<PAGE>
EXHIBIT 23.4
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Prospectus constituting part of this
Registration Statement on Form S-4 of Centura Software Corporation of our report
dated January 31, 1997 relating to the financial statements of Centura Software
Corporation, which appears in such Prospectus. We also consent to the reference
to us under the headings "Experts" and "Selected Financial Data" in such
Prospectus. However, it should be noted that Price Waterhouse LLP has not
prepared or certified such "Selected Financial Information".
/s/ Price Waterhouse LLP
Price Waterhouse LLP
San Jose, California
March 7, 1997
<PAGE>
EXHIBIT 23.5
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Prospectus constituting part of this
Registration Statement on Form S-4 of Centura Software Corporation of our report
dated January 31, 1997 relating to the financial statements of InfoSpinner,
Inc., which appears in such Prospectus. We also consent to the reference to us
under the headings "Experts" and "Selected Financial Data" in such Prospectus.
However, it should be noted that Price Waterhouse LLP has not prepared or
certified such "Selected Financial Information".
/s/ Price Waterhouse LLP
Price Waterhouse LLP
San Jose, California
March 7, 1997
