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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 [FEE REQUIRED]
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
FOR THE TRANSITION PERIOD TO
COMMISSION FILE NUMBER: 0-21010
CENTURA SOFTWARE CORPORATION
(FORMERLY GUPTA CORPORATION)
(Exact name of registrant as specified in its charter)
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<S> <C>
CALIFORNIA 94-2874178
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
975 ISLAND DRIVE, REDWOOD SHORES, CALIFORNIA 94065
(Address of principal executive offices) (Zip Code)
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Registrant's telephone number, including area code: (650) 596-3400
Securities registered pursuant to Section 12(b) of the Act:
NONE
Securities registered pursuant to section 12(g) of the Act:
COMMON STOCK, $.01 PAR VALUE PER SHARE
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No _
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment of this
Form 10-K. [ ]
The aggregate market value of the voting stock held by non-affiliates of the
Registrant was approximately $27,166,615 as of February 28, 1998, based upon the
closing sale price on the NASDAQ National Market reported for such date. Shares
of Common Stock held by each officer and director and by each person who owns 5%
or more of the outstanding Common Stock have been excluded in that such persons
may be deemed to be affiliates. This determination of affiliate status is not
necessarily a conclusive determination for other purposes.
As of February 28, 1998, there were 29,526,171 shares of the Registrant's
Common Stock outstanding.
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PART I
ITEM 1. BUSINESS
Except for the historical information contained herein, the matters
discussed in this document are forward-looking statements that involve certain
risks and uncertainties, including the risks and uncertainties under "Risk
Factors".
OVERVIEW
Centura Software Corporation (the "Company" or "Centura"), formerly Gupta
Corporation, provides a suite of products usable by application developers to
build and deploy component based distributed business applications. Centura
products include an embedded database that scales from Smart Cards to the Web,
and application development tools for Windows and Web clients. Centura products
are designed to be deployed in both thin- and fat-client environments, using
business logic objects that can be reused in multi-tier architectures in
distributed environments (The Internet is referred to hereinafter as the "World
Wide Web" or the "Web" and corporate internal Webs are referred to as
"Intranets"). The Company's product lines include a family of embedded
databases, (SQLBASE), application development tools, (CENTURA TEAM DEVELOPER,
THE 32-BIT VERSION OF SQLWINDOWS, SQLWINDOWS AND CENTURA NET.DB) and PC to
mainframe connectivity products (SQLHOST). Now in its seventh generation,
SQLBASE was the first Relational Database Management System ("RDBMS") available
in the PC and PC LAN environment offering similar RDBMS functions previously
found only in high-end databases. The Company's products have historically been
market leaders in the Windows client/server environment, used both in
work-group/departmental business applications, as well as packaged applications
sold by third party software vendors to small and medium size businesses. The
Company is continuing to enhance its existing Windows client product line. At
the same time, the Company is enhancing its products into new market
opportunities for thin-clients (the Web, Portable Device Applications ("PDAs")
and smart appliances. In these markets, a small memory requirement (or
"footprint"), client/server or embedded application and database architecture
has a natural fit.
The Company's embeddable database, SQLBASE, is a robust, small footprint
RDBMS, which requires no database administrator ("DBA"). Business applications
that embed SQLBASE operate with a single set of source code on a desktop PC, a
PC LAN, the Web, and connected mobile client environments. The Company's
development tools, CENTURA TEAM DEVELOPER and SQLWINDOWS, are 4GL object
oriented tools offering improved programmer productivity. The Company recently
introduced CENTURA NET.DB, a browser-based SQL to HTML Web authoring tool.
CENTURA NET.DB makes it easy to connect corporate databases with end users,
providing dynamic access to SQL databases in JavaScript enabled Web browsers. In
addition, as CENTURA NET.DB is browser based, it can run on any client platform
capable of running a browser. SQLHOST allows organizations to integrate DB2 or
legacy data into a client/server environment without compromising performance,
control, or security.
The primary customers of Centura products are application developers,
including Fortune 1000 developers who deploy Centura products throughout company
branch offices and customers' offices, Independent Software Vendors (ISVs) who
develop and deploy shrink-wrapped, packaged applications for small and medium
size business, and Value Added Resellers who develop customized software for
end-users. A new set of customers is emerging which embed SQLBASE in smart
and/or mobile electronic devices, such as the government of Mexico which imbeds
SQLBASE in Smart Cards for NAFTA export control. Some application developers
deploy both the embedded database and the application development tools in their
applications. Other developers deploy only the embedded database, connecting
SQLBASE to other business logic application tools such as Java or Visual Basic,
or to application development tools sitting on top of other, larger databases.
The Company has established multiple distribution channels that provide
broad market coverage for its products and address the specific needs of its
varied customer segments worldwide. The Company's
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products are used in at least 75 countries. Its customers include include
Automatic Data Processing ("ADP"), Aurum, CamData, Citibank N.A., Daimler-Benz,
Ford Motor Company, SQL Financials, IFS, Help Desk Software, Norfolk Southern,
Ontario Hydro, Lilly Software, Siemens-Nixdorf Informations Systeme AG
("Siemens-Nixdorf"), The Southern Company, United Airlines, United Parcel
Service, Deutsch Bank, M-5, Xerox, Computer Asssociates, and the governments of
Mexico, France, Australia and the United Kingdom.
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 1970s and 1980s, 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.
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 Windows NT
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.
Today, the traditional fat-client PC and PC LAN environment continues to
exist as a platform for business applications. At the same time, new form
factors are emerging with a need for the company's products. As suggested by the
creation of network computers there is an increasing trend among end-users to
move the business logic from the PC to the server, which generally provides an
easier way to maintain consistent and secure up to date applications and data.
In addition, due to the proliferation of PCs to millions of end-users, the costs
of maintaining a PC has become a matter of concern to many enterprises. This
client/server architecture is referred to as a thin-client, and can refer to
both a Windows network computer as well as a Web browser client. The Company
believes the introduction of small, smart server centric access devices, such as
palm top organizers, smart phones, PDAs and WebTV-TM- will continue to increase.
This new multi- or n-tier, thin-client establishes a need for a new software
application architecture, creating an opportunity for software tools such as
those available from the Company that fit the needs of the thin-client world.
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The Web is an example of a thin-client architecture. 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" which typically also run on PCs, but will
increasingly be accessible through mobile, smart devices. Industry analysts are
expecting millions of new small, form factors that will provide mobile access to
servers over the next 5 years. Similar to the rapid emergence of PCs and LANs in
the late 1980s and early 1990s, the emergence of the Web and multiple types of
access devices raises new challenges and opportunities for organizations and the
business applications they choose to manage their business. More than ever
before, the use of technology will impact the bottom line of a business, as
recent studies continue to support the effectiveness of the Web for performing
business transactions. Corporations will increasingly provide direct, electronic
access to back office data to their employees, customers and suppliers.
Web-based systems can be deployed as simple departmental systems or highly
distributed networks that can provide access to end-users in locations and
geographies outside the corporate network. There is also an increasing trend
toward disconnected or so-called distributed or "mobile" applications where a
stand-alone PC, laptop PC, Smart Card or other thin-clients 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.
With the continued price/performance curve of the microprocessor, new form
factors of thin-clients will continue to evolve and proliferate, such as palm
top organizers, PDAs, smart phones and WebTV-TM-. Industry analysts are
forecasting shipments of millions of units of new smart, thin-clients. These
mobile devices can instantaneously connect end-users to remote server
information, available for either information or transactions. These new
thin-clients are catalysts for new technologies and new applications and provide
an opportunity for a new generation of business applications taking advantage of
the thin-client server-centric access architecture. These thin-clients need
robust, small footprint embedded databases.
The increase in the deployment of PCs--in both traditional fat client/server
environments and increasingly for implementation and access to thin-client
Web-based or multi-tier environments--is fueling demand by organizations for new
applications utilizing this thin-client architecture.
One other industry trend is changing the architectural design of today's
business applications. Organizations want to integrate the data generated by the
back office throughout the enterprise and, increasingly, with its customers.
Customer service account representatives need access to the latest information
about corporate customers and sales activity and desire electronic connection or
integration to company accounting records. Organizations generally want to
eliminate the information time lag between disparate information systems
throughout the enterprise and the external supply chain and tend to prefer
enterprise wide applications, regardless of their size. It would be unlikely
that one software vendor can provide all the applications required within an
organization. What is important is that the business logic of one application
can be shared between other applications operating in the organization. This
integration between disparate applications places an increased demand for
business applications built with components and objects. Existing software
applications and new software applications are being redesigned to meet the
changing demands for integration and access to metadata, and center on the use
and design of components, objects and reusable code that can operate in a
distributed COM/DCOM environment. Additionally, Java has emerged as a clear
player in the development arena. Java offers a great opportunity to help deliver
and use server side components via Java Enterprise Beans deployed under the
CORBA Architecture. Java objects running on the server will provide the
scalability and platform independence needed to build distributed applications.
The Company was founded to provide application development tools deployed in
applications operating in the Windows client/server environment. In 1996, 1997
and 1998 the Company announced and delivered extensions that operate in a Web
browser client/server environment. The Company will continue
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to invest in tools for both the thin- and fat-client Windows world, and will
take advantage of new opportunities for its products in the emerging thin-client
world of the Web and smart mobile devices, which is a natural extension of
Intranet and network-centric computing. The Company's current product offerings
are fully compliant with and accommodate data structures for years beginning
after January 1, 2000.
COMPANY STRATEGIES
The Company products have historically been used by its customers to design
client/server applications with Windows clients. As the client/server world
continues to evolve with new types of clients accessing a server-centric
architecture, the Company is transitioning its products to meet the needs of
developers whose applications link the new thin-clients (the Web, PDAs, smart
phones, etc.) to servers. At the same time, the Company will continue to evolve
its object oriented application development tools so that class libraries can
use and generate components and objects in a distributed COM/DCOM and CORBA
environment. Key elements of its strategies are highlighted below. Finally, the
Company believes its small footprint RDBMS can be embedded in other types of new
smart electronic devices, such as copiers and routers.
EMBEDDED DATABASE. The Company believes several industry trends will drive
demand for a robust, non-DBA, small footprint embedded database. An embedded
database is integrated with business application code, and is invisible to the
end user. An embedded database has high server programmability, allowing
developers to control the database server from the applications, reducing the
need for a DBA through self tuning and self recovery functions. A robust
embedded database is scalable, and can support hundreds of simultaneous users.
One growth factor for embedded databases is the expectation by certain
industry analysts that the next growth opportunity for PCs is the implementation
of enterprise wide applications in mid-size businesses. This mid-size market is
being targeted by application vendors now selling to large corporations, as well
as application vendors now selling to small businesses. Both of these
application vendors may find their existing choice of a database is not
appropriate for the mid size business. Application vendors sold to Fortune 1000
customers typically run on top of large databases. These Fortune 1000 databases
generally require large license fees, a large footprint, and a requirement for
an in house DBA--attributes that do not match the mid-size business market
requirements. On the other hand, current small business application vendors will
discover their existing embedded database probably provides adequate response
for transactions happening with a small number of end-users, but will not scale
up to several hundred end-users, and will be unable to respond to the
transaction needs of mid-size companies. The demand for robust, non-DBA,
scalable, embedded databases that operate in either a LAN-based or Web-based
environment will continue to grow as more and more small and medium size
businesses buy and implement enterprise transaction-based applications. These
small and mid-size businesses do not have an internal DBA, and cannot afford the
expense of hiring such a person.
The other trend impacting the growing need for embedded databases is the
emerging market for distributed, mobile thin-clients, such as WebTV-TM-, palm
top organizers and smart devices, such as cellular phones and Smart Cards. These
new thin-clients and smart appliances require a robust, small footprint embedded
database that can also synchronize and exchange data between a server and the
mobile client. SQLBASE EXCHANGE, the add-on product sold with SQLBASE, is a
database replication tool, enabling an embedded database on a mobile,
thin-client to easily exchange data with a remote server.
With the proliferation of the Web, there is a growing need for small,
non-dba databases for use with common application development tools, such as
Java and Visual Basic. The SQLBASE API makes it easy for application developers
to connect SQLBASE within their application development process. SQLBASE
supports open connectivity to a variety of development tools, including Visual
Basic, Java and Visual C++, utilizing high performance ODBC and JDBC level 4.
SQLBASE offers a 100% Java JDBC driver (Level 4)
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that permits Java developers to optimize their SQLBASE connectivity
requirements. Further, as part of the embedded oriented features of SQLBASE,
Centura currently offers external functions, which allow developers to call DLL
base procedures from Triggers and Stored Procedures. Due to the importance of
Java, it is the Company's intention to incorporate Java base external functions
in future releases of SQLBASE. There can be no assurance that the Company will
be successful in these efforts.
The foregoing factors combine to create, what the Company believes, is a
compelling opportunity for the Company's embedded database products.
APPLICATION DEVELOPMENT TOOLS. The Company believes there will be a
continued demand for building applications that run in an n-tier environment,
with access to common, reusable business logic objects for both fat-clients and
thin-clients. CENTURA TEAM DEVELOPER is a 4GL, object-oriented development tool,
designed to maximize developer's investment in developing business logic code.
CENTURA TEAM DEVELOPER applications have native connectivity not only to
SQLBASE, but Oracle, Sybase and Microsoft SQLServer with the same set of APIs.
The same CENTURA TEAM DEVELOPER business logic can be deployed as both a Windows
and browser client, with minimal reprogramming of code, providing an easy
redefinition of application packages to support Internet-based
customer-to-supplier value chains. With the continued trend toward enterprise
wide applications, Centura expects a continued interest in the use of
application development tools that access and create components and business
logic objects available on either the server or the client. Developers will be
able to create new application solutions throughout the enterprise by
customizing and modifying existing components. These components will provide a
common linkage between disparate applications. Sales automation systems can be
linked to accounting systems, and companies can post and retrieve applications
via thin- and fat-clients--all possible by using common business logic
components created with CENTURA TEAM DEVELOPER. The Company expects that in the
future, a component's location on the network will become irrelevant to the
developer. Developers will expect to be able to compose, distribute, and debug
applications from any location. The Company plans to offer enhancements for
CENTURA TEAM DEVELOPER in 1998 that are designed to make it easy to manage and
distribute ActiveX components in a COM/DCOM distributed architecture. As Java
servlets or Java Beans can be invoked from COM interfaces, the Company intends
to enhance CENTURA TEAM DEVELOPER to be able to use these types of objects as
well as pure COM objects. In addition, it is the Company's intention that
CENTURA TEAM DEVELOPER may, in the future support integration with CORBA
environments to expose and use Java objects. There can be no assurance that the
Company will be successful in these efforts. The Company expects companies to
gradually move away from buying custom applications towards the building of new
systems by integrating and customizing existing components. The competitive
advantage will come from customizing off-the-shelf applications. This "buy and
customize" approach offers the best of both worlds: rapid development and the
ability to customize the application to meet existing business processes
requirements. The object architecture provided by CENTURA TEAM DEVELOPER is
conducive to individual customization of applications. This component, reusable
architecture, provides an advantage to the Company's application developers,
especially in sales situations where evaluation criteria might be the ease in
which components can be customized.
CENTURA NET.DB is a Web authoring tool, enabling Webmasters or software
developers to design SQL to HTML dynamic queries deployed within any
JavaScript-enabled Web browser. CENTURA NET.DB is browser-based for both design
and deployment. CENTURA NET.DB requires no special SQL, HTML, CGI, Perl, or C/
C++ expertise--and there is no requirement for browser plug-ins and other server
software. The CENTURA NET.DB architecture is intelligent about its use of
resources, accessing only the business logic code necessary to satisfy a
user/program request, and enabling hundreds of simultaneous accesses on a single
NT server. The Company expects to offer a version of CENTURA NET.DB that will
enable transaction processing via the Web.
TOTAL COST OF OWNERSHIP. The Company's products are built to be cost
effective for both the software developer and the end user.
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The Company's products offer several advantages for the developer. The
Company's products are scalable, allowing a single set of source code to be
deployed on multiple platforms. Business applications that embed SQLBASE can be
installed as a single user desktop or a server environment from a single SKU.
Applications written with CENTURA TEAM DEVELOPER can interface with SQLBASE, as
well as Oracle, with a single set of code. This single set of source code
approach may reduce the amount of quality assurance resources required by
application developers, which can sometimes exceed the cost of developing the
application source code. CENTURA TEAM DEVELOPER maximizes the investment dollar
spent to develop and test business logic objects. Using the CENTURA TEAM
DEVELOPER class libraries, application developers can easily share business
logic code between applications. CENTURA TEAM DEVELOPER can deploy a single set
of business logic as either a Windows or a browser client, enabling the
transformation of business applications from Windows clients to Web clients,
without reprogramming the original Windows client logic. Using the built-in
revision control features of CENTURA TEAM DEVELOPER, programming teams have
access to the latest code, making it easier to develop complex applications on
time and on budget. CENTURA TEAM DEVELOPER is well positioned for the emerging
need to develop complex, enterprise-wide component based architecture
applications. Self recovery and self tuning features found in SQLBASE typically
result in fewer support calls from end-users providing better customer
satisfaction between the end user and the application developer.
The Company's products also offer a low total cost of ownership to
end-users. SQLBASE is a very small, yet robust database. This means applications
can run very effectively on a small footprint PC, reducing the hardware cost
required to install and operate applications which embed SQLBASE. SQLBASE
applications can include, within the application, log-in and assignment of
password features for new users, eliminating the need for end-users to know how
to operate the database. With built-in self-tuning and self-recovery processes,
SQLBASE applications automatically reboot and reestablish the database when a PC
loses power. SQLBASE applications reduce the need for internal MIS or data base
administrators, and reduces the amount of support calls for which an end user
would typically pay. End-users do not have to upgrade to 32-bit architectures
before installing applications built with the Company's products. CENTURA NET.DB
operates in a 16-bit browser environment, making it easy to connect end-users
around the world who may not yet have upgraded to a 32-bit PC. Both CENTURA TEAM
DEVELOPER and CENTURA NET.DB make it easy to webify an application built with
CENTURA TEAM DEVELOPER or SQLBASE, allowing access by employees and customers to
corporate data. The Company's products are priced for a PC client/server
environment, minimizing the cost of client/server solutions. This enables a low
cost of entry for small and medium size businesses. The Company's products are
cross platform, enabling applications to operate on Windows NT, Windows 95,
Windows 3.1, DOS and NetWare with minimal programming changes. See "Risk
Factors-- New Product Risks; Rapid Technological Change" and "--Highly
Competitive Markets".
DISTRIBUTION CHANNELS, PARTNERSHIPS AND STRATEGIC ALLIANCES. The Company
distributes its products using a blended distribution model that provides
incentives for its direct sales force to work closely with business partners.
The Company'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, ADP and Aurum have a
partnership with Centura, whereby Centura provides these application developers
the right to remanufacture the SQLBASE product. See "Risk Factors--Dependence
Upon Distribution Channels" and "--Dependence on Third-Party Organizations".
WORLDWIDE MARKETS. The Company has designed its products and established
its marketing and sales channels to address the worldwide market opportunities,
including markets requiring double-byte enabled source code, for embeddable
databases and PC client/server systems. The Company has established operations
on six continents that have exclusive rights through either wholly-owned
subsidiaries or third-party distribution partners. CENTURA TEAM DEVELOPER is
shipped with OBJECT NATIONALIZER, which facilitates application development in
multiple languages. Approximately 58% of the Company's net revenues for 1997
were derived from sales outside the United States, and its products are
installed in at least 75 countries. The Company generally launches new products
on a worldwide basis. The Company's software
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products support international data conventions, and certain products have been
localized into French, German and Japanese language editions.
SUPPORT PROGRAMS. The Company provides product support services directly
and through third-party vendors to enable easy customer implementation of its
client/server systems. The Company 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 support network through a forum
on CompuServe, an Internet news group, and a strong presence on the World Wide
Web. A pay per request program is being implemented, and is scheduled to be
offered beginning in 1998. The Company-certified training partners offer courses
each year to assure customers of the right mix of classroom or on-site training.
Customers can also opt to study at their own pace with a specially developed
computer-based training course. In addition, a team of professional consulting
engineers are available to help companies develop application systems using
Centura products.
CHANGES IN STRATEGIC DIRECTION On January 6, 1997, in an effort to expand
its product offerings in areas complimentary with the Company's core products,
technology and overall strategic concept and into architectures embracing the
World Wide Web, the Company entered into a definitive agreement to acquire
Infospinner, Inc. ("Infospinner") of Richardson, Texas (the "Merger Agreement").
The Company did not obtain the majority vote of its shareholders required for
approval of the proposed merger within the designated time frame, and as such,
Infospinner elected to exercise its right, pursuant to the Merger Agreement, to
terminate the transaction. Beginning in the second half, and culminating in the
fourth quarter of 1997, the Company refocused and restructured its operations to
leverage its core technological competencies into next generation products which
continue to embrace a distributed architecture with components accessible
through both the client and the server and operating in both the Web and other
thin-clients. With the addition of CENTURA NET.DB, the Company's products now
encompass a comprehensive architecture for the development and deployment of
information systems and applications from a host environment, through two-tier
client/server and SQL databases, to the multi-tier environment of the World Wide
Web. See "Risk Factors--Changes in Strategic Direction: Restructuring;" "--New
Product Risks; Rapid Technological Change".
PRODUCTS
The Company's embeddable database, development environments, family of
connectivity products, and Web-based development environments, enable teams of
developers to embed, build and deploy scaleable client/server applications
throughout distributed computing environments. The Company's major products
include:
SQLBASE--THE SQLBASE family consists of embeddable and small-footprint
database products that enable application developers to provide low cost of
ownership applications with complete and robust RDBMS functionality and help
businesses deploy decentralized applications easily and cost-effectively. These
products--SQLBASE SERVER and SQLBASE DESKTOP--help organizations store data on
machines ranging from small mobile devices and single-user PCs to workgroup
servers and company-wide LAN and Web database servers. New versions of SQLBASE,
referred to as the SQLBASE MICROSERVERS, are being designed to meet the needs of
thin-clients and Smart Cards.
CENTURA TEAM DEVELOPER AND SQLWINDOWS--THE CENTURA TEAM DEVELOPER AND
SQLWINDOWS products enable customers to develop and deploy 32- and 16-bit, next
generation and Web-centric client/server object-oriented applications. CENTURA
TEAM DEVELOPER and SQLWINDOWS are created specifically to meet the needs of
application development teams seeking the power to move from workgroup and
enterprise pilot projects into large enterprise applications. These products
deliver client/server application scalability, new Internet integration, and
drag-and-drop replication functionality. The product family includes CENTURA
TEAM DEVELOPER and SQLWINDOWS, CENTURA APPLICATION SERVER, and the CENTURA
DEVELOPERS KIT, a set of
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object-oriented interfaces that help developers create reusable objects in the
CENTURA TEAM DEVELOPER 32-bit and SQLWINDOWS 16-bit environments.
CENTURA WEB DEVELOPER--CENTURA WEB DEVELOPER, a subset of CENTURA TEAM
DEVELOPER, enables the development of Web-based, thin-client applications which
allow the deployment of CENTURA TEAM DEVELOPER business logic and transaction
processing applications in thin-client environments.
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.
CENTURA NET.DB--CENTURA NET.DB is a SQL to HTML browser-based Web authoring
tool. CENTURA NET.DB reads the referential integrity of a SQL database, and
automatically generates an HTML page view of each table. Using smart wizards,
Webmasters can easily customize and design dynamic SQL queries and updates of
live databases. The SQL queries can be deployed in any JavaScript enabled
browser and are therefore platform independent. No special browser plug-ins or
server software is needed.
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END-USERS AND APPLICATIONS
No customer accounted for more than 10% of net revenues during the fiscal
years ended December 31, 1997, 1996, or 1995.
The Company's products are used by end-users in a wide variety of industries
for different applications:
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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.................. Accounting solutions
Payroll services
Various commercial real estate applications
Portfolio and credit tracking
Decision support for insurance underwriters
Tax preparation automation
On-line remote banking
Government.......................... Child welfare case management and others
Industrial Products................. Sales administration and analysis
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
Import/Export tracking via Smart Card technology
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
The Company's marketing and sales efforts are targeted to worldwide users
and developers of PC client/server systems and applications. 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.
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The Company generally segregates its customers, and accordingly its sales
force, into two basic categories:
EMBEDDED APPLICATIONS/LARGE SCALE DEPLOYMENT. Many customers purchase the
Company's products as part of a larger scale application deployment activity,
such as embedding a database in an application to be sold or otherwise marketed,
or creating an enterprise specific system solution using one or more of the
Company's products. As these applications can be complex and in some cases
critical to the business of an enterprise, these customers typically require a
greater degree of individual attention both from the Company's direct sales
force and technical support organizations, or from technically sophisticated
third parties, than do users who purchase the Company's products for a single
use or one-time development activity. To address the requirements of these
customers, the Company has established a field sales organization, which
operates in the United States, Canada, Mexico, Brazil, France, Germany, Italy,
Switzerland, Austria, the Netherlands, Belgium, the United Kingdom, Australia
and Japan. See "Risk Factors--International Sales and Operations" and "--Recent
Company Losses; Fluctuations in Quarterly Results".
These customers include vertical software partners, hardware original
equipment manufacturers ("OEMs"), systems integrators and ISVs with whom the
Company generally has established marketing or licensing arrangements. Such
partners include Automated Data Processing, Inc (payroll systems), 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, the Company has an
architecture which enables ISVs to use the Company's products to co-engineer
enterprise-wide client/server applications or deliver add-on software. Hardware
OEMs purchase the Company's products and bundle them with their personal
computer hardware or applications software for resale to their customers. The
Company currently has OEM relationships with NCR, IBM, Siemens-Nixdorf, Computer
Associates International, Inc. ("CA") and other computer vendors. The Company
has entered into cooperative arrangements with system integrators, such as
Electronic Data Systems, that build large, custom turnkey solutions for their
corporate customers using the Company's products.
SINGLE USE OR ONE-TIME DEVELOPMENT. These customers generally utilize
outside services to specify, design, build and deploy limited client/server
systems within the enterprise. In addition, ISVs may utilize the Company's
development tools in the early stages of application development. These
customers include small, medium and large size businesses. The Company reaches
these customers through its corporate telesales organization and through an
indirect distribution channel, consisting of resellers, application developers,
distributors, value-added resellers ("VARs") and consultants.
The Company also distributes its products through major independent
distributors that may in turn sell such products to smaller VARs, resellers and
dealers. The Company presently has a distribution agreement with DistribuPro,
for distribution of the Company's products in North America. The Company also
has a network of international distributors, including Computer 2000 AG GmbH in
Europe and Mitsubishi Corporation in Japan. Many of the Company's distributors
carry competing product lines. The Company'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 the Company believes that, to date, it has provided adequate allowances
for exchanges and returns, there can be no certainty that actual returns will
not exceed the Company's allowances, particularly in connection with
introduction of new products or enhancements. See "Risk Factors--Dependence Upon
Distribution Channels" and "--International Sales and Operations."
In a number of markets, including rapidly growing client/server markets such
as Japan and Korea, the Company has entered into multi-year master distribution
agreements with unrelated companies that have also licensed the use of the
Company's name. These organizations are in place to increase the Company's
opportunities and penetration in such markets where the rapid adoption of
client/server technologies is
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anticipated. While the Company believes that to date these agreements have
increased the Company's penetration in these markets, there can be no certainty
that this performance will continue or that these relationships will remain in
place. The Company 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. See "Risk Factors--Dependence Upon Distribution Channels."
The Company 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 the Company's products and products of
other software vendors into systems that are sold directly to end-users. The
Company has certified over 1,000 VARs marketing to industries such as financial
services, telecommunications, publishing, transportation and health care. See
"Risk Factors--Dependence Upon Distribution Channels."
MARKETING. To support its sales organizations, the Company conducts
comprehensive marketing programs and cooperative selling arrangements with the
Company's strategic partners. The Company's marketing programs include direct
mail, public relations, advertising, seminars, trade shows and ongoing customer
communication programs. The Company has entered into cooperative selling
arrangements with strategic partners, including NCR, ICL Personal Systems and
Siemens-Nixdorf that provide joint marketing or network solutions for
incorporating their products with the Company's products. The Company 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 the Company or
deployment of desktop or mobile database applications.
The majority of the Company'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 the Company's revenues
for the foreseeable future. Accordingly, broad market acceptance of PC client/
server systems is critical to the Company's future success. Failure of the
Company 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 the Company'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. The Company is committed to providing timely,
high-quality technical support, which the Company 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.
The Company offers flexible multi-tiered technical support programs tailored to
these specific customer needs. The Company offers a licensed maintenance service
to all its customers to provide bug fixes and software enhancements. In
addition, the Company provides technical support through a telephone hotline
service. For the large enterprise-wide customer, the Company offers
comprehensive premium support programs. The Company 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, PRODUCT DEVELOPMENT AND ENGINEERING
Since inception, the Company has made substantial investments in research
and product development. During 1997, 1996 and 1995, the Company's expenditures
in research and development, net of capitalized software, were $9.7 million,
$11.0 million and $14.4 million, representing 17%, 17% and 22% of net revenues,
respectively. The Company's products have been developed by its internal product
development staff and, in certain instances, by strategic use of outside
consultants. The Company believes that timely development of new products and
enhancements to existing products is essential to maintain its competitive
position.
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The Company is committed to continued development of new technologies for PC
client/server computing. The Company supports major 32-bit operating systems,
including Microsoft Windows 95, Microsoft Windows NT and Novell NetWare. In
addition, the Company 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 the Company's business, operating
results and financial condition. See "Risk Factors--New Product Risks; Rapid
Technological Change" and "--Component Software Markets".
COMPETITION
The market for embedded databases and application development tools system
software is intensely competitive and rapidly changing. The Company's products
are specifically targeted at the emerging portion of this market relating to
embeddable database PC and Web client/server software, and the Company's current
and prospective competitors offer a variety of solutions to address this market
segment.
EMBEDDABLE DATABASE MARKET. As database capacity is often indicative of
differences in customer application, segments within the PC client/server market
in which the Company competes can generally be distinguished and segregated by
the number of anticipated users and target capacity of the database utilized.
The Company generally markets its database products in environments utilizing
capacity ranging from small, five kilobyte Smart Card environments to those in
excess of five Gigabytes. Competitors of the Company include Microsoft, Oracle,
Computer Associates, IBM, Sybase, Pervasive, and Informix, and generally have
product offerings which compete with the Company's products in some or all of
these capacity ranges. In addition, some of these competitors are providers of
sophisticated database software, originally designed and marketed primarily for
use with mainframes and minicomputers, which, if successfully re-configured to
provide similar functionality in PC client/server, or smaller capacity
environments, could materially and adversely impact the Company's revenues,
results of operations and financial condition.
TOOLS AND CONNECTIVITY MARKETS. The Company faces competition from
providers of application development software, such as Sybase's Powersoft
Division, Microsoft, and Borland, and connectivity software competitors such as
IBM. The Company also faces potential competition from vendors of applications
development tools based on 4GLs (fourth-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 the Company'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
the Company. In addition, many competitors have established relationships with
customers of the Company. The Company's competitors could in the future
introduce products with more features and lower prices than the Company's
offerings. These companies could also bundle existing or new products with more
established products to compete with the Company. Furthermore, as the PC and Web
client/ server market expands, a number of companies, with significantly greater
resources than the Company, could attempt to increase their presence in this
market by acquiring or forming strategic alliances with competitors of the
Company, or by introducing products specifically designed for the PC and Web
client/ server market.
The principal competitive factors affecting the market for the Company's
products include breadth of distribution and name recognition, product
architecture, performance, functionality, price, product quality, customer
support, and the Company's financial viability. The Company experienced
increased competition during 1997, 1996, and 1995, resulting in loss of market
share. The Company 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 the Company introduces such products in this
manner, it may not be able to
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compete effectively because of the significantly larger resources available to
many of the Company's competitors. There can be no assurance that the Company
will be able to compete successfully or that competition will not have a
material adverse effect on the Company's business, operating results and
financial condition. See "Risk Factors--Highly Competitive Markets" and
"--Market Acceptance of PC Client/Server Systems".
INTELLECTUAL PROPERTY
The Company currently has one patent issued with respect to its SQLWINDOWS
and CENTURA TEAM DEVELOPER 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 the Company's
technology is expensive and difficult, and there can be no assurance that these
measures will be successful. While the Company's competitive position may be
affected by its ability to protect its proprietary information, the Company
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 the Company's competitive
position.
The Company provides its software products to customers under non-exclusive,
non-transferable license agreements. As is customary in the software industry to
protect intellectual property rights, the Company does not sell or transfer
title to its software products to customers. Under the Company'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, only on designated
computers at specified sites. The Company relies primarily on "shrink-wrap"
licenses for the protection of products intended for single, one-time use or
limited deployment. 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.
The Company 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 the Company, the Company ceases to do
business or the Company breaches its contractual obligations to the customer.
The Company 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 the Company in the future with respect to current or future
products or that any such assertion may not result in costly litigation or
require the Company 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, the Company
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, 1997, the Company had 180 full-time employees, including
31 in research and development, 6 in manufacturing, 94 in sales and marketing,
16 in technical services and support and 33 in finance and administration. The
Company maintains competitive compensation, benefits, equity participation and
work environment policies to assist in attracting and retaining qualified
personnel. None of the Company's employees are covered by collective bargaining
agreements. The Company believes its relationship with its employees is good.
The Company believes that the success of its business will depend in large
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part on its ability to attract and retain qualified personnel. Competition for
such personnel is intense, and there can be no assurance that the Company will
be successful in attracting and retaining such personnel.
RISK FACTORS
This Annual Report on Form 10-K contains certain forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933 and Section 21E
of the Securities Exchange Act of 1934. Actual results could differ materially
from those projected in the forward-looking statements as a result of certain of
the risk factors set forth below and elsewhere in this Annual Report on Form
10-K. In evaluating the Company's business, prospective investors should
carefully consider the following factors in addition to the other information
presented in this report.
CHANGES IN STRATEGIC DIRECTION: RESTRUCTURING. In efforts to stem losses
and maximize return on the Company's core assets and technologies, the Company
has restructured its operations and announced changes in strategic direction
several times in recent financial periods. The first of these changes, which
began in December 1995, encompassed a change in the Company's name from Gupta
Corporation to Centura Software Corporation and the identification of a flagship
product bearing the name CENTURA. In early 1997, the Company refocused its
marketing and sales efforts away from RDBMS and development tools products to a
middleware connectivity product and the related Merger Agreement with
Infospinner for which the Company did not obtain required shareholder approval
within the specified time frame and, as such, was not consummated. In the second
half of 1997, however, the Company restructured and refocused operations on its
core competencies, products and technologies and terminated its distribution
arrangement with Infospinner. There can be no assurance that the restructuring
efforts the Company has engaged in to date will be successful or that the
Company will be able to sustain profitability on a quarterly or annual basis. In
addition, there can be no assurance that the Company's management will not deem
it appropriate to undertake other major restructuring efforts or changes in
strategic direction in the future or to what degree any of these efforts will
result in improved operational performance, if at all.
RECENT CHANGES IN SENIOR MANAGEMENT. In the fourth quarter of 1997, the
Company announced significant changes in senior management. Such changes
included the appointment of Scott R. Broomfield as Chief Executive Officer, John
W. Bowman as Chief Financial Officer, and Kathy Lane as Senior Vice President of
Marketing, and the election of Messrs. Jack King, Phillip Koen, Jr., and Earl
Stahl to the Company's Board of Directors, and the retirement of Samuel M.
Inman, III, Earl Stahl and Richard Gelhaus from their positions as officers of
the Company. In February 1998 the Company announced the election of Messrs.
William D. Nicholas and Peter Micciche to the Board of Directors and the
appointment of Scott R. Broomfield to the position of Chairman & CEO. There can
be no assurance that the new management team will be successful in execution of
its objectives or that the successful execution of these objectives will result
in improved operating results or financial position of the Company.
DEPENDENCE ON KEY PERSONNEL. The Company's future performance is
substantially dependent on the performance of its executive officers and key
product development, technical, sales, marketing and management personnel. The
Company does not have employment or non-competition agreements with any of its
employees. The loss of the services of any executive officer or other key
technical or management personnel of the Company for any reason could have a
material adverse effect on the business, operating results and financial
condition of the Company. In addition, the Company needs to recruit a Vice
President, Engineering/Chief Technology Officer. The Company considers this
position critical to the success of its ongoing competitive position in defined
markets and operations. There can be no assurance that an appropriate individual
will be located to fill this position on a timely basis on terms reasonable to
the Company, or at all.
The future success of the 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 the Company
has experienced difficulty in identifying and hiring qualified
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engineering and software development personnel. There can be no assurance that
the 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 "Business--Employees" and "--Executive Officers of Registrant".
RECENT COMPANY LOSSES; FLUCTUATIONS IN QUARTERLY RESULTS. The Company has
experienced in the past and may in the future to continue to experience
significant fluctuations in quarterly operating results. The Company reported a
loss of $0.6 million for fiscal year 1997, a profit of $2.0 million for 1996,
and a loss of $44.1 million for 1995. There can be no assurance that the
restructuring efforts the Company has engaged in to date will be successful or
that the Company will be able to sustain profitability on a quarterly or annual
basis. Many of the Company's product licensing arrangements are subject to
revenue recognition on a per-unit deployed basis as the Company's deferred
obligation to such customers is gradually extinguished. Revenue recognition in
such cases is therefore dependent upon the business activities of the Company's
customers and the timely and accurate reporting of such activities to the
Company, which makes predictability of the related revenue extremely uncertain.
In addition, quarterly operating results of the Company will depend on a number
of other factors that are difficult to forecast, including, general market
demand for the Company's products; the size and timing of individual orders
during a quarter; the Company's ability to fulfill such orders; introduction,
localization or enhancement of products by the Company; delays in the
introduction and/or enhancement of products by the Company and its competitors;
market acceptance of new products; reviews in the industry press concerning the
products of the 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 the Company'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 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 Company's 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 the Company 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. The Company 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 the Company'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. The Company may be
unable to adjust spending in a timely manner to compensate for any unexpected
revenue shortfall. Accordingly, any significant shortfall in sales of the
Company's products in relation to the Company's expectations could have an
immediate adverse impact on the Company's business, operating results and
financial condition. To the extent that the Company's expenses exceed expected
revenues in any fiscal period, its business, operating results and financial
condition could be materially and adversely affected. Due to the foregoing
factors, it is likely that the Company's operating results may, during any
fiscal period, fall below the expectations of securities analysts and investors.
In such event, the trading price of the Company's common stock could be
materially and adversely affected. See "Item 7. Management's Discussion and
Analysis of Financial Condition and Results of Operations".
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VOLATILITY OF THE COMPANY'S COMMON STOCK PRICE. The market for the
Company's common stock is highly volatile. The trading price of the Company's
common stock fluctuated significantly in 1997, 1996 and 1995, 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 the Company or its competitors, litigation and other factors. Any
shortfall in revenue or earnings from levels expected by securities analysts or
others could have an immediate and significant adverse effect on the trading
price of the Company's common stock in any given period. Additionally, the
Company 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 the
Company's common stock. Finally, the Company participates in a highly dynamic
industry, which often results in significant volatility of its common stock
price.
DILUTIVE AND POTENTIAL DILUTIVE EFFECT TO SHAREHOLDERS. The Company has
engaged in a number of transactions which have resulted in dilution to the
Company's shareholders. 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 "Class Action Lawsuit"). The Company reached a binding
settlement agreement (the "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, the Company 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, 1997, 2,500,000 Settlement Shares have been issued and distributed in full
settlement of the Class Action Lawsuit. Issuance of the Settlement Shares was
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, were fully
tradeable, fully paid and non-assessable. See Note 6 of Notes to Consolidated
Financial Statements.
In February 1998, Computer Associates, Inc. ("CA"), and Newport Acquisition
Company, LLP ("NAC") entered into a Note Purchase and Sale Agreement (to which
the Company consented) and the Company and NAC entered into a Note Conversion
Agreement (the "Agreements"). Under the terms of the Agreements, a promissory
note, plus accrued interest, in the amount of $12,251,000, payable to CA (the
"CA Note") was acquired by NAC, and immediately converted into 11,415,094 shares
of the Company's common stock (the "Shares"). Concurrently with execution of the
Agreements, the Company and NAC entered into an Investor Rights Agreement (the
"Rights Agreement") wherein the Company has agreed to register the Shares under
the Securities Act, effective February 27, 1999.
Also in February 1998, pursuant to the terms a Common of Stock and Warrant
Purchase Agreement, the Company completed a management-led private placement of
2,330,191 shares of the Company's common stock (the "Private Placement"),
resulting in gross proceeds to the Company of $2,470,000. Transaction costs
associated with both the Agreements and the Private Placement are estimated to
be approximately $600,000. The Company has agreed to register the Private
Placement shares under the Securities Act.
In June 1997, the Company issued warrants to purchase 90,000 and 10,000
shares of common stock to Pacific Business Funding Corporation and its affiliate
Sand Hill Capital, LLC, respectively, at an exercise price of $2.094 per share.
The warrants expire on June 30, 2002. In February 1998, in connection with the
Agreements, the Company entered into a Warrant Purchase Agreement with CA
wherein the Company issued and sold to CA, a warrant to purchase 500,000 shares
of the Company's common stock (the "CA Warrant"). The CA Warrant is exercisable
at $1.906 per share and expires on February 27, 2003. The Company has agreed to
register the shares issuable upon exercise of the CA Warrant under the
Securities
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Act, no later than April 29, 1998. Also in February 1998, in connection with the
Private Placement the Company issued warrants to purchase 582,548 shares of the
Company's common stock at an exercise price of $1.25 per share (the "Private
Placement Warrants"). The Private Placement Warrants expire on February 27,
2003. Also, in consideration of services rendered in connection with the Private
Placement, the Company issued to Rochon Capital Group, Ltd. warrants to purchase
354,717 shaes of the Company's common stock at an exercise price of $2.12 (the
"Rochon Warrants"). The Rochon Warrants expire on February 27, 2003. The Company
has agreed to register the shares issuable under the terms of the Private
Placement Warrants and the Rochon Warrants under the Securities Act. In March
1998 the Company issued to NAC an additional warrant to purchase 893,320 shares
of the Company's Common Stock at an exercise price of $1.81 per share (the "NAC
Warrant"), pursuant to a Right of First Refusal provision contained in the
Rights Agreement. The NAC Warrant is subject to three-year vesting.
From time to time, the Company issues shares of common stock pursuant to its
1992 Employee Stock Purchase Plan and pursuant to options granted under its 1995
Incentive Stock Option Plan, 1998 Employee Stock Option Plan and 1996 Directors'
Stock Option Plan. Additional options remain outstanding and are exercisable
pursuant to the Company's 1986 Incentive Stock Option Plan, which terminated in
July 1996. In addition, the Company has issued non-plan options to purchase an
aggregate of 1,500,000 shares of common stock to the Company's Chief Executive
Officer, Chief Financial Officer and Sr. Vice President of Marketing. In March
1998, the Company's Board of Directors approved the 1998 Employee Stock Option
Plan, under which options to purchase 1,415,000 shares of common stock are
issuable to non-officer employees.
Future issuance of such shares of the Company's common stock pursuant to any
of the foregoing will dilute the beneficial ownership of existing Company
shareholders.
NEED FOR ADDITIONAL EQUITY FINANCING. The Company may be required to seek
additional equity financing to finance the acquisition of new products and
technologies, capital equipment and continuing operations. If the Company 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 Company's shareholders.
NEW PRODUCT RISKS; RAPID TECHNOLOGICAL CHANGE. The markets for the
Company'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 the Company
depends substantially upon its ability to continue to enhance 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, the Company's businesses could be
adversely affected. The Company's success will also depend on the ability of its
primary products, SQLBASE, CENTURA TEAM DEVELOPER, SQLWINDOWS, CENTURA NET.DB,
and SQLHOST, to perform well with existing and future leading, industry-standard
application software products intended to be used in connection with RDBMS. 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
the Company to timely release new versions or upgrades, 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 the Company. In
addition, commercial acceptance of the Company's products and services could be
adversely affected by critical or negative statements or reports by industry and
financial analysts concerning the Company and its products, or other factors
such as the Company's financial performance. If the Company is unable to develop
and introduce new products or enhancements to existing 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.
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The Company depends substantially upon internal efforts for the development
of new products and product enhancements. The Company 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 the Company 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 the Company may contain undetected
errors when first introduced or as new versions are released. The Company has in
the past discovered software errors in certain of its new products and
enhancements, respectively, after their introduction. Although the Company has
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 the Company's business, operating results and
financial condition.
From time to time, the Company or its competitors may announce new products,
product versions, capabilities or technologies that have the potential to
replace or shorten the life cycles of the Company's existing products. The
Company has historically experienced increased returns of a particular product
version following the announcement of a planned release of a new version of that
product. The Company provides 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 Company. See "Business--Research and Product Development" and "Item 7.
Management's Discussion and Analysis of Financial Condition and Results of
Operations".
YEAR 2000 ISSUE. The "Year 2000 Issue" arises because most computer systems
and programs were designed to handle only a two-digit year, as opposed to a four
digit year. When the year 2000 begins these computers may interpret "00" as the
year 1900 and could either stop processing date-related computations or could
process them incorrectly. As customers and potential customers of the Company
begin to devote incremental resources to this issue, resources previously
allocated to other information systems requirements may be redirected to address
the Year 2000 issue. To the extent that the Company's products are not selected
as part of customers' overall Year 2000 solution, redirection of these customer
resources could have a material adverse effect on the Company's results of
operations and financial condition. In addition, the Year 2000 Issue creates
risk for the Company from unforeseen problems in its internal computer systems
and from third parties with which the Company interacts. Such failures of the
Company's and/or third parties' computer systems could have a material impact on
the Company's ability to conduct its business, and to process and account for
the transfer of funds electronically.
EMBEDDABLE DATABASE MARKET. Since database capacity is often indicative of
differences in customer application, segments within the PC client/server market
in which the Company competes can generally be distinguished and segregated by
the target capacity of the database utilized. The Company generally markets its
database products in environments utilizing capacity ranging from small, five
kilobyte Smart Card environments to those in excess of five Gigabytes.
Competitors of the Company, including Microsoft, Oracle, CA, IBM, Sybase,
Borland, Pervasive, and Informix, generally have product offerings which compete
with the Company's products in some or all of these capacity ranges. In
addition, some of these competitors are providers of sophisticated database
software, originally designed and marketed primarily for use with mainframes and
minicomputers, which, if successfully re-configured to provide similar
functionality in Windows or Browser clients, or smaller capacity environments,
could materially and adversely impact the Company's revenues, results of
operations and financial condition.
COMPETITION. The market for embedded databases and application development
tools system software is intensely competitive and rapidly changing. The
Company's products are specifically targeted at
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the emerging portion of this market relating to embeddable PC and Web
client/server software, and the Company's current and prospective competitors
offer a variety of solutions to address this market segment. The Company faces
competition from providers of application development software, such as Oracle,
Sybase's Powersoft Division, Microsoft, and Borland, and connectivity software
competitors such as IBM. The Company 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 and a variety of newly created Java based development tools,
additional competitors or potential competitors have emerged.
Many of the Company'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
the Company. In addition, many competitors have established relationships with
customers of the Company. The Company's competitors could in the future
introduce products with more features and lower prices than the Company's
offerings. These companies could also bundle existing or new products with more
established products to compete with the Company. Furthermore, as the PC and Web
client/ server market expands, a number of companies, with significantly greater
resources than the Company, could attempt to increase their presence in this
market by acquiring or forming strategic alliances with competitors of the
Company, or by introducing products specifically designed for the PC and Web
client/ server market.
The principal competitive factors affecting the market for the Company's
products include breadth of distribution and name recognition, product
architecture, performance, functionality, price, product quality, customer
support. The Company experienced increased competition during 1997, 1996, and
1995, resulting in loss of market share. The Company 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 the Company introduces such
products in this manner, it may not be able to compete effectively because of
the significantly larger resources available to many of the Company's
competitors. There can be no assurance that the Company will be able to compete
successfully or that competition will not have a material adverse effect on the
Company's business, operating results and financial condition. See
"Business--Competition".
MARKET ACCEPTANCE OF PC CLIENT/SERVER SYSTEMS. To date, substantially all
of the Company's revenues have been derived from the licensing of software
products for PC client/server systems and licensing of such products is expected
to continue to account for substantially all of the Company's revenues for the
foreseeable future. With the increasing focus on enterprise-wide systems that
embrace the World Wide Web, some customers may opt for solutions that favor
mainframe or mini-computer solutions with associated Web connectivity.
Accordingly, some companies may abandon use of PC client/server systems, which
could have a material adverse effect on the Company's future success. See "Item
7. Management's Discussion and Analysis of Financial Condition and Results of
Operations".
COMPONENT SOFTWARE MARKETS. The advent of so-called "component" software
may alter the way in which customers buy software. In this structure, logical
statements or discreet "units of activity" can be distributed pursuant to
executable statements within a Windows or Browser client environment. As
specific software functionality can be bundled into smaller units or objects
rather than in broad, highly functional products such as the Company's
development tools, customers may be less willing to buy such broad, highly
functional products. If such a trend continues, the Company may choose to
introduce component-type products. The costs and efforts necessary to package
and distribute such components are largely unknown and there can be no assurance
that the Company will be able to repackage and distribute its products in such a
component-type software structure, in an efficient manner, or at all.
INTERNET SOFTWARE MARKET. The market for Internet software in general, and
the segments of such market addressed by the Company's products in particular,
are relatively new. The future financial performance of the Company will depend
in part on the continued expansion of this market and these
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<PAGE>
market segments and the growth in the demand for other products developed by the
Company, as well as increased acceptance of the Company'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 the Company will
be able to respond effectively to the evolving requirements of the market and
market segments, or that MIS professionals will accept the Company's products.
If the Company is not successful in developing, marketing, localizing and
selling applications that gain commercial acceptance in these markets and market
segments on a timely basis, the Company's business, operating results and
financial condition could be materially and adversely affected. See
"Business--Overview".
DEPENDENCE UPON DISTRIBUTION CHANNELS. The Company relies on relationships
with value-added resellers and independent third party distributors for a
substantial portion of its sales and revenues. Some of the Company's resellers
and distributors also offer competing products. Most of the Company's resellers
and distributors are not subject to any minimum purchase requirements, they can
cease marketing the Company's products at any time, and they may from time to
time be granted stock exchange or rotation rights. Moreover, the introduction of
new and enhanced products may result in higher product returns and exchanges
from distributors and resellers. Any product returns or exchanges in excess of
recorded allowances could have a material adverse effect on the Company's
business, operating results and financial condition. The Company also maintains
strategic relationships with a number of vertical software vendors and other
technology companies for marketing or resale of the Company's products. Any
termination or significant disruption of the Company's relationship with any of
its resellers or distributors, or the failure by such parties to renew
agreements with the Company, could materially and adversely affect the Company's
business, operating results and financial condition. Since 1994 the Company has
reduced its resources devoted to North American corporate sales and also
decreased its expenditures on corporate and product marketing. Failure of the
Company to successfully implement, support and manage its sales strategies could
have a material adverse effect on the Company.
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 the Company's current distributors. The bankruptcy,
deterioration in financial condition or other business difficulties of a
distributor or retailer could render the Company's accounts receivable from such
entity uncollectible, and this could result in a material adverse effect on the
Company's business, operating results and financial condition. There can be no
assurance that distributors will continue to purchase the Company's products or
provide the Company's products with adequate promotional support. Failure of
distributors to do so could have a material and adverse effect on the Company's
business, operating results and financial condition.
In a number of international markets the Company has entered into
quasi-exclusive, multi-year agreements with independent companies that have also
licensed the use of the Company's name. These agreements are in place to
increase the Company's opportunities and penetration in such markets where the
rapid adoption of client/server technologies is anticipated. While the Company
believes that to date these agreements have increased the Company's penetration
in such markets, there can be no certainty that this performance will continue
nor that these relationships will remain in place. The Company's future cost of
maintaining its business in these markets could increase substantially if these
agreements are not renewed. See "Business--Marketing, Distribution and Product
Support".
DEPENDENCE ON THIRD-PARTY ORGANIZATIONS. The Company is increasingly
dependent on the efforts of third party "partners", including consultants,
system houses and software developers to implement, service and support the
Company's products. These third parties increasingly have opportunities to
select from a very broad range of products from the Company's competitors, many
of whom have greater resources and market acceptance than the Company. In order
to succeed, the Company must actively recruit and sustain relationships with
these third parties. There can be no assurance that the Company will be
successful in recruiting new partners or in sustaining its relationships with
its existing partners.
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INTERNATIONAL SALES AND OPERATIONS. International sales represented 58%,
60% and 61% of the Company's net revenues for the years ended December 31, 1997,
1996 and 1995, respectively. A key component of the Company'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
Company will need to retain effective distributors, and hire, retain and
motivate qualified personnel internationally to maintain and/or expand its
international presence. There can be no assurance that the 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 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 the Company's
products are denominated both in local currencies of the respective geographic
region and in US dollars, depending upon the economic stability of that region
and locally accepted business practices. Accordingly, any increase in the value
of the US dollar relative to local currencies in these markets may negatively
impact revenues, results of operations and financial condition. An increase in
the relative value of the US dollar would serve to increase the relative foreign
currency cost to the customer of a US dollar denominated purchase, which may
negatively affect the Company's sales in foreign markets. In addition, the US
dollar value of a sale denominated in a region's local currency decreases in
proportion to relative increases in the value of the US dollar. 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
Company's international operations and, consequently, on the Company's business,
operating results and financial condition. See "Business--Marketing,
Distribution and Product Support--Customer Support and Service".
PROPRIETARY RIGHTS. The success and ability of the Company to compete is
dependent in part upon the Company's proprietary technology. While the Company
relies on trademark, trade secret and copyright laws to protect its technology,
the Company believes 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. The Company has one patent with
respect to its SQLWINDOWS and CENTURA TEAM DEVELOPER products. The Company
believes 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 the Company's technology.
The source code for the Company's 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.
The Company generally enters into confidentiality or license agreements with
its employees, consultants and vendors, and generally controls access to and
distribution of its software, documentation and other proprietary information.
Despite efforts to protect proprietary rights, unauthorized parties may attempt
to copy aspects of the Company's 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 the Company will prevent
misappropriation of the Company's technology 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
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litigation could result in substantial costs and diversion of resources and
could have a material adverse effect on the Company's business, operating
results and financial condition.
There can be no assurance that third parties will not claim infringement by
the Company with respect to current or future products, and the Company expects
that it 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, the Company has received notices alleging that its
products infringe trademarks of third parties. The Company 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 the Company regarding trademark infringement. Any such third party
claims, whether or not they are meritorious, could result in costly litigation
or require the Company to enter into royalty or licensing agreements. Such
royalty or license agreements, if required, may not be available on terms
acceptable to the Company, or at all. If the Company was 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 the Company's
business, operating results and financial condition. See "Business--Intellectual
Property".
MANAGEMENT OF POTENTIAL GROWTH. In recent years, the Company has
experienced both expansion and contraction of its operations each of which has
placed significant demands on the Company's administrative, operational and
financial resources. To manage future growth, if any, the Company 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 the Company will be able to perform such actions
successfully. The Company intends to continue to invest in improving its
financial systems and controls in connection with higher levels of operations.
Although the Company believes that its systems and controls are adequate for the
current level of operations, the Company anticipates that it may need to add
additional personnel and expand and upgrade its financial systems to manage any
future growth. The Company's failure to do so could have a material adverse
effect upon the Company's business, operating results and financial condition.
LEGAL PROCEEDINGS. On September 17, 1997, Technology Venture (Software)
Holdings Limited, formerly known as Eagerquest Investments Limited
("Eagerquest") filed suit against the Company in the United States District
Court for the Central District of California alleging that the Company acted
improperly in terminating its contract with Eagerquest for the distribution of
the Company's products in the territories of Hong Kong and China and that the
Company's actions illegally damaged Eagerquest. The Company believes that its
actions were within its rights under its contract with Eagerquest and that the
allegations are without merit. The Company intends to defend itself vigorously
in this action and that the outcome will not have a material adverse affect on
the Company's financial situation or business prospects.
Other than the above, there are currently no material pending legal
proceedings against the Company or any of its subsidiaries. The Company operates
in an environment, however, where litigation may occur in the course of its
normal business operations. In the complex and volatile industry in which the
Company operates, disputes, litigation, regulatory proceedings and other actions
are a necessary risk of doing business. There can be no assurance that the
Company will not participate in such legal proceedings and that the costs and
charges will not have a material adverse impact on the Company's future success.
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DIRECTORS AND EXECUTIVE OFFICERS OF REGISTRANT
The following table sets forth information as of February 28, 1998,
regarding the directors and executive officers of the Company:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ------------------------------------ --- ---------------------------------------------------------------------
<S> <C> <C>
Scott R. Broomfield................. 41 President and Chief Executive Officer (Principal Executive Officer),
Chairman of the Board of Directors
John W. Bowman...................... 43 Senior Vice President, Finance and Operations and Chief Financial
Officer (Principal Financial Officer)
Michael Moore....................... 60 Senior Vice President, World Wide Sales
Kathy Lane.......................... 55 Senior Vice President, Marketing
Ann Bontatibus...................... 53 Vice President, Technical Services and Support
Lionel Carrasco..................... 35 Vice President, Business Development
John Griffin........................ 50 Vice President, European Operations
Richard Lucien...................... 40 Vice President, Corporate Controller
(Principal Accounting Officer)
Samuel M. Inman, III(1)............. 47 Director
Jack King(2)........................ 64 Director
Phillip Koen, Jr.(2)(1)............. 46 Director
Peter Micciche(2)................... 44 Director
William D. Nicholas(1).............. 49 Director
Earl M. Stahl....................... 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. Broomfield has served as Chief Executive Officer and a director of the
Company since December 1997 and Chairman of the Board of Directors and Chief
Executive Officer since February 1998. Prior to joining the Company, Mr.
Broomfield was a principal with the firm of Hickey & Hill Incorporated ("Hickey
& Hill") from February 1993 to December 1997, advising companies needing
operational and financial restructuring. In this capacity, Mr. Broomfield
assisted companies with executive management, strategy, operational and
financial restructuring, business planning and business development. Prior to
joining Hicky & Hill, Mr. Broomfield held senior management positions at Trilogy
Systems, Inc., and Digital Equipment Corporation. Mr. Broomfield has a BS in
psychology from Azusa Pacific University and an MBA, from Santa Clara
University.
Mr. Bowman has served as Chief Financial Officer of the Company since
December 1997. Prior to joining the Company Mr. Bowman also served as a
principal with the firm of Hickey & Hill from July 1997 to December 1997 where
he assisted companies with executive management, strategy, operational and
financial restructuring, business planning and business development. Prior to
joining Hicky & Hill, Mr. Bowman was President of Country Club Foods, Inc. from
November 1995 through June 1997 and from February 1992 through November 1995
served as Vice President of Finance for Speckels Sugar Co., Inc. Prior to this,
from 1978 through 1992, Mr. Bowman held various senior financial management
positions at Unisys Corporation. Mr. Bowman holds a BS in Business Management
from San Diego State University and an MBA in Finance from the University of
California, Berkeley.
Mr. Moore joined the Company in January 1997 and served as Sr. Vice
President of Sales for the Intercontinental Region from January 1997 through
October 1997 and Senior Vice President, Worldwide
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Sales since that time. Prior to joining the Company, Mr. Moore served in several
senior sales management positions at Tandem Computer Corporation, including VP,
Western US Operations, VP, Intercontinental Division, and VP, Worldwide Sales
Operations, from 1981 until 1995. Prior to joining Tandem, Mr. Moore held sales
management positions for both Honeywell Information Systems and Durango Systems.
Mr. Moore holds a BA degree in Political Science from Long Beach State
University, CA.
Ms. Lane has served as Senior Vice President of Marketing since joining the
Company in December 1997. Prior to this, Ms. Lane served as Vice President,
Marketing for Harman Interactive from June 1994 until May 1997 when the company
was sold to Intel. Prior to that, from September 1993 through June 1994, Ms.
Lane founded and served at NewMedia Ware. From June 1991 through June 1993 Ms.
Lane served as President, Professional Division at Chipsoft, (which was later
acquired by Intuit, a leading provider of accounting and tax software for the
desk-top). Prior to this, Ms. Lane served as CEO of Softview from September 1988
through June 1991 and in executive and senior marketing roles at several
software and related companies, including Dataquest, a market research firm, and
was elected to and chaired the Marketing Special Interest Group for the Software
Publishers Association for four years. Ms. Lane received a B.S. in Business
Administration from Fort Hays State College in Kansas.
Ms. Bontatibus began her tenure at Centura Software Corporation in January,
1994 as Director of Professional Services and was promoted to the position of
Vice President, Worldwide Services and Support in March 1997. Prior to joining
Centura, from 1987 until January 1994, Ms. Bontatibus held the position of
Director, Field Services at Ingres Corporation, a software company that
developed and marketed the Ingres database and 4GL development tools. Prior to
this Ms. Bontatibus held senior project management and consultant positions at
Amdahl, Chevron and IBM. Ms. Bontatibus holds a B.S. degree in Accounting from
New York University.
Mr. Carrasco has served as Vice President, Business Development since
November 1997. Mr. Carrasco joined the Company in June 1996 and served in
various Senior Product Management positions from June 1996 until November 1997.
Prior to joining the Company, from September 1995 until June 1996, Mr. Carrasco
served as Chief Executive Officer and Chief Technical Officer of Ingenieria de
Soluciones in Mexico City, a company that builds custom sized software
applications and development tools. Prior to this, Mr. Carrasco was Chief
Executive Officer and Chief Technical Officer of ISSA, a distribution partner of
the Company in Mexico and was co-founder of Centura de Mexico, the Company's
wholly owned subsidiary in Mexico. Mr. Carrasco brings several years of
professional experience including working as an international consultant for the
United Nations, and in various countries as an evangelist for new technologies.
Mr. Carrasco's most important enterprise to date is ISOL, which is
internationally recognized by Microsoft as one of the most valuable and
technically capable software houses in Latin America. Currently, Mr. Carrasco is
a member of the Board of Directors of two software houses in Mexico. Mr.
Carrasco obtained his bachelors degree in History from the National School of
Anthropology and History in Mexico in 1985 and his masters degree in Computer
Science from the Arthuro Rosembluet Foundation in 1987.
Mr. Griffin has served as Vice President and Managing Director for Europe at
Centura Software Corporation since January 1, 1998. Mr. Griffin joined the
Company in January 1997 and served as Managing Director, Northern Europe Region
through December 1997. Prior to joining the Company, Mr. Griffin was Managing
Director at BMC Software Limited from 1985 until 1995. He held various
management positions at IBM UK Limited from 1970 to 1985. Mr. Griffin holds a
Bachelor of Arts in Economics and Law from Keele University.
Mr. Lucien has served as Vice President, Corporate Controller since joining
the Company in December 1997 and served as a consultant to the Company from July
1997 through December 1997. Prior to joining the Company, Mr. Lucien was
Corporate Controller at Berkeley Systems, Inc., a software games and
entertainment company, from February 1996 through June 1997 and was Director of
Corporate Reporting at Spectrum HoloByte, Inc., a software games and
entertainment company, from July 1994
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<PAGE>
through February 1996. Prior to this, Mr. Lucien served in the International
Consulting Practice of Tohmatsu & Co., the Japanese affiliate of Delloitte,
Touche, Tohmatsu, International, in Osaka, Japan, from July 1991 through March
1994. Prior to this, Mr. Lucien served in various financial management positions
at Nellcor, Inc., a manufacturer of non-invasive medical instruments from June
1987 through 1990. Mr Lucien began his professional career at Touche Ross & Co.
in January 1985 and holds a B.S. degree in business administration from
California State University, Hayward.
Mr. Inman served as Chairman of the Board of Directors from September 1996
until February 1998 and as President and Chief Executive Officer (Principal
Executive Officer) from December 1995 until December 1997, and President and
Chief Operating Officer from April 1995 until November 1997. Prior to joining
the Company, from March 1993 until April 1995, 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 a B.S. degree in
mathematics.
Mr. King has served on the Company's Board of Directors since December 1997.
Mr. King has been President and CEO of Zitel Corporation, a company specializing
in Year 2000 software conversion consulting, systems integration and
"intelligence-based" technology solutions, since November 1986. Prior to joining
Zitel, Mr. King has held key executive and senior management positions at
Dynamic Disk, Data Electronics, Memorex and Xerox Corporation. Mr. King holds a
B.S. in Industrial Management from San Diego State University.
Mr. Koen has has served on the Company's Board of Directors since December
1997. Mr. Koen has served as Senior Vice President, Finance and Chief Financial
Officer of PointCast Corporation since June of 1997. Prior to this Mr. Koen
served as Chief Financial Officer of Etec Systems from December 1993 until June
1997. Prior to that he was the Vice President of Finance, and then the Chief
Financial Officer at Levelor Corporation from April 1989 to December 1993. Mr.
Koen holds a B.A. in Economics from Claremont Mens College and an M.B.A in
General Management from the University of Virginia.
Mr. Micciche has served as a member of the Board of Directors since February
1998. Mr. Micciche has been President and CEO of SceneWare Corporation since
September 1994. Prior to that he was Vice-President and General Manager, North
America at The ASK Group from December 1992 until May, 1993, and was President
of Cognos Corporation from December 1989 through December 1992. Mr. Micciche
graduated from Boston College with a Bachelor of Science in Accounting and from
Suffolk University with an MBA in Finance.
Mr. Nicholas has served as a member of the Board of Directors since February
1998 and has been associated with Crossroads Capital Partners, LLC since June
1997. Prior ot this he was President of Integrated Consulting Solutions, Inc.
from January 1994 through June 1997. From March 1981 until January 1994 Mr.
Nicholas served as a Partner in the Information & Technology Group of Ernst &
Young. Mr. Nicholas received a Bachelor of Arts in Mathematics from LaSalle
University, holds a Bachelor of Science in Accounting from St. Joseph's
University, and obtained a Masters in Business Administration from Villanova
University. Mr. Nicholas is a Certified Public Accountant (CPA) and a Certified
Data Processor (CDP).
Mr. Stahl, served as Chief Technology Officer and Senior Vice President for
the products organization at Centura Software Corporation from April 16, 1995
until December 1997. Mr. Stahl joined Centura in 1988 and has held various key
positions within the company's development organization, including spearheading
the company's client/server tools development effort. Mr. Stahl has more than 20
years of industry experience, which includes product development and support on
mainframe, minicomputers, and PC systems. He holds a B.S. in computer science
from San Diego State University and has previously managed development projects
at Bell Northern Research, Dest Corporation, and VisiCorp. Mr. Stahl is
currently Vice President of Engineering for DataMind Corporation.
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The Board of Directors elects the Company's officers and such officers serve
at the discretion of the Board of Directors of the Company. There are no family
relationships among the officers or directors of the Company.
ITEM 2. PROPERTIES
The Company leases approximately 48,000 square feet of office, development
and warehousing space in facilities in Redwood Shores, California.
As of December 31, 1997, the Company 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, and
Vienna. The Company believes that its facilities are adequate for its current
needs and that suitable additional space will be available as needed.
ITEM 3. LEGAL PROCEEDINGS
On September 17, 1997, Technology Venture (Software) Holdings Limited,
formerly known as Eagerquest Investments Limited ("Eagerquest") filed suit
against the Company in the United States District Court for the Central District
of California alleging that the Company acted improperly in terminating its
contract with Eagerquest for the distribution of the Company's products in the
territories of Hong Kong and China and that the Company's actions illegally
damaged Eagerquest. The Company believes that its actions were within its rights
under its contract with Eagerquest and that the allegations are without merit.
The Company intends to defend itself vigorously in this action and that the
outcome will not have a material adverse affect on the Company's financial
situation or business prospects.
As of December 31, 1997, to the best of the Company's knowledge there were
no other pending actions, potential actions, claims or proceedings against the
Company that could result in potential damages in excess of $50,000. As noted in
the "Legal Proceedings" section under "Risk Factors" above, 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.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS--NOT APPLICABLE
No matters were submitted to a vote of the Company's shareholders during the
fiscal quarter ended December 31, 1997.
27
<PAGE>
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER
MATTERS
The Company's common stock is quoted on The Nasdaq SmallCap Market (the
"SmallCap Market") 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 Company's common stock. The Company's common stock began trading on
The Nasdaq National Market ("Nasdaq") on February 5, 1993 under the trading
symbol "GPTA". At December 31, 1997 the Company did not meet the Nasdaq minimum
tangible net worth requirements for continued listing. On January 13, 1998, the
Company was notified that effective January 15, 1998, the Company's shares were
to be listed on the SmallCap Market and that continued listing on the SmallCap
Market was contingent upon meeting all continued listing standards adopted by
the National Association of Securities Dealers (the "NASD"), effective February
27, 1998. At February 27, 1998, including, on a pro-forma basis, the effect of
the Agreements and the Private Placement, the Company had met all the SmallCap
Market continued listing requirements as required by the NASD. Continued listing
of the Company on the SmallCap Market is predicated on continuing to meet the
listing requirements adopted by the NASD.
<TABLE>
<CAPTION>
HIGH LOW
--------- ---------
<S> <C> <C>
1997
First Quarter............................................................ $ 5.125 $ 2.875
Second Quarter........................................................... 3.625 1.313
Third Quarter............................................................ 3.125 1.438
Fourth Quarter........................................................... 2.719 1.063
1996
First Quarter............................................................ $ 7.125 $ 5.563
Second Quarter........................................................... 6.750 4.688
Third Quarter............................................................ 5.625 4.375
Fourth Quarter........................................................... 4.750 2.750
</TABLE>
The Company has not paid any cash dividends. The Company currently does not
anticipate paying any cash dividends in the foreseeable future.
As of February 28, 1998, there were approximately 1,036 shareholders of
record (not including beneficial holders of stock held in street name) of the
Company's common stock.
28
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
The following selected consolidated financial data should be read in
conjunction with the Company's consolidated financial statements and related
notes included elsewhere herein. The statements of operations data for the years
ended December 31, 1997, 1996 and 1995 and the balance sheets data at December
31, 1997 and 1996 are derived from, and are qualified by reference to, the
audited consolidated financial statements of the Company included elsewhere in
this Annual Report on Form 10-K and should be read in conjunction with those
consolidated financial statements and the notes thereto, which have been audited
by Price Waterhouse, LLP, independent accountants, whose report is included
elsewhere in this Annual Report on Form 10-K. The statement of operations data
for the years ended December 31, 1994 and 1993 and the balance sheet data at
December 31, 1995, 1994 and 1993 are derived from audited consolidated financial
statements not included in this Annual Report on Form 10-K. Historical earnings
per share data has been restated to reflect the adoption of Statement of
Financial Accounting Standard No. 128, "Earnings per Share." The pro-forma
balance sheet data for 1997 is unaudited.
SELECTED CONSOLIDATED STATEMENTS OF OPERATIONS DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------------
1997 1996 1995 1994 1993
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Net Revenues:
Product.................................... $ 40,714 $ 45,452 $ 49,408 $ 46,134 $ 41,655
Service.................................... 17,232 17,781 16,306 10,398 5,820
--------- --------- --------- --------- ---------
Net Revenues................................. 57,946 63,233 65,714 56,532 47,475
Cost of revenues............................. 12,218 14,578 19,640 17,146 11,407
--------- --------- --------- --------- ---------
Gross Profit................................. $ 45,728 $ 48,655 $ 46,074 $ 39,386 $ 36,068
Operating income (loss)...................... $ 1,230 $ 2,484 $ (42,993) $ (32,981) $ (1,858)
Net income (loss)............................ $ (649) $ 2,027 $ (44,079) $ (31,841) $ (1,908)
Basic net income (loss) per share(3)......... $ (0.04) $ 0.15 $ (3.62) $ (2.66) $ (0.17)
Basic weighted average common shares(3)...... 15,439 13,231 12,175 11,957 11,411
Diluted net income (loss) per share(3)....... $ (0.04) $ 0.15 $ (3.62) $ (2.66) $ (0.17)
Diluted weighted average common shares(3).... 15,439 13,380 12,175 11,957 11,411
</TABLE>
SELECTED CONSOLIDATED BALANCE SHEETS DATA
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------------------------------
1997 1996 1995 1994 1993
--------- --------- --------- --------- ---------
1997
-----------
PRO-FORMA(1)
<S> <C> <C> <C> <C> <C> <C>
Working Capital (Deficit)(2)..... $ (4,250) $ (18,232) $ (15,616) $ (25,604) $ 599 $ 40,919
Total Assets..................... 30,070 28,200 36,705 48,104 58,161 72,372
Long-term Obligations............ 856 856 12,188 11,744 1,939 477
Shareholders' Equity (Deficit)... $ 4,028 $ (9,954) $ (16,923) $ (24,057) $ 18,670 $ 49,223
</TABLE>
- ------------------------------
(1) The December 1997 Pro-forma balances reflect adjustments to the December 31,
1997 balances for the conversion of the CA Note, plus accrued interest and a
private placement of common stock which were completed on February 27, 1998.
The balance of the CA Note plus accrued interest was approximately
$12,112,000 at December 31, 1997 and gross proceeds from the Private
Placement were $2,470,000. Transaction costs associated with both the sale
and conversion of the CA Note and the Private Placement are estimated to be
approximately $600,000. See Note 13 to the Consolidated Financial
Statements.
(2) Working Capital (Deficit) includes deferred revenue of $14,618,000,
$21,891,000, $28,800,000, $21,879,000 and $12,261,000 at December 31, 1997,
1996, 1995, 1994 and 1993, respectively.
(3) See Note 2 of Notes to Consolidated Financial Statements for an explanation
of shares used in computing net income (loss) per basic and diluted common
shares and equivalents.
29
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Management's discussion and analysis of the financial condition and results
of operations should be read in conjunction with the audited consolidated
financial statements and the notes thereto, as well as "Risk Factors" included
in this Annual Report on Form 10-K.
OVERVIEW
The Company commenced operations in 1984 and provides a suite of products
application developers use to build and deploy business applications in a cost
effective manner. Centura products include an embedded database that scales from
Smart Cards to the Web, and object oriented application development tools.
Centura products are designed to be deployed in both thin- and fat-client
environments, using business logic objects that can be reused in multi-tier
architectures in distributed environments. The Company's product lines include
an embedded database, (SQLBASE), application development tools, (CENTURA TEAM
DEVELOPER, THE 32-BIT VERSION OF SQLWINDOWS, AND CENTURA NET.DB) and PC to
mainframe connectivity products (SQLHOST). These products are expected to
constitute the majority of the Company's net revenues for the foreseeable
future. The Company cannot accurately predict the exact timing of new product
releases or enhancements. Any failure to deliver products as scheduled, or such
products' failure to achieve early market acceptance, could have a material
adverse effect on the business, operating results and financial condition of the
Company. The Company distributes its products in the United States and
internationally through a corporate sales organization consisting of the
Company'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. See "Item 1. Business--Risk Factors--New Product
Risks; Rapid Technological Change," "--Highly Competitive Markets", "--Market
Acceptance of PC Client/Server Systems" and "--Internet Software Market".
The Company has experienced in the past and may in the future continue to
experience significant fluctuations in quarterly operating results. The Company
reported a loss of $0.6 million for fiscal year 1997, a profit of $2.0 million
for 1996, and a loss of $44.1 million for 1995. Beginning in the fourth quarter
of 1997, the Company refocused and restructured its operations to leverage its
core technological competencies into next generation products, which include
embeddable databases and continue to embrace object oriented application
development and both thin- and fat-client environments. With the addition of
CENTURA NET.DB, the Company's products now provide a comprehensive architecture
for the development and deployment of information systems and applications from
a host environment, through two-tier client/server and SQL databases, to the
multi-tier environment of the World Wide Web. The Company recognized total
restructuring charges of $1.0 million in 1997 and approximately $5.4 million in
1995. There can be no assurance that the restructuring efforts the Company has
engaged in to date will be successful or that the Company will be able to
sustain profitability on a quarterly or annual basis. Many of the Company's
product licensing arrangements are subject to revenue recognition on a per-unit
deployed basis as the Company's deferred obligation to its customers is
gradually extinguished. Revenue recognition in such cases is therefore dependent
upon the business activities of the Company's customers and the timely and
accurate reporting of such activities to the Company, which makes predictability
of the related revenue extremely uncertain. Although the Company 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. The Company 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. Accordingly, any significant shortfall in sales of the Company's
products in relation to the Company's expectations could have an immediate
adverse impact on the Company's business, operating results and financial
condition.
30
<PAGE>
To the extent that the Company's expenses exceed expected revenues in any fiscal
period, its business, operating results and financial condition could be
materially and adversely affected. Due to the foregoing factors, it is likely
that the Company's operating results may, during any fiscal period, fall below
the expectations of securities analysts and investors. See "Part I, Item 1.
Business, Risk Factors--Recent Company Losses; Fluctuations in Quarterly
Results."
RECENT DEVELOPMENTS
SALE AND CONVERSION OF NOTE PAYABLE. In February 1998, Computer Associates,
Inc. ("CA"), and Newport Acquisition Company, LLP ("NAC") entered into a Note
Purchase and Sale Agreement and the Company and NAC entered into a Note
Conversion Agreement (the "Agreements"). Under the terms of the Agreements, a
promissory note, plus accrued interest, in the amount of $12.3 million, payable
to CA (the "CA Note") was acquired by NAC, and immediately converted into
11,415,094 shares of the Company's common stock (the "Shares"). In February
1998, in connection with the Agreements, the Company entered into a Warrant
Purchase Agreement with CA wherein the Company sold and issued to CA, at an
issuance price of $.001 per share, a warrant to purchase 500,000 shares of the
Company's common stock. The warrant is exercisable at $1.906 per share and
expires on February 28, 2003.
PRIVATE PLACEMENT. Also in February 1998, pursuant to the terms of Stock
Purchase Agreements, the Company completed a private placement of 2,330,191
shares of the Company's common stock (the "Private Placement"), resulting in net
proceeds to the Company, after deducting estimated transaction costs, of
approximately $1.9 million. Under the terms of the Stock Purchase Agreements,
the Company has agreed to register the shares, issued pursuant to the Stock
Purchase Agreements under the Securities Act of 1933, no later than May 29,
1998. In connection with the Private Placement the Company issued warrants to
purchase 582,548 shares of the Company's common stock. The warrants are
exercisable at $1.25 per share and expire on February 28, 2003. Also, in
consideration of services rendered in connection with the Private Placement, the
Company issued to Rochon Capital Group, Ltd. Warrants to purchase 354,717 shares
of the Company's common stock at an exercise price of $2.12 (the "Rochon
Warrants"). The Rochon warrants expire on February 27, 2003. Transaction costs
associated with both the Agreements and the Private Placement are estimated to
be approximately $0.6 million. See Note 13, of Notes to The Consolidated
Financial Statements.
The Company had, on a pro-forma basis, including the effect of the
Agreements and the Private Placement, deficit working capital of $4.3 million
and net shareholders equity of $4.0 million at December 31, 1997.
In addition, at December 31, 1997 the Company did not meet the Nasdaq
minimum tangible net worth requirements for continued listing on the Nasdaq
National Market. On January 13, 1998, the Company was notified that effective
January 15, 1998, the Company's shares were to be listed on The Nasdaq SmallCap
Market (the "SmallCap Market") and that continued listing on the Small Cap
Market was contingent upon meeting listing standards adopted by the NASD,
effective February 27, 1998. At February 27, 1998, including, on a pro-forma
basis, the effect of the Agreements and the Private Placement, the Company had
met all SmallCap Market listing requirements as required by the NASD. Continued
listing on the SmallCap Market is predicated on the Company continuing to meet
the listing requirements adopted by the NASD.
31
<PAGE>
RESULTS OF OPERATIONS
The following table sets forth consolidated statements of operations data as
a percentage of net revenues for the periods indicated:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------
<S> <C> <C> <C>
1997 1996 1995
----------- ----------- -----------
Net revenues:
Product.......................................................... 70% 72% 75%
Service.......................................................... 30 28 25
--- --- ---
Net revenues................................................... 100 100 100
Cost of revenues:
Product.......................................................... 8 8 14
Service.......................................................... 13 15 16
--- --- ---
Cost of revenues............................................... 21 23 30
--- --- ---
Gross profit................................................. 79 77 70
--- --- ---
Operating expenses:
Sales and marketing.............................................. 45 46 65
Research and development......................................... 17 17 22
General and administrative....................................... 12 10 17
Acquisition expense.............................................. 1 1 --
Litigation expense............................................... -- (1) 23
Restructuring expense............................................ 2 -- 8
--- --- ---
Total operating expenses....................................... 77 73 135
--- --- ---
Operating income (loss)...................................... 2 4 (65)
Other income (expense), net........................................ (3) -- --
Provision for income taxes......................................... -- 1 2
--- --- ---
Net income (loss).................................................. (1)% 3% (67)%
--- --- ---
--- --- ---
Gross Margins:
Gross margin on product revenues................................. 88% 89% 82%
Gross margin on service revenues................................. 57% 46% 34%
</TABLE>
NET PRODUCT REVENUES. Net product revenues for 1997 decreased 10% to $40.7
million from $45.5 million in 1996 primarily due to decreased sales of
SQLWINDOWS. Customers continued to migrate from the 16-bit to the 32-bit
environment offered by the CENTURA TEAM DEVELOPER product, which partially
offset the decline in SQLWINDOWS sales. Sales of the Company's SQLBASE products
increased to $24.5 million or 60% of net product revenues in 1997 from $23.8
million or 52% of net product revenues in 1996. The CENTURA TEAM DEVELOPER
product line, released in May 1996, accounted for $10.7 million or 26% of net
product revenues for 1997 compared with $8.5 million or 19% of net product
revenues in 1996. Net product revenues for 1996 decreased 8% from $49.4 million
in 1995 primarily due to decreased sales of SQLWINDOWS. Sales of SQLBASE
products in 1996 decreased slightly from $24.8 million or 50% of net product
revenue in 1995. Sales of other tools and connectivity software accounted for
$5.5 million or 14%, $13.1 million or 29% and $4.0 million or 8% of net product
revenues for 1997, 1996 and 1995, respectively. International revenue accounted
for 63%, 67% and 66% of total net product revenues for 1997, 1996 and 1995,
respectively.
NET SERVICE REVENUES. Net service revenues decreased 3% to $17.2 million in
1997 from $17.8 million in 1996. The Company believes the decrease corresponds
to the overall decrease in net product revenues experienced in 1997, partially
offset by renewals of customer support and service agreements from prior
32
<PAGE>
years. Net service revenues increased in 1996 from $16.3 million in 1995 due
primarily 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. 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 46%, 41% and 46% of total net service revenues for 1997, 1996 and
1995, respectively.
In October 1997, the American Institute of Certified Public Accountants
issued Statement of Position No. 97-2 ("SOP 97-2"), "Software Revenue
Recognition", which the Company currently intends to adopt for transactions
entered into in the fiscal year beginning January 1, 1998. SOP 97-2 provides
guidance on recognizing revenue for software transactions and supersedes SOP
91-1, "Software Revenue Recognition". The Company believes that the adoption of
SOP 97-2 will not have a significant impact on its current licensing or revenue
recognition practices.
COST OF PRODUCT REVENUES. Cost of product as a percentage of product
revenues was 12%, 11% and 18% for 1997, 1996 and 1995, respectively. In December
1995, the Company 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 revenues 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 1997 and 1996 from 1995 levels. 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 embedded applications or large scale deployment sales, which
generally involve software reproduction licenses.
In accordance with Statement of Financial Accounting Standards No. 86,
"Accounting for the Costs of Computer Software to be Sold, Leased or Otherwise
Marketed", the Company capitalizes internal development costs on a project when
the technological feasibility of such project has been determined. The Company
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 amortization
software purchased from third parties, increased to $2.7 million in 1997 from
$1.6 million in 1996. Amortization of capitalized software costs, including one
time charge to write-off capitalized software, were $2.2 million in 1995. See
Notes 2 and 3 of Notes to Consolidated Financial Statements.
COST OF SERVICE REVENUES. Cost of service revenues, as a percentage of
service revenues, decreased to 43% in 1997 from 54% in 1996 and 66% in 1995.
Cost of service consists primarily of personnel costs related to maintenance,
training and technical support. In December 1995 and August 1997, the Company
completed operational restructurings which encompassed outsourcing certain
support functions. The outsourcing activities enabled a lower infrastructural
cost of service while maintaining adequate levels of support. It is likely that
the Company will increase the levels of technical service in 1998 and as such,
the cost of service as a percentage of service revenues may also increase, to
the extent that service revenues do not grow at the same rate.
SALES AND MARKETING EXPENSES. Sales and marketing expenses, consisting
principally of salaries, sales commissions and costs of advertising and
marketing campaigns, decreased 10% to $26.2 million in 1997 from $29.1 million
in 1996. In 1996, sales and marketing expenses decreased 32% from $42.9 million
in 1995. Sales and marketing expenses represented 45%, 46% and 65% of net
revenues in 1997, 1996 and 1995, respectively. The decrease in sales and
marketing expenses in 1997 was due to reductions in staffing, including the
elimination of portions of the field sales organization which were focussed on
the Foresite product which the Company discontinued in the fourth quarter of
1997. The decrease in sales and marketing expenses in 1996 as compared with 1995
related to the elimination of the telebusiness product
33
<PAGE>
sales organization and the reduction of marketing staff and programs with the
objective of targeting marketing at enterprise client/server solution providers.
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,
-------------------------------
1997 1996 1995
--------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C>
Gross research and development expenses...................... $ 10,742 $ 12,897 $ 16,662
Capitalized internal software development costs.............. (1,018) (1,865) (2,242)
--------- --------- ---------
Net research and development expenses........................ $ 9,724 $ 11,032 $ 14,420
--------- --------- ---------
--------- --------- ---------
As a percentage of net revenues:
Gross research and development expenses.................... 19% 20% 25%
Net research and development expenses...................... 17% 17% 22%
</TABLE>
Research and development expenses decreased 12% to $9.7 million in 1997 from
$11.0 million in 1996. The decrease reflects a reduction in staffing and
associated continuing engineering costs required to develop new products in
1997. The Company anticipates that development costs will increase in 1998 as
the Company expands its efforts to leverage core technologies into next
generation products. Research and development expenses in 1995 reflected a $3.4
million write-off of previously capitalized software development costs in
conjunction with the Company's restructuring efforts in that year. After
accounting for this one-time charge, research and development expenses were
essentially flat in 1996 as compared with 1995. The Company believes that the
development of new products and the enhancement of existing products, are
essential to its continued success, and the Company intends to continue to
devote substantial resources to new product development.
GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses
increased 5% to $7.0 million in 1997 from $6.7 million in 1996, due principally
to increases in costs to retain key personnel, offset by staffing reductions in
the second half of 1997. General and administrative expenses were $11.0 million
in 1995 which included an approximate $1.3 million one time charge for
accounting and professional fees for re-audits of the 1993 and 1994 fiscal year
financial statements and the audit of the 1995 fiscal year financial statements.
These expenses represented 12%, 10% and 17% of net revenues in 1997, 1996 and
1995, respectively. In 1995 and 1997, the Company completed operational
restructuring which included staff reductions and the abandonment of certain MIS
projects which led to reduced general and administrative expenses in 1996 as
compared with 1995. See: --Year 2000 Issue.
LITIGATION SETTLEMENT--CLASS ACTION LAWSUIT. (See Note 7 of Notes to
Consolidated Financial Statements). The Company reached a binding settlement
agreement with plaintiffs' counsel in a lawsuit filed against the Company and
certain of its officers and directors by a holder of the Company's common stock
and gained court approval of the settlement agreement on September 30, 1996. As
part of the settlement, the Company agreed to provide up to a maximum of
2,500,000 shares of its common stock to a fund to be distributed among the
members of the plaintiff class. As of December 31, 1997, 2,500,000 shares have
been issued and distributed under the settlement agreement and no additional
shares are required to be issued. The 1995 Consolidated Financial Statements
include $15.3 million in litigation expense arising from the settlement
agreement and associated legal expenses.
ACQUISITION EXPENSES. On January 6, 1997, in an effort to expand its
product offerings in areas complimentary with the Company's core products,
technology and Internet applications, the Company entered into a definitive
agreement to acquire Infospinner, Inc. (Infospinner) of Richardson, Texas (the
"Merger Agreement"). The Company did not obtain the majority vote of its
shareholders required for the
34
<PAGE>
approval of the proposed merger, and as such, Infospinner elected to exercise
its right, pursuant to the Merger Agreement, to terminate the transaction. In
connection with the Merger Agreement, the Company entered into a non-exclusive
distribution agreement with Infospinner which was subsequent terminated. See
"Restructuring expenses."
RESTRUCTURING EXPENSES. Beginning in the second half of 1997, the
distribution agreement with Infospinner terminated and the Company restructured
its operations to leverage its core technological competencies into next
generation products, which include embeddable databases and development tools
that continue to embrace object oriented development and both thin- and
fat-client environments. In 1997 the Company incurred charges related to its
restructuring efforts in the amount of approximately $1.5 million, which
included the write-off of prepaid distribution royalties in connection with the
termination of the Infospinner distribution agreement and severance costs,
offset by the reversal of approximately $0.5 million in existing restructuring
reserves, originally recorded in 1995. The results of operations for 1996
include the reversal of $0.2 million of restructuring reserves due to a change
in estimated employee reduction costs. In 1995 the Company incurred
restructuring costs of $5.0 million related primarily to severance, write-offs
of purchased technology and prepaid license fees, facilities charges associated
with early termination of leases and cancellations of distributor agreements.
There can be no assurance that the restructuring efforts the Company has engaged
in to date will be successful or that the Company will be able to achieve
consistent levels of profitability on a quarterly or annual basis. In addition,
there can be no assurance that the Company's management will not deem it
appropriate to undertake other major restructuring efforts in the future or to
what degree any of these efforts will result in improved operational
performance, if at all. See "Item I Business--"Company Strategies" and "--Risk
Factors--Change in Strategic Direction: Restructuring" and "--New Product Risks;
Rapid Technological Change."
In addition to the restructuring charges detailed above, the Company took
certain one-time charges that were reflected in its 1995 operating results.
These charges included $1.3 million in accounting and related professional fees
for audits of the 1995, 1994 and 1993 financial statements, charged to general
and administrative expense; a $3.4 million write-off of capitalized software
development expense, 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. The Company'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. The Company recorded a foreign currency loss of approximately
$1.0 million in 1997, principally due to the decline in the value of certain
European currencies in the first quarter of 1997. The Company recorded a foreign
currency gain of $0.2 million in 1996 and a loss of $0.4 million in 1995. The
Company expanded its hedging program in the second half of 1997 in an effort to
hedge up to a targeted 90% of its exposure to foreign currency fluctuation. The
costs of currency hedging are reflected in the reported gains and losses of
foreign currency transactions. The Company anticipates that it will continue the
hedging program in 1998. Nonetheless, a decrease in the value of foreign
currencies relative to the value of the U.S. dollar could result in losses from
foreign currency transactions. The Company's net interest expense was $0.8
million in 1997 and $0.2 million in 1996 and the Company had net interest income
of $0.4 million in 1995. The decrease in interest income and the increase in
interest expense over these periods is due principally to the decrease in cash
available for investment.
Sales of the Company's products are denominated both in local currencies of
the respective geographic region and in U.S. dollars, depending upon the
economic stability of that region and locally accepted business practices.
Accordingly, any increase in the value of the U.S. dollar relative to local
currencies in these markets may negatively impact revenues, results of
operations and financial condition. An increase in the relative value of the
U.S. dollar would serve to increase the relative foreign currency cost to the
customer of a U.S. dollar denominated purchase, which may negatively affect the
Company's
35
<PAGE>
sales in those markets. The U.S. dollar value of a sale denominated in a
region's local currency decreases in proportion to relative increases in the
value of the U.S. dollar.
PROVISION FOR INCOME TAXES. The provision for income taxes was $0.1 million
in 1997, $0.5 million in 1996 and $1.1 million in 1995. The provision for income
taxes related primarily to foreign withholding taxes. As of December 31, 1997,
the Company had net operating loss carryforwards of approximately $70.2 million
available to offset future federal taxable income and $30.8 million available to
offset future state taxes, which expire in 2012. The availability and timing of
these loss 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, 1997, 1996 and 1995, the Company fully reserved its
deferred tax assets due to the existence of uncertainty of the Company's ability
to realize the deferred tax assets. The Company does not anticipate that recent
developments, resulting in the issuance of approximately 13.7 million shares of
common stock, will impair its ability to utilize net operating loss
carryforwards available at December 31, 1997. See Note 8 and Note 13 of Notes to
Consolidated Financial Statements and "--Recent Developments."
YEAR 2000 ISSUE. The Company has commenced, for all of its information
systems, a year 2000 date conversion project to address all necessary code
changes, testing and implementation of mission critical applications. The "Year
2000 Issue" arises because most computer systems and programs were designed to
handle only a two-digit year, as opposed to a four digit year. When the year
2000 begins these computers may interpret "00" as the year 1900 and could either
stop processing date-related computations or could process them incorrectly. The
Year 2000 Issue creates risk for the Company from unforeseen problems in its
internal computer systems and from third parties with which the Company
interacts. Such failures of the Company's and/or third parties' computer systems
could have a material impact on the Company's ability to conduct its business,
and to process and account for the transfer of funds electronically. Management
has not completed its assessment of all of the potential Year 2000 compliance
expenses and the related potential effect on the Company's earnings.
INFLATION. The Company believes that inflation has not had a material
impact on the Company's operating results and does not expect inflation to have
a material impact on the Company's operating results in 1998.
LIQUIDITY AND CAPITAL RESOURCES:
At December 31, 1997, the Company had a deficit working capital position of
approximately $18.2 million and a net shareholders deficit of approximately $10
million, due principally to deferred product and support revenue of $14.6
million, and a subordinated note, including accrued interest, in the amount of
approximately $12.1 million.
In February 1998, the Company entered into a series of transactions which
resulted in the reduction of its working capital deficit to $4.3 million
(deficit) and its net shareholders deficit to $4.0 million net shareholders
equity, on a pro forma basis. See "--Recent Developments."
The Company reached a binding settlement agreement with plaintiffs' counsel
in a lawsuit filed against the Company and certain of its officers and directors
by a holder of the Company's common stock and gained court approval of the
settlement agreement on September 30, 1996. As part of the settlement, the
Company agreed to provide up to a maximum of 2,500,000 shares of its common
stock to a fund to be distributed among the members of the plaintiff class. As
of December 31, 1997, 2,500,000 shares have been issued and distributed under
the settlement agreement and no additional shares are required to be issued. See
Note 6 of Notes to Consolidated Financial Statements.
The Company entered into an unsecured floating rate convertible subordinated
note for $10.0 million (the "Note") and a related agreement with Computer
Associates Inc. ("CA") (the "CA Agreement") in March 1995. The Note would mature
on March 31, 1998 and could be convertible into common stock at
36
<PAGE>
the Company's option on May 1, 1998 for a number of shares based on the market
price of the Company's common stock at the time of conversion if certain
conditions had been met. Interest on the Note is calculated based on the
one-month LIBOR plus 1.25% and was payable quarterly. At the Company's option
interest payments could be deferred until the principal was due. Pursuant to the
CA Agreement, the ability of the Company to convert the Note to common stock
required 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 (the "Minimum Market Capitalization Requirement"). If
the Company did not meet the Minimum Market Capitalization Requirement, the
Company would lose the option to convert the Note into common stock, and all
outstanding principal and interest would be due and payable on March 31, 1998.
At December 31, 1997 the Company had approximately $6.0 million in unsecured
foreign currency contracts, denominated in various European currencies, as part
of a program to hedge the financial exposure arising from foreign denominated
monetary assets and liabilities.
The deferred product and support revenue of $14.6 million at December 31,
1997 reflects a delay in recognition of revenue in accordance with contractual
agreements and requires minimal resources of the Company.
Net cash used by operating activities was $3.3 million in 1997, $7.7 million
in 1996 and $5.1 million in 1995. The use of cash in 1997 was due principally to
decreases in deferred revenue and accounts payable and accrued liabilities,
offset by depreciation and amortization and decreases in accounts receivable. In
1996, 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 accrued litigation,
depreciation and amortization, adjustments for capitalized software, deferred
revenue, and provision for sales returns and allowances were offset by the net
loss and the increase to accounts receivable. Inventories, which were located at
the Company's third party turnkey vendor, decreased by $1.1 million in 1995.
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 used in investing activities was $1.6 million in 1997, principally due
to the purchase of equipment and capitalized software costs, partially offset by
maturities of investments. Cash provided by investing activities was $4.6
million in 1996, principally due to maturities of investments offset by
acquisition of property and equipment, and capitalization of software
development costs. Cash used in investing activities of $2.7 million in 1995 was
utilized for additions in the amount 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.
Net cash provided by financing activities in 1997 and 1996 totaled $2.2
million and $0.2 million, respectively, primarily as a result of proceeds from
short-term borrowings and 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 $10.0 million subordinated convertible debt
financing by CA.
The Company believes that expected cash flows from operations and existing
cash balances, will be sufficient to meet the Company's currently anticipated
working capital and capital expenditure requirements for the next 12 months. The
Company may, however, choose to raise cash for operational or other needs
sometime in the future. If the Company 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 Company's
shareholders.
The Company's capital requirements also may be affected by acquisitions of
businesses, products and technologies that are complementary to the Company's
business, which the Company considers from time to time. The Company regularly
evaluates such opportunities. Any such transaction, if consummated, may further
reduce the Company's working capital or require the issuance of equity.
37
<PAGE>
In January 1998, the Company entered into a $5.0 million asset based loan
facility with Coast Business Credit. The loan provides for borrowings of up to
$5.0 million, secured by the Company's accounts receivable, combined with a $0.5
million capital equipment facility. The facility bears interest at a rate of
2.25% above the Bank of America Reference Rate, and provides for the ability to
reduce interest costs based on the achievement of certain financial covenants.
The facility matures in January 2000 and provides for the ability to extend the
agreement for one year at the option of the Company. The facility replaces the
Pacific Business Funding Corporation accounts receivable factoring agreement
entered into by the Company in June 1997.
FACTORS THAT MAY AFFECT FUTURE RESULTS
The Company has experienced in the past and expects in the future to
continue to experience significant fluctuations in quarterly operating results.
The Company has at times recognized a substantial portion of its net revenues in
the last month or last few weeks of a quarter. The Company 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 the Company's
products, introduction, localization or enhancement of products by the Company
and its competitors, market acceptance of new products, reviews in the industry
press concerning the products of the Company or its competitors, changes or
anticipated changes in pricing by the Company or its competitors, mix of
distribution channels through which products are sold, mix of products sold,
returns from the Company's distributors and general economic conditions. As a
result, the Company 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 the Company'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. The Company
may be unable to adjust spending in a timely manner to compensate for any
unexpected revenue shortfall. Accordingly, any significant shortfall in sales of
the Company's products in relation to the Company's expectations could have an
immediate adverse impact on the Company's business, operating results and
financial condition. In addition, the Company currently intends to increase its
operating expenses to fund greater levels of sales and marketing operations and
expand distribution channels. To the extent that such expenses proceed or are
not subsequently followed by increased net revenues, the Company's business,
operating results and financial condition could be materially and adversely
affected.
In the future, the Company 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 the Company
will be able to effectively complete or integrate acquisitions, and failure to
do so could have a material adverse effect on the Company's operating results.
As of the date hereof, the Company has no understanding or agreement with any
other entity regarding any potential acquisition or combination, the
consummation of which is probable.
In addition, quarterly operating results of the Company will depend on a
number of other factors that are difficult to forecast, including factors listed
in "Item 1. Business, --Risk Factors--Recent Company Losses; Fluctuations in
Quarterly Results".
38
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders
of Centura Software Corporation:
In our opinion, the consolidated financial statements listed in the index
appearing under Item 14(a)(1) and (2) on page 61 present fairly, in all material
respects, the financial position of Centura Software Corporation at December 31,
1997 and 1996, and the results of their operations and their cash flows for each
of the three years in the period ended December 31, 1997, 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.
/s/ Price Waterhouse LLP
San Jose, California
February 10 , 1998, except as to Note 13
which is dated February 27, 1998
39
<PAGE>
CENTURA SOFTWARE CORPORATION
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
PRO-FORMA
AT DECEMBER DECEMBER 31,
31, --------------------
1997 1997 1996
------------- --------- ---------
(UNAUDITED)
(NOTE 13)
<S> <C> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents................................ $ 5,844 $ 3,974 $ 6,669
Short-term investments................................... -- -- 2,065
Accounts receivable, less allowances of $1,621 and
$2,826................................................. 11,744 11,744 13,574
Inventories.............................................. 259 259 216
Other current assets..................................... 3,089 3,089 3,300
------------- --------- ---------
Total current assets................................... 20,936 19,066 25,824
Property and equipment, at cost, net of accumulated
depreciation............................................. 3,511 3,511 3,622
Capitalized software, at cost, net of accumulated
amortization............................................. 2,573 2,573 4,226
Long-term investments...................................... 1,263 1,263 1,221
Other assets............................................... 1,787 1,787 1,812
------------- --------- ---------
Total assets........................................... $ 30,070 $ 28,200 $ 36,705
------------- --------- ---------
------------- --------- ---------
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
Current Liabilities:
Current portion of long-term obligations................. $ -- $ 10,000 $ 336
Accounts payable......................................... 4,244 4,244 5,683
Accrued compensation and related expenses................ 1,521 1,521 2,484
Short-term borrowings.................................... 1,581 1,581 --
Other accrued liabilities................................ 3,013 5,125 4,313
Accrued litigation expenses.............................. 209 209 6,733
Deferred revenue......................................... 14,618 14,618 21,891
------------- --------- ---------
Total current liabilities.............................. 25,186 37,298 41,440
Long-term debt, less current portion....................... -- -- 10,032
Other long-term liabilities................................ 856 856 2,156
------------- --------- ---------
Total liabilities...................................... 26,042 38,154 53,628
Commitments and contingencies (Note 7)
Shareholders' equity (deficit):
Preferred stock, no par value; 2,000 shares authorized;
none issued............................................ -- -- --
Common stock, par value $.01 per share; 60,000 shares
authorized; 15,784 shares and 13,728 shares issued and
outstanding (29,526 shares, pro forma)................. 84,618 70,636 63,047
Cumulative translation adjustment........................ (484 ) (484) (513)
Accumulated deficit...................................... (80,106 ) (80,106) (79,457)
------------- --------- ---------
Total shareholders' equity (deficit)................... 4,028 (9,954) (16,923)
------------- --------- ---------
Total liabilities and shareholders' equity (deficit)... $ 30,070 $ 28,200 $ 36,705
------------- --------- ---------
------------- --------- ---------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
40
<PAGE>
CENTURA SOFTWARE CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------
1997 1996 1995
--------- --------- ----------
<S> <C> <C> <C>
Net revenues:
Product.................................................................... $ 40,714 $ 45,452 $ 49,408
Service.................................................................... 17,232 17,781 16,306
--------- --------- ----------
Net revenues............................................................. 57,946 63,233 65,714
Cost of revenues:
Product.................................................................... 4,779 5,060 8,878
Service.................................................................... 7,439 9,518 10,762
--------- --------- ----------
Cost of revenues......................................................... 12,218 14,578 19,640
--------- --------- ----------
Gross profit........................................................... 45,728 48,655 46,074
Operating expenses:
Sales and marketing........................................................ 26,224 29,106 42,931
Research and development................................................... 9,724 11,032 14,420
General and administrative................................................. 6,990 6,667 11,043
Acquisition expense........................................................ 530 467 --
Litigation expense......................................................... -- (878) 15,323
Restructuring expense...................................................... 1,030 (223) 5,350
--------- --------- ----------
Total operating expenses................................................. 44,498 46,171 89,067
--------- --------- ----------
Operating income (loss)................................................ 1,230 2,484 (42,993)
Other income (expense):
Interest income............................................................ 234 637 1,127
Interest expense........................................................... (1,039) (831) (701)
Foreign currency gain (loss)............................................... (1,012) 215 (439)
--------- --------- ----------
Income (loss) before income taxes............................................ (587) 2,505 (43,006)
Provision for income taxes................................................... 62 478 1,073
--------- --------- ----------
Net income (loss)............................................................ $ (649) $ 2,027 $ (44,079)
--------- --------- ----------
--------- --------- ----------
Basic net income (loss) per share............................................ $ (.04) $ 0.15 $ (3.62)
--------- --------- ----------
--------- --------- ----------
Basic weighted average common shares......................................... 15,439 13,231 12,175
--------- --------- ----------
--------- --------- ----------
Diluted net income (loss) per share.......................................... $ (.04) $ 0.15 $ (3.62)
--------- --------- ----------
--------- --------- ----------
Diluted weighted average common shares....................................... 15,439 13,380 12,175
--------- --------- ----------
--------- --------- ----------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
41
<PAGE>
CENTURA SOFTWARE CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------
1997 1996 1995
--------- --------- ----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss).............................................................. $ (649) $ 2,027 $ (44,079)
Adjustments to reconcile net income (loss) to net cash used in operating
activities:
Depreciation and amortization................................................ 5,390 5,311 6,252
Adjustments to capitalized software development costs........................ -- -- 3,360
Issuance of stock warrants................................................... 103 165 --
Provision for doubtful accounts, sales returns and allowances................ 187 586 7,138
Non-cash restructuring charges............................................... 166 (223) 2,205
Changes in assets and liabilities:
Accounts receivable........................................................ 1,643 (1,986) (4,978)
Inventories................................................................ (43) 2 1,096
Other current assets....................................................... (429) (301) 169
Other assets............................................................... (12) (21) (155)
Accounts payable and accrued liabilities................................... (2,416) (4,189) 2,099
Deferred revenue........................................................... (7,273) (6,909) 6,921
Accrued litigation expense................................................. 9 (2,877) 14,328
Other long-term liabilities................................................ -- 742 546
--------- --------- ----------
Net cash used in operating activities.................................... (3,324) (7,673) (5,098)
Cash flows from investing activities:
Maturities of investments...................................................... 2,065 8,748 19,812
Purchases of investments....................................................... -- (123) (14,419)
Proceeds from sale of property and equipment................................... -- 341 --
Acquisitions of property and equipment......................................... (2,253) (1,262) (3,115)
Capitalization of software costs............................................... (1,018) (2,890) (4,013)
Capitalization of other intangibles............................................ (360) (202) (932)
--------- --------- ----------
Net cash provided by (used in) investing activities...................... (1,566) 4,612 (2,667)
Cash flows from financing activities:
Repayment of note payable...................................................... (368) (327) (305)
Proceeds from notes payable.................................................... -- -- 10,000
Proceeds from short-term borrowings, net....................................... 1,581 -- --
Repayment of capital lease obligations......................................... -- (32) (448)
Proceeds from issuance of common stock, net.................................... 953 587 1,300
--------- --------- ----------
Net cash provided by financing activities................................ 2,166 228 10,547
Effect of exchange rate changes on cash and cash equivalents..................... 29 (363) 52
--------- --------- ----------
Net increase (decrease) in cash and cash equivalents............................. (2,695) (3,196) 2,834
Cash and cash equivalents at beginning of period................................. 6,669 9,865 7,031
--------- --------- ----------
Cash and cash equivalents at end of period....................................... $ 3,974 $ 6,669 $ 9,865
--------- --------- ----------
--------- --------- ----------
Supplemental disclosure of cash flow information:
Cash paid for income taxes..................................................... $ 60 $ 154 $ 1,183
--------- --------- ----------
--------- --------- ----------
Cash paid for interest......................................................... $ 204 $ 62 $ 142
--------- --------- ----------
--------- --------- ----------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
42
<PAGE>
CENTURA SOFTWARE CORPORATION
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIT)
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
COMMON STOCK CUMULATIVE
-------------------- TRANSLATION (ACCUMULATED
SHARES AMOUNT ADJUSTMENT DEFICIT) TOTAL
--------- --------- ------------- ------------ ----------
<S> <C> <C> <C> <C> <C>
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)
Issuance of common stock under stock option
plans............................................ 472 674 -- -- 674
Issuance of common stock under Employee Stock
Purchase Plan.................................... 132 279 -- -- 279
Issuance of common stock in relation to settlement
of class action securities litigation............ 1,452 6,533 -- -- 6,533
Issuance of stock warrants for 100,000 shares in
connection with short-term borrowings............ -- 103 -- -- 103
Cumulative translation adjustment.................. -- -- 29 -- 29
Net loss........................................... -- -- -- (649) (649)
--------- --------- ----- ------------ ----------
Balances, December 31, 1997.......................... 15,784 $ 70,636 $ (484) $ (80,106) $ (9,954)
--------- --------- ----- ------------ ----------
--------- --------- ----- ------------ ----------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
43
<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.
On January 6, 1997, the Company entered into a definitive agreement (the
"Agreement") to acquire InfoSpinner, Inc. ("InfoSpinner") of Richardson, Texas.
The completion of the transaction was subject to the approval of both companies'
shareholders as well as other legal requirements. In addition, under the terms
of the Agreement, either party had the right to terminate the transaction if the
merger had not been consummated by April 30, 1997. As of April 30, 1997, the
Company did not obtain the majority vote of the shareholders required for the
approval of the proposed merger, and as a result, the board of directors of
InfoSpinner elected to exercise its right to terminate the transaction.
The Company has in the past experienced significant losses from operations,
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 and
technological efforts on the Company's core competencies. 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
believes that the recent measures combined with the introduction of new products
and the refocus on core competencies 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. Financial instruments that potentially subject the
Company to concentrations of credit risk consist principally of cash,
investments, and accounts receivable. At December 31, 1997, the Company's cash
and cash equivalents include Money Market accounts and Certificates of Deposit.
Cost approximates market value of the securities at December 31, 1997.
The Company generally does not require collateral for its receivables and
maintains reserves for potential credit losses.
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
44
<PAGE>
CENTURA SOFTWARE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
has the intent and ability to hold until maturity are classified as
held-to-maturity and are recorded at amortized cost.
The Company enters into forward contracts to reduce the risks associated
with foreign currency fluctuations on net assets denominated in foreign
currencies. At December 31, 1997, the Company had $5,980,000 in forward
contracts denominated in four European currencies; German Deutsche Marks,
British Pounds Sterling, Netherland Guilders, and Italian Lire. At December 31,
1996 the Company had $400,000 forward contracts denominated in Mexican Pesos.
The carrying value of all other financial instruments approximate their
respective fair values. See Note 13, "Subsequent Events".
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 $1,018,000 and $1,865,000 for the years ended
December 31, 1997 and 1996, respectively. The Company did not capitalize and
purchased software in 1997 and capitalized $1,025,000 of purchased software in
1996.
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 $2,671,000, $1,644,000 and $5,580,000, which included
the write-off of $3,360,000 in previously capitalized development costs, for the
years ended December 31, 1997, 1996 and 1995, 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 (deficit). Gains and
losses from foreign currency-denominated transactions effected by the Company's
U.S. operations are included in other income (expense).
REVENUE RECOGNITION. The Company receives licensing fees from certain
resellers (including original equipment manufacturers) under product licensing
arrangements. Such fees are recorded as revenue as
45
<PAGE>
CENTURA SOFTWARE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
product is sold and reported to the Company by the reseller when ongoing
significant post delivery obligations exist. When no such obligations exist,
such fees are recorded as revenue when the product is shipped and collectability
is probable. 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. 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.
In October 1997, the American Institute of Certified Public Accountants
issued Statement of Position No. 97-2 ("SOP 97-2"), "Software Revenue
Recognition", which the Company currently intends to adopt for transactions
entered into the fiscal year beginning January 1, 1998. SOP 97-2 provides
guidance on recognizing revenue on software transactions and supersedes SOP
91-1, "Software Revenue Recognition". The Company believes that the adoption of
SOP 97-2 will not have a significant impact on its current licensing or revenue
recognition practices.
NET INCOME (LOSS) PER SHARE. The Company has adopted Statement of Financial
Accounting Standards (SFAS) No. 128, "Earnings Per Share" ("SFAS 128"). SFAS 128
requires the presentation of basic earnings per share ("EPS") and diluted EPS,
for companies with potentially dilutive securities, such as options. Earnings
per share for all prior periods have been restated to conform with the
provisions of SFAS 128.
Basic earnings per share is computed using the weighted average number of
shares of common stock. Diluted earnings per share is computed using the
weighted average number of shares of common stock, common equivalent shares
outstanding during the period. Common equivalent shares consist of convertible
preferred stock (using the if converted method) and stock options and warrants
(using the treasury stock method). Common equivalent shares are excluded from
the computation if their effect is antidilutive.
For the year ended December 31, 1996, 149,000 options and warrants to
purchase common stock were included within the computation of diluted EPS.
Antidilutive options and warrants to purchase 4,055,000, 2,935,000, and
3,633,000 shares of common stock were outstanding at December 31, 1997, 1996 and
1995, respectively. Antidilutive convertible debt to convert to 3,774,000 and
1,832,000 shares of common stock were outstanding at December 31, 1996, and
1995, respectively. No such shares were outstanding at December 31, 1997 as the
Company lost the conversion option during 1997.
STOCK-BASED COMPENSATION. During 1995, the 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
46
<PAGE>
CENTURA SOFTWARE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
APB 25, while providing the pro forma footnote disclosure required by SFAS 123.
See Note 8 "Capital Stock," for the required pro-forma disclosure.
RECENT ACCOUNTING PRONOUNCEMENT. In June 1997, the Financial Accounting
Standards Board issued Statement of Financial Accounting Standards No. 130,
"Reporting Comprehensive Income" ("SFAS 130"). SFAS 130 establishes standards
for the reporting of comprehensive income and its components in a full set of
general-purpose financial statements for periods ending after December 15, 1997.
Reclassification of financial statements for earlier periods for comparative
purposes is required. The Company will adopt SFAS 130 in 1998 and does not
expect such adoption to have a material effect on the consolidated financial
statements.
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 131, "Disclosures About Segments of An
Enterprise and Related Information" ("SFAS 131"). SFAS 131 revises information
regarding the reporting of operating segments. It also establishes standards for
related disclosures about products and services, geographic areas and major
customers. The Company will adopt SFAS 131 beginning in 1998 and has not
evaluated the impact of such adoption on the notes to its consolidated financial
statements.
RECLASSIFICATIONS. In order to conform to the 1997 presentation, certain
reclassifications have been made to the 1996 and 1995 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,
----------------------
1997 1996
---------- ----------
(IN THOUSANDS)
<S> <C> <C>
Computer equipment.................................................... $ 16,418 $ 16,253
Furniture and fixtures................................................ 1,997 2,045
Leasehold improvements................................................ 2,075 491
---------- ----------
20,490 18,789
Less: accumulated depreciation and amortization....................... (16,979) (15,167)
---------- ----------
$ 3,511 $ 3,622
---------- ----------
---------- ----------
</TABLE>
Capitalized software, at cost, net of accumulated amortization consists of
the following:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1997 1996
--------- ---------
(IN THOUSANDS)
<S> <C> <C>
Internally developed software............................................ $ 7,142 $ 6,124
Purchased software....................................................... 3,852 3,852
--------- ---------
10,994 9,976
Less: accumulated amortization........................................... (8,421) (5,750)
--------- ---------
$ 2,573 $ 4,226
--------- ---------
--------- ---------
</TABLE>
47
<PAGE>
CENTURA SOFTWARE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 3. BALANCE SHEET DETAIL: (CONTINUED)
Deferred revenue consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1997 1996
--------- ---------
(IN THOUSANDS)
<S> <C> <C>
Deferred product revenue................................................ $ 7,152 $ 15,002
Deferred support revenue................................................ 7,466 6,889
--------- ---------
$ 14,618 $ 21,891
--------- ---------
--------- ---------
</TABLE>
NOTE 4. SHORT-TERM BORROWINGS
On June 26, 1997, the Company entered into a one year agreement to factor,
with recourse, certain accounts receivable. Under the terms of the agreement,
the Company may factor accounts receivable at an advance rate of eighty percent
of such eligible accounts receivable. Interest is calculated at the rate of 1.2%
per month based on the average daily balance outstanding. As of December 31,
1997 total eligible accounts receivable factored were $1,581,000. See Note 8,
"Capital Stock--Warrants" and Note 13, "Subsequent Events."
NOTE 5. 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, 1997, 1996 and 1995:
<TABLE>
<CAPTION>
SEVERANCE
AND FACILITY
BENEFITS CHARGES OTHER TOTAL
----------- ----------- --------- ---------
<S> <C> <C> <C> <C>
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
----------- ----------- --------- ---------
Less: payments applied......................................... (89) (89)
Reversal of reserve............................................ -- (474) -- (474)
----------- ----------- --------- ---------
Accrued liability at December 31, 1997......................... $ -- $ -- $ -- $ --
----------- ----------- --------- ---------
----------- ----------- --------- ---------
</TABLE>
In November 1997, the Company incurred restructuring charges of $1,504,000,
which included a write-off of $640,000 in prepaid royalties, $344,000 of
severance benefits for certain executives and employees and a $520,000 write-off
of other assets, partially offset by the reversal of $474,000 of reserves
established in prior periods due to changes in estimates. The decision to
write-off the existing prepaid royalty and other assets was associated with the
Company's decision to discontinue certain products. At December 31, 1997
$290,000 related to the restructuring charge was included in other current
liabilities. The Company expects to pay all remaining obligations related to
these charges in 1998.
48
<PAGE>
CENTURA SOFTWARE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 5. RESTRUCTURING CHARGES: (CONTINUED)
The 1996 results of operations include the reversal of $223,000 of
restructuring reserves due to changes in estimates.
NOTE 6. LONG-TERM DEBT:
Long-term debt consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------
1997 1996
---------- ---------
(IN THOUSANDS)
<S> <C> <C>
Subordinated note payable.............................................. $ 10,000 $ 10,000
Other note payable..................................................... -- 368
---------- ---------
10,000 10,368
Less: current portion.................................................. (10,000) (336)
---------- ---------
Long-term debt......................................................... $ -- $ 10,032
---------- ---------
---------- ---------
</TABLE>
The Company entered into an unsecured floating rate convertible subordinated
note and related agreement CA (the "CA Agreement") in March 1995 for
$10,000,000. The CA Agreement matures on March 31, 1998 and was convertible into
common stock at the Company's option on the maturity date for a number of shares
based on the market price of the Company's common stock at the time of
conversion. Interest on the note is calculated based on the one-month LIBOR plus
1.25% and is payable quarterly. At the Company's option interest payments may be
deferred until the principal is due. The conversion to common stock 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 (the "Minimum Market Capitalization Requirement"). The Company did not meet
the Minimum Market Capitalization Requirement and lost the option to convert the
note into common stock. Accrued interest totaled $2,112,000 and $1,300,000 and
is included in other accrued liabilities and other long-term liabilities at
December 31, 1997 and 1996, respectively. See Note 13. "Subsequent Events".
NOTE 7. COMMITMENTS AND CONTINGENCIES:
The Company has long-term noncancelable lease commitments for office space
and equipment. At December 31, 1997, future minimum rental payments under
noncancelable operating leases are as follows (in thousands):
<TABLE>
<S> <C>
1998............................................................... $ 3,852
1999............................................................... 3,433
2000............................................................... 2,641
2001............................................................... 2,069
2002............................................................... 1,472
Thereafter......................................................... 121
---------
$ 13,588
---------
---------
</TABLE>
Rent expense for the years ended December 31, 1997, 1996 and 1995, amounted
to $3,057,000, $3,235,000, and $3,524,000, respectively.
49
<PAGE>
CENTURA SOFTWARE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 7. COMMITMENTS AND CONTINGENCIES: (CONTINUED)
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 (the "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,
the Company 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, 1997, 2,500,000 shares have been issued
and distributed under the settlement agreement and no additional shares are
required to be issued. The 1995 Consolidated Financial Statements include
$15,300,000 in litigation expense arising from the settlement agreement and
associated legal expenses.
On September 17, 1997, Technology Venture (Software) Holdings Limited,
formerly known as Eagerquest Investments Limited ("Eagerquest") filed suit
against the Company in the United States District Court for the Central District
of California alleging that the Company acted improperly in terminating its
contract with Eagerquest for the distribution of the Company's products in the
territories of Hong Kong and China and that the Company's actions illegally
damaged Eagerquest. The Company believes that its actions were within its rights
under its contract with Eagerquest and that the allegations are without merit.
The Company intends to defend itself vigorously in this action and that the
outcome will not have a material adverse affect on the Company's financial
situation or business prospects.
NOTE 8. 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 86 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 one to three months after termination of employment with the
Company. In July 1996 the 86 ISOP was terminated and shares in the plan
available for grant at that time have been canceled.
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 95 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 1997, 1996, and 1995, holders of stock options were granted the
opportunity to exchange previously granted stock options for new stock options
exercisable at $1.50, $5.94 and $9.00 per share, respectively, the fair market
value of common stock on the dates of exchange. The remaining original
50
<PAGE>
CENTURA SOFTWARE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 8. CAPITAL STOCK (CONTINUED)
terms of the stock options were not changed. Options to purchase 2,844,000,
2,337,000, and 904,000 shares of common stock were exchanged in the 1997, 1996,
and 1995 repricing, respectively.
The following table summarizes the stock activity under the 86 ISOP and 95
ISOP:
<TABLE>
<CAPTION>
OPTION PRICE PER
OPTION SHARES SHARE
-------------------------- --------------------
AVAILABLE OUTSTANDING LOW HIGH
----------- ------------- --------- ---------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
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 --
Shares discontinued.................................................. (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
Shares discontinued.................................................. (545) --
Options granted...................................................... (3,682) 3,682 $ 1.500 $ 5.000
Options exercised.................................................... -- (472) $ .250 $ 1.625
Options canceled..................................................... 3,740 (3,740) $ 1.250 $ 10.750
----------- ------
Balances, December 31, 1997.......................................... 713 2,155
----------- ------
----------- ------
</TABLE>
DIRECTORS STOCK OPTION PLAN. 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 a prior Directors' stock option plan,
other than the initial 20,000 shares granted to the Director under such plan.
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 of the Company's common stock on the date of the grant.
Options granted under the 96 DSOP have a term of ten years. 200,000 options were
granted and 50,000 options were canceled in 1997. 250,000 options were granted
and 100,000 options were canceled in 1996 under the 96 DSOP. At December 31,
1997 300,000 options are issued and outstanding and 200,000 options are
available for future grants under the 96 DSOP.
51
<PAGE>
CENTURA SOFTWARE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 8. CAPITAL STOCK (CONTINUED)
OTHER STOCK OPTIONS. In November 1997, the Company granted 1,500,000
options to certain executive officers as an option grant external to the 86
ISOP, or the 95 ISOP. The options vest over a period of two years from the date
of grant and exercisable at $1.91 per share.
The following table summarizes information regarding all stock options
outstanding at December 31, 1997:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
------------------------------- ------------------------------
WEIGHTED- NUMBER
NUMBER AVERAGE EXERCISABLE
OUTSTANDING AT REMAINING WEIGHTED- AT DECEMBER WEIGHTED-
DECEMBER 31, CONTRACTUAL AVERAGE 31, AVERAGE
RANGE OF EXERCISE PRICES 1997 LIFE (YEARS) EXERCISE PRICE 1997 EXERCISE PRICE
- --------------------------------------- -------------- --------------- --------------- ------------- ---------------
<S> <C> <C> <C> <C> <C>
$0.5000 to $1.9063..................... 3,627,853 5.24 $ 1.69 819,062 $ 1.49
$2.3125 to $5.9375..................... 171,000 8.41 $ 2.76 46,375 $ 3.90
$6.1250 to $10.750..................... 155,667 8.00 $ 6.29 77,072 $ 6.44
-------------- ----- -------------
3,954,520 5.49 $ 1.92 942,509 $ 2.02
-------------- ----- -------------
-------------- ----- -------------
</TABLE>
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 132,000, 100,000 and 98,000 purchase
rights were issued in 1997, 1996 and 1995, respectively. At December 31, 1997
there were no ESPP shares available for employee purchases.
WARRANTS. In June 1997, the Company issued warrants to purchase 90,000 and
10,000 shares of common stock to Pacific Business Funding Corporation and its
affiliate Sand Hill Capital, LLC, at an exercise price of $2.09 per share. The
warrants were valued at $103,000 using a risk-free rate of 6.33% and a
volatility factor of 55%, and the related charge is included in general and
administrative expenses in 1997. The warrants expire on June 30, 2002.
Warrants to purchase 100,000 shares of common stock were issued by the
Company on November 22, 1996 in connection with a potential acquisition 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 in 1996. Exercise of the warrants was contingent upon completion of the
proposed acquisition. As the Company did not obtain the majority vote of its
shareholders required for approval of the proposed acquisition within the
designated time frame, the warrants have been cancelled.
52
<PAGE>
CENTURA SOFTWARE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 8. CAPITAL STOCK (CONTINUED)
SHARES RESERVED FOR FUTURE ISSUANCE. The following table summarizes shares
of common stock reserved for future issuance as of December 31, 1997 (in
thousands):
<TABLE>
<S> <C>
Incentive stock option plan...................................... 713,437
Directors' stock option plan..................................... 200,000
Employee stock purchase plan..................................... --
---------
913,437
---------
---------
</TABLE>
PRO FORMA STOCK COMPENSATION DISCLOSURE. The Company applies the provisions
of APB 25 and related interpretations in accounting for compensation expense
under the 95 ISOP, 96 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, 1997, 1996 and 1995
would have been as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------
1997 1996 1995
--------- --------- ----------
(IN THOUSANDS, EXCEPT, PER SHARE
DATA)
<S> <C> <C> <C>
Net income (loss):
As reported........................................... $ (649) $ 2,027 $ (44,079)
Pro-forma............................................. $ (5,512) $ (3,594) $ (46,548)
Basic and diluted net income (loss) per share:
As reported........................................... $ (0.04) $ .15 $ (3.62)
Pro-forma............................................. $ (.36) $ (.27) $ (3.82)
</TABLE>
The fair value of each stock option granted under the 86 and 95 ISOP and 96
DSOP was estimated using the Black-Scholes model with the following assumptions:
zero dividend yield; an expected life of 48 months; weighted average expected
volatility of 65%, 63.54% and 67.49% in 1997, 1996 and in 1995; and a weighted
average risk-free interest rate of 6.20%, 5.57% and 6.21% in 1997, 1996 and
1995. The weighted average fair value of stock options granted under the 95
ISOP, the 96 DSOP and non-plan options for the years ended December 31, 1997,
1996, and 1995 were $.91, $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,
1997, 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.
53
<PAGE>
CENTURA SOFTWARE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 8. CAPITAL STOCK (CONTINUED)
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 9. INCOME TAXES:
Operating income (loss) before income taxes are attributable to the
following jurisdictions:
<TABLE>
<CAPTION>
YEAR END DECEMBER 31,
--------------------------------
1997 1996 1995
--------- --------- ----------
(IN THOUSANDS)
<S> <C> <C> <C>
Domestic....................................................... $ 360 $ 2,903 $ (42,182)
Foreign........................................................ (947) (398) (1,897)
--------- --------- ----------
$ (587) $ 2,505 $ (44,079)
--------- --------- ----------
--------- --------- ----------
</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
foreign withholding taxes.
54
<PAGE>
CENTURA SOFTWARE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 9. 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>
DECEMBER 31,
----------------------
1997 1996
---------- ----------
(IN THOUSANDS)
<S> <C> <C>
Deferred tax assets:
Net operating losses................................................ $ 26,437 $ 21,414
Nondeductible reserves.............................................. 1,333 4,486
Credit carryforwards................................................ 4,521 3,756
Deferred revenue.................................................... 5,146 8,379
Depreciation........................................................ 482 534
---------- ----------
Gross deferred tax asset.......................................... 37,919 38,569
Less: valuation allowance........................................... (37,133) (37,585)
---------- ----------
Net deferred tax asset............................................ 786 984
---------- ----------
Deferred tax liabilities:
Software capitalization............................................. (786) (984)
---------- ----------
Total net deferred tax assets (liabilities)........................... $ -- $ --
---------- ----------
---------- ----------
</TABLE>
At December 31, 1997, the Company had net operating loss carryforwards of
approximately $70.2 million available to offset future federal taxable income
and $30.8 million available to offset future state taxes, which expire through
2012. 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, 1997 and 1996, 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.
55
<PAGE>
CENTURA SOFTWARE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 10. 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 REST OF
AMERICA EUROPE WORLD TOTAL
---------- --------- --------- ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Year ended December 31, 1997:
Total revenues................................ $ 24,473 $ 27,650 $ 5,823 $ 57,946
Operating income (loss)....................... (12,787) 11,742 2,275 1,230
Identifiable assets at year end............... 22,329 4,843 1,028 $ 28,200
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
</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 11. 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 12. RELATED PARTY TRANSACTIONS:
The Company recognized revenue of $750,000, $664,000 and $2,450,000 for the
years ended December 31, 1997, 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. The Company recognized revenue of $489,000, $1,783,000
and $2,007,000 for the years ended December 31, 1997, 1996, and 1995 from this
distributor.
NOTE 13. SUBSEQUENT EVENTS:
LOAN FACILITY. In January 1998, the Company entered into a $5,000,000 asset
based loan facility with Coast Business Credit, the "Facility". The loan
provides for borrowings of up to $5,000,000, secured by the
56
<PAGE>
CENTURA SOFTWARE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 13. SUBSEQUENT EVENTS: (CONTINUED)
Company's accounts receivable, combined with a $500,000 capital equipment
facility. The Facility bears interest at 2.25% above the Bank of America
Reference Rate, and provides for ability to reduce interest cost based on the
achievement of certain financial covenants. The Facility matures in January 2000
and provides for the ability to extend the agreement for one year at the option
of the Company. The facility replaces an accounts receivable factoring agreement
entered into by the Company in June 1997.
SALE AND CONVERSION OF NOTE PAYABLE. In February 1998, Computer Associates,
Inc. ("CA"), and Newport Acquisition Company, LLP ("NAC") entered into a Note
Purchase and Sale Agreement and the Company and NAC entered into a Note
Conversion Agreement (the "Agreements"). Under the terms of the Agreements, a
promissory note, plus accrued interest, in the amount of $12,251,000, payable to
CA (the "CA Note") was acquired by NAC, and immediately converted into
11,415,094 shares of the Company's common stock (the "Shares"). In February
1998, in connection with the Agreements, the Company entered into a Warrant
Purchase Agreement with CA wherein the Company sold and issued to CA, at an
issuance price of $.001 per share, a warrant to purchase 500,000 shares of the
Company's common stock. The warrant is exercisable at $1.906 per share and
expires on February 27, 2003.
PRIVATE PLACEMENT. Also in February 1998, pursuant to the terms of Stock
Purchase Agreements, the Company completed a private placement of 2,330,191
shares of the Company's common stock (the "Private Placement"), resulting in
gross proceeds to the Company of $2,470,000. The Company has agreed to register
the shares under the Securities Act of 1933, as amended. In connection with the
Private Placement the Company issued warrants to purchase 582,548 shares of the
Company's common stock. The warrants are exercisable at $1.25 per share and
expire on February 28, 2003. Also, in consideration of services rendered in
connection with the Private Placement, the Company issued to Rochon Capital
Group, Ltd. warrants to purchase 354,717 shares of the Company's common stock at
an exercise price of $2.12 (the "Rochon Warrants"). The Rochon Warrants expire
on February 27, 2003.
Transaction costs associated with both the Agreements and the Private
Placement were approximately $600,000.
57
<PAGE>
Schedule II
CENTURA SOFTWARE CORPORATION
VALUATION AND QUALIFYING ACCOUNTS
(IN THOUSANDS)
<TABLE>
<CAPTION>
BALANCE AT ADDITIONS BALANCE AT
BEGINNING OF CHARGED TO END OF
DESCRIPTION THE YEAR EXPENSES WRITE-OFFS THE YEAR
- --------------------------------------------------------------- ------------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
1997:
Allowance for doubtful accounts.............................. $ 1,140 $ 530 $ (405) $ 1,265
Reserve for sales returns and allowances..................... 1,686 (343) (987) 356
------ ----------- ----------- -----------
$ 2,826 $ 187 $ (1,392) $ 1,621
------ ----------- ----------- -----------
------ ----------- ----------- -----------
1996:
Allowance for doubtful accounts.............................. $ 1,529 $ 406 $ (795) $ 1,140
Reserve for sales returns and 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 and allowances..................... 1,884 5,430 (5,368) 1,946
------ ----------- ----------- -----------
$ 2,891 $ 7,138 $ (6,554) $ 3,475
------ ----------- ----------- -----------
------ ----------- ----------- -----------
</TABLE>
58
<PAGE>
ITEM 9. CHANGE IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
Not Applicable.
59
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information regarding the executive officers and directors of the Company
required by this item is contained in "Part I, Item 1. Business--Directors and
Executive Officers of Registrant".
Additional information required by this item is incorporated by reference
from the Company's Proxy Statement for the 1998 Annual Meeting of Shareholders
to be held June 17, 1998, a copy of which will be filed with the Securities and
Exchange Commission no later than 120 days from the end of the Company's last
fiscal year.
ITEM 11. EXECUTIVE COMPENSATION
Incorporated by reference from the Proxy Statement for the 1998 Annual
Meeting of Shareholders to be held June 17, 1998, a copy of which will be filed
with the Securities and Exchange Commission.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Incorporated by reference from the Proxy Statement for the 1998 Annual
Meeting of Shareholders to be held June 17, 1998, a copy of which will be filed
with the Securities and Exchange Commission.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Incorporated by reference from the Proxy Statement for the 1998 Annual
Meeting of Shareholders to be held June 17, 1998, a copy of which will be filed
with the Securities and Exchange Commission.
60
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) The following documents are filed as part of this Report:
(1) Financial Statements. The following financial statements of the Company
are contained in Item 8 of this Annual Report on Form 10-K:
1. Report of Price Waterhouse LLP, Independent Accountants.
2. Consolidated Balance Sheets at December 31, 1997 and 1996.
3. Consolidated Statements of Operations for each of the three years in
the period ended December 31, 1997.
4. Consolidated Statements of Shareholders' Equity (Deficit) at December
31, 1997, 1996 and 1995.
5. Consolidated Statements of Cash Flows for each of the three years in
the period ended December 31, 1997.
6. Notes to Consolidated Financial Statements.
(2) Financial Statement Schedules. The following financial statement
schedules of the Company for the year ended December 31, 1997, 1996 and
1995 is contained in Item 8 of this Annual Report on Form 10-K:
1. II--Valuation and Qualifying Accounts
2. Report of Price Waterhouse LLP, Independent Accountants. Refer to
Item 14(a)(1)1 above.
Schedules not listed above have been omitted because they are either
inapplicable or the required information has been given in
Management's Discussion and Analysis of Financial Condition and
Results of Operations or in the financial statements or the notes
thereto.
(3) Exhibits.--Refer to Item 14(c) below.
(b) Reports on Form 8-K.
The Company filed a report on Form 8-K dated December 9, 1997 announcing a
change in its executive officers and Board membership and information
relating to the Company's change in management.
61
<PAGE>
(c) Exhibits:
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ---------------------- ---------------------------------------------------------------------------------------------
<C> <S>
2.1 (1) Agreement and Plan of Reorganization dated January 6, 1997 by and among the Registrant, IS
Acquisition Corporation and InfoSpinner, Inc.
2.2 (1) Form of Certificate of Merger among the Registrant, IS Acquisition Corporation and
InfoSpinner, Inc.
3 (i)(2) Articles of Incorporation of Registrant, as amended on September 24, 1996.
3 (iii) Bylaws of Registrant, as amended effective February 27, 1998.
4.1 (13) Preferred Shares Rights Agreement, dated as of August 3, 1994, between the Registrant 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.
4.2 Amendment to Preferred Shares Rights Agreement effective February 27, 1998.
10.1 (3) Form of Directors' and Officers' Indemnification Agreement.
10.2 (4)(5) 1986 Incentive Stock Option Plan, as amended, and forms of agreements thereunder.
10.3 (3) 1991 United Kingdom Sub Plan and forms of agreement thereunder.
10.4 (2) 1992 Employee Stock Purchase Plan and forms of agreements thereunder, as amended on September
24, 1996.
10.5 (3)* 1992 Directors' Stock Option Plan and forms of agreements thereunder.
10.8 (3) Lease Agreement dated February 4, 1992 between Registrant and Bohannon Associates.
10.9 (6) 1996 Executive Officers' Compensation Plan.
10.12(3) Forms of License Agreements.
10.14(2) 1995 Stock Option Plan and forms of agreement thereunder, as amended on September 24, 1996.
10.16(7) Note Purchase Agreement dated March 31, 1996 between the Company and Computer Associates
International, Inc.
10.17(8)* Executive Employment Agreement dated April 10, 1996 between the Company and Sam M. Inman III.
10.18(9)* Loan Agreement Secured by Property and Securities dated August 31, 1996 between the Company
and Earl and Ann Stahl.
10.19(2)* 1996 Directors' Stock Option Plan and forms of agreement thereunder.
10.20(2) Stipulation of Settlement dated July 19, 1996, in regards to 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(14) Distributorship Agreement dated January 6, 1997, between the Registrant and InfoSpinner, Inc.
10.22* Intentionally omitted.
</TABLE>
62
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ---------------------- ---------------------------------------------------------------------------------------------
<C> <S>
10.23(15) Factoring Agreement dated June 26, 1997, between Centura Software Corporation and Pacific
Business Funding Corporation.
10.24(15) Warrant to Purchase Common Stock issued June 30, 1997 by Centura Software Corporation to Sand
Hill Capital.
10.25(15)* 1997 Executive Retention Program.
10.26(16) Lease Agreement, dated October 14, 1996, between Westport Investment and the Registrant.
10.27* Letter Agreement dated November 5, 1997 between the Registrant and Hickey & Hill
Incorporated, and form of Nonstatutory Stock Options issued to new Executives.
10.28* Settlement Agreements and Mutual Releases between the Registrant and Sam M. Inman, III and
between the Registrant and Earl Stahl.
10.29 Loan and Security Agreement dated January 19, 1998 between the Registrant and Coast Business
Credit, a division of Southern Pacific Bank.
10.30 Common Stock and Warrant Purchase Agreement dated February 27, 1998 between the Registrant
and certain Purchasers of the Registrant's Common Stock.
10.31 Note Conversion Agreement dated February 27, 1998 between the Registrant and Newport
Acquisition Company No. 2, LLC.
10.32 Warrant Purchase Agreement dated February 27, 1998 between the Registrant and Computer
Associates International, Inc.
10.33 Investor Rights Agreement dated February 27, 1998 between the Registrant and Newport
Acquisition Company No. 2, LLC.
10.34 Common Stock Purchase Warrants issued to Rochon Capital Group, Ltd. on February 27, 1998.
10.35* 1998 Employee Stock Option Plan and form of Nonstatutory Option Agreements thereunder.
11.1 (14) Statement regarding Computation of per share earnings.
16 (10)(11)(12) Letter regarding change in Certifying Accountant.
21 (1) Subsidiaries of Registrant.
23.1 Consent of Price Waterhouse LLP, Independent Accountants.
24.1 Power of Attorney. See Page 65.
27.1 Financial Data Schedules at December 31, 1997 and for the year ended December 31, 1997.
27.2 Financial Data Schedules for the three month periods ended March 31, June 30, and September
30, 1997, respectively, restated for the effect of the adoption of Statement of Financial
Accounting Standard No. 128, "Earnings Per Share."
27.3 Financial Data Schedules for the three month periods ended March 31, June 30, and September
30, 1996, respectively, and years ended December 31, 1995 and 1996, restated for the effect
of the adoption of Statement of Financial Accounting Standard No. 128, "Earnings Per Share."
</TABLE>
- ------------------------
* Management Compensatory Plan or Arrangement.
63
<PAGE>
(1) Incorporated by reference from the Company's Registration Statement on Form
S-4 (No. 333-20491) filed with the Commission on January 27, 1997.
(2) Incorporated by reference from the Company's Quarterly Report on Form 10-Q
for the quarter ended September 30, 1996.
(3) 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.
(4) Incorporated by reference from the Company's Registration Statement on Form
S-8 (No. 33-62194) filed with the Commission on May 5, 1993.
(5) Incorporated by reference from the Company's Registration Statement on Form
S-8 (No. 33-83850) filed with the Commission on September 9, 1994.
(6) Incorporated by reference from the Company's Annual Report on Form 10-K for
the year ended December 31, 1995.
(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 Current Report on Form 8-K
dated July 2, 1993.
(11) 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).
(12) Incorporated by reference from the Company's Current Report on Form 8-K
dated January 8, 1996.
(13) Incorporated by reference from the Company's Registration Statement on Form
8-A filed with the Commission on August 10, 1994.
(14) Incorporated by reference from Amendment No. 1 to the Company's
Registration Statement on Form S-4 filed with the Commission on March 10,
1997.
(15) Incorporated by reference from the Company's Quarterly Report on Form 10-Q
for the quarter ended June 30, 1997.
(16) Incorporated by reference from the Company's Quarterly Report on Form
10-Q/A for the quarter ended June 30, 1997.
64
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 and 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
CENTURA SOFTWARE CORPORATION
By: /s/ SCOTT R. BROOMFIELD Date: March 30, 1998
- ------------------------------
Scott R. Broomfield,
PRESIDENT, CHIEF EXECUTIVE
OFFICER AND CHAIRMAN OF THE
BOARD OF DIRECTORS (PRINCIPAL
EXECUTIVE OFFICER)
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Scott R. Broomfield or John W. Bowman, or either
of them, with the power to substitution, his attorney-in-fact and agents, to
sign any and all amendments to this Annual Report on Form 10-K, and to file the
same, with exhibits thereto and other documents in connection therewith, with
the Securities and Exchange Commission, hereby ratifying and confirming all that
each of said attorney-in-fact, or substitute or substitutes may do or cause to
be done by virtue thereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
By: /s/ SCOTT R. BROOMFIELD
-------------------------------------------
Scott R. Broomfield, PRESIDENT, CHIEF EXECUTIVE Date: March 30, 1998
OFFICER AND CHAIRMAN OF THE BOARD OF DIRECTORS
(PRINCIPAL EXECUTIVE OFFICER)
/s/ JOHN W. BOWMAN
-------------------------------------------
John W. Bowman, SENIOR VICE PRESIDENT, FINANCE Date: March 30, 1998
AND OPERATIONS AND CHIEF FINANCIAL OFFICER
(PRINCIPAL FINANCIAL OFFICER)
By: /s/ RICHARD LUCIEN
-------------------------------------------
Richard Lucien, VICE PRESIDENT, CORPORATE Date: March 30, 1998
CONTROLLER (PRINCIPAL ACCOUNTING OFFICER)
By: /s/ PETER MICCICHE
------------------------------------------- Date: March 30, 1998
Peter Micciche, DIRECTOR
By: /s/ WILLIAM D. NICHOLAS
------------------------------------------- Date: March 30, 1998
William D. Nicholas, DIRECTOR
By: /s/ EARL M. STAHL
------------------------------------------- Date: March 30, 1998
Earl M. Stahl, DIRECTOR
65
<PAGE>
<TABLE>
<S> <C>
By: /s/ SAMUEL M. INMAN, III
------------------------------------------- Date: March 30, 1998
Samuel M. Inman, III, DIRECTOR
By: /s/ PHILIP KOEN, JR.
------------------------------------------- Date: March 30, 1998
Philip Koen, Jr., DIRECTOR
By: /s/ JACK KING
------------------------------------------- Date: March 30, 1998
Jack King, DIRECTOR
</TABLE>
66
<PAGE>
CENTURA SOFTWARE CORPORATION
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT SEQUENTIALLY
NUMBER EXHIBIT NUMBERED PAGE
- ---------------------- ------------------------------------------------------------------------------- -----------------
<C> <S> <C>
2.1 (1) Agreement and Plan of Reorganization dated January 6, 1997 by and among the
Registrant, IS Acquisition Corporation and InfoSpinner, Inc.
2.2 (1) Form of Certificate of Merger among the Registrant, IS Acquisition Corporation
and InfoSpinner, Inc.
3 (i)(2) Articles of Incorporation of Registrant, as amended on September 24, 1996.
3 (iii) Bylaws of Registrant, as amended effective February 27, 1998.
4.1 (13) Preferred Shares Rights Agreement, dated as of August 3, 1994, between the
Registrant 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.
4.2 Amendment to Preferred Shares Rights Agreement effective February 27, 1998.
10.1 (3) Form of Directors' and Officers' Indemnification Agreement.
10.2 (4)(5) 1986 Incentive Stock Option Plan, as amended, and forms of agreements
thereunder.
10.3 (3) 1991 United Kingdom Sub Plan and forms of agreement thereunder.
10.4 (2) 1992 Employee Stock Purchase Plan and forms of agreements thereunder, as
amended on September 24, 1996.
10.5 (3)* 1992 Directors' Stock Option Plan and forms of agreements thereunder.
10.8 (3) Lease Agreement dated February 4, 1992 between Registrant and Bohannon
Associates.
10.9 (6) 1996 Executive Officers' Compensation Plan.
10.12(3) Forms of License Agreements.
10.14(2) 1995 Stock Option Plan and forms of agreement thereunder, as amended on
September 24, 1996.
10.16(7) Note Purchase Agreement dated March 31, 1996 between the Company and Computer
Associates International, Inc.
10.17(8)* Executive Employment Agreement dated April 10, 1996 between the Company and Sam
M. Inman III.
10.18(9)* Loan Agreement Secured by Property and Securities dated August 31, 1996 between
the Company and Earl and Ann Stahl.
10.19(2)* 1996 Directors' Stock Option Plan and forms of agreement thereunder.
10.20(2) Stipulation of Settlement dated July 19, 1996, in regards to 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 SEQUENTIALLY
NUMBER EXHIBIT NUMBERED PAGE
- ---------------------- ------------------------------------------------------------------------------- -----------------
<C> <S> <C>
10.21(14) Distributorship Agreement dated January 6, 1997, between the Registrant and
InfoSpinner, Inc.
10.22* Intentionally omitted.
10.23(15) Factoring Agreement dated June 26, 1997, between Centura Software Corporation
and Pacific Business Funding Corporation.
10.24(15) Warrant to Purchase Common Stock issued June 30, 1997 by Centura Software
Corporation to Sand Hill Capital.
10.25(15)* 1997 Executive Retention Program.
10.26(16) Lease Agreement, dated October 14, 1996, between Westport Investments and the
Registrant.
10.27* Letter Agreement dated November 5, 1997 between the Registrant and Hickey &
Hill Incorporated, and form of Nonstatutory Stock Options issued to new
Executives.
10.28* Settlement Agreements and Mutual Releases between the Registrant and Sam M.
Inman, III and between the Registrant and Earl Stahl.
10.29 Loan and Security Agreement dated January 19, 1998 between the Registrant and
Coast Business Credit, a division of Southern Pacific Bank.
10.30 Common Stock and Warrant Purchase Agreement dated February 27, 1998 between the
Registrant and certain Purchasers of the Registrant's Common Stock.
10.31 Note Conversion Agreement dated February 27, 1998 between the Registrant and
Newport Acquisition Company No. 2, LLC.
10.32 Warrant Purchase Agreement dated February 27, 1998 between the Registrant and
Computer Associates International, Inc.
10.33 Investor Rights Agreement dated February 27, 1998 between the Registrant and
Newport Acquisition Company No. 2, LLC.
10.34 Common Stock Purchase Warrants issued to Rochon Capital Group, Ltd. on February
27, 1998.
10.35* 1998 Employee Stock Option Plan and form of Nonstatutory Option Agreements
thereunder.
11.1 (14) Statement regarding Computation of per share earnings.
16 (10)(11)(12) Letter regarding change in Certifying Accountant.
21 (1) Subsidiaries of Registrant.
23.1 Consent of Price Waterhouse LLP, Independent Accountants.
24.1 Power of Attorney. See Page 65.
27.1 Financial Data Schedules at December 31, 1997 and for the year ended December
31, 1997.
27.2 Financial Data Schedules for the three month periods ended March 31, June 30,
and September 30, 1997, respectively, restated for the effect of the adoption
of Statement of Financial Accounting Standard No. 128, "Earnings Per Share."
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT SEQUENTIALLY
NUMBER EXHIBIT NUMBERED PAGE
- ---------------------- ------------------------------------------------------------------------------- -----------------
<C> <S> <C>
27.3 Financial Data Schedules for the three month periods ended March 31, June 30,
and September 30, 1996, respectively, and years ended December 31, 1995 and
1996, restated for the effect of the adoption of Statement of Financial
Accounting Standard No. 128, "Earnings Per Share."
</TABLE>
- ------------------------
* Management Compensatory Plan or Arrangement.
(1) Incorporated by reference from the Company's Registration Statement on Form
S-4 (No. 333-20491) filed with the Commission on January 27, 1997.
(2) Incorporated by reference from the Company's Quarterly Report on Form 10-Q
for the quarter ended September 30, 1996.
(3) 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.
(4) Incorporated by reference from the Company's Registration Statement on Form
S-8 (No. 33-62194) filed with the Commission on May 5, 1993.
(5) Incorporated by reference from the Company's Registration Statement on Form
S-8 (No. 33-83850) filed with the Commission on September 9, 1994.
(6) Incorporated by reference from the Company's Annual Report on Form 10-K for
the year ended December 31, 1995.
(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 Current Report on Form 8-K
dated July 2, 1993.
(11) 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).
(12) Incorporated by reference from the Company's Current Report on Form 8-K
dated January 8, 1996.
(13) Incorporated by reference from the Company's Registration Statement on Form
8-A filed with the Commission on August 10, 1994.
(14) Incorporated by reference from Amendment No. 1 to the Company's
Registration Statement on Form S-4 filed with the Commission on March 10,
1997.
(15) Incorporated by reference from the Company's Quarterly Report on Form 10-Q
for the quarter ended June 30, 1997.
(16) Incorporated by reference from the Company's Quarterly Report on Form
10-Q/A for the quarter ended June 30, 1997.
<PAGE>
AMENDED AND RESTATED
BYLAWS
OF
CENTURA SOFTWARE CORPORATION
(formerly Gupta Corporation)
as of
February 27, 1998
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I CORPORATE OFFICES. . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 PRINCIPLE OFFICE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 OTHER OFFICES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE II MEETINGS OF SHAREHOLDERS. . . . . . . . . . . . . . . . . . . . . . 1
2.1 PLACE OF MEETINGS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2.2 ANNUAL MEETING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2.3 SPECIAL MEETING. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2.4 NOTICE OF SHAREHOLDERS' MEETINGS . . . . . . . . . . . . . . . . . . . . . 2
2.5 MANNER OF GIVING NOTICE; AFFIDAVIT OF NOTICE . . . . . . . . . . . . . . . 2
2.6 QUORUM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.7 ADJOURNED MEETING; NOTICE. . . . . . . . . . . . . . . . . . . . . . . . . 3
2.8 VOTING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.9 VALIDATION OF MEETINGS; WAIVER OF NOTICE; CONSENT. . . . . . . . . . . . . 4
2.10 SHAREHOLDER ACTION BY WRITTEN CONSENT WITHOUT A MEETING . . . . . . . . . 5
2.11 RECORD DATE FOR SHAREHOLDER NOTICE; VOTING; GIVING CONSENTS . . . . . . . 6
2.12 PROXIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.13 INSPECTORS OF ELECTION. . . . . . . . . . . . . . . . . . . . . . . . . . 7
ARTICLE III DIRECTORS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
3.1 POWERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
3.2 NUMBER OF DIRECTORS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
3.3 ELECTION AND TERM OF OFFICE OF DIRECTORS . . . . . . . . . . . . . . . . . 8
3.4 RESIGNATION AND VACANCIES. . . . . . . . . . . . . . . . . . . . . . . . . 8
3.5 PLACE OF MEETINGS; MEETINGS BY TELEPHONE . . . . . . . . . . . . . . . . . 9
3.6 REGULAR MEETINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
3.7 SPECIAL MEETINGS; NOTICE . . . . . . . . . . . . . . . . . . . . . . . . . 9
3.8 QUORUM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10
3.9 WAIVER OF NOTICE . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10
3.10 ADJOURNMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10
3.11 NOTICE OF ADJOURNMENT . . . . . . . . . . . . . . . . . . . . . . . . . .10
3.12 ACTION WITHOUT MEETING. . . . . . . . . . . . . . . . . . . . . . . . . .11
3.13 FEES AND COMPENSATION OF DIRECTORS. . . . . . . . . . . . . . . . . . . .11
3.14 APPROVAL OF LOANS TO OFFICERS . . . . . . . . . . . . . . . . . . . . . .11
3.15 SUPER MAJORITY VOTE OF DIRECTORS. . . . . . . . . . . . . . . . . . . . .11
ARTICLE IV COMMITTEES. . . . . . . . . . . . . . . . . . . . . . . . . . . . .12
4.1 COMMITTEES OF DIRECTORS. . . . . . . . . . . . . . . . . . . . . . . . . .12
4.2 MEETINGS AND ACTION OF COMMITTEES. . . . . . . . . . . . . . . . . . . . .12
ARTICLE V OFFICERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .13
5.1 OFFICERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .13
5.2 ELECTION OF OFFICERS . . . . . . . . . . . . . . . . . . . . . . . . . . .13
<PAGE>
5.3 SUBORDINATE OFFICERS . . . . . . . . . . . . . . . . . . . . . . . . . . .13
5.4 REMOVAL AND RESIGNATION OF OFFICERS. . . . . . . . . . . . . . . . . . . .13
5.5 VACANCIES IN OFFICERS. . . . . . . . . . . . . . . . . . . . . . . . . . .14
5.6 CHAIRMAN OF THE BOARD. . . . . . . . . . . . . . . . . . . . . . . . . . .14
5.7 PRESIDENT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14
5.8 VICE PRESIDENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14
5.9 SECRETARY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14
5.10 CHIEF FINANCIAL OFFICER . . . . . . . . . . . . . . . . . . . . . . . . .15
ARTICLE VI INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES,
AND OTHER AGENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .15
6.1 INDEMNIFICATION OF DIRECTORS AND OFFICERS. . . . . . . . . . . . . . . . .15
6.2 INDEMNIFICATION OF OTHERS. . . . . . . . . . . . . . . . . . . . . . . . .16
6.3 PAYMENT OF EXPENSES IN ADVANCE . . . . . . . . . . . . . . . . . . . . . .16
6.4 INDEMNITY NOT EXCLUSIVE. . . . . . . . . . . . . . . . . . . . . . . . . .16
6.5 INSURANCE INDEMNIFICATION. . . . . . . . . . . . . . . . . . . . . . . . .17
6.6 CONFLICTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .17
ARTICLE VII RECORDS AND REPORTS. . . . . . . . . . . . . . . . . . . . . . . .17
7.1 MAINTENANCE AND INSPECTION OF SHARE REGISTER . . . . . . . . . . . . . . .17
7.2 MAINTENANCE AND INSPECTION OR BYLAWS . . . . . . . . . . . . . . . . . . .18
7.3 MAINTENANCE AND INSPECTION OF OTHER CORPORATE RECORDS. . . . . . . . . . .18
7.4 INSPECTION BY DIRECTORS. . . . . . . . . . . . . . . . . . . . . . . . . .19
7.5 ANNUAL REPORT TO SHAREHOLDERS; WAIVER. . . . . . . . . . . . . . . . . . .19
7.6 FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . .19
ARTICLE VIII GENERAL MATTERS . . . . . . . . . . . . . . . . . . . . . . . . .20
8.1 RECORD DATE FOR PURPOSES OTHER THAN NOTICE AND VOTING. . . . . . . . . . .20
8.2 CHECKS; DRAFTS; EVIDENCES OF INDEBTEDNESS. . . . . . . . . . . . . . . . .20
8.3 CORPORATE CONTRACTS AND INSTRUMENTS: HOW EXECUTED. . . . . . . . . . . . .20
8.4 CERTIFICATES FOR SHARES. . . . . . . . . . . . . . . . . . . . . . . . . .21
8.5 LOST CERTIFICATES. . . . . . . . . . . . . . . . . . . . . . . . . . . . .21
8.6 CONSTRUCTION; DEFINITION . . . . . . . . . . . . . . . . . . . . . . . . .21
ARTICLE iX AMENDMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . .21
9.1 AMENDMENT BY SHAREHOLDERS. . . . . . . . . . . . . . . . . . . . . . . . .22
9.2 AMENDMENT BY DIRECTORS . . . . . . . . . . . . . . . . . . . . . . . . . .22
</TABLE>
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<PAGE>
CENTURA SOFTWARE CORPORATION
ARTICLE I
CORPORATE OFFICES
1.1 PRINCIPAL OFFICE
The board of directors shall fix the location of the principal
executive office of the corporation at any place within or outside the State
of California. If the principal executive office is located outside such
state and the corporation has one or more business offices in such state,
then the board of directors shall fix and designate a principal business
office in the State of California.
1.2 OTHER OFFICES
The board of directors may at any time establish branch or
subordinate offices at any place or places where the corporation is qualified
to do business.
ARTICLE II
MEETINGS OF SHAREHOLDERS
2.1 PLACE OF MEETINGS
Meetings of shareholders shall be held at any place within or
outside the State of California designated by the board of directors. In the
absence of any such designation, shareholders' meetings shall be held at the
principal executive office of the corporation.
2.2 ANNUAL MEETING
The annual meeting of shareholders shall be held each year on
a date and at a time designated by the board of directors. In the absence of
such designation, the annual meeting of shareholders shall be held on the
18th of April in each year at 10:00 a.m. However, if such day falls on a
legal holiday, then the meeting shall be held at the same time and place on
the next succeeding full business day. At the meeting, directors shall be
elected, and any other proper business may be transacted.
2.3 SPECIAL MEETING
A special meeting of the shareholders may be called at any
time by the board of directors, or by the chairman of the board, or by the
president, or by one or more shareholders holding shares in the aggregate
entitled to cast not less than ten percent (10%) of the votes at that meeting.
<PAGE>
If a special meeting is called by any person or persons other
than the board of directors or the president or the chairman of the board,
then the request shall be in writing, specifying the time of such meeting and
the general nature of the business proposed to be transacted, and shall be
delivered personally or sent by registered mail or by telegraphic or other
(facsimile transmission to the chairman of the board, the president, any vice
president or the secretary of the corporation. The officer receiving the
request shall cause notice to be promptly given to the shareholders entitled
to vote, in accordance with the provisions of Sections 2.4 and 2.5 of these
bylaws, that a meeting will be held at the time requested by the person or
persons calling the meeting, so long as that time is not less than
thirty-five (35) nor more than sixty (60) days after the receipt of the
request. If the notice is not given within twenty (20) days after receipt of
the request, then the person or persons requesting the meeting may give the
notice. Nothing contained in this paragraph of this Section 2.3 shall be
construed as limiting, fixing or affecting the time when a meeting of
shareholders called by action of the board of directors may be held.
2.4 NOTICE OF SHAREHOLDERS' MEETINGS
All notices of meetings of shareholders shall be sent or
otherwise given in accordance with Section 2.5 of these bylaws not less than
ten (10) (or, if sent by third-class mail pursuant to Section 2.5 of these
bylaws, thirty (30)) nor more than sixty (60) days before the date of the
meeting. The notice shall specify the place, date, and hour of the meeting
and (i) in the case of a special meeting, the general nature of the business
to be transacted (no business other than that specified in the notice may be
transacted) or (ii) in the case of the annual meeting, those matters which
the board of directors, at the time of giving the notice, intends to present
for action by the shareholders (but subject to the provisions of the next
paragraph of this Section 2.4 any proper matter may be presented at the
meeting for such action). The notice of any meeting at which directors are
to be elected shall include the name of any nominee or nominees whom, at the
time of the notice, the board intends to present for election.
If action is proposed to be taken at any meeting for approval
of (i) a contract or transaction in which a director has a direct or indirect
financial interest, pursuant to Section 310 of the Corporations Code of
California (the "Code"), (ii) an amendment of the articles of incorporation,
pursuant to Section 902 of the Code, (iii) a reorganization of the
corporation, pursuant to Section 1201 of the Code, (iv) a voluntary
dissolution of the corporation, pursuant to Section 1900 of the Code, or (v)
a distribution in dissolution other than in accordance with the rights of
outstanding preferred shares, pursuant to Section 2007 of the Code, then the
notice shall also state the general nature of that proposal.
2.5 MANNER OF GIVING NOTICE; AFFIDAVIT OF NOTICE
Written notice of any meeting of shareholders shall be given
either (i) personally or (ii) by first-class mail or (iii) by third class
mail but only if the corporation has outstanding shares held of record by
five hundred (500) or more persons (determined as provided in Section 605 of
the Code) on the record date for the shareholders' meeting, or (iv) by
telegraphic or other written communication. Notices not personally delivered
shall be sent charges prepaid and shall be addressed to the shareholder at
the address of that shareholder appearing on the books of the
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<PAGE>
corporation or given by the shareholder to the corporation for the purpose of
notice. If no such address appears on the corporation's books or is given,
notice shall be deemed to have been given if sent to that shareholder by mail
or telegraphic or other written communication to the corporation's principal
executive office, or if published at least once in a newspaper of general
circulation in the county where that office is located. Notice shall be
deemed to have been given at the time when delivered personally or deposited
in the mail or sent by telegram or other means of written communication.
If any notice addressed to a shareholder at the address of
that shareholder appearing on the books of the corporation is returned to the
corporation by the United States Postal Service marked to indicate that the
United States Postal Service is unable to deliver the notice to the
shareholder at that address, then all future notices or reports shall be
deemed to have been duly given without further mailing if the same shall be
available to the shareholder on written demand of the shareholder at the
principal executive office of the corporation for a period of one (1) year
from the date of the giving of the notice.
An affidavit of the mailing or other means of giving any
notice of any shareholders' meeting, executed by the secretary, assistant
secretary or any transfer agent of the corporation giving the notice, shall
be prima facie evidence of the giving of such notice.
2.6 QUORUM
The presence in person or by proxy of the holders of a
majority of the shares entitled to vote thereat constitutes a quorum for the
transaction of business at all meetings of shareholders. The shareholders
present at a duly called or held meeting at which a quorum is present may
continue to do business until adjournment, notwithstanding the withdrawal of
enough shareholders to leave less than a quorum, if any action taken (other
than adjournment) is approved by at least a majority of the shares required
to constitute a quorum.
2.7 ADJOURNED MEETING; NOTICE
Any shareholders' meeting, annual or special, whether or not a
quorum is present, may be adjourned from time to time by the vote of the
majority of the shares represented at that meeting, either in person or by
proxy. In the absence of a quorum, no other business may be transacted at
that meeting except as provided in Section 2.6 of these bylaws.
When any meeting of shareholders, either annual or special, is
adjourned to another time or place, notice need not be given of the adjourned
meeting if the time and place are announced at the meeting at which the
adjournment is taken. However, if a new record date for the adjourned meeting
is fixed or if the adjournment is for more than forty-five (45) days from the
date set for the original meeting, then notice of the adjourned meeting shall
be given. Notice of any such adjourned meeting shall be given to each
shareholder of record entitled to vote at the adjourned meeting in accordance
with the provisions of Sections 2.4 and 2.5 of these bylaws. At any
adjourned meeting the corporation may transact any business which might have
been transacted at the original meeting.
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<PAGE>
2.8 VOTING
The shareholders entitled to vote at any meeting of
shareholders shall be determined in accordance with the provisions of Section
2.11 of these bylaws, subject to the provisions of Sections 702 through 704
of the Code (relating to voting shares held by a fiduciary, in the name of a
corporation or in joint ownership).
The shareholders' vote may be by voice vote or by ballot;
provided, however, that any election for directors must be by ballot if
demanded by any shareholder at the meeting and before the voting has begun.
Except as provided in the last paragraph of this Section 2.8,
or as may be otherwise provided in the articles of incorporation, each
outstanding share, regardless of class, shall be entitled to one vote on,
each matter submitted to a vote of the shareholders. Any shareholder
entitled to vote on any matter may vote part of the shares in favor of the
proposal and refrain from voting the remaining shares or, except when the
matter is the election of directors, may vote them against the proposal; but,
if the shareholder fails to specify the number of shares which the
shareholder is voting affirmatively, it will be conclusively presumed that
the shareholder's approving vote is with respect to all shares which the
shareholder is entitled to vote.
If a quorum is present, the affirmative vote of the majority
of the shares represented and voting at a duly held meeting (which shares
voting affirmatively also constitute at least a majority of the required
quorum) shall be the act of the shareholders, unless the vote of a greater
number or a vote by classes is required by the Code or by the articles of
incorporation.
At a shareholders' meeting at, which directors are to be
elected, a shareholder shall be entitled to cumulate votes (i.e. cast for
any candidate a number of votes greater than the number of votes which such
shareholder normally is entitled to cast) if the candidates' names have been
placed in nomination prior to commencement of the voting and the shareholder
has given notice prior to commencement of the voting of the shareholder's
intention to cumulate votes. If any shareholder has given such a notice, then
every shareholder entitled to vote may cumulate votes for candidates in
nomination either (i) by giving one candidate a number of votes equal to the
number of directors to be elected multiplied by the number of votes to which
that shareholder's shares are normally entitled or (ii) by distributing the
shareholder's votes on the same principle among any or all of the candidates,
as the shareholder thinks fit. The candidates receiving the highest number of
affirmative votes, up to the number of directors to be elected, shall be
elected; votes against any candidate and votes withheld shall have no legal
effect.
2.9 VALIDATION OF MEETINGS; WAIVER OF NOTICE; CONSENT
The transactions of any meeting of shareholders, either annual
or special, however called and noticed, and wherever held, shall be as valid
as though had at a meeting duly held after regular call and notice, if a
quorum be present either in person or by proxy, and if, either before or
after the meeting, each person entitled to vote, who was not present in
person or by proxy, signs a written waiver of notice or a consent to the
holding of the meeting or an approval of the minutes thereof. The waiver of
notice or consent or approval need not specify either the business
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<PAGE>
to be transacted or the purpose of any annual or special meeting of
shareholders, except that if action is taken or proposed to be taken for
approval of any of those matters specified in the second paragraph of Section
2.4 of these bylaws, the waiver of notice or consent or approval shall state
the general nature of the proposal. All such waivers, consents, and
approvals shall be filed with the corporate records or made a part of the
minutes of the meeting.
Attendance by a person at a meeting shall also constitute a
waiver of notice of and presence at that meeting, except when the person
objects at the beginning of the meeting to the transaction of any business
because the meeting is not lawfully called or convened. Attendance at a
meeting is not a waiver of any right to object to the consideration of
matters required by the Code to be included in the notice of the meeting but
not so included, if that objection is expressly made at the meeting.
2.10 SHAREHOLDER ACTION BY WRITTEN CONSENT WITHOUT A MEETING
Any action which may be taken at any annual or special meeting
of shareholders may be taken without a meeting and without prior notice, if a
consent in writing, setting forth the action so taken, is signed by the
holders of outstanding shares having not less than the minimum number of
votes that would be necessary to authorize or take that action at a meeting
at which all shares entitled to vote on that action were present and voted.
In the case of election of directors, such a consent shall be
effective only if signed by the holders of all outstanding shares entitled to
vote for the election of directors. However, a director may be elected at
any time to fill any vacancy on the board of directors, provided that it was
not created by removal of a director and that it has not been filled by the
directors, by the written consent of the holders of a majority of the
outstanding shares entitled to vote for the election of directors.
All such consents shall be maintained in the corporate
records. Any shareholder giving a written consent, or the shareholder's
proxy holders, or a transferee of the shares, or a personal representative of
the shareholder, or their respective proxy holders, may revoke the consent by
a writing received by the secretary of the corporation before written
consents of the number of shares required to authorize the proposed action
have been filed with the secretary.
If the consents of all shareholders entitled to vote have not
been solicited in writing and if the unanimous written consent of all such
shareholders has not been received, then the secretary shall give prompt
notice of the corporate action approved by the shareholders without a
meeting. Such notice shall be given to those shareholders entitled to vote
who have not consented in writing and shall be given in the manner specified
in Section 2.5 of these bylaws. In the case of approval of (i) a contract or
transaction in which a director has a direct or indirect financial interest,
pursuant to Section 310 of the Code, (ii) indemnification of a corporate
"agent," pursuant to Section 317 of the Code, (iii) a reorganization of the
corporation, pursuant to Section 1201 of the Code, and (iv) a distribution in
dissolution other than in accordance with the rights of outstanding preferred
shares, pursuant to Section 2007 of the Code, the notice shall be given at
least ten (10) days before the consummation of any action authorized by that
approval.
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<PAGE>
2.11 RECORD DATE FOR SHAREHOLDER NOTICE; VOTING; GIVING
CONSENTS
For purposes of determining the shareholders entitled to
notice of any meeting or to vote thereat or entitled to give consent to
corporate action without a meeting, the board of directors may fix, in
advance, a record date, which shall not be more than sixty (60) days nor less
than ten (10) days before the date of any such meeting nor more than sixty
(60) days before any such action without a meeting, and in such event only
shareholders of record on the date so fixed are entitled to notice and to
vote or to give consents, as the case may be, notwithstanding any transfer of
any shares on the books of the corporation after the record date, except as
otherwise provided in the Code.
If the board of directors does not so fix a record date:
(a) the record date for determining shareholders
entitled to notice of or to vote at a meeting of shareholders shall be at the
close of business on the business day next preceding the day on which notice
is given or, if notice is waived, at the close of business on the business
day next preceding the day on which the meeting is held; and
(b) the record date for determining shareholders
entitled to give consent to corporate action in writing without a meeting,
(i) when no prior action by the board has been taken, shall be the day on
which the first written consent is given, or (ii) when prior action by the
board has been taken, shall be at the close of business on the day on which
the board adopts the resolution relating to that action, or the sixtieth
(60th) day before the date of such other action, whichever is later.
The record date for any other purpose shall be as provided in
Article VIII of these bylaws.
2.12 PROXIES
Every person entitled to vote for directors, or on any other
matter, shall have the right to do so either in person or by one or more
agents authorized by a written proxy signed by the person and filed with the
secretary of the corporation. A proxy shall be deemed signed if the
shareholder's name is placed on the proxy (whether by manual signature,
typewriting, telegraphic transmission or otherwise) by the shareholder or the
shareholder's attorney-in-fact. A validly executed proxy which does not
state that it is irrevocable shall continue in full force and effect unless
(i) the person who executed the proxy revokes it prior to the time of voting
by delivering a writing to the corporation stating that the proxy is revoked
or by executing a subsequent proxy and presenting it to the meeting or by
voting in person at the meeting, or (ii) written notice of the death or
incapacity of the maker of that proxy is received by the corporation before
the vote pursuant to that proxy is counted; provided, however, that no proxy
shall be valid after the expiration of eleven (11) months from the date of
the proxy, unless otherwise provided in the proxy. The dates contained on
the forms of proxy presumptively determine the order of execution, regardless
of the postmark dates on the envelopes in which they are mailed. The
revocability of a proxy that states on its face that it is irrevocable shall
be governed by the provisions of Sections 705(e) and 705(f) of the Code.
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<PAGE>
2.13 INSPECTORS OF ELECTION
Before any meeting of shareholders, the board of directors may
appoint an inspector or inspectors of election to act at the meeting or its
adjournment. If no inspector of election is so appointed, then the chairman
of the meeting may, and on the request of any shareholder or a shareholder's
proxy shall, appoint an inspector or inspectors of election to act at the
meeting. The number of inspectors shall be either one (1) or three (3). If
inspectors are appointed at a meeting. pursuant to the request of one (1) or
more shareholders or proxies, then the holders of a majority of shares or
their proxies present at the meeting shall determine whether one (1) or three
(3) inspectors are to be appointed. If any person appointed as inspector
fails to appear or fails or refuses to act, then the chairman of the meeting
may, and upon the request of any shareholder or a shareholder's proxy shall,
appoint a person to fill that vacancy.
Such inspectors shall:
(a) determine the number of shares outstanding and the
voting power of each, the number of shares represented at the meeting, the
existence of a quorum, and the authenticity, validity, and effect of proxies;
(b) receive votes, ballots or consents;
(c) hear and determine all challenges and questions in
any way arising in connection with the right to vote;
(d) count and tabulate all votes or consents;
(e) determine when the polls shall close;
(f) determine the result; and
(g) do any other acts that may be proper to conduct the
election or vote with fairness to all shareholders.
ARTICLE III
DIRECTORS
3.1 POWERS
Subject to the provisions of the Code and any limitations in
the articles of incorporation and these bylaws relating to action required to
be approved by the shareholders or by the outstanding shares, the business
and affairs of the corporation shall be managed and all corporate powers
shall be exercised by or under the direction of the board of directors.
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<PAGE>
3.2 NUMBER OF DIRECTORS
The number of directors of the corporation shall be not less
than five (5) nor more than nine (9).* The exact number of directors shall
be seven (7) until changed, within the limits specified above, by a bylaw
amending this Section 3.2, duly adopted by the board of directors or by the
shareholders. This indefinite number may be changed, or a definite number
may be fixed without provision for an indefinite number, by a duly adopted
amendment to the articles of incorporation or by an amendment to this bylaw
adopted by the vote or written consent of holders of a majority of the
outstanding shares entitled to vote; provided, however, that an amendment
reducing the fixed number or the minimum number of directors to a number less
than five (5) cannot be adopted if the votes cast against its adoption at a
meeting, or the shares not consenting in the case of an action by written
consent, are equal to more than sixteen and two-thirds percent (16-2/3%) of
the outstanding shares entitled to vote thereon.
No reduction of the authorized number of directors shall have
the effect of removing any director before that director's term of office
expires.
3.3 ELECTION AND TERM OF OFFICE OF DIRECTORS
Directors shall be elected at each annual meeting of
shareholders to hold office until the next annual meeting. Each director,
including a director elected to fill a vacancy, shall hold office until the
expiration of the term for which elected and until a successor has been
elected and qualified.
3.4 RESIGNATION AND VACANCIES
Any director may resign effective on giving written notice to
the chairman of the board, the president, the secretary or the board of
directors, unless the notice specifies a later time for that resignation to
become effective. If the resignation of a director is effective at a future
time, the board of directors may elect a successor to take office when the
resignation becomes effective.
Vacancies in the board of directors may be filled by a
majority of the remaining directors, even if less than a quorum, or by a sole
remaining director; however, a vacancy created by the removal of a director
by the vote or written consent of the shareholders or by court order may be
filled only by the affirmative vote of a majority of the shares represented
and voting at a duly held meeting at which a quorum is present (which shares
voting affirmatively also constitute a majority of the required quorum) or by
the unanimous written consent of all shares entitled to vote thereon. Each
director so elected shall hold office until the next annual meeting of the
shareholders and until a successor has been elected and qualified.
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* The number of directors of the corporation shall be not less than five (5)
nor more than nine (9)-April 20, 1990.
* The number of directors was fixed at seven on March 14, 1995.
* The number of directors was fixed at five on April 17, 1997.
* The number of directors was fixed at seven on February 28, 1998.
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<PAGE>
A vacancy or vacancies in the board of directors shall be
deemed to exist (i) in the event of the death, resignation or removal of any
director, (ii) if the board of directors by resolution declares vacant the
office of a director who has been declared of unsound mind by an order of
court or convicted of a felony, (iii) if the authorized number of directors
is increased, or (iv) if the shareholders fail, at any meeting of
shareholders at which any director or directors are elected, to elect the
number of directors to be elected at that meeting.
The shareholders may elect a director or directors at any time
to fill any vacancy or vacancies not filled by the directors, but any such
election other than to fill a vacancy created by removal, if by written
consent, shall require the consent of the holders of a majority of the
outstanding shares entitled to vote thereon.
3.5 PLACE OF MEETINGS; MEETINGS BY TELEPHONE
Regular meetings of the board of directors may be held at any
place within or outside the State of California that has been designated from
time to time by resolution of the board. In the absence of such a
designation, regular meetings shall be held at the principal executive office
of the corporation. Special meetings of the board may be held at any place
within or outside the State of California that has been designated in the
notice of the meeting or, if not stated in the notice or if there is no
notice, at the principal executive office of the corporation.
Any meeting, regular or special, may be held by conference
telephone or similar communication equipment, so long as all directors
participating in the meeting can hear one another; and all such directors
shall be deemed to be present in person at the meeting.
3.6 REGULAR MEETINGS
Regular meetings of the board of directors may be held without
notice if the times of such meetings are fixed by the board of directors.
3.7 SPECIAL MEETINGS; NOTICE
Special meetings of the board of directors for any purpose or
purposes may be called at any time by the chairman of the board, the
president, any vice president, the secretary or any two directors.
Notice of the time and place of special meetings shall be
delivered personally or by telephone to each director or sent by first-class
mail or telegram, charges prepaid, addressed to each director at that
director's address as it is shown on the records of the corporation. If the
notice is mailed, it shall be deposited in the United States mail at least
four (4) days before the time of the holding of the meeting. If the notice
is delivered personally or by telephone or telegram, it shall be delivered
personally or by telephone or to the telegraph company at least forty-eight
(48) hours before the time of the holding of the meeting. Any oral notice
given personally or by telephone may be communicated either to the director
or to a person at the office of the director who the person giving the notice
has reason to believe will promptly communicate
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it to the director. The notice need not specify the purpose or the place of
the meeting, if the meeting is to be held at the principal executive office
of the corporation.
3.8 QUORUM
A majority of the authorized number of directors shall
constitute a quorum for the transaction of business, except to adjourn as
provided in Section 3.10 of these bylaws. Every act or decision done or made
by a majority of the directors present at a duly held meeting at which a
quorum is present shall be regarded as the act of the board of directors,
subject to the provisions of Section 310 of the Code (as to approval of
contracts or transactions in which a director has a direct or indirect
material financial interest), Section 311 of the Code (as to appointment of
committees), Section 317(e) of the Code (as to indemnification of directors),
the articles of incorporation, and other applicable law.
A meeting at which a quorum is initially present may continue
to transact business notwithstanding the withdrawal of directors, if any
action taken is approved by at least a majority of the required quorum for
that meeting.
3.9 WAIVER OF NOTICE
Notice of a meeting need not be given to any director (i) who
signs a waiver of notice or a consent to holding the meeting or an approval
of the minutes thereof, whether before or after the meeting, or (ii) who
attends the meeting without protesting, prior thereto or at its commencement,
the lack of notice to such directors. All such waivers, consents, and
approvals shall be filed with the corporate records or made part of the
minutes of the meeting. A waiver of notice need not specify the purpose of
any regular or special meeting of the board of directors.
3.10 ADJOURNMENT
A majority of the directors present, whether or not
constituting a quorum, may adjourn any meeting to another time and place.
3.11 NOTICE OF ADJOURNMENT
Notice of the time and place of holding an adjourned meeting
need not be given unless the meeting is adjourned for more than twenty-four
(24) hours. If the meeting is adjourned for more than twenty-four (24)
hours, then notice of the time and place of the adjourned meeting shall be
given before the adjourned meeting takes place, in the manner specified in
Section 3.7 of these bylaws, to the directors who were not present at the
time of the adjournment.
3.12 ACTION WITHOUT MEETING
Any action required or permitted to be taken by the board of
directors may be taken without a meeting, provided that all members of the
board individually or collectively consent in writing to that action. Such
action by written consent shall have the same force and effect as a
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unanimous vote of the board of directors. Such written consent and any
counterparts thereof shall be filed with the minutes of the proceedings of
the board.
3.13 FEES AND COMPENSATION OF DIRECTORS
Directors and members of committees may receive such
compensation, if any, for their services and such reimbursement of expenses
as may be fixed or determined by resolution of the board of directors. This
Section 3.13 shall not be construed to preclude any director from serving the
corporation in any other capacity as an officer, agent, employee or otherwise
and receiving compensation for those services.
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3.14 APPROVAL OF LOANS TO OFFICERS *
The corporation may, upon the approval of the board of
directors alone, make loans of money or property to, or guarantee the
obligations of, any officer of the corporation or its parent or subsidiary,
whether or not a director, or adopt an employee benefit plan or plans
authorizing such loans or guaranties provided that (i) the board of directors
determines that such a loan or guaranty or plan may reasonably be expected to
benefit the corporation, (ii) the corporation has outstanding shares held of
record by 100 or more persons (determined as provided in Section 605 of the
Code) on the date of approval by the board of directors, and (iii) the
approval of the board of directors is by a vote sufficient without counting
the vote of any interested director or directors.
3.15 SUPER MAJORITY VOTE OF DIRECTORS.
A two-thirds super majority vote of directors shall be
required to approve any of the following actions:
(a) consolidation or merger of the Company with or into any
other corporation in which securities possessing more than fifty percent
(50%) of the total combined voting power of the Company's outstanding
securities are transferred to a person or persons different from the persons
holding those securities immediately prior to such transaction (other than a
consolidation or merger in which the surviving entity is the Company or one
of its wholly-owned subsidiaries) or transfer or sale of all or substantially
all of the assets of the Company; or
(b) an increase in the Company's secured indebtedness to an
aggregate amount in excess of $15 million."
ARTICLE IV
COMMITTEES
4.1 COMMITTEES OF DIRECTORS
The board of directors may, by resolution adopted by a
majority of the authorized number of directors, designate one (1) or more
committees, each consisting of two or more directors, to serve at the
pleasure of the board. The board may designate one (1) or more directors as
alternate members of any committee, who may replace any absent member at any
meeting of the committee. The appointment of members or alternate members of
a committee requires the vote of a majority of the authorized number of
directors. Any committee, to the extent provided in the resolution of the
board, shall have all the authority of the board, except with respect to:
(a) the approval of any action which, under the Code,
also requires shareholders' approval or approval of the outstanding shares;
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* This section is effective only if it has been approved by the shareholders in
accordance with Sections 315(b) and 153 of the Code.
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(b) the filling of vacancies on the board of directors
or in any committee;
(c) the fixing of compensation of the directors for
serving on the board or any committee;
(d) the amendment or repeal of these bylaws or the
adoption of new bylaws;
(e) the amendment or repeal of any resolution of the
board of directors which by its express terms is not so amendable or
repealable;
(f) a distribution to the shareholders of the
corporation, except at a rate or in a periodic amount or within a price range
determined by the board of directors; or
(g) the appointment of any other committees of the board
of directors or the members of such committees.
4.2 MEETINGS AND ACTION OF COMMITTEES
Meetings and actions of committees shall be governed by, and
held and taken in accordance with, the provisions of Article III of these
bylaws, Section 3.5 (place of meetings), Section 3.6 (regular meetings),
Section 3.7 (special meetings and notice), Section 3.8 (quorum), Section 3.9
(waiver of notice), Section 3.10 (adjournment), Section 3.11 (notice of
adjournment), and Section 3.12 (action without meeting), with such changes in
the context of those bylaws as are necessary to substitute the committee and
its members for the board of directors and its members; provided, however,
that the time of regular meetings of committees may be determined either by
resolution of the board of directors or by resolution of the committee, that
special meetings of committees may also be called by resolution of the board
of directors, and that notice of special meetings of committees shall also be
given to all alternate members, who shall have the right to attend all
meetings of the committee. The board of directors may adopt rules for the
government of any committee not inconsistent with the provisions of these
bylaws.
ARTICLE V
OFFICERS
5.1 OFFICERS
The officers of the corporation shall be a president, a
secretary, and a chief financial officer. The corporation may also have, at
the discretion of the board of directors, a chairman of the board, one or
more vice presidents, one or more assistant secretaries, one or more
assistant treasurers, and such other officers as may be appointed in
accordance with the provisions of Section 5.3 of these bylaws. Any number of
offices may be held by the same person.
5.2 ELECTION OF OFFICERS
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The officers of the corporation, except such officers as may
be appointed in accordance with the provisions of Section 5.3 or Section 5.5
of these bylaws, shall be chosen by the board, subject to the rights, if any,
of an officer under any contract of employment.
5.3 SUBORDINATE OFFICERS
The board of directors may appoint, or may empower the
president to appoint, such other officers as the business of the corporation
may require, each of whom shall hold office for such period, have such
authority, and perform such duties as are provided in these bylaws or as the
board of directors may from time to time determine.
5.4 REMOVAL AND RESIGNATION OF OFFICERS
Subject to the rights, if any, of an officer under any
contract of employment, any officer may be removed, either with or without
cause, by the board of directors at any regular or special meeting of the
board or, except in case of an officer chosen by the board of directors, by
any officer upon whom such power of removal may be conferred by the board of
directors.
Any officer may resign at any time by giving written notice to
the corporation. Any resignation shall take effect at the date of the
receipt of that notice or at any later time specified in that notice; and,
unless otherwise specified in that notice, the acceptance of the resignation
shall not be necessary to make it effective. Any resignation is without
prejudice to the rights, if any, of the corporation under any contract to
which the officer is a party.
5.5 VACANCIES IN OFFICES
A vacancy in any office because of death, resignation,
removal, disqualification or any other cause shall be filled in the manner
prescribed in these bylaws for regular appointments to that office.
5.6 CHAIRMAN OF THE BOARD
The chairman of the board, if such an officer be elected,
shall, if present, preside at meetings of the board of directors and exercise
and perform such other powers and duties as may from time to time be assigned
to him by the board of directors or as may be prescribed by these bylaws. If
there is no president, then the chairman of the board shall also be the chief
executive officer of the corporation and shall have the powers and duties
prescribed in Section 5.7 of these bylaws.
5.7 PRESIDENT
Subject to such supervisory powers, if any, as may be given by
the board of directors to the chairman of the board, if there be such an
officer, the president shall be the chief executive officer of the
corporation and shall, subject to the control of the board of directors, have
general supervision, direction, and control of the business and tee officers
of the corporation. He shall preside at all meetings of the shareholders
and, in the absence or nonexistence of a chairman of
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the board, at all meetings of the board of directors. He shall have the
general powers and duties of management usually vested in the office of
president of a corporation, and shall have such other powers and duties as
may be prescribed by the board of directors or these bylaws.
5.8 VICE PRESIDENTS
In the absence or disability of the president, the vice
presidents, if any, in order of their rank as fixed by the board of directors
or, if not ranked, a vice president designated by the board of directors,
shall perform all the duties of the president and when so acting shall have
all the powers of, and be subject to all the restrictions upon, the
president. The vice presidents shall have such other powers and perform such
other duties as from time to time may be prescribed for them respectively by
the board of directors, these bylaws, the president or the chairman of the
board.
5.9 SECRETARY
The secretary shall keep or cause to be kept, at the principal
executive office of the corporation or such other place as the board of
directors may direct, a book of minutes of all meetings and actions of
directors, committees of directors and shareholders. The minutes shall show
the time and place of each meeting, whether regular or special (and, if
special, how authorized and the notice given), the names of those present at
directors' meetings or committee meetings, the number of shares present or
represented at shareholders' meetings, and the proceedings thereof.
The secretary shall keep, or cause to be kept, at the
principal executive office of the corporation or at the office of the
corporation's transfer agent or registrar, as determined by resolution of the
board of directors, a share register, or a duplicate share register, showing
the names of all shareholders and their addresses, the number and classes of
shares held by each, the number and date of certificates evidencing such
shares, and the number and date of cancellation of every certificate
surrendered for cancellation.
The secretary shall give, or cause to be given, notice of all
meetings of the shareholders and of the board of directors required to be
given by law or by these bylaws. He shall keep the seal of the corporation,
if one be adopted, in safe custody and shall have such other powers and
perform such other duties as may be prescribed by the board of directors or
by these bylaws.
5.10 CHIEF FINANCIAL OFFICER
The chief financial officer shall keep and maintain, or cause
to be kept and maintained, adequate and correct books and records of accounts
of the properties and business transactions of the corporation, including
accounts of its assets, liabilities, receipts, disbursements, gains, losses,
capital, retained earnings, and shares. The books of account shall at all
reasonable times be open to inspection by any director.
The chief financial officer shall deposit all money and other
valuables in the name and to the credit of the corporation with such
depositaries as may be designated by the board of
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directors. He shall disburse the funds of the corporation as may be ordered
by the board of directors, shall render to the president and directors,
whenever they request it, an account of all of his transactions as chief
financial officer and of the financial condition of the corporation, and
shall have such other powers and perform such other duties as may be
prescribed by the board of directors or these bylaws.
ARTICLE VI
INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES,
AND OTHER AGENTS
6.1 INDEMNIFICATION OF DIRECTORS AND OFFICERS
The corporation shall, to the maximum extent and in the manner
permitted by the Code, indemnify each of its directors and officers against
expenses (as defined in Section 317(a) of the Code), judgments, fines,
settlements, and other amounts actually and reasonably incurred in connection
with any proceeding (as defined in Section 317(a) of the Code), arising by
reason of the fact that such person is or was an agent of the corporation.
For purposes of this Section 6.1, a "director" or "officer" of the
corporation includes any person (i) who is or was a director or officer of
the corporation, (ii) who is or was serving at the request of the corporation
as a director or officer of another corporation, partnership, joint venture,
trust or other enterprise, or iii) who was a director, officer or employee of
a corporation which was a predecessor corporation of the corporation or of
another enterprise at the request of such predecessor corporation.
6.2 INDEMNIFICATION OF OTHERS
The corporation shall have the power, to the extent and in the
manner permitted by the Code, to indemnify each of its employees and agents
(other than directors and officers) against expenses (as defined in Section
317(a) of the Code), judgments, fines, settlements, and other amounts
actually and reasonably incurred in connection with any proceeding (as
defined in Section 317 (a) of the Code), arising by reason of the fact that
such person is or was an agent of the corporation. For purposes of this
Section 6.2, an "agent" of the corporation (other than a director or officer)
includes any person (i) who is or was an agent of the corporation, (ii) who
is or was serving at the request of the corporation as an agent of another
corporation, partnership, joint venture, trust or other enterprise, or (iii)
who was an agent of a corporation which was a predecessor corporation of the
corporation or of another enterprise at the request of such predecessor
corporation.
6.3 PAYMENT OF EXPENSES IN ADVANCE
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Expenses incurred in defending any civil or criminal action or
proceeding for which indemnification is required pursuant to Section 6.1 or
for which indemnification is permitted pursuant to Section 6.2 following
authorization thereof by the Board of Directors shall be paid by the
corporation in advance of the final disposition of such action or proceeding
upon receipt of any undertaking by or on behalf of the indemnified party to
repay such amount if it shall ultimately be determined that the indemnified
party is not entitled to be indemnified as authorized in this Article VI.
6.4 INDEMNITY NOT EXCLUSIVE
The indemnification provided by this Article VI shall not be
deemed exclusive of any other rights to which those seeking indemnification
may be entitled under any bylaw, agreement, vote of shareholders or
disinterested directors or otherwise, both as to action in an official
capacity and as to action in another capacity while holding such office, to
the extent that such additional rights to indemnification are authorized in
the Articles of Incorporation.
6.5 INSURANCE INDEMNIFICATION
The corporation shall have the power to purchase and maintain
insurance on behalf of any person who is or was a director, officer, employee
or agent of the corporation against any liability asserted against or
incurred by such person in such capacity or arising out of such person's
status as such, whether or not the corporation would have the power to
indemnify him against such liability under the provisions of this Article VI.
6.6. CONFLICTS
No indemnification or advance shall be made under this Article
VI, except where such indemnification or advance is mandated by law or the
order, judgment or decree of any court of competent jurisdiction, in any
circumstance where it appears:
(1) That it would be inconsistent with a provision of
the Articles of Incorporation, these bylaws, a resolution of the shareholders
or an agreement in effect at the time of the accrual of the alleged cause of
the action asserted in the proceeding in which the expenses were incurred or
other amounts were paid, which prohibits or otherwise limits indemnification;
or
(2) That it would be inconsistent with any condition
expressly imposed by a court in approving a settlement.
ARTICLE VII
RECORDS AND REPORTS
7.1 MAINTENANCE AND INSPECTION OF SHARE REGISTER
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The corporation shall keep either at its principal executive
office or at the office of its transfer agent or registrar (if either be
appointed), as determined by resolution of the board of directors, a record
of its shareholders listing the names and addresses of all shareholders and
the number and class of shares held by each shareholder.
A shareholder or shareholders of the corporation who holds at
least five percent (5%) in the aggregate of the outstanding voting shares of
the corporation or who holds at least one percent (1%) of such voting shares
and has filed a Schedule 14B with the Securities and Exchange Commission
relating to the election of directors, may (i) inspect and copy the records
of shareholders' names, addresses, and shareholdings during usual business
hours on five (5) days prior written demand on the corporation, (ii) obtain
from the transfer agent of the corporation, on written demand and on the
tender of such transfer agent's usual charges for such list, a list of the
names and addresses of the shareholders who are entitled to vote for the
election of directors, and their shareholdings, as of the most recent record
date for which that list has been compiled or as of a date specified by the
shareholder after the date of demand. Such list shall be made available to
any such shareholder by the transfer agent on or before the later of five (5)
days after the demand is received or five (5) days after the date specified
in the demand as the date as of which the list is to be compiled.
The record of shareholders shall also be open to inspection on
the written demand of any shareholder or holder of a voting trust
certificate, at any time during usual business hours, for a purpose
reasonably related to the holder's interests as a shareholder or as the
holder of a voting trust certificate.
Any inspection and copying under this Section 7.1 may be made
in person or by an agent or attorney of the shareholder or holder of a voting
trust certificate making the demand.
7.2 MAINTENANCE AND INSPECTION OF BYLAWS
The corporation shall keep at its principal executive office
or, if its principal executive office is not in the State of California, at
its principal business office in California the original or a copy of these
bylaws as amended to date, which bylaws shall be open to inspection by the
shareholders at all reasonable times during office hours. If the principal
executive office of the corporation is outside the State of California and
the corporation has no principal business office in such state, then the
secretary shall, upon the written request of any shareholder, furnish to that
shareholder a copy of these bylaws as amended to date.
7.3 MAINTENANCE AND INSPECTION OF OTHER CORPORATE RECORDS
The accounting books and records and the minutes of
proceedings of the shareholders, of the board of directors, and of any
committee or committees of the board of directors shall be kept at such place
or places as are designated by the board of directors or, in absence of such
designation, at the principal executive office of the corporation. The
minutes shall be kept in written form, and the accounting books and records
shall be kept either in written form or in any other form capable of being
converted into written form.
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The minutes and accounting books and records shall be open to
inspection upon the written demand of any shareholder or holder of a voting
trust certificate, at any reasonable time during usual business hours, for a
purpose reasonably related to the holder's interests as a shareholder or as
the holder of a voting trust certificate. The inspection may be made in
person or by an agent or attorney and shall include the right to copy and
make extracts. Such rights of inspection shall extend to the records of each
subsidiary corporation of the corporation.
7.4 INSPECTION BY DIRECTORS
Every director shall have the absolute right at any reasonable
time to inspect all books, records, and documents of every kind as well as
the physical properties of the corporation and each of its subsidiary
corporations. Such inspection by a director may be made in person or by an
agent or attorney. The right of inspection includes the right to copy and
make extracts of documents.
7.5 ANNUAL REPORT TO SHAREHOLDERS, WAIVER
The board of directors shall cause an annual report to be sent
to the shareholders not later than one hundred twenty (120) days after the
close of the fiscal year adopted by the corporation. Such report shall be
sent at least fifteen (15) days (or, if sent by third-class mail, thirty-five
(35) days before the annual meeting of shareholders to be held during the
next fiscal year and in the manner specified in Section 2.5 of these bylaws
for giving notice to shareholders of the corporation.
The annual report shall contain (i) a balance sheet as of the
end of the fiscal year, (ii) an income statement, (iii) a statement of
changes in financial position for the fiscal year, and (iv) any report of
independent accountants or, if there is no such report, the certificate of an
authorized officer of the corporation that the statements were prepared
without audit from the books and records of the corporation.
The foregoing requirement of an annual report shall be waived
so long as the shares of the corporation are held by fewer than one hundred
(100) holders of record.
7.6 FINANCIAL STATEMENTS
If no annual report for the fiscal year has been sent to
shareholders, then the corporation shall, upon the written request of any
shareholder made more than one hundred twenty (120) days after the close of
such fiscal year, deliver or mail to the person making the request, within
thirty (30) days thereafter, a copy of a balance sheet as of the end of such
fiscal year and an income statement and statement of changes in financial
position for such fiscal year.
If a shareholder or shareholders holding at least five percent
(5%) of the outstanding shares of any class of stock of the corporation makes
a written request to the corporation for an income statement of the
corporation for the three-month, six-month or nine-month period of the then
current fiscal year ended more than thirty (30) days before the date of the
request, and for a balance sheet of the corporation as of the end of that
period, then the chief financial officer shall
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cause that statement to be prepared, if not already prepared, and shall
deliver personally or mail that statement or statements to the person making
the request within thirty (30) days after the receipt of the request. If the
corporation has not sent to the shareholders its annual report for the last
fiscal year, the statements referred to in the first paragraph of this
Section 7.6 shall likewise be delivered or mailed to the shareholder or
shareholders within thirty (30) days after the request.
The quarterly income statements and balance sheets referred to
in this section shall be accompanied by the report, if any, of any
independent accountants engaged by the corporation or by the certificate of
an authorized officer of the corporation that the financial statements were
prepared without audit from the books and records of the corporation.
ARTICLE VIII
GENERAL MATTERS
8.1 RECORD DATE FOR PURPOSES OTHER THAN NOTICE AND VOTING
For purposes of determining the shareholders entitled to
receive payment of any dividend or other distribution or allotment of any
rights or the shareholders entitled to exercise any rights in respect of any
other lawful action (other than action by shareholders by written consent
without a meeting), the board of directors may fix, in advance, a record
date, which shall not be more than sixty (60) days before any such action.
In that case, only shareholders of record at the close of business on the
date so fixed are entitled to receive the dividend, distribution or allotment
of rights, or to exercise such rights, as the case may be, notwithstanding
any transfer of any shares on the books of the corporation after the record
date so fixed, except as otherwise provided in the Code.
If the board of directors does not so fix a record date, then
the record date for determining shareholders for any such purpose shall be at
the close of business on the day on which the board adopts the applicable
resolution or the sixtieth (60th) day before the date of that action,
whichever is later.
8.2 CHECKS; DRAFTS; EVIDENCES OF INDEBTEDNESS
From time to time, the board of directors shall determine by
resolution which person or persons may sign or endorse all checks, drafts,
other orders for payment of money, notes or other evidences of indebtedness
that are issued in the name of or payable to the corporation, and only the
persons so authorized shall sign or endorse those instruments.
8.3 CORPORATE CONTRACTS AND INSTRUMENTS: HOW EXECUTED
The board of directors, except as otherwise provided in these
bylaws, may authorize any officer or officers, or agent or agents, to enter
into any contract or execute any instrument in the name of and on behalf of
the corporation; such authority may be general or confined to specific
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instances. Unless so authorized or ratified by the board of directors or
within the agency power of an officer, no officer, agent or employee shall
have any power or authority to bind the corporation by any contract or
engagement or to pledge its credit or to render it liable for any purpose or
for any amount.
8.4 CERTIFICATES FOR SHARES
A certificate or certificates for shares of the corporation
shall be issued to each shareholder when any of such shares are fully paid.
The board of directors may authorize the issuance of certificates for shares
partly paid provided that these certificates shall state the total amount of
the consideration to be paid for them and the amount actually paid. All
certificates shall be signed in the name of the corporation by the chairman
of the board or the vice chairman of the board or the president or a vice
president and by the chief financial officer or an assistant treasurer or the
secretary or an assistant secretary, certifying the number of shares and the
class or series of shares owned by the shareholder. Any or all of the
signatures on the certificate may be facsimile.
In case any officer, transfer agent or registrar who has
signed or whose facsimile signature has been placed on a certificate ceases
to be that officer, transfer agent or registrar before that certificate is
issued, it may be issued by the corporation with the same effect as if that
person were an officer, transfer agent or registrar at the date of issue.
8.5 LOST CERTIFICATES
Except as provided in this Section 8.5, no new certificates
for shares shall be issued to replace a previously issued certificate unless
the latter is surrendered to the corporation and cancelled at the same time.
The board of directors may, in case any share certificate or certificate for
any other security is lost, stolen or destroyed, authorize the issuance of
replacement certificates on such terms and conditions as the board may
require; the board may require indemnification of the corporation secured by
a bond or other adequate security sufficient to protect the corporation
against any claim that may be made against it, including any expense or
liability, on account of the alleged loss, theft or destruction of the
certificate or the issuance of the replacement certificate.
8.6 CONSTRUCTION; DEFINITIONS
Unless the context requires otherwise, the general provisions,
rules of construction, and definitions in the Code shall govern the
construction of these bylaws. Without limiting the generality of this
provision, the singular number includes the plural, the plural number
includes the singular, and the term "person" includes both a corporation and
a natural person.
ARTICLE IX
AMENDMENTS
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9.1 AMENDMENT BY SHAREHOLDERS
New bylaws may be adopted or these bylaws may be amended or
repealed by the vote or written consent of holders of a majority of the
outstanding shares entitled to vote; provided, however, that if the articles
of incorporation of the corporation set forth the number of authorized
directors of the corporation, then the authorized number of directors may be
changed only by an amendment of the articles of incorporation.
9.2 AMENDMENT BY DIRECTORS
Subject to the rights of the shareholders as provided in
Section 9.1 of these bylaws, bylaws, other than a bylaw or an amendment of a
bylaw changing the authorized number of directors (except to fix the
authorized number of directors pursuant to a bylaw providing for a variable
number of directors), may be adopted, amended or repealed by the board of
directors.
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CENTURA SOFTWARE CORPORATION
AMENDMENT TO PREFERRED SHARES RIGHTS AGREEMENT
On February 17, 1998, the Board of Directors of Centura Software
Corporation (the "COMPANY") voted to amend that certain Preferred Shares Rights
Agreement dated as of August 3, 1994 (the "RIGHTS AGREEMENT") between the
Company (formerly Gupta Corporation) and Chemical Trust Company of California
(pursuant to Section 27 of the Rights Agreement), effective as of February 27,
1998, as follows:
SECTION 1(a) "ACQUIRING PERSON".
Section 1(a) of the Rights Agreement shall be amended and restated in its
entirety to read as follows:
"(a) "Acquiring Person" shall mean any Person who or
which, together with all Affiliates and Associates of such
Person, shall be the Beneficial Owner of 15% or more of the
Common Shares then outstanding, but shall not include the
Company, any Subsidiary of the Company or any employee
benefit plan of the Company or of any Subsidiary of the
Company, or any entity holding Common Shares for or pursuant
to the terms of any such plan. Notwithstanding the
foregoing, no Person shall be deemed to be an Acquiring
Person either (i) as the result of an acquisition of Common
Shares by the Company which, by reducing the number of
shares outstanding, increases the proportionate number of
shares beneficially owned by such Person to 15% or more of
the Common Shares of the Company then outstanding; PROVIDED,
HOWEVER, that if a Person shall become the Beneficial Owner
of 15% or more of the Common Shares of the Company then
outstanding by reason of share purchases by the Company and
shall, after such share purchases by the Company, become the
Beneficial Owner of any additional Common Shares of the
Company, then such Person shall be deemed to be an Acquiring
Person, or (ii) if within eight days after such Person would
otherwise become an Acquiring Person (but for the operation
of this clause (ii)), such Person notifies the Board of
Directors that such Person did so inadvertently and within
two days after such notification, such Person is the
Beneficial Owner of less than 15% of the outstanding Common
Shares. Notwithstanding the foregoing: (i) Umang P. Gupta
("Gupta") shall not be considered an "Acquiring Person" as a
result of being, at any date, the Beneficial Owner of that
number of Common Shares which he currently beneficially owns
or which he is permitted or required to purchase on or
before such date in accordance with the provisions of any
plan, arrangement, agreement or transaction
<PAGE>
approved by the Board of Directors of the Company or any
committee of the Board of Directors; PROVIDED, HOWEVER,
that if Gupta shall, after the date hereof, become the
Beneficial Owner of any Common Shares other than
pursuant to a plan, arrangement, agreement or transaction
approved by the Board of Directors of the Company or any
committee of the Board of Directors, then, if Gupta
would otherwise be an Acquiring Person, he shall be
deemed to be an Acquiring Person and all Common Shares
then beneficially owned by Gupta shall be counted for
purposes of determining whether Gupta is an Acquiring
Person; and (ii) neither Newport Acquisition Company No.
2, LLC ("NAC"), nor any of the Persons listed on Annex I
attached hereto (collectively, the "Approved Persons")
shall be considered an "Acquiring Person" as a result of
(i) the purchase from Computer Associates International,
Inc. by NAC of that certain Floating Rate Convertible
Subordinated Note Due 1998 dated as of April 3, 1995 in
the principal amount of $10,000,000 (the "Note"), (ii)
the conversion of the Note by NAC into 11,415,094 shares
of Common Stock of the Company (the "Conversion Shares")
pursuant to a Note Conversion Agreement between the
Company and NAC dated February 27, 1998 or (iii) any of
such Approved Persons becoming the Beneficial Owner of
additional Common Shares of the Company up to but not
exceeding 14.99% of the Common Shares then outstanding,
but not including in either the numerator or denominator
for purposes of such percentage calculation any of the
Conversion Shares."
SECTION 1(g) "CONTINUING DIRECTOR".
Section 1(g) of the Rights Agreement shall be amended and restated
in its entirety to read as follows:
"(g) "Continuing Director" shall mean (i) any member of
the Board of Directors of the Company, while a member of the
Board, who is not an Acquiring Person, or an Affiliate or
Associate of an Acquiring Person, or a representative of an
Acquiring Person or of any such Affiliate or Associate, and
who was a member of the Board prior to the date of this
Agreement, or (ii) any Person who subsequently becomes a
member of the Board, while a member of the Board, who is not
an Acquiring Person, or an Affiliate or Associate of an
Acquiring Person, or a representative of an Acquiring Person
or of any such Affiliate or Associate, if such Person's
nomination for election or election to the Board is
recommended or approved by a majority of the Continuing
<PAGE>
Directors; or (iii) any Person nominated to the Board of
Directors by NAC."
The undersigned, being the duly appointed Secretary of Centura Software
Corporation, does hereby certify that the Rights Agreement was amended as set
forth above effective as of February 27, 1998.
/s/ Craig Johnson
Craig Johnson
Secretary
<PAGE>
[LETTERHEAD]
November 5, 1997 CONFIDENTIAL
Board of Directors
Centura Software Corporation
975 Island Drive
Redwood Shores, California 94065
RE: HICKEY & HILL, INC. MANAGEMENT CONTRACT
Gentlemen:
This letter sets out the terms and conditions upon which HICKEY & HILL, INC.
("H&H") would be engaged to provide management services to Centura Software
Corporation ("Centura" or the "Company"). Furthermore, it is our
understanding that the Board is in agreement with the general terms and
conditions of this effort and that the Company has the approvals necessary to
execute this agreement. We are prepared to undertake this engagement per the
following:
SERVICES
Services to be provided would be at the direction of the Company's Board
of Directors. At present it is contemplated that such services would
include the following:
- Performing duties of the Chief Executive Officer, Chief Financial
Officer and the principal marketing officer during the engagement,
as appropriate. Such duties will be performed initially by Scott
Broomfield, John Bowman and Kathy Lane, respectively. During the
month of November, 1997, however, the positions being filed are
that of the Chief Operations Officer, V.P. of Finance and the
principal marketing officer.
- Development and implementation of a plan to improve shareholder
value, through development and implementation of an updated
business plan, subject to the Company's Board of Directors.
1
<PAGE>
- Assist the Board of Directors in execution of Progress Software's
("Progress") acquisition interest. Our understanding is that
Progress will deliver a letter of intent, or equivalent by December
1, 1997.
The initial term of this engagement will extend through December 31,
1999. Moreover, this engagement may be terminated by either party upon
90 days prior written notice. In the event of termination, the Options
will continue to vest monthly for an additional 90 days (monthly basis)
after written notice.
COMPENSATION
H&H would be compensated as follows:
A. $70,000 per month for the first two months, $50,000 per month
thereafter. The monthly fee will be due and payable in advance on the
first day of each month. Reimbursable business expenses will be due upon
presentation of an invoice. Further, the Company will pay H&H an
additional $25,000 for work performed during the second half of October,
1997.
B. Non-statutory stock options to purchase 1,500,000 shares of common
stock of the Company at a price equal to the closing price on the NASDAQ
stock market on the day prior to the signing of this contract, to be
issued pursuant to a Company stock option plan (the "Options") approved
and duly adopted by the Board of Directors of the Company, but not
subject to shareholder approval (unless otherwise required by the
NASDAQ). Such Options, unless the Progress acquisition occurs, will vest
in increments of 25% every six months after commencement of the
engagement, with an accelerated vesting in the event of a "Change of
Control" (defined in Section E below).
C. In the event that Progress enters into a letter of intent or
memorandum of understanding by December 1, 1997 to acquire the Company
and H&H is involved in the running of the business, then the Options
will vest monthly beginning November 1, 1997 (at the beginning of the
month -- 62,500 shares / month), plus the monthly cash compensation as
defined above in Section A.
D. Reimbursement of all reasonable business expenses.
E. As used above in Section B., "Change of Control" shall mean any of
the following events, subject to a Progress carve out:
- All or substantially all of the assets of the Company are sold,
exchanged or otherwise transferred in one or more transactions;
- The Company is merged or consolidated with or into another
corporation with the effect that the common stockholders with the
effect that the common stockholders immediately prior to such
merger or consolidation hold less than 75% of the ordinary voting
power of the outstanding securities of the
2
<PAGE>
surviving corporation of such merger or the corporation resulting
from such consolidation;
- A person or group (such as term is used in rule 13d-5 under the
Securities and Exchange Act of 1934) shall, as a result of the
tender or exchange offer, open market purchases, merger, private
placement or otherwise, have become, directly or indirectly, the
beneficial owner (within the meaning of the rule 13d-5 under the
Securities and Exchange Act of 1934) or securities having 25% or
more of the voting power of then outstanding securities of the
Company.
ADMINISTRATIVE MATTERS
1. The Company grants to H&H permission to participate in discussions,
on the Company's behalf, with third parties and disclose such
information which, in H&H's sole discretion, is considered appropriate.
Any of the H&H representatives may be involved with these discussions.
The Company further agrees that all written materials and documents
prepared by or gathered by H&H are, or become, the property of H&H.
2. H&H makes no representation nor can offer any assurance that the
Company can, in fact, become or remain profitable or that the means
required in that attempt will be acceptable to the Company. H&H would
commit its best effort and experience in this engagement, but it can
provide no further commitment or guarantee of any kind as to the results.
3. Neither H&H nor any of its officers, directors, shareholders, agents,
employees or associates will be liable to the Company, or any of its
investors or to anyone who may claim any right due to a relationship
with the Company for any acts or omissions in the performance of
services under the terms of this agreement, unless the acts are due to
gross negligence of H&H. The Company will indemnify and hold H&H and
each of its officers, directors, shareholders, agents, employees and
associates who become involved in providing services pursuant to the
arrangement herein, free and harmless from obligations, costs, claims,
losses, liabilities, damages, injuries, judgments and expenses,
including, but not limited to, attorney's fees and any attachments
arising from, growing out of or in any way connected with services
rendered to the Company under the terms of this agreement unless H&H or
any of its officers, directors, shareholders, agents, employees or
associates is judged by a court of competent jurisdiction to be guilty
of gross negligence.
4. Prior to commencing the performance of any services hereunder, H&H
shall be satisfied that this agreement had been duly authorized by all
necessary corporate action of the part of the Company, including, if
applicable, shareholder approval.
5. H&H will be performing services hereunder as an independent
contractor and not as an employee of the Company. The Company
acknowledges and agrees to this action.
3
<PAGE>
6. Further, if any action at law or in equity, including any action for
declaratory relief, is brought to enforce or interpret the provisions of
this agreement, the prevailing party will be entitled to reasonable
attorney's fees.
We appreciate the opportunity to work with the Board on this engagement. If
you agree with the above, please sign both letters and return one copy to our
firm.
Sincerely,
/s/ SRB
Scott R. Broomfield
Principal
AGREED AND ACCEPTED THIS 6TH DAY OF NOVEMBER, 1997
---
BY: /s/ S INMAN , OF CENTURA SOFTWARE.
--------------------------
Sam Inman, CEO
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<PAGE>
CENTURA SOFTWARE CORPORATION
NOTICE OF NONSTATUTORY STOCK OPTION GRANT
Optionee's Name and Address:
Scott Broomfield
Centura Software Corporation
975 Island Drive
Redwood Shores, CA 94065
You have been granted an option to purchase Common Stock of Centura Software
Corporation (the "Company"), as follows:
<TABLE>
<S> <C>
Board Approval Date: November 6, 1997
-------------------------------------
Date of Grant (Later of Board
Approval Date or Commencement of
Employment/ Consulting): November 6, 1997
-------------------------------------
Exercise Price Per Share: $1.906
-------------------------------------
Total Number of Shares Granted: 750,000
-------------------------------------
Total Price of Shares Granted: $1,429,500.00
-------------------------------------
Term/Expiration Date: November 5, 2007
-------------------------------------
Vesting Commencement Date: November 5, 1997
-------------------------------------
Vesting Schedule: 25% of the shares subject to the
option shall be exercisable as of
the Vesting Commencement Date and
thereafter 25% of the shares subject
to the option shall become exercisable
on each subsequent six month anniversary
of the Vesting Commencement Date as
follows: an additional 25% of the shares
become exercisable on May 5, 1998, an
additional 25% of the shares become
exercisable on November 5, 1998 and and
additional 25% of the shares become
exercisable on May 5, 1999; provided,
however, that 100% of the shares subject
to the option shall become exercisable
upon the occurrence of any of the
following events:
(i) All or substantially all of the
assets of the Company are sold,
exchanged or otherwise
transferred in one or more
transactions;
(ii) The Company is merged or
consolidated with or into another
corporation with the effect
that the common stockholders
immediately prior to such
merger or consolidation hold
less than 75% of the ordinary
voting power of the outstanding
securities of the surviving
corporation of such merger or
the corporation resulting from
such consolidation; or
</TABLE>
1
<PAGE>
<TABLE>
<S> <C>
(iii) A person or group (such as
term is used in rule 13d-5 under the
Securities and Exchange Act of
1934) shall, as a result of
the tender or exchange offer,
open market purchases, merger,
private placement or
otherwise, have become,
directly or indirectly, the
beneficial owner (within the
meaning of rule 13d-5 under
the Securities and Exchange
Act of 1934) or securities
having 15% or more of the
voting power of then
outstanding securities of the
Company, excluding the
issuance of securities in
connection with the conversion
of the Floating Rate
Convertible Subordinated Note
Due 1998 dated as of April 3,
1995 issued by the Company to
Computer Associates
International, Inc. and any
transactions related thereto.
(iv) The Board elects to expand its
membership to 9, or if 3 of its
existing members resign or are in
some way removed from the Board.
(v) The 2 Board members nominated by
Newport Acquisition Company No 2
LLC or its successors ("Newport")
vote the Newport shares.
(vi) Termination of the employee or
consultant by the Company for any
reason without cause.
Termination Period: Option may be exercised for a period
of 5 years after termination of
employment or consulting relationship
with the Company (but in no event later
than the Expiration Date).
</TABLE>
By your signature and the signature of the Company's representative below,
you and the Company agree that this option is granted under and governed by the
terms and conditions of the Nonstatutory Stock Option Agreement attached and
made a part of this document.
<TABLE>
<S> <C>
OPTIONEE: CENTURA SOFTWARE CORPORATION
By:
- --------------------------------- -----------------------------------
Signature
Title:
- --------------------------------- -----------------------------------
Print Name
</TABLE>
2
<PAGE>
CENTURA SOFTWARE CORPORATION
NONSTATUTORY STOCK OPTION AGREEMENT
1. GRANT OF OPTION. Centura Software Corporation, a California corporation
(the "COMPANY"), hereby grants to the Optionee named in the Notice of Stock
Option Grant attached to this Agreement ("OPTIONEE"), an option (the "OPTION")
to purchase the total number of shares of Common Stock (the "SHARES") set forth
in the Notice of Stock Option Grant, at the exercise price per share set forth
in the Notice of Stock Option Grant (the "EXERCISE PRICE") subject to the terms,
definitions and provisions of this Nonstatutory Stock Option Agreement (the
"Agreement").
This Option is intended to be a Nonstatutory Stock Option.
2. EXERCISE OF OPTION. This Option shall be exercisable during its term in
accordance with the Vesting Schedule set out in the Notice of Stock Option Grant
as follows:
(a) RIGHT TO EXERCISE.
(i) This Option may not be exercised for a fraction of a share.
(ii) In the event of Optionee's death, disability or other
termination of employment, the exercisability of the Option is governed
by Sections 6, 7 and 8 below, subject to the limitations contained in
paragraph (iii) below.
(iii) In no event may this Option be exercised after the date of
expiration of the term of this Option as set forth in the Notice of Stock
Option Grant.
(b) METHOD OF EXERCISE.
(i) This Option shall be exercisable by delivering to the Company a
written notice of exercise (in the form attached as EXHIBIT A) which
shall state the election to exercise the Option, the number of Shares in
respect of which the Option is being exercised, and such other
representations and agreements as to the holder's investment intent with
respect to such Shares of Common Stock as may be required by the Company.
Such written notice shall be signed by Optionee and shall be delivered in
person or by certified mail to the Secretary of the Company. The written
notice shall be accompanied by payment of the Exercise Price. This Option
shall be deemed to be exercised upon receipt by the Company of such
written notice accompanied by the Exercise Price.
(ii) As a condition to the exercise of this Option, Optionee agrees
to make adequate provision for federal, state or other tax withholding
obligations, if any, which arise upon the exercise of the Option or
disposition of Shares, whether by withholding, direct payment to the
Company, or otherwise.
(iii) No Shares will be issued pursuant to the exercise of an Option
unless such issuance and such exercise shall comply with all relevant
provisions of law and the requirements of any stock exchange upon which
the Shares may then be listed. Assuming such compliance, for income tax
purposes the Shares shall be considered transferred to Optionee on the
date on which the Option is exercised with respect to such Shares.
3. OPTIONEE'S REPRESENTATIONS. In the event the Shares purchasable
pursuant to the exercise of this Option have not been registered under the
Securities Act of 1933, as amended (the "SECURITIES ACT"), at the time this
Option is exercised, Optionee shall, if required by the Company, concurrently
with the exercise of all or any portion of this Option, deliver to the Company
an investment representation statement in customary form, a copy of which is
available for Optionee's review from the Company upon request.
1
<PAGE>
4. METHOD OF PAYMENT. Payment of the Exercise Price shall be by any of the
following, or a combination of the following, at the election of Optionee: (a)
cash; (b) check; (c) surrender of other Shares of Common Stock of the Company
that (i) either have been owned by Optionee for more than six (6) months on the
date of surrender or were not acquired, directly or indirectly, from the
Company, and (ii) have a Fair Market Value on the date of surrender equal to the
aggregate exercise price of the Shares as to which said Option shall be
exercised; (d) authorization from the Company to retain from the total number of
Shares as to which the Option is exercised that number of Shares having a Fair
Market value on the date of exercise equal to the exercise price for the total
number of Shares as to which the Option is exercised; or (e) if there is a
public market for the Shares and they are registered under the Securities Act,
delivery of a properly executed exercise notice together with irrevocable
instructions to a broker to deliver promptly to the Company the amount of sale
or loan proceeds required to pay the exercise price.
5. RESTRICTIONS ON EXERCISE. This Option may not be exercised if the
issuance of such Shares upon such exercise or the method of payment of
consideration for such shares would constitute a violation of any applicable
federal or state securities or other law or regulation, including any rule under
Part 207 of Title 12 of the Code of Federal Regulations ("REGULATION G") as
promulgated by the Federal Reserve Board. As a condition to the exercise of this
Option, the Company may require Optionee to make any representation and warranty
to the Company as may be required by any applicable law or regulation.
6. TERMINATION OF RELATIONSHIP. In the event of termination of Optionee's
employment or consulting relationship with the Company, Optionee may, to the
extent otherwise so entitled at the date of such termination (the "TERMINATION
DATE"), exercise this Option during the Termination Period set out in the Notice
of Stock Option Grant. To the extent that Optionee was not entitled to exercise
this Option at the date of such termination, or if Optionee does not exercise
this Option within the time specified in the Notice of Stock Option Grant, the
Option shall terminate.
7. DISABILITY OF OPTIONEE. Notwithstanding the provisions of Section 6
above, in the event of termination of Optionee's employment or consulting
relationship with the Company as a result of total and permanent disability (as
defined in Section 22(e)(3) of the Internal Revenue Code), Optionee may, but
only within five (5) years from the date of termination of such relationship
(but in no event later than the date of expiration of the term of this Option as
set forth in Section 10 below), exercise the Option to the extent otherwise so
entitled at the date of such termination. To the extent that Optionee was not
entitled to exercise the Option at the date of termination, or if Optionee does
not exercise such Option (to the extent otherwise so entitled) within the time
specified in this Agreement, the Option shall terminate.
8. DEATH OF OPTIONEE. In the event of the death of Optionee:
(a) during the term of this Option and while an employee or consultant
of the Company and having been an employee or consultant of the Company
since the date of grant of the Option, the Option may be exercised, at any
time within five (5) years following the date of death (but in no event
later than the date of expiration of the term of this Option as set forth in
Section 10 below), by Optionee's estate or by a person who acquired the
right to exercise the Option by bequest or inheritance, including by an
officer of High Technology Capital Management, but only to the
extent of the right to exercise that would have accrued had Optionee
continued living and remained as an employee of the Company three (3) months
after the date of death; or
(b) within thirty (30) days after the termination of Optionee's
employment or consulting relationship with the Company, the Option may be
exercised, at any time within five (5) years following the date of death
(but in no event later than the date of expiration of the term of this
Option as set forth in Section 10 below), by Optionee's estate or by a
person who acquired the right to exercise the Option by bequest or
inheritance, but only to the extent of the right to exercise that had
accrued at the date of termination.
2
<PAGE>
9. NON-TRANSFERABILITY OF OPTION. This Option may not be transferred in
any manner otherwise than by will or by the laws of descent or distribution. The
designation of a beneficiary does not constitute a transfer. An Option may be
exercised during the lifetime of Optionee only by Optionee or a transferee
permitted by this section. The terms of this Option shall be binding upon the
executors, administrators, heirs, successors and assigns of Optionee.
10. TERM OF OPTION. This Option may be exercised only within the term set
out in the Notice of Stock Option Grant, and may be exercised during such term
only in accordance with the terms of this Option.
11. NO ADDITIONAL EMPLOYMENT RIGHTS. Optionee understands and agrees that
the vesting of Shares pursuant to the Vesting Schedule is earned only by
continuing as an employee or consultant of the Company at the will of the
Company (not through the act of being hired, being granted this Option or
acquiring Shares under this Agreement). Optionee further acknowledges and agrees
that nothing in this Agreement shall confer upon Optionee any right with respect
to continuation as an employee or consultant of the Company, nor shall it
interfere in any way with his or her right or the Company's right to terminate
his or her employment or consulting relationship at any time, with or without
cause.
12. TAX CONSEQUENCES. Optionee acknowledges that he or she has read the
brief summary set forth below of certain federal tax consequences of exercise of
this Option and disposition of the Shares under the law in effect as of the date
of grant. OPTIONEE UNDERSTANDS THAT THIS SUMMARY IS NECESSARILY INCOMPLETE, AND
THE TAX LAWS AND REGULATIONS ARE SUBJECT TO CHANGE. OPTIONEE SHOULD CONSULT HIS
OR HER OWN TAX ADVISER BEFORE EXERCISING THIS OPTION OR DISPOSING OF THE SHARES.
(a) EXERCISE OF NONSTATUTORY STOCK OPTION. Optionee may incur regular
federal income tax liability upon the exercise of the Option. Optionee will
be treated as having received compensation income (taxable at ordinary
income tax rates) equal to the excess, if any, of the fair market value of
the Shares on the date of exercise over the Exercise Price. In addition, if
Optionee is an employee of the Company, the Company will be required to
withhold from Optionee's compensation or collect from Optionee and pay to
the applicable taxing authorities an amount equal to a percentage of this
compensation income at the time of exercise.
(b) DISPOSITION OF SHARES. Gain realized on the disposition of Shares
will be treated as long-term or short-term capital gain depending on whether
or not the disposition occurs more than one year after the exercise date.
13. SIGNATURE. This Stock Option Agreement shall be deemed executed by the
Company and Optionee upon execution by such parties of the Notice of Stock
Option Grant attached to this Stock Option Agreement.
[REMAINDER OF PAGE LEFT INTENTIONALLY BLANK]
3
<PAGE>
EXHIBIT A
NOTICE OF EXERCISE
<TABLE>
<S> <C>
To: Centura Software Corporation
Attn: Stock Option Administrator
Subject: Notice of Intention to Exercise Nonstatutory Stock
Option
----------------------------------------------------
</TABLE>
This is official notice that the undersigned ("OPTIONEE") intends to
exercise Optionee's option to purchase shares of Centura Software
Corporation Common Stock, under and pursuant to the Nonstatutory Stock Option
Agreement dated , as follows:
<TABLE>
<S> <C>
Grant Number:
------------------------------------------------
Date of Purchase:
------------------------------------------------
Number of Shares:
------------------------------------------------
Purchase Price:
------------------------------------------------
Method of Payment
of Purchase Price:
------------------------------------------------
Social Security
No.:
------------------------------------------------
The shares should be issued as follows:
Name:
------------------------------------------------
Address:
------------------------------------------------
------------------------------------------------
------------------------------------------------
Signed:
------------------------------------------------
Date:
------------------------------------------------
</TABLE>
<PAGE>
CENTURA SOFTWARE CORPORATION
NOTICE OF NONSTATUTORY STOCK OPTION GRANT
Optionee's Name and Address:
John Bowman
Centura Software Corporation
975 Island Drive
Redwood Shores, CA 94065
You have been granted an option to purchase Common Stock of Centura Software
Corporation (the "Company"), as follows:
<TABLE>
<S> <C>
Board Approval Date: November 6, 1997
-------------------------------------
Date of Grant (Later of Board
Approval Date or Commencement of
Employment/ Consulting): November 6, 1997
-------------------------------------
Exercise Price Per Share: $1.906
-------------------------------------
Total Number of Shares Granted: 375,000
-------------------------------------
Total Price of Shares Granted: $714,750.00
-------------------------------------
Term/Expiration Date: November 5, 2007
-------------------------------------
Vesting Commencement Date: November 5, 1997
-------------------------------------
Vesting Schedule: 25% of the shares subject to the
option shall be exercisable as of
the Vesting Commencement Date and
thereafter 25% of the shares subject
to the option shall become exercisable
on each subsequent six month anniversary
of the Vesting Commencement Date as
follows: an additional 25% of the shares
become exercisable on May 5, 1998, an
additional 25% of the shares become
exercisable on November 5, 1998 and and
additional 25% of the shares become
exercisable on May 5, 1999; provided,
however, that 100% of the shares
subject to the option shall become
exercisable upon the occurrence of
any of the following events:
(i) All or substantially all of the
assets of the Company are sold,
exchanged or otherwise
transferred in one or more
transactions;
(ii) The Company is merged or
consolidated with or into another
corporation with the effect
that the common stockholders
immediately prior to such
merger or consolidation hold
less than 75% of the ordinary
voting power of the outstanding
securities of the surviving
corporation of such merger or
the corporation resulting from
such consolidation; or
</TABLE>
1
<PAGE>
<TABLE>
<S> <C>
(iii) A person or group (such as
term is used in rule 13d-5 under the
Securities and Exchange Act of
1934) shall, as a result of
the tender or exchange offer,
open market purchases, merger,
private placement or
otherwise, have become,
directly or indirectly, the
beneficial owner (within the
meaning of rule 13d-5 under
the Securities and Exchange
Act of 1934) or securities
having 15% or more of the
voting power of then
outstanding securities of the
Company, excluding the
issuance of securities in
connection with the conversion
of the Floating Rate
Convertible Subordinated Note
Due 1998 dated as of April 3,
1995 issued by the Company to
Computer Associates
International, Inc. and any
transactions related thereto.
(iv) The Board elects to expand its
membership to 9, or if 3 of its
existing members resign or are in
some way removed from the Board.
(v) The 2 Board members nominated by
Newport Acquisition Company No 2
LLC or its successors ("Newport")
vote the Newport shares.
(vi) Termination of the employee or
consultant by the Company for any
reason without cause.
Termination Period: Option may be exercised for a period
of 5 years after termination of
employment or consulting relationship
with the Company (but in no event later
than the Expiration Date).
</TABLE>
By your signature and the signature of the Company's representative below,
you and the Company agree that this option is granted under and governed by the
terms and conditions of the Nonstatutory Stock Option Agreement attached and
made a part of this document.
<TABLE>
<S> <C>
OPTIONEE: CENTURA SOFTWARE CORPORATION
By:
- --------------------------------- -----------------------------------
Signature
Title:
- --------------------------------- -----------------------------------
Print Name
</TABLE>
2
<PAGE>
CENTURA SOFTWARE CORPORATION
NONSTATUTORY STOCK OPTION AGREEMENT
1. GRANT OF OPTION. Centura Software Corporation, a California corporation
(the "COMPANY"), hereby grants to the Optionee named in the Notice of Stock
Option Grant attached to this Agreement ("OPTIONEE"), an option (the "OPTION")
to purchase the total number of shares of Common Stock (the "SHARES") set forth
in the Notice of Stock Option Grant, at the exercise price per share set forth
in the Notice of Stock Option Grant (the "EXERCISE PRICE") subject to the terms,
definitions and provisions of this Nonstatutory Stock Option Agreement (the
"Agreement").
This Option is intended to be a Nonstatutory Stock Option.
2. EXERCISE OF OPTION. This Option shall be exercisable during its term in
accordance with the Vesting Schedule set out in the Notice of Stock Option Grant
as follows:
(a) RIGHT TO EXERCISE.
(i) This Option may not be exercised for a fraction of a share.
(ii) In the event of Optionee's death, disability or other
termination of employment, the exercisability of the Option is governed
by Sections 6, 7 and 8 below, subject to the limitations contained in
paragraph (iii) below.
(iii) In no event may this Option be exercised after the date of
expiration of the term of this Option as set forth in the Notice of Stock
Option Grant.
(b) METHOD OF EXERCISE.
(i) This Option shall be exercisable by delivering to the Company a
written notice of exercise (in the form attached as EXHIBIT A) which
shall state the election to exercise the Option, the number of Shares in
respect of which the Option is being exercised, and such other
representations and agreements as to the holder's investment intent with
respect to such Shares of Common Stock as may be required by the Company.
Such written notice shall be signed by Optionee and shall be delivered in
person or by certified mail to the Secretary of the Company. The written
notice shall be accompanied by payment of the Exercise Price. This Option
shall be deemed to be exercised upon receipt by the Company of such
written notice accompanied by the Exercise Price.
(ii) As a condition to the exercise of this Option, Optionee agrees
to make adequate provision for federal, state or other tax withholding
obligations, if any, which arise upon the exercise of the Option or
disposition of Shares, whether by withholding, direct payment to the
Company, or otherwise.
(iii) No Shares will be issued pursuant to the exercise of an Option
unless such issuance and such exercise shall comply with all relevant
provisions of law and the requirements of any stock exchange upon which
the Shares may then be listed. Assuming such compliance, for income tax
purposes the Shares shall be considered transferred to Optionee on the
date on which the Option is exercised with respect to such Shares.
3. OPTIONEE'S REPRESENTATIONS. In the event the Shares purchasable
pursuant to the exercise of this Option have not been registered under the
Securities Act of 1933, as amended (the "SECURITIES ACT"), at the time this
Option is exercised, Optionee shall, if required by the Company, concurrently
with the exercise of all or any portion of this Option, deliver to the Company
an investment representation statement in customary form, a copy of which is
available for Optionee's review from the Company upon request.
1
<PAGE>
4. METHOD OF PAYMENT. Payment of the Exercise Price shall be by any of the
following, or a combination of the following, at the election of Optionee: (a)
cash; (b) check; (c) surrender of other Shares of Common Stock of the Company
that (i) either have been owned by Optionee for more than six (6) months on the
date of surrender or were not acquired, directly or indirectly, from the
Company, and (ii) have a Fair Market Value on the date of surrender equal to the
aggregate exercise price of the Shares as to which said Option shall be
exercised; (d) authorization from the Company to retain from the total number of
Shares as to which the Option is exercised that number of Shares having a Fair
Market value on the date of exercise equal to the exercise price for the total
number of Shares as to which the Option is exercised; or (e) if there is a
public market for the Shares and they are registered under the Securities Act,
delivery of a properly executed exercise notice together with irrevocable
instructions to a broker to deliver promptly to the Company the amount of sale
or loan proceeds required to pay the exercise price.
5. RESTRICTIONS ON EXERCISE. This Option may not be exercised if the
issuance of such Shares upon such exercise or the method of payment of
consideration for such shares would constitute a violation of any applicable
federal or state securities or other law or regulation, including any rule under
Part 207 of Title 12 of the Code of Federal Regulations ("REGULATION G") as
promulgated by the Federal Reserve Board. As a condition to the exercise of this
Option, the Company may require Optionee to make any representation and warranty
to the Company as may be required by any applicable law or regulation.
6. TERMINATION OF RELATIONSHIP. In the event of termination of Optionee's
employment or consulting relationship with the Company, Optionee may, to the
extent otherwise so entitled at the date of such termination (the "TERMINATION
DATE"), exercise this Option during the Termination Period set out in the Notice
of Stock Option Grant. To the extent that Optionee was not entitled to exercise
this Option at the date of such termination, or if Optionee does not exercise
this Option within the time specified in the Notice of Stock Option Grant, the
Option shall terminate.
7. DISABILITY OF OPTIONEE. Notwithstanding the provisions of Section 6
above, in the event of termination of Optionee's employment or consulting
relationship with the Company as a result of total and permanent disability (as
defined in Section 22(e)(3) of the Internal Revenue Code), Optionee may, but
only within five (5) years from the date of termination of such relationship
(but in no event later than the date of expiration of the term of this Option as
set forth in Section 10 below), exercise the Option to the extent otherwise so
entitled at the date of such termination. To the extent that Optionee was not
entitled to exercise the Option at the date of termination, or if Optionee does
not exercise such Option (to the extent otherwise so entitled) within the time
specified in this Agreement, the Option shall terminate.
8. DEATH OF OPTIONEE. In the event of the death of Optionee:
(a) during the term of this Option and while an employee or consultant
of the Company and having been an employee or consultant of the Company
since the date of grant of the Option, the Option may be exercised, at any
time within five (5) years following the date of death (but in no event
later than the date of expiration of the term of this Option as set forth in
Section 10 below), by Optionee's estate or by a person who acquired the
right to exercise the Option by bequest or inheritance, but only to the
extent of the right to exercise that would have accrued had Optionee
continued living and remained as an employee of the Company three (3) months
after the date of death; or
(b) within thirty (30) days after the termination of Optionee's
employment or consulting relationship with the Company, the Option may be
exercised, at any time within five (5) years following the date of death
(but in no event later than the date of expiration of the term of this
Option as set forth in Section 10 below), by Optionee's estate or by a
person who acquired the right to exercise the Option by bequest or
inheritance, but only to the extent of the right to exercise that had
accrued at the date of termination.
2
<PAGE>
9. NON-TRANSFERABILITY OF OPTION. This Option may not be transferred in
any manner otherwise than by will or by the laws of descent or distribution. The
designation of a beneficiary does not constitute a transfer. An Option may be
exercised during the lifetime of Optionee only by Optionee or a transferee
permitted by this section. The terms of this Option shall be binding upon the
executors, administrators, heirs, successors and assigns of Optionee.
10. TERM OF OPTION. This Option may be exercised only within the term set
out in the Notice of Stock Option Grant, and may be exercised during such term
only in accordance with the terms of this Option.
11. NO ADDITIONAL EMPLOYMENT RIGHTS. Optionee understands and agrees that
the vesting of Shares pursuant to the Vesting Schedule is earned only by
continuing as an employee or consultant of the Company at the will of the
Company (not through the act of being hired, being granted this Option or
acquiring Shares under this Agreement). Optionee further acknowledges and agrees
that nothing in this Agreement shall confer upon Optionee any right with respect
to continuation as an employee or consultant of the Company, nor shall it
interfere in any way with his or her right or the Company's right to terminate
his or her employment or consulting relationship at any time, with or without
cause.
12. TAX CONSEQUENCES. Optionee acknowledges that he or she has read the
brief summary set forth below of certain federal tax consequences of exercise of
this Option and disposition of the Shares under the law in effect as of the date
of grant. OPTIONEE UNDERSTANDS THAT THIS SUMMARY IS NECESSARILY INCOMPLETE, AND
THE TAX LAWS AND REGULATIONS ARE SUBJECT TO CHANGE. OPTIONEE SHOULD CONSULT HIS
OR HER OWN TAX ADVISER BEFORE EXERCISING THIS OPTION OR DISPOSING OF THE SHARES.
(a) EXERCISE OF NONSTATUTORY STOCK OPTION. Optionee may incur regular
federal income tax liability upon the exercise of the Option. Optionee will
be treated as having received compensation income (taxable at ordinary
income tax rates) equal to the excess, if any, of the fair market value of
the Shares on the date of exercise over the Exercise Price. In addition, if
Optionee is an employee of the Company, the Company will be required to
withhold from Optionee's compensation or collect from Optionee and pay to
the applicable taxing authorities an amount equal to a percentage of this
compensation income at the time of exercise.
(b) DISPOSITION OF SHARES. Gain realized on the disposition of Shares
will be treated as long-term or short-term capital gain depending on whether
or not the disposition occurs more than one year after the exercise date.
13. SIGNATURE. This Stock Option Agreement shall be deemed executed by the
Company and Optionee upon execution by such parties of the Notice of Stock
Option Grant attached to this Stock Option Agreement.
[REMAINDER OF PAGE LEFT INTENTIONALLY BLANK]
3
<PAGE>
EXHIBIT A
NOTICE OF EXERCISE
<TABLE>
<S> <C>
To: Centura Software Corporation
Attn: Stock Option Administrator
Subject: Notice of Intention to Exercise Nonstatutory Stock
Option
----------------------------------------------------
</TABLE>
This is official notice that the undersigned ("OPTIONEE") intends to
exercise Optionee's option to purchase shares of Centura Software
Corporation Common Stock, under and pursuant to the Nonstatutory Stock Option
Agreement dated , as follows:
<TABLE>
<S> <C>
Grant Number:
------------------------------------------------
Date of Purchase:
------------------------------------------------
Number of Shares:
------------------------------------------------
Purchase Price:
------------------------------------------------
Method of Payment
of Purchase Price:
------------------------------------------------
Social Security
No.:
------------------------------------------------
The shares should be issued as follows:
Name:
------------------------------------------------
Address:
------------------------------------------------
------------------------------------------------
------------------------------------------------
Signed:
------------------------------------------------
Date:
------------------------------------------------
</TABLE>
<PAGE>
CENTURA SOFTWARE CORPORATION
NOTICE OF NONSTATUTORY STOCK OPTION GRANT
Optionee's Name and Address:
Kathy Lane
Centura Software Corporation
975 Island Drive
Redwood Shores, CA 94065
You have been granted an option to purchase Common Stock of Centura Software
Corporation (the "Company"), as follows:
<TABLE>
<S> <C>
Board Approval Date: November 6, 1997
-------------------------------------
Date of Grant (Later of Board
Approval Date or Commencement of
Employment/ Consulting): November 6, 1997
-------------------------------------
Exercise Price Per Share: $1.906
-------------------------------------
Total Number of Shares Granted: 375,000
-------------------------------------
Total Price of Shares Granted: $714,750.00
-------------------------------------
Term/Expiration Date: November 5, 2007
-------------------------------------
Vesting Commencement Date: November 5, 1997
-------------------------------------
Vesting Schedule: 25% of the shares subject to the
option shall be exercisable as of
the Vesting Commencement Date and
thereafter 25% of the shares subject
to the option shall become exercisable
on each subsequent six month anniversary
of the Vesting Commencement Date as
follows: an additional 25% of the shares
become exercisable on May 5, 1998, an
additional 25% of the shares become
exercisable on November 5, 1998 and and
additional 25% of the shares become
exercisable on May 5, 1999; provided,
however, that 100% of the shares
subject to the option shall become
exercisable upon the occurrence of
any of the following events:
(i) All or substantially all of the
assets of the Company are sold,
exchanged or otherwise
transferred in one or more
transactions;
(ii) The Company is merged or
consolidated with or into another
corporation with the effect
that the common stockholders
immediately prior to such
merger or consolidation hold
less than 75% of the ordinary
voting power of the outstanding
securities of the surviving
corporation of such merger or
the corporation resulting from
such consolidation; or
</TABLE>
1
<PAGE>
<TABLE>
<S> <C>
(iii) A person or group (such as
term is used in rule 13d-5 under the
Securities and Exchange Act of
1934) shall, as a result of
the tender or exchange offer,
open market purchases, merger,
private placement or
otherwise, have become,
directly or indirectly, the
beneficial owner (within the
meaning of rule 13d-5 under
the Securities and Exchange
Act of 1934) or securities
having 15% or more of the
voting power of then
outstanding securities of the
Company, excluding the
issuance of securities in
connection with the conversion
of the Floating Rate
Convertible Subordinated Note
Due 1998 dated as of April 3,
1995 issued by the Company to
Computer Associates
International, Inc. and any
transactions related thereto.
(iv) The Board elects to expand its
membership to 9, or if 3 of its
existing members resign or are in
some way removed from the Board.
(v) The 2 Board members nominated by
Newport Acquisition Company No 2
LLC or its successors ("Newport")
vote the Newport shares.
(vi) Termination of the employee or
consultant by the Company for any
reason without cause.
Termination Period: Option may be exercised for a period
of five (5) years after termination of
employment or consulting relationship
with the Company (but in no event later
than the Expiration Date).
</TABLE>
By your signature and the signature of the Company's representative below,
you and the Company agree that this option is granted under and governed by the
terms and conditions of the Nonstatutory Stock Option Agreement attached and
made a part of this document.
<TABLE>
<S> <C>
OPTIONEE: CENTURA SOFTWARE CORPORATION
By:
- --------------------------------- -----------------------------------
Signature
Title:
- --------------------------------- -----------------------------------
Print Name
</TABLE>
2
<PAGE>
CENTURA SOFTWARE CORPORATION
NONSTATUTORY STOCK OPTION AGREEMENT
1. GRANT OF OPTION. Centura Software Corporation, a California corporation
(the "COMPANY"), hereby grants to the Optionee named in the Notice of Stock
Option Grant attached to this Agreement ("OPTIONEE"), an option (the "OPTION")
to purchase the total number of shares of Common Stock (the "SHARES") set forth
in the Notice of Stock Option Grant, at the exercise price per share set forth
in the Notice of Stock Option Grant (the "EXERCISE PRICE") subject to the terms,
definitions and provisions of this Nonstatutory Stock Option Agreement (the
"Agreement").
This Option is intended to be a Nonstatutory Stock Option.
2. EXERCISE OF OPTION. This Option shall be exercisable during its term in
accordance with the Vesting Schedule set out in the Notice of Stock Option Grant
as follows:
(a) RIGHT TO EXERCISE.
(i) This Option may not be exercised for a fraction of a share.
(ii) In the event of Optionee's death, disability or other
termination of employment, the exercisability of the Option is governed
by Sections 6, 7 and 8 below, subject to the limitations contained in
paragraph (iii) below.
(iii) In no event may this Option be exercised after the date of
expiration of the term of this Option as set forth in the Notice of Stock
Option Grant.
(b) METHOD OF EXERCISE.
(i) This Option shall be exercisable by delivering to the Company a
written notice of exercise (in the form attached as EXHIBIT A) which
shall state the election to exercise the Option, the number of Shares in
respect of which the Option is being exercised, and such other
representations and agreements as to the holder's investment intent with
respect to such Shares of Common Stock as may be required by the Company.
Such written notice shall be signed by Optionee and shall be delivered in
person or by certified mail to the Secretary of the Company. The written
notice shall be accompanied by payment of the Exercise Price. This Option
shall be deemed to be exercised upon receipt by the Company of such
written notice accompanied by the Exercise Price.
(ii) As a condition to the exercise of this Option, Optionee agrees
to make adequate provision for federal, state or other tax withholding
obligations, if any, which arise upon the exercise of the Option or
disposition of Shares, whether by withholding, direct payment to the
Company, or otherwise.
(iii) No Shares will be issued pursuant to the exercise of an Option
unless such issuance and such exercise shall comply with all relevant
provisions of law and the requirements of any stock exchange upon which
the Shares may then be listed. Assuming such compliance, for income tax
purposes the Shares shall be considered transferred to Optionee on the
date on which the Option is exercised with respect to such Shares.
3. OPTIONEE'S REPRESENTATIONS. In the event the Shares purchasable
pursuant to the exercise of this Option have not been registered under the
Securities Act of 1933, as amended (the "SECURITIES ACT"), at the time this
Option is exercised, Optionee shall, if required by the Company, concurrently
with the exercise of all or any portion of this Option, deliver to the Company
an investment representation statement in customary form, a copy of which is
available for Optionee's review from the Company upon request.
1
<PAGE>
4. METHOD OF PAYMENT. Payment of the Exercise Price shall be by any of the
following, or a combination of the following, at the election of Optionee: (a)
cash; (b) check; (c) surrender of other Shares of Common Stock of the Company
that (i) either have been owned by Optionee for more than six (6) months on the
date of surrender or were not acquired, directly or indirectly, from the
Company, and (ii) have a Fair Market Value on the date of surrender equal to the
aggregate exercise price of the Shares as to which said Option shall be
exercised; (d) authorization from the Company to retain from the total number of
Shares as to which the Option is exercised that number of Shares having a Fair
Market value on the date of exercise equal to the exercise price for the total
number of Shares as to which the Option is exercised; or (e) if there is a
public market for the Shares and they are registered under the Securities Act,
delivery of a properly executed exercise notice together with irrevocable
instructions to a broker to deliver promptly to the Company the amount of sale
or loan proceeds required to pay the exercise price.
5. RESTRICTIONS ON EXERCISE. This Option may not be exercised if the
issuance of such Shares upon such exercise or the method of payment of
consideration for such shares would constitute a violation of any applicable
federal or state securities or other law or regulation, including any rule under
Part 207 of Title 12 of the Code of Federal Regulations ("REGULATION G") as
promulgated by the Federal Reserve Board. As a condition to the exercise of this
Option, the Company may require Optionee to make any representation and warranty
to the Company as may be required by any applicable law or regulation.
6. TERMINATION OF RELATIONSHIP. In the event of termination of Optionee's
employment or consulting relationship with the Company, Optionee may, to the
extent otherwise so entitled at the date of such termination (the "TERMINATION
DATE"), exercise this Option during the Termination Period set out in the Notice
of Stock Option Grant. To the extent that Optionee was not entitled to exercise
this Option at the date of such termination, or if Optionee does not exercise
this Option within the time specified in the Notice of Stock Option Grant, the
Option shall terminate.
7. DISABILITY OF OPTIONEE. Notwithstanding the provisions of Section 6
above, in the event of termination of Optionee's employment or consulting
relationship with the Company as a result of total and permanent disability (as
defined in Section 22(e)(3) of the Internal Revenue Code), Optionee may, but
only within five (5) years from the date of termination of such relationship
(but in no event later than the date of expiration of the term of this Option as
set forth in Section 10 below), exercise the Option to the extent otherwise so
entitled at the date of such termination. To the extent that Optionee was not
entitled to exercise the Option at the date of termination, or if Optionee does
not exercise such Option (to the extent otherwise so entitled) within the time
specified in this Agreement, the Option shall terminate.
8. DEATH OF OPTIONEE. In the event of the death of Optionee:
(a) during the term of this Option and while an employee or consultant
of the Company and having been an employee or consultant of the Company
since the date of grant of the Option, the Option may be exercised, at any
time within five (5) years following the date of death (but in no event
later than the date of expiration of the term of this Option as set forth in
Section 10 below), by Optionee's estate or by a person who acquired the
right to exercise the Option by bequest or inheritance, but only to the
extent of the right to exercise that would have accrued had Optionee
continued living and remained as an employee of the Company three (3) months
after the date of death; or
(b) within thirty (30) days after the termination of Optionee's
employment or consulting relationship with the Company, the Option may be
exercised, at any time within five (5) years following the date of death
(but in no event later than the date of expiration of the term of this
Option as set forth in Section 10 below), by Optionee's estate or by a
person who acquired the right to exercise the Option by bequest or
inheritance, but only to the extent of the right to exercise that had
accrued at the date of termination.
2
<PAGE>
9. NON-TRANSFERABILITY OF OPTION. This Option may not be transferred in
any manner otherwise than by will or by the laws of descent or distribution. The
designation of a beneficiary does not constitute a transfer. An Option may be
exercised during the lifetime of Optionee only by Optionee or a transferee
permitted by this section. The terms of this Option shall be binding upon the
executors, administrators, heirs, successors and assigns of Optionee.
10. TERM OF OPTION. This Option may be exercised only within the term set
out in the Notice of Stock Option Grant, and may be exercised during such term
only in accordance with the terms of this Option.
11. NO ADDITIONAL EMPLOYMENT RIGHTS. Optionee understands and agrees that
the vesting of Shares pursuant to the Vesting Schedule is earned only by
continuing as an employee or consultant of the Company at the will of the
Company (not through the act of being hired, being granted this Option or
acquiring Shares under this Agreement). Optionee further acknowledges and agrees
that nothing in this Agreement shall confer upon Optionee any right with respect
to continuation as an employee or consultant of the Company, nor shall it
interfere in any way with his or her right or the Company's right to terminate
his or her employment or consulting relationship at any time, with or without
cause.
12. TAX CONSEQUENCES. Optionee acknowledges that he or she has read the
brief summary set forth below of certain federal tax consequences of exercise of
this Option and disposition of the Shares under the law in effect as of the date
of grant. OPTIONEE UNDERSTANDS THAT THIS SUMMARY IS NECESSARILY INCOMPLETE, AND
THE TAX LAWS AND REGULATIONS ARE SUBJECT TO CHANGE. OPTIONEE SHOULD CONSULT HIS
OR HER OWN TAX ADVISER BEFORE EXERCISING THIS OPTION OR DISPOSING OF THE SHARES.
(a) EXERCISE OF NONSTATUTORY STOCK OPTION. Optionee may incur regular
federal income tax liability upon the exercise of the Option. Optionee will
be treated as having received compensation income (taxable at ordinary
income tax rates) equal to the excess, if any, of the fair market value of
the Shares on the date of exercise over the Exercise Price. In addition, if
Optionee is an employee of the Company, the Company will be required to
withhold from Optionee's compensation or collect from Optionee and pay to
the applicable taxing authorities an amount equal to a percentage of this
compensation income at the time of exercise.
(b) DISPOSITION OF SHARES. Gain realized on the disposition of Shares
will be treated as long-term or short-term capital gain depending on whether
or not the disposition occurs more than one year after the exercise date.
13. SIGNATURE. This Stock Option Agreement shall be deemed executed by the
Company and Optionee upon execution by such parties of the Notice of Stock
Option Grant attached to this Stock Option Agreement.
[REMAINDER OF PAGE LEFT INTENTIONALLY BLANK]
3
<PAGE>
EXHIBIT A
NOTICE OF EXERCISE
<TABLE>
<S> <C>
To: Centura Software Corporation
Attn: Stock Option Administrator
Subject: Notice of Intention to Exercise Nonstatutory Stock
Option
----------------------------------------------------
</TABLE>
This is official notice that the undersigned ("OPTIONEE") intends to
exercise Optionee's option to purchase shares of Centura Software
Corporation Common Stock, under and pursuant to the Nonstatutory Stock Option
Agreement dated , as follows:
<TABLE>
<S> <C>
Grant Number:
------------------------------------------------
Date of Purchase:
------------------------------------------------
Number of Shares:
------------------------------------------------
Purchase Price:
------------------------------------------------
Method of Payment
of Purchase Price:
------------------------------------------------
Social Security
No.:
------------------------------------------------
The shares should be issued as follows:
Name:
------------------------------------------------
Address:
------------------------------------------------
------------------------------------------------
------------------------------------------------
Signed:
------------------------------------------------
Date:
------------------------------------------------
</TABLE>
<PAGE>
CENTURA SOFTWARE CORPORATION
SETTLEMENT AGREEMENT AND MUTUAL RELEASE
This Settlement Agreement and Mutual Release ("AGREEMENT") is made by and
between Centura Software Corporation, a California corporation (the
"COMPANY"), and Samuel M. Inman ("MR. INMAN").
WHEREAS, Mr. Inman is employed by the Company; and
WHEREAS, the Company and Mr. Inman have mutually agreed to terminate the
existing employment relationship and to release each other from any claims
arising from or related to the employment relationship.
NOW, THEREFORE, in consideration of the mutual promises made herein, the
Company and Mr. Inman (collectively referred to as the "PARTIES") hereby
agree as follows:
1. RESIGNATION. Mr. Inman and the Company agree that Mr. Inman's
status as President, Chief Executive Officer and Chairman of the Board of
Directors of the Company and all other positions of the Company held by Mr.
Inman shall terminate on December 8, 1997, provided, however, that Mr.
Inman's employment with the Company shall continue beyond the termination of
such status as provided in this Agreement; and provided further than Mr.
Inman shall remain a Director of the Company until Mr. Inman resigns such
position or is requested to resign by the Company's Board of Directors, at
which time Mr. Inman agrees to resign such position.
2. CONTINUATION OF EMPLOYMENT. In consideration for the release of
claims by Mr. Inman set forth below and other obligations under this
Agreement, the Company and Mr. Inman agree to the following terms with
respect to continuation of Mr. Inman's employment by the Company:
(a) that Mr. Inman shall continue to work as a full-time employee
of the Company until December 31, 1997 (the "Termination Date"), and shall be
entitled to receive his current base salary and any earned but unpaid bonus
and accrued vacation (less applicable withholding) through December 31, 1997
in accordance with the Company's regular payroll practices while so employed;
and
(b) that as a condition to Mr. Inman's continued employment with
the Company, during the period commencing on January 1, 1998 and continuing
through July 31, 1998 (the "Service Period"), Mr. Inman agrees to provide
services to the Company as follows:
(i) Mr. Inman shall be available to assist the President,
or other employees of the Company as designated by the President, in
fulfilling such projects reasonably consistent with Mr. Inman's prior
position with the Company as requested by the President;
<PAGE>
(ii) Mr. Inman shall report directly to the President of
the Company; and
(iii) Mr. Inman shall contact the President no less
frequently than monthly, at a day and time each month mutually agreed to by
Mr. Inman and the President, to report the status of Mr. Inman's continuing
projects for the Company.
To facilitate Mr. Inman's rendering of services to the Company, as set forth
above, during the Service Period, the Company agrees to maintain Mr. Inman's
electronic mail addresses on the Company's systems. Mr. Inman hereby
acknowledges and agrees that the performance of his services is on an at-will
basis, and that his services may be terminated at any time for any reason by
the Company or Mr. Inman upon ten (10) days' written notice.
3. PAYMENT. In consideration for the release of claims set forth below
and Mr. Inman's continued services to the Company during the Service Period,
the Company agrees to pay Mr. Inman a lump sum payment of $233,333.33, which
is equal to seven months of current base salary (less applicable tax
withholding), on or about January 5, 1998, the first business day of the
Service Period.
4. EMPLOYEE BENEFITS.
(a) Mr. Inman shall continue to receive the Company's life,
medical, dental and vision insurance benefits at Company expense until the
earlier of July 31, 1998 or the date on which Mr. Inman commences full or
part-time employment with a new employer, which date shall be the "qualifying
event" date under the Consolidated Omnibus Budget Reconciliation Act of 1985,
as amended ("COBRA"). Following such date, Mr. Inman shall have the right to
continue, at his own expense, coverage under the Company's medical, dental
and vision (but not life) insurance programs as provided by COBRA.
(b) Except as otherwise provided above, Mr. Inman shall not be
entitled to participate in any of the Company's benefit plans or programs
offered to employees or officers of the Company, including, but not limited
to, any accrual of vacation, after the Termination Date.
5. STOCK OPTIONS. Under the terms of the Stock Option Agreements issued
to Mr. Inman over the course of his employment with the Company, Mr. Inman
was granted options to purchase 479,999 (the "January 1996 Options"), and
120,000 (the "March 1997 Option") total shares of the Company's Common Stock
under the Company's 1986 Stock Option Plan and 1995 Stock Option Plan,
respectively. The January 1996 Options and the March 1997 Option may
hereinafter be referred to collectively as the Options. As of the
Termination Date, 260,000 shares under the January 1996 Options and 0 shares
under the March 1997 Option have vested, respectively (the "Vested Shares")
and 219,999 and 120,000 shares, respectively, have not vested (the "Unvested
Shares"). Subject to the provisions set forth in the next sentence, in
consideration for the release of claims set forth below and for Mr. Inman's
continued services to the Company during the Service Period, as well as other
obligations under this Agreement, the Options shall continue to vest at their
regular monthly vesting rate during the Service Period or so long as Mr.
Inman serves as a member of the Board, and such Options shall thereafter
be
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<PAGE>
exercisable with respect to such fully vested option shares for 30 days
after the later of the date on which Mr. Inman ceases to provide services to
the Company in accordance with Section 2(b) above or ceases to serve as a
director of the Company, but no later than 30 days after July 31, 1998. The
foregoing provision shall be null and void and of no force or effect if: (i)
in the opinion of the Company's independent auditors, such continued vesting
would require the Company to recognize an additional compensation expense to
its income statement for the fiscal year ending December 31, 1997 or 1998, or
(ii) if it is determined by the Board of Directors, upon consultation with
the Company's management and independent auditors, that such continued
vesting would preclude accounting for any proposed business combination of
the Company as a pooling of interests, and the Board otherwise desires to
approve such a proposed business transaction which requires as a condition to
the closing of such transaction that it be accounted for as a pooling of
interests.
Mr. Inman acknowledges and agrees that if the Options are not exercised
within 90 days of the Termination Date, they shall no longer qualify as
incentive stock options within the meaning of Section 422 of the Internal
Revenue Code of 1986, as amended, and shall thereafter be nonstatutory stock
options. Mr. Inman further acknowledges and agrees that he shall remain
bound by all other terms of the Stock Option Agreements issued by the Company
to him.
6. NO OTHER PAYMENTS DUE. The Company agrees that it will continue to
pay to Mr. Inman the salary described in Section 2(a) through the Termination
Date in accordance with the Company's normal payroll practices, and that the
Company will pay to Mr. Inman on or before the Termination Date all salary as
may then be due to Mr. Inman. Mr. Inman will execute an acknowledgment of
receipt of all such payments as received and an acknowledgment that, in light
of the payment by the Company of all wages due, or to become due to Mr.
Inman, California Labor Code Section 206.5 is not applicable to the Parties
hereto. That section provides in pertinent part as follows:
No employer shall require the execution of any release of any
claim or right on account of wages due, or to become due, or
made as an advance on wages to be earned, unless payment of
such wages has been made.
7. RELEASE OF CLAIMS. In consideration for the obligations of both
parties set forth in this Agreement, Mr. Inman and the Company, on behalf of
themselves, and their respective heirs, executors, officers, directors,
employees, investors, stockholders, administrators and assigns, hereby fully
and forever release each other and their respective heirs, executors,
officers, directors, employees, investors, stockholders, administrators and
assigns, of and from any claim, duty, obligation or cause of action relating
to any matters of any kind, whether presently known or unknown, suspected or
unsuspected, that any of them may possess arising from any omissions, acts or
facts that have occurred up until and including the date of this Agreement
including, without limitation:
(a) any and all claims relating to or arising from Mr. Inman's
employment relationship with the Company and the termination of that
relationship;
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<PAGE>
(b) any and all claims relating to, or arising from, Mr. Inman's
right to purchase, or actual purchase of shares of stock of the Company;
(c) any and all claims for wrongful discharge of employment; breach
of contract, both express and implied; breach of a covenant of good faith and
fair dealing, both express and implied, negligent or intentional infliction
of emotional distress; negligent or intentional misrepresentation; negligent
or intentional interference with contract or prospective economic advantage;
negligence; and defamation;
(d) any and all claims for violation of any federal, state or
municipal statute, including, but not limited to, Title VII of the Civil
Rights Act of 1964, the Civil Rights Act of 1991, the Age Discrimination in
Employment Act of 1967, the Americans with Disabilities Act of 1990, and the
California Fair Employment and Housing Act;
(e) any and all claims arising out of any other laws and
regulations relating to employment or employment discrimination; and
(f) any and all claims for attorneys' fees and costs.
The Company and Mr. Inman agree that the release set forth in this
Section 6 shall be and remain in effect in all respects as a complete general
release as to the matters released. This release does not extend to any
obligations incurred or specified under (i) this Agreement, (ii) the
Indemnification Agreement dated _____, 199___ between Mr. Inman and the
Company (the "Indemnification Agreement"), or (iii) attributable to any act
of fraud by any party hereto.
Except as expressly provided herein, this Agreement shall supersede
and render null and void any and all prior agreements between the parties
other than the Indemnification Agreement, the Options, and the
Confidentiality Agreement as defined in Section 10 hereof.
8. ACKNOWLEDGMENT OF WAIVER OF CLAIMS UNDER ADEA. Mr. Inman
acknowledges that he is waiving and releasing any rights he may have under
the Age Discrimination in Employment Act of 1967 ("ADEA") and that this
waiver and release is knowing and voluntary. Mr. Inman and the Company agree
that this waiver and release does not apply to any rights or claims that may
arise under ADEA after the Effective Date of this Agreement. Mr. Inman
acknowledges that the consideration given for this waiver and release
Agreement is in addition to anything of value to which Mr. Inman was already
entitled. Mr. Inman further acknowledges that he has been advised by this
writing that (a) he should consult with an attorney PRIOR to executing this
Agreement; (b) he has at least twenty-one (21) days within which to consider
this Agreement; (c) he has at least seven (7) days following the execution of
this Agreement by the Parties to revoke the Agreement (the "Revocation
Period"); and (d) this Agreement shall not be effective until the Revocation
Period has expired.
9. CIVIL CODE SECTION 1542. The Parties represent that they are not
aware of any claim by either of them other than the claims that are released
by this Agreement. Mr. Inman and the Company acknowledge that they have been
advised by legal counsel and are familiar with the provisions of California
Civil Code Section 1542, which provides as follows:
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<PAGE>
A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT
KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT THE TIME OF EXECUTING THE
RELEASE, WHICH IF KNOWN BY HIM MUST HAVE MATERIALLY AFFECTED HIS
SETTLEMENT WITH THE DEBTOR.
Mr. Inman and the Company, being aware of said Code section, agree to
expressly waive any rights they may have thereunder, as well as under any
other statute or common law principles of similar effect.
10. NONDISCLOSURE OF CONFIDENTIAL AND PROPRIETARY INFORMATION. Mr.
Inman understands and agrees that his obligations to the Company under his
existing Proprietary Information and Inventions Assignment and
Confidentiality Agreement between Mr. Inman and the Company (the
"CONFIDENTIALITY AGREEMENT"), a copy of which is attached hereto as EXHIBIT
A, shall continue through the Termination Date and shall survive termination
of his relationship with the Company under this Agreement and that Mr. Inman
shall continue to maintain the confidentiality of all confidential and
proprietary information of the Company as provided by the Confidentiality
Agreement. Mr. Inman agrees that at all times hereafter, he shall not
intentionally divulge, furnish or make available to any party any of the
trade secrets, patents, patent applications, price decisions or
determinations, inventions, customers, proprietary information or other
intellectual property of the Company, until after such time as such
information has become publicly known otherwise than by act of collusion of
Mr. Inman.
11. NONCOMPETITION AND NONSOLICITATION. Mr. Inman agrees that through
the Service Period, Mr. Inman shall not, without the prior written consent of
the Company, at any time, directly or indirectly, whether or not for
compensation, engage in, or have any interest in Pervasive Software Company
or Sybase Corporation (whether as an employee, officer, director, agent,
security holder, creditor, consultant, partner or otherwise). Mr. Inman
further agrees that through the Service Period and a period of one year
thereafter, Mr. Inman shall not induce or attempt to induce any person who is
an employee of the Company, or any affiliated company, to leave the Company,
or any affiliated company, to become an employee of any person, firm,
corporation or business that engages in any activity that is in direct
competition with the Company. It is expressly agreed by the Parties that
after the Termination Date Mr. Inman may pursue and engage in full-time
employment that does not conflict with his obligations under this Section 11
and that such employment shall not constitute a breach of this Agreement by
Mr. Inman.
The Parties intend that the covenant contained in the preceding paragraph
shall be construed as a series of separate covenants, one for each county or
other geographic or political subdivision of each jurisdiction in which the
Company conducts business. If, in any judicial proceeding, a court shall
refuse to enforce any of the separate covenants deemed included in this
paragraph, then the unenforceable covenant shall be deemed eliminated from
the provisions for the purpose of those proceedings to the extent necessary
to permit the remaining separate covenants to be enforced.
-5-
<PAGE>
12. NON-DISPARAGEMENT. Each Party agrees to refrain from any
disparagement, criticism, defamation, slander of the other, or tortious
interference with the contracts and relationships of the other. The
Company's personnel records will reflect that Mr. Inman voluntarily
terminated his employment on the Employment Termination Date.
13. AUTHORITY. The Company represents and warrants that the undersigned
has the authority to act on behalf of the Company and to bind the Company and
all who may claim through it to the terms and conditions of this Agreement.
Mr. Inman represents and warrants that he has the capacity to act on his own
behalf and on behalf of all who might claim through him to bind them to the
terms and conditions of this Agreement. Each Party warrants and represents
that there are no liens or claims of lien or assignments in law or equity or
otherwise of or against any of the claims or causes of action released herein.
14. NO REPRESENTATIONS. Neither Party has relied upon any
representations or statements made by the other Party hereto which are not
specifically set forth in this Agreement.
15. SEVERABILITY. In the event that any provision hereof becomes or is
declared by a court or other tribunal of competent jurisdiction to be
illegal, unenforceable or void, this Agreement shall continue in full force
and effect without said provision.
16. ARBITRATION. The Parties shall attempt to settle all disputes
arising in connection with this Agreement through good faith consultation.
In the event no agreement can be reached on such dispute within fifteen (15)
days after notification in writing by either Party to the other concerning
such dispute, the dispute shall be settled by binding arbitration to be
conducted in Santa Clara County before the American Arbitration Association
under its California Employment Dispute Resolution Rules, or by a judge to be
mutually agreed upon. The arbitration decision shall be final, conclusive and
binding on both Parties and any arbitration award or decision may be entered
in any court having jurisdiction. The Parties agree that the prevailing
party in any arbitration shall be entitled to injunctive relief in any court
of competent jurisdiction to enforce the arbitration award. The Parties
further agree that the prevailing Party in any such proceeding shall be
awarded reasonable attorneys' fees and costs. This Section 16 shall not
apply to the Confidentiality Agreement. THE PARTIES HEREBY WAIVE ANY RIGHTS
THEY MAY HAVE TO TRIAL BY JURY IN REGARD TO ARBITRABLE CLAIMS.
17. ENTIRE AGREEMENT. This Agreement, and the exhibit hereto, represent
the entire agreement and understanding between the Company and Mr. Inman
concerning Mr. Inman's separation from the Company, and supersede and replace
any and all prior agreements and understandings concerning Mr. Inman's
relationship with the Company and his compensation by the Company, other than
the Stock Option Agreements described in Section 4 and the Confidentiality
Agreement described in Section 10.
18. NO ORAL MODIFICATION. This Agreement may only be amended in writing
signed by Mr. Inman and the Company.
19. GOVERNING LAW. This Agreement shall be governed by the laws of the
State of California, without regard to its conflicts of law provisions.
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<PAGE>
20. EFFECTIVE DATE. This Agreement is effective seven days after it has
been signed by both Parties and such date is referred to herein as the
"EFFECTIVE DATE."
21. COUNTERPARTS. This Agreement may be executed in counterparts, and
each counterpart shall have the same force and effect as an original and
shall constitute an effective, binding agreement on the part of each of the
undersigned.
22. ASSIGNMENT. This Agreement may not be assigned by Mr. Inman or the
Company without the prior written consent of the other party.
Notwithstanding the foregoing, this Agreement may be assigned by the Company
to a corporation controlling, controlled by or under common control with the
Company without the consent of Mr. Inman.
23. VOLUNTARY EXECUTION OF AGREEMENT. This Agreement is executed
voluntarily and without any duress or undue influence on the part or behalf
of the Parties hereto, with the full intent of releasing all claims. The
Parties acknowledge that:
(a) they have read this Agreement;
(b) they have been represented in the preparation, negotiation, and
execution of this Agreement by legal counsel of their own choice or that they
have voluntarily declined to seek such counsel;
(c) they understand the terms and consequences of this Agreement
and of the releases it contains; and
(d) they are fully aware of the legal and binding effect of this
Agreement.
[SIGNATURE PAGE FOLLOWS]
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<PAGE>
IN WITNESS WHEREOF, the Parties have executed this Agreement and Mutual
Release on the respective dates set forth below.
CENTURA SOFTWARE CORPORATION
Dated as of December 8, 1997 By: /s/ Samuel Inman
------------------------------------
Title: President & Chief Executive Officer
SAMUEL M. INMAN, an individual
Dated as of December 8, 1997 /s/Samuel Inman
------------------------------------
Samuel M. Inman
-8-
<PAGE>
EXHIBIT A
CONFIDENTIALITY AGREEMENT
<PAGE>
CENTURA SOFTWARE CORPORATION
SETTLEMENT AGREEMENT AND MUTUAL RELEASE
This Settlement Agreement and Mutual Release ("AGREEMENT") is made by and
between Centura Software Corporation, a California corporation (the "COMPANY"),
and Earl M. Stahl ("MR. STAHL").
WHEREAS, Mr. Stahl is employed by the Company; and
WHEREAS, the Company and Mr. Stahl have mutually agreed to terminate the
existing employment relationship and to release each other from any claims
arising from or related to the employment relationship.
NOW, THEREFORE, in consideration of the mutual promises made herein, the
Company and Mr. Stahl (collectively referred to as the "PARTIES") hereby agree
as follows:
1. RESIGNATION. Mr. Stahl and the Company agree that Mr. Stahl's status as
Senior Vice President, Engineering and Chief Technical Officer of the Company,
all other positions of the Company held by Mr. Stahl, and Mr. Stahl's full-time
employment with the Company shall terminate on December 8, 1997 (the
"Termination Date"), provided, however, that Mr. Stahl shall remain a Director
of the Company until Mr. Stahl resigns such position or is requested to resign
by the Company's Board of Directors, at which time Mr. Stahl agrees to resign
such position.
2. CONTINUATION OF EMPLOYMENT. During the period commencing on December 9,
1997 and continuing thereafter until terminated by the Company or Mr. Stahl in
accordance with this Section 2 (the "Service Period"), Mr. Stahl agrees to
provide services to the Company as follows:
(i) Mr. Stahl shall be available to assist the President, or other
employees of the Company as designated by the President, in fulfilling such
projects reasonably consistent with Mr. Stahl's prior position with the
Company as requested by the President, including without limitation
providing technical product support on SQL Windows and CTD for bug fixes,
architecture changes and other matters;
(ii) Mr. Stahl shall report directly to the President of the Company;
and
(iii) Mr. Stahl shall contact the President no less frequently than
monthly, at a day and time each month mutually agreed to by Mr. Stahl and
the President, to report the status of Mr. Stahl's continuing projects for
the Company.
To facilitate Mr. Stahl's rendering of services to the Company, as set forth
above, during the Service Period, the Company agrees to maintain Mr. Stahl's
electronic mail addresses on the Company's systems, maintain a voice mailbox,
and continue to provide computer equipment as needed. Mr. Stahl hereby
acknowledges and agrees that the performance of his services is on an at-will
basis, that his services may be terminated at any time for any reason by the
Company or Mr. Stahl upon ten (10) days' written notice, and that upon such
termination the Company's compensation obligations to Mr. Stahl under Section 3
below shall terminate.
3. PAYMENT AND LOAN AGREEMENT. In consideration for the release of claims
set forth below and for Mr. Stahl's continued services to the Company during the
Service Period, for each month for which Mr. Stahl performs services during the
Service Period, the Company will credit an amount equal to Mr. Stahl's current
monthly base salary (less applicable withholding) first to accrued interest and
then to the outstanding principal balance under the loan pursuant to that
certain Loan Agreement Secured by Property and Securities dated August 31, 1995
by and between the Company and Earl and Ann Stahl (the "Loan" and "Loan
Agreement"). Mr. Stahl acknowledges that he shall not be entitled to any other
payments from the Company for services performed during the Service Period. The
Parties acknowledge and agree that in accordance with Section 3 of the Note
Secured by Deed of Trust under the Loan
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<PAGE>
Agreement, all outstanding principal balance and accrued interest on the Loan
shall become due and payable in full six (6) months after termination of the
Service Period, or if earlier, upon the occurrence of any of the events
specified in items (i), (ii), (iv), (v) and (vi) of such Section 3. The Parties
agree that the Loan and Loan Agreement shall be unmodified and shall remain in
full force and effect.
4. EMPLOYEE BENEFITS. Following the Termination Date, Mr. Stahl shall have
the right to continue, at his own expense, coverage under the Company's medical,
dental and vision insurance programs as provided by COBRA. Except as otherwise
provided above, Mr. Stahl shall not be entitled to participate in any of the
Company's benefit plans or programs offered to employees or officers of the
Company.
5. STOCK OPTIONS. Options to purchase the Company's Common Stock held by
Mr. Stahl will continue to vest at their regular monthly vesting rate during the
Service Period or so long as Mr. Stahl serves as a member of the Board, and such
options shall thereafter be exercisable with respect to such vested option
shares thereunder for 30 days after the later of the date on which Mr. Stahl
ceases to provide services to the Company in accordance with Section 2 above or
ceases to serve as a Director of the Company.
Mr. Stahl acknowledges and agrees that if the such options are not exercised
within 90 days of the Termination Date, they shall no longer qualify as
incentive stock options within the meaning of Section 422 of the Internal
Revenue Code of 1986, as amended, and shall thereafter be nonstatutory stock
options. Mr. Stahl further acknowledges and agrees that he shall remain bound by
all terms of the Stock Option Agreements issued by the Company to him.
6. NO OTHER PAYMENTS DUE. Mr. Stahl acknowledges and agrees that the
payments being made to him, and the obligations being undertaken by the Company,
as described in this Agreement, constitute all payments which he is entitled to
receive and that, except as expressly provided herein, he is not entitled to any
further or additional compensation or benefit from the Company. Mr. Stahl
acknowledges that, in light of the payment by the Company of all wages due, or
to become due to Mr. Stahl, California Labor Code Section 206.5 is not
applicable to the Parties hereto. That section provides in pertinent part as
follows:
No employer shall require the execution of any release of any claim or right
on account of wages due, or to become due, or made as an advance on wages to
be earned, unless payment of such wages has been made.
7. RELEASE OF CLAIMS. In consideration for the obligations of both parties
set forth in this Agreement, Mr. Stahl and the Company, on behalf of themselves,
and their respective heirs, executors, officers, directors, employees,
investors, stockholders, administrators and assigns, hereby fully and forever
release each other and their respective heirs, executors, officers, directors,
employees, investors, stockholders, administrators and assigns, of and from any
claim, duty, obligation or cause of action relating to any matters of any kind,
whether presently known or unknown, suspected or unsuspected, that any of them
may possess arising from any omissions, acts or facts that have occurred up
until and including the date of this Agreement including, without limitation:
(a) any and all claims relating to or arising from Mr. Stahl's
employment relationship with the Company and the termination of that
relationship;
(b) any and all claims relating to, or arising from, Mr. Stahl's right
to purchase, or actual purchase of shares of stock of the Company;
(c) any and all claims for wrongful discharge of employment; breach of
contract, both express and implied; breach of a covenant of good faith and
fair dealing, both express and implied, negligent or intentional infliction
of emotional distress; negligent or intentional misrepresentation; negligent
or intentional interference with contract or prospective economic advantage;
negligence; and defamation;
2
<PAGE>
(d) any and all claims for violation of any federal, state or municipal
statute, including, but not limited to, Title VII of the Civil Rights Act of
1964, the Civil Rights Act of 1991, the Age Discrimination in Employment Act
of 1967, the Americans with Disabilities Act of 1990, and the California
Fair Employment and Housing Act;
(e) any and all claims arising out of any other laws and regulations
relating to employment or employment discrimination; and
(f) any and all claims for attorneys' fees and costs.
The Company and Mr. Stahl agree that the release set forth in this Section 6
shall be and remain in effect in all respects as a complete general release as
to the matters released. This release does not extend to any obligations
incurred or specified under (i) this Agreement, (ii) the Indemnification
Agreement dated , 199 between Mr. Stahl and the Company (the
"Indemnification Agreement"), or (iii) attributable to any act of fraud by any
party hereto.
Except as expressly provided herein, this Agreement shall supersede and
render null and void any and all prior agreements between the parties other than
the Indemnification Agreement, Mr. Stahl's options, and the Confidentiality
Agreement as defined in Section 10 hereof.
8. ACKNOWLEDGMENT OF WAIVER OF CLAIMS UNDER ADEA. Mr. Stahl acknowledges
that he is waiving and releasing any rights he may have under the Age
Discrimination in Employment Act of 1967 ("ADEA") and that this waiver and
release is knowing and voluntary. Mr. Stahl and the Company agree that this
waiver and release does not apply to any rights or claims that may arise under
ADEA after the Effective Date of this Agreement. Mr. Stahl acknowledges that the
consideration given for this waiver and release Agreement is in addition to
anything of value to which Mr. Stahl was already entitled. Mr. Stahl further
acknowledges that he has been advised by this writing that (a) he should consult
with an attorney PRIOR to executing this Agreement; (b) he has at least
twenty-one (21) days within which to consider this Agreement; (c) he has at
least seven (7) days following the execution of this Agreement by the Parties to
revoke the Agreement (the "Revocation Period"); and (d) this Agreement shall not
be effective until the Revocation Period has expired.
9. CIVIL CODE SECTION 1542. The Parties represent that they are not aware
of any claim by either of them other than the claims that are released by this
Agreement. Mr. Stahl and the Company acknowledge that they have been advised by
legal counsel and are familiar with the provisions of California Civil Code
Section 1542, which provides as follows:
A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW
OR SUSPECT TO EXIST IN HIS FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH
IF KNOWN BY HIM MUST HAVE MATERIALLY AFFECTED HIS SETTLEMENT WITH THE
DEBTOR.
Mr. Stahl and the Company, being aware of said Code section, agree to
expressly waive any rights they may have thereunder, as well as under any other
statute or common law principles of similar effect.
10. NONDISCLOSURE OF CONFIDENTIAL AND PROPRIETARY INFORMATION. Mr. Stahl
understands and agrees that his obligations to the Company under his existing
Proprietary Information and Inventions Assignment and Confidentiality Agreement
between Mr. Stahl and the Company (the "CONFIDENTIALITY AGREEMENT"), a copy of
which is attached hereto as EXHIBIT A, shall continue through the Termination
Date and shall survive termination of his relationship with the Company under
this Agreement and that Mr. Stahl shall continue to maintain the confidentiality
of all confidential and proprietary information of the Company as provided by
the Confidentiality Agreement. Mr. Stahl agrees that at all times hereafter, he
shall not intentionally divulge, furnish or make available to any party any of
the trade secrets, patents, patent applications, price decisions or
determinations, inventions, customers, proprietary information or other
3
<PAGE>
intellectual property of the Company, until after such time as such information
has become publicly known otherwise than by act of collusion of Mr. Stahl.
11. NONCOMPETITION AND NONSOLICITATION. Mr. Stahl agrees that through the
Service Period, Mr. Stahl shall not, without the prior written consent of the
Company, at any time, directly or indirectly, whether or not for compensation,
engage in, or have any interest in Pervasive Software Company or Sybase
Corporation (whether as an employee, officer, director, agent, security holder,
creditor, consultant, partner or otherwise). Mr. Stahl further agrees that
through the Service Period and a period of one year thereafter, Mr. Stahl shall
not induce or attempt to induce any person who is an employee of the Company, or
any affiliated company, to leave the Company, or any affiliated company, to
become an employee of any person, firm, corporation or business described above.
It is expressly agreed by the Parties that after the Termination Date Mr. Stahl
may pursue and engage in full-time employment that does not conflict with his
obligations under this Section 11 and that such employment shall not constitute
a breach of this Agreement by Mr. Stahl.
The Parties intend that the covenant contained in the preceding paragraph
shall be construed as a series of separate covenants, one for each county or
other geographic or political subdivision of each jurisdiction in which the
Company conducts business. If, in any judicial proceeding, a court shall refuse
to enforce any of the separate covenants deemed included in this paragraph, then
the unenforceable covenant shall be deemed eliminated from the provisions for
the purpose of those proceedings to the extent necessary to permit the remaining
separate covenants to be enforced.
12. NON-DISPARAGEMENT. Each Party agrees to refrain from any disparagement,
criticism, defamation, slander of the other, or tortious interference with the
contracts and relationships of the other. The Company's personnel records will
reflect that Mr. Stahl voluntarily terminated his employment on the Employment
Termination Date.
13. AUTHORITY. The Company represents and warrants that the undersigned has
the authority to act on behalf of the Company and to bind the Company and all
who may claim through it to the terms and conditions of this Agreement. Mr.
Stahl represents and warrants that he has the capacity to act on his own behalf
and on behalf of all who might claim through him, including his spouse, Ann
Stahl, to bind them to the terms and conditions of this Agreement. Each Party
warrants and represents that there are no liens or claims of lien or assignments
in law or equity or otherwise of or against any of the claims or causes of
action released herein.
14. NO REPRESENTATIONS. Neither Party has relied upon any representations
or statements made by the other Party hereto which are not specifically set
forth in this Agreement.
15. SEVERABILITY. In the event that any provision hereof becomes or is
declared by a court or other tribunal of competent jurisdiction to be illegal,
unenforceable or void, this Agreement shall continue in full force and effect
without said provision.
16. ARBITRATION. The Parties shall attempt to settle all disputes arising
in connection with this Agreement through good faith consultation. In the event
no agreement can be reached on such dispute within fifteen (15) days after
notification in writing by either Party to the other concerning such dispute,
the dispute shall be settled by binding arbitration to be conducted in Santa
Clara County before the American Arbitration Association under its California
Employment Dispute Resolution Rules, or by a judge to be mutually agreed upon.
The arbitration decision shall be final, conclusive and binding on both Parties
and any arbitration award or decision may be entered in any court having
jurisdiction. The Parties agree that the prevailing party in any arbitration
shall be entitled to injunctive relief in any court of competent jurisdiction to
enforce the arbitration award. The Parties further agree that the prevailing
Party in any such proceeding shall be awarded reasonable attorneys' fees and
costs. This Section 16 shall not apply to the Confidentiality Agreement. THE
PARTIES HEREBY WAIVE ANY RIGHTS THEY MAY HAVE TO TRIAL BY JURY IN REGARD TO
ARBITRABLE CLAIMS.
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<PAGE>
17. ENTIRE AGREEMENT. This Agreement, and the exhibit hereto, represent the
entire agreement and understanding between the Company and Mr. Stahl concerning
Mr. Stahl's separation from the Company, and supersede and replace any and all
prior agreements and understandings concerning Mr. Stahl's relationship with the
Company and his compensation by the Company, other than the Loan and Loan
Agreement described in Section 2, the Confidentiality Agreement described in
Section 10, and the Option Agreements between the Company and Mr. Stahl, which
agreements shall remain in full force and effect.
18. NO ORAL MODIFICATION. This Agreement may only be amended in writing
signed by Mr. Stahl and the Company.
19. GOVERNING LAW. This Agreement shall be governed by the laws of the
State of California, without regard to its conflicts of law provisions.
20. EFFECTIVE DATE. This Agreement is effective seven days after it has
been signed by both Parties and such date is referred to herein as the
"EFFECTIVE DATE."
21. COUNTERPARTS. This Agreement may be executed in counterparts, and each
counterpart shall have the same force and effect as an original and shall
constitute an effective, binding agreement on the part of each of the
undersigned.
22. ASSIGNMENT. This Agreement may not be assigned by Mr. Stahl or the
Company without the prior written consent of the other party. Notwithstanding
the foregoing, this Agreement may be assigned by the Company to a corporation
controlling, controlled by or under common control with the Company without the
consent of Mr. Stahl.
23. VOLUNTARY EXECUTION OF AGREEMENT. This Agreement is executed
voluntarily and without any duress or undue influence on the part or behalf of
the Parties hereto, with the full intent of releasing all claims. The Parties
acknowledge that:
(a) they have read this Agreement;
(b) they have been represented in the preparation, negotiation, and
execution of this Agreement by legal counsel of their own choice or that
they have voluntarily declined to seek such counsel;
(c) they understand the terms and consequences of this Agreement and of
the releases it contains; and
(d) they are fully aware of the legal and binding effect of this
Agreement.
[Signature Page Follows]
5
<PAGE>
IN WITNESS WHEREOF, the Parties have executed this Agreement and Mutual
Release on the respective dates set forth below.
<TABLE>
<S> <C>
CENTURA SOFTWARE CORPORATION
Dated as of December , 1997 By:/s/ Samuel Inman
Title: President & Chief Executive Officer
EARL M. STAHL, an individual
Dated as of December 8, 1997 /s/ Earl M. Stahl
Earl M. Stahl
</TABLE>
6
<PAGE>
EXHIBIT A
CONFIDENTIALITY AGREEMENT
7
<PAGE>
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- ------------------------------------------------------------------------------
LOAN AND SECURITY AGREEMENT
by and between
CENTURA SOFTWARE CORPORATION
and
COAST BUSINESS CREDIT,
a division of Southern Pacific Bank
Dated as of January 19, 1998
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
PAGE
----
1. DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
Account Debtor. . . . . . . . . . . . . . . . . . . . . . . . . . . .1
Adjusted Net Worth. . . . . . . . . . . . . . . . . . . . . . . . . .1
Affiliate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
Audit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
Borrower. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
Borrower's Address. . . . . . . . . . . . . . . . . . . . . . . . . .1
Business Day. . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
Change of Control . . . . . . . . . . . . . . . . . . . . . . . . . .1
Closing Date. . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
Coast . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
Code . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2
Collateral. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2
Credit Limit. . . . . . . . . . . . . . . . . . . . . . . . . . . . .2
Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2
Deposit Account . . . . . . . . . . . . . . . . . . . . . . . . . . .2
Dollars or $. . . . . . . . . . . . . . . . . . . . . . . . . . . . .2
Early Termination Fee . . . . . . . . . . . . . . . . . . . . . . . .2
Eligible Foreign Receivables. . . . . . . . . . . . . . . . . . . . .2
Eligible Receivables. . . . . . . . . . . . . . . . . . . . . . . . .2
Equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3
Equipment Acquisition Loans . . . . . . . . . . . . . . . . . . . . .3
Event of Default. . . . . . . . . . . . . . . . . . . . . . . . . . .3
GAAP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3
General Intangibles . . . . . . . . . . . . . . . . . . . . . . . . .3
Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4
Investment Property . . . . . . . . . . . . . . . . . . . . . . . . .4
Loan Documents. . . . . . . . . . . . . . . . . . . . . . . . . . . .4
Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4
Material Adverse Effect . . . . . . . . . . . . . . . . . . . . . . .4
Maturity Date . . . . . . . . . . . . . . . . . . . . . . . . . . . .4
Maximum Dollar Amount . . . . . . . . . . . . . . . . . . . . . . . .4
Minimum Monthly Interest. . . . . . . . . . . . . . . . . . . . . . .4
Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4
Permitted Liens . . . . . . . . . . . . . . . . . . . . . . . . . . .4
Person . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5
Prime Rate. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5
Receivable Loans. . . . . . . . . . . . . . . . . . . . . . . . . . .5
Receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5
Renewal Date. . . . . . . . . . . . . . . . . . . . . . . . . . . . .5
Renewal Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5
Solvent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5
Other Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5
2. CREDIT FACILITIES . . . . . . . . . . . . . . . . . . . . . . . . . .6
2.1 Loans. . . . . . . . . . . . . . . . . . . . . . . . . . . . .6
2.2 Intentionally Deleted. . . . . . . . . . . . . . . . . . . . .6
3. INTEREST AND FEES . . . . . . . . . . . . . . . . . . . . . . . . . .6
3.1 Interest . . . . . . . . . . . . . . . . . . . . . . . . . . .6
3.2 Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6
4. SECURITY INTEREST . . . . . . . . . . . . . . . . . . . . . . . . . .6
5. CONDITIONS PRECEDENT. . . . . . . . . . . . . . . . . . . . . . . . .6
5.1 Status of Accounts at Closing. . . . . . . . . . . . . . . . .6
5.2 Minimum Availability . . . . . . . . . . . . . . . . . . . . .6
5.3 Landlord Waiver. . . . . . . . . . . . . . . . . . . . . . . .6
5.4 Executed Agreement . . . . . . . . . . . . . . . . . . . . . .6
5.5 Opinion of Borrower's Counsel. . . . . . . . . . . . . . . . .7
5.6 Priority of Coast's Liens. . . . . . . . . . . . . . . . . . .7
5.7 Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . .7
5.8 Borrower's Existence . . . . . . . . . . . . . . . . . . . . .7
5.9 Organizational Documents . . . . . . . . . . . . . . . . . . .7
5.10 Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . .7
5.11 Due Diligence. . . . . . . . . . . . . . . . . . . . . . . . .7
5.12 Other Documents and Agreements . . . . . . . . . . . . . . . .7
6. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE BORROWER . . . . . .7
6.1 Existence and Authority. . . . . . . . . . . . . . . . . . . .7
6.2 Name; Trade Names and Styles . . . . . . . . . . . . . . . . .7
6.3 Place of Business; Location of Collateral. . . . . . . . . . .8
6.4 Title to Collateral; Permitted Liens . . . . . . . . . . . . .8
6.5 Maintenance of Collateral. . . . . . . . . . . . . . . . . . .8
6.6 Books and Records. . . . . . . . . . . . . . . . . . . . . . .8
6.7 Financial Condition, Statements and Reports. . . . . . . . . .8
-i-
<PAGE>
TABLE OF CONTENTS
(CONTINUED)
PAGE
----
6.8 Tax Returns and Payments; Pension Contributions. . . . . . . .8
6.9 Compliance with Law. . . . . . . . . . . . . . . . . . . . . .9
6.10 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . .9
6.11 Use of Proceeds. . . . . . . . . . . . . . . . . . . . . . . .9
6.12 Computer Associates. . . . . . . . . . . . . . . . . . . . . .9
7. RECEIVABLES . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9
7.1 Representations Relating to Receivables. . . . . . . . . . . .9
7.2 Representations Relating to Documents and Legal Compliance . .9
7.3 Schedules and Documents relating to Receivables. . . . . . . .9
7.4 Collection of Receivables. . . . . . . . . . . . . . . . . . 10
7.5 Remittance of Proceeds . . . . . . . . . . . . . . . . . . . 10
7.6 Disputes . . . . . . . . . . . . . . . . . . . . . . . . . . 10
7.7 Returns. . . . . . . . . . . . . . . . . . . . . . . . . . . 10
7.8 Verification . . . . . . . . . . . . . . . . . . . . . . . . 10
7.9 No Liability . . . . . . . . . . . . . . . . . . . . . . . . 10
8. ADDITIONAL DUTIES OF THE BORROWER . . . . . . . . . . . . . . . . . 11
8.1 Financial and Other Covenants. . . . . . . . . . . . . . . . 11
8.2 Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . 11
8.3 Reports. . . . . . . . . . . . . . . . . . . . . . . . . . . 11
8.4 Access to Collateral, Books and Records. . . . . . . . . . . 11
8.5 Negative Covenants . . . . . . . . . . . . . . . . . . . . . 11
8.6 Litigation Cooperation . . . . . . . . . . . . . . . . . . . 12
8.7 Further Assurances . . . . . . . . . . . . . . . . . . . . . 12
9. TERM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
9.1 Maturity Date. . . . . . . . . . . . . . . . . . . . . . . . 12
9.2 Early Termination. . . . . . . . . . . . . . . . . . . . . . 12
9.3 Payment of Obligations . . . . . . . . . . . . . . . . . . . 12
10. EVENTS OF DEFAULT AND REMEDIES. . . . . . . . . . . . . . . . . . . 13
10.1 Events of Default. . . . . . . . . . . . . . . . . . . . . . 13
10.2 Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . 14
10.3 Standards for Determining Commercial Reasonableness. . . . . 15
10.4 Power of Attorney. . . . . . . . . . . . . . . . . . . . . . 15
10.5 Application of Proceeds. . . . . . . . . . . . . . . . . . . 17
10.6 Remedies Cumulative. . . . . . . . . . . . . . . . . . . . . 17
11. GENERAL PROVISIONS. . . . . . . . . . . . . . . . . . . . . . . . . 17
11.1 Interest Computation . . . . . . . . . . . . . . . . . . . . 17
11.2 Application of Payments. . . . . . . . . . . . . . . . . . . 17
11.3 Charges to Accounts. . . . . . . . . . . . . . . . . . . . . 17
11.4 Monthly Accountings. . . . . . . . . . . . . . . . . . . . . 17
11.5 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . 18
11.6 Severability . . . . . . . . . . . . . . . . . . . . . . . . 18
11.7 Integration. . . . . . . . . . . . . . . . . . . . . . . . . 18
11.8 Waivers. . . . . . . . . . . . . . . . . . . . . . . . . . . 18
11.9 No Liability for Ordinary Negligence . . . . . . . . . . . . 18
11.10 Amendment. . . . . . . . . . . . . . . . . . . . . . . . . . 18
11.11 Time of Essence. . . . . . . . . . . . . . . . . . . . . . . 18
11.12 Attorneys Fees, Costs and Charges. . . . . . . . . . . . . . 18
11.13 Benefit of Agreement . . . . . . . . . . . . . . . . . . . . 19
11.14 Publicity. . . . . . . . . . . . . . . . . . . . . . . . . . 19
11.15 Paragraph Headings; Construction . . . . . . . . . . . . . . 19
11.16 Governing Law; Jurisdiction; Venue . . . . . . . . . . . . . 19
11.17 Mutual Waiver of Jury Trial. . . . . . . . . . . . . . . . . 19
-ii-
<PAGE>
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- ------------------------------------------------------------------------------
COAST
LOAN AND SECURITY AGREEMENT
Borrower: Centura Software Corporation
Address: 975 Island Drive
Redwood Shores, California 94065
Date: January __, 1998
THIS LOAN AND SECURITY AGREEMENT is entered into on the above date between
COAST BUSINESS CREDIT, a division of Southern Pacific Bank ("Coast"), a
California corporation, with offices at 12121 Wilshire Boulevard, Suite 1111,
Los Angeles, California 90025, and the borrower(s) named above (the
"Borrower"), whose chief executive office is located at the above address
("Borrower's Address"). The Schedule to this Agreement (the "Schedule")
shall for all purposes be deemed to be a part of this Agreement, and the same
is an integral part of this Agreement. (Definitions of certain terms used in
this Agreement are set forth in Section 1 below.)
1. DEFINITIONS. As used in this Agreement, the following terms have the
following meanings:
"ACCOUNT DEBTOR" means the obligor on a Receivable or General Intangible.
"ADJUSTED NET WORTH" means consolidated owner's equity plus subordinated
debt otherwise permitted hereunder determined in accordance with GAAP.
"AFFILIATE" means, with respect to any Person, a relative, partner,
shareholder, director, officer, or employee of such Person, or any parent or
subsidiary of such Person, or any Person controlling, controlled by or under
common control with such Person.
"AUDIT" means to inspect, audit and copy Borrower's books and records
and the Collateral.
"BORROWER" has the meaning set forth in the
introduction to this Agreement.
"BORROWER'S ADDRESS" has the meaning set forth in the introduction to
this Agreement.
"BUSINESS DAY" means a day on which Coast is open for business.
"CHANGE OF CONTROL" shall be deemed to have occurred at such time as a
"person" or "group" (within the meaning of Sections 13(d) and 14(d)(2) of the
Securities Exchange Act of 1934) (other than the current holders of the
ownership interests in any Borrower) becomes the "beneficial owner" (as
defined in Rule 13d-3 under the Securities Exchange Act of 1934), directly or
indirectly, as a result of any single transaction, of more than forty nine
percent (49%) of the total voting power of all classes of stock or other
ownership interests then outstanding of any Borrower normally entitled to
vote in the election of directors or analogous governing body.
"CLOSING DATE" date of the initial funding under this Agreement.
"COAST" has the meaning set forth in the introduction to this Agreement.
-1-
<PAGE>
COAST BUSINESS CREDIT LOAN AND SECURITY AGREEMENT
- ------------------------------------------------------------------------------
"CODE" means the Uniform Commercial Code as adopted and in effect in the
State of California from time to time.
"COLLATERAL" has the meaning set forth in Section 4 hereof.
"CREDIT LIMIT" means the maximum amount of Loans that Coast may make to
Borrower pursuant to the amounts and percentages shown on the Schedule.
"DEFAULT" means any event which with notice or passage of time or both,
would constitute an Event of Default.
"DEPOSIT ACCOUNT" has the meaning set forth in Section 9105 of the Code.
"DOLLARS or $" means United States dollars.
"EARLY TERMINATION FEE" means the amount set forth on the Schedule that
Borrower must pay Coast if this Agreement is terminated by Borrower or Coast
pursuant to Section 9.2 hereof.
"ELIGIBLE FOREIGN RECEIVABLES" means Receivables arising from Borrower's
customers located outside the United States which Coast otherwise approves
for borrowing in its sole and absolute discretion. Without limiting the
foregoing, Coast will consider the following in determining the eligibility
of such receivables: (i) whether the Borrower's goods are shipped backed by
an irrevocable letter of credit satisfactory to Coast (as to form, substance,
and issuer or domestic confirming bank) that has been delivered to Coast and
is directly drawable by Coast, or (ii) whether the Borrower's customer is a
large or rated company having a verifiable credit history, or (iii) whether
Borrower's customer is a foreign subsidiary of a customer of Borrower that is
a company that was formed and has its primary place of business within the
United States, or (iv) whether Borrower's customer is a large foreign
corporation, or (v) whether Borrower's customer is a foreign company with a
Dun & Bradstreet rating of 3A2 or better, or (vi) whether Borrower's goods
are shipped to a company that has credit insurance acceptable to Coast in its
discretion.
"ELIGIBLE RECEIVABLES" means Receivables and Eligible Foreign
Receivables arising in the ordinary course of Borrower's business from the
sale of goods or rendition of services, which Coast, in its sole judgment,
shall deem eligible for borrowing, based on such considerations as Coast may
from time to time deem appropriate. Eligible Receivables shall not include
the following:
(a) Receivables that the Account Debtor has failed to pay within 60
days of due date not to exceed 90 days of invoice date or Accounts with
selling terms of more than 60 days;
(b) Receivables owed by an Account Debtor or its Affiliates where
twenty five percent (25%) or more of all Receivables owed by that Account
Debtor (or its Affiliates) are deemed ineligible under clause (a) above;
(c) Receivables with respect to which the Account Debtor is an
employee, Affiliate, or agent of Borrower;
(d) Receivables with respect to which goods are placed on
consignment, guaranteed sale, sale or return, sale on approval, bill and
hold, or other terms by reason of which the payment by the Account Debtor may
be conditional;
(e) Receivables, other than Eligible Foreign Receivables, that are
not payable in Dollars or with respect to which the Account Debtor: (i) does
not maintain its chief executive office in the United States, or (ii) is not
organized under the laws of the United States or any State thereof, or (iii)
is the government of any foreign country or sovereign state, or of any state,
province, municipality, or other political subdivision thereof, or of any
department, agency, public corporation, or other instrumentality thereof;
(f) Receivables with respect to which the Account Debtor is either
(i) the United States or any department, agency, or instrumentality of the
United States (exclusive, however, of Accounts with respect to which Borrower
has complied, to the satisfaction of Coast, with the Assignment of Claims
Act, 31 U.S.C. " 3727), or (ii) any State of the United States (exclusive,
however, of Receivables owed by any State that does not have a statutory
counterpart to the Assignment of Claims Act);
(g) Receivables with respect to which the Account Debtor is a
creditor of Borrower, has or has asserted a right of setoff, has disputed its
liability, or has made any claim with
2
<PAGE>
COAST BUSINESS CREDIT LOAN AND SECURITY AGREEMENT
- ------------------------------------------------------------------------------
respect to the Receivables or Receivables owing from Computer Associates
unless a nonoffset letter satisfactory to Coast has been obtained;
(h) Receivables with respect to an Account Debtor which is a
domestic distributor whose total obligations owing to Borrower exceed 5% of
all Eligible Receivables with a total concentration cap of 30% for domestic
Eligible Receivables for all domestic distributors, to the extent of the
obligations owing by such Account Debtor in excess of such percentage. A 25%
concentration shall apply in all other cases. In order to exceed the above
referenced limits, Borrower must obtain the prior written approval of Coast,
which approval is subject to the discretion of Coast, reasonably exercised,
on an Account Debtor by Account Debtor basis;
(i) Receivables with respect to which the Account Debtor is subject
to any reorganization, bankruptcy, insolvency, arrangement, readjustment of
debt, dissolution or liquidation proceeding, or becomes insolvent, or goes
out of business;
(j) Receivables the collection of which Coast, in its reasonable
credit judgment, believes to be doubtful by reason of the Account Debtor's
financial condition;
(k) Receivables with respect to which the goods giving rise to such
Receivable have not been shipped and billed to the Account Debtor, the
services giving rise to such Receivable have not been performed and accepted
by the Account Debtor, or the Receivable otherwise does not represent a final
sale;
(l) Receivables with respect to which the Account Debtor is located
in the states of New Jersey, Minnesota, Indiana, or West Virginia (or any
other state that requires a creditor to file a Business Activity Report or
similar document in order to bring suit or otherwise enforce its remedies
against such Account Debtor in the courts or through any judicial process of
such state), unless Borrower has qualified to do business in New Jersey,
Minnesota, Indiana, West Virginia, or such other states, or has filed a
Notice of Business Activities Report with the applicable division of
taxation, the department of revenue, or with such other state offices, as
appropriate, for the then-current year, or is exempt from such filing
requirement; and
(m) Receivables that represent progress payments or other advance
billings that are due prior to the completion of performance by Borrower of
the subject contract for goods or services.
"EQUIPMENT" means all of Borrower's present and hereafter acquired
machinery, molds, machine tools, motors, furniture, equipment, furnishings,
fixtures, trade fixtures, motor vehicles, tools, parts, dies, jigs, goods and
other goods (other than Inventory) of every kind and description used in
Borrower's operations or owned by Borrower and any interest in any of the
foregoing, and all attachments, accessories, accessions, replacements,
substitutions, additions or improvements to any of the foregoing, wherever
located.
"EQUIPMENT ACQUISITION LOANS" means the Loans described in Section [2(d)]
of the Schedule.
"EVENT OF DEFAULT" means any of the events set forth in Section 10.1 of
this Agreement.
"GAAP" means generally accepted accounting principles as in effect from
time to time in the United States, consistently applied.
"GENERAL INTANGIBLES" means all general intangibles of Borrower, whether
now owned or hereafter created or acquired by Borrower, including, without
limitation, all choses in action, causes of action, corporate or other
business records, Deposit Accounts, investment property, inventions, designs,
drawings, blueprints, patents, patent applications, trademarks and the
goodwill of the business symbolized thereby, names, trade names, trade
secrets, goodwill, copyrights, registrations, licenses, franchises, customer
lists, security and other deposits, rights in all litigation presently or
hereafter pending for any cause or claim (whether in contract, tort or
otherwise), and all judgments now or hereafter arising therefrom, all claims
of Borrower against Coast, rights to purchase or sell real or personal
property, rights as a licensor or licensee of any kind, royalties, telephone
numbers, proprietary information, purchase orders, and all insurance policies
and claims (including without limitation life insurance, key man insurance,
credit insurance, liability insurance, property insurance and other
insurance), tax refunds and claims, computer programs, discs, tapes and tape
files, claims under guaranties, security interests or other security held by
or granted to Borrower, all rights to indemnification
3
<PAGE>
COAST BUSINESS CREDIT LOAN AND SECURITY AGREEMENT
- ------------------------------------------------------------------------------
and all other intangible property of every kind and nature (other than
Receivables).
"INVENTORY" means all of Borrower's now owned and hereafter acquired
goods, merchandise or other personal property, wherever located, to be
furnished under any contract of service or held for sale or lease (including
without limitation all raw materials, work in process, finished goods and
goods in transit, and including without limitation all farm products), and
all materials and supplies of every kind, nature and description which are or
might be used or consumed in Borrower's business or used in connection with
the manufacture, packing, shipping, advertising, selling or finishing of such
goods, merchandise or other personal property, and all warehouse receipts,
documents of title and other documents representing any of the foregoing.
"INVESTMENT PROPERTY" has the meaning set forth in Section 9115 of the
Code as in effect as of the date hereof.
"LOAN DOCUMENTS" means this Agreement, the agreements and documents
listed on Section 5 of the Schedule, and any other agreement, instrument or
document executed in connection herewith or therewith.
"LOANS" has the meaning set forth in Section 2.1 hereof.
"MATERIAL ADVERSE EFFECT" means a material adverse effect on (i) the
business, assets, condition (financial or otherwise) or results of operations
of Borrower or any subsidiary of Borrower or any guarantor of any of the
Obligations, (ii) the ability of Borrower or any guarantor of any of the
Obligations to perform its obligations under this Agreement (including,
without limitation, repayment of the Obligations as they come due) or (iii)
the validity or enforceability of this Agreement or any other agreement or
document entered into by any party in connection herewith, or the rights or
remedies of Coast hereunder or thereunder.
"MATURITY DATE" means the date that this Agreement shall cease to be
effective, as set forth on the Schedule, subject to the provisions of Section
9.1 and 9.2 hereof.
"MAXIMUM DOLLAR AMOUNT" has the meaning set forth in Section 2 of the
Schedule.
"MINIMUM MONTHLY INTEREST" has the meaning set forth in Section 3 of
the Schedule.
"OBLIGATIONS" means all present and future Loans, advances, debts,
liabilities, obligations, guaranties, covenants, duties and indebtedness at
any time owing by Borrower to Coast, whether evidenced by this Agreement or
any note or other instrument or document, whether arising from an extension
of credit, opening of a letter of credit, banker's acceptance, loan,
guaranty, indemnification or otherwise, whether direct or indirect
(including, without limitation, those acquired by assignment and any
participation by Coast in Borrower's debts owing to others), absolute or
contingent, due or to become due, including, without limitation, all
interest, charges, expenses, fees, attorneys' fees (including attorneys' fees
and expenses incurred in bankruptcy), expert witness fees, audit fees, letter
of credit fees, collateral monitoring fees, closing fees, facility fees,
termination fees, minimum interest charges and any other sums chargeable to
Borrower under this Agreement or under any other present or future instrument
or agreement between Borrower and Coast.
"PERMITTED LIENS" means the following:
(a) purchase money security interests in specific items of
Equipment;
(b) leases of specific items of Equipment;
(c) liens for taxes not yet payable;
(d) additional security interests and liens consented to in writing
by Coast, which consent shall not be unreasonably withheld;
(e) security interests being terminated substantially concurrently
with this Agreement;
(f) liens of materialmen, mechanics, warehousemen, carriers, or
other similar liens arising in the ordinary course of business and securing
obligations which are not delinquent;
(g) liens incurred in connection with the extension, renewal or
refinancing of the indebtedness secured by liens of the type described above
in clauses (a) or (b) above, provided
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COAST BUSINESS CREDIT LOAN AND SECURITY AGREEMENT
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that any extension, renewal or replacement lien is limited to the property
encumbered by the existing lien and the principal amount of the indebtedness
being extended, renewed or refinanced does not increase;
(h) liens in favor of customs and revenue authorities which secure
payment of customs duties in connection with the importation of goods; or
(i) licenses or sublicenses of intellectual property granted in the
ordinary course of Borrower's business not interfering in any material
respect with the business of Borrower or of any licensor under any license
provided that such licenses or sublicenses do not prohibit the grant of the
security interest to Coast hereunder.
Coast will have the right to require, as a condition to its consent under
subparagraph (d) above, that the holder of the additional security interest
or lien sign an intercreditor agreement on Coast's then standard form,
acknowledge that the security interest is subordinate to the security
interest in favor of Coast, and agree not to take any action to enforce its
subordinate security interest so long as any Obligations remain outstanding,
and that Borrower agree that any uncured default in any obligation in excess
of $100,000 secured by the subordinate security interest shall also
constitute an Event of Default under this Agreement.
"PERSON" means any individual, sole proprietorship, general partnership,
limited partnership, limited liability partnership, limited liability
company, joint venture, trust, unincorporated organization, association,
corporation, government, or any agency or political division thereof, or any
other entity.
"PRIME RATE" means the actual "Reference Rate" or the substitute
therefor of the Bank of America NT & SA whether or not that rate is the
lowest interest rate charged by said bank. If the Prime Rate, as defined, is
unavailable, "Prime Rate" shall mean the highest of the prime rates published
in the Wall Street Journal on the first business day of the applicable month,
as the base rate on corporate loans at large U.S. money center commercial
banks.
"RECEIVABLE LOANS" means the Loans described in Section 2(a) of the
Schedule.
"RECEIVABLES" means all of Borrower's now owned and hereafter acquired
accounts (whether or not earned by performance), letters of credit, contract
rights, chattel paper, instruments, securities, documents, securities
accounts, security entitlements, commodity contracts, commodity accounts,
investment property and all other forms of obligations at any time owing to
Borrower, all guaranties and other security therefor, all merchandise
returned to or repossessed by Borrower, and all rights of stoppage in transit
and all other rights or remedies of an unpaid vendor, lienor or secured party.
"RENEWAL DATE" shall mean the Maturity Date if this Agreement is renewed
pursuant to Section 9.1 hereof, and each anniversary thereafter that this
Agreement is renewed pursuant to Section 9.1 hereof.
"RENEWAL FEE" means the fee that Borrower must pay Coast upon renewal of
this Agreement pursuant to Section 9.1 hereof, in the amount set forth on the
Schedule.
"SOLVENT" means, with respect to any Person on a particular date, that
on such date (a) at fair valuations, all of the properties and assets of such
Person are greater than the sum of the debts, including contingent
liabilities, of such Person, (b) the present fair salable value of the
properties and assets of such Person is not less than the amount that will be
required to pay the probable liability of such Person on its debts as they
become absolute and matured, (c) such Person is able to realize upon its
properties and assets and pay its debts and other liabilities, contingent
obligations and other commitments as they mature in the normal course of
business, (d) such Person does not intend to, and does not believe that it
will, incur debts beyond such Person's ability to pay as such debts mature,
and (e) such Person is not engaged in business or a transaction, and is not
about to engage in business or a transaction, for which such Person's
properties and assets would constitute unreasonably small capital after
giving due consideration to the prevailing practices in the industry in which
such Person is engaged. In computing the amount of contingent liabilities at
any time, it is intended that such liabilities will be computed at the amount
that, in light of all the facts and circumstances existing at such time,
represents the amount that reasonably can be expected to become an actual or
matured liability.
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COAST BUSINESS CREDIT LOAN AND SECURITY AGREEMENT
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"OTHER TERMS" All accounting terms used in this Agreement, unless
otherwise indicated, shall have the meanings given to such terms in
accordance with GAAP. All other terms contained in this Agreement, unless
otherwise indicated, shall have the meanings provided by the Code, to the
extent such terms are defined therein.
2. CREDIT FACILITIES.
2.1 LOANS. Coast will make loans to Borrower (the "Loans"), in amounts
and in percentages to be determined by Coast in its good faith discretion, up
to the Credit Limit, provided no Default or Event of Default has occurred and
is continuing. In addition, Coast may create reserves against or reduce its
advance rates based upon Eligible Receivables without declaring a Default or
an Event of Default if it determines that there has occurred a Material
Adverse Effect.
2.2 INTENTIONALLY DELETED.
3. INTEREST AND FEES.
3.1 INTEREST. All Loans and all other monetary Obligations shall bear
interest at the rate shown on the Schedule, except where expressly set forth
to the contrary in this Agreement. Interest shall be payable monthly, on the
last day of the month. Interest may, in Coast's discretion, be charged to
Borrower's loan account, and the same shall thereafter bear interest at the
same rate as the other Loans. Regardless of the amount of Obligations that
may be outstanding from time to time, Borrower shall pay Coast Minimum
Monthly Interest during the term of this Agreement with respect to the
Receivable Loans and the Inventory Loans in the amount set forth on the
Schedule.
3.2 FEES. Borrower shall pay Coast the fee(s) shown on the Schedule,
which are in addition to all interest and other sums payable to Coast and are
deemed fully earned and are nonrefundable.
4. SECURITY INTEREST.
To secure the payment and performance of all of the Obligations when
due, Borrower hereby grants to Coast a security interest in all of Borrower's
interest in the following, whether now owned or hereafter acquired, and
wherever located: All Receivables, Inventory, Equipment, Investment
Property, and General Intangibles, including, without limitation, all of
Borrower's Deposit Accounts, and all money, and all property now or at any
time in the future in Coast's possession (including claims and credit
balances), and all proceeds of any of the foregoing (including proceeds of
any insurance policies, proceeds of proceeds, and claims against third
parties), all products of any of the foregoing, and all books and records
related to any of the foregoing (all of the foregoing, together with all
other property in which Coast may now or in the future be granted a lien or
security interest, is referred to herein, collectively, as the "Collateral")
5. CONDITIONS PRECEDENT.
The obligation of Coast to make the Loans is subject to the
satisfaction, in the sole discretion of Coast, at or prior to the first
advance of funds hereunder, of each, every and all of the following
conditions:
5.1 STATUS OF ACCOUNTS AT CLOSING. No accounts payable shall be due and
unpaid 120 days past invoice date except for such accounts payable being
contested in good faith in appropriate proceedings and for which adequate
reserves have been provided.
5.2 MINIMUM AVAILABILITY. Borrower shall have minimum availability
immediately following the initial funding in the amount set forth on the
Schedule.
5.3 LANDLORD WAIVER. Coast shall have received duly executed
(a) landlord waivers and access agreements in form and
substance satisfactory to Coast, in Coast's sole and absolute discretion,
and, when deemed appropriate by Coast, in form for recording in the
appropriate recording office, with respect to all leased locations where
Borrower maintains any inventory or equipment.
(b) warehouse waivers in form and substance satisfactory to
Coast, in Coast's sole and absolute discretion, and when deemed appropriate
by Coast, in form for recording in the appropriate recording office, with
respect to all warehouse locations where Borrower maintains any inventory or
equipment.
5.4 EXECUTED AGREEMENT. Coast shall have received this Agreement duly
executed and in
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COAST BUSINESS CREDIT LOAN AND SECURITY AGREEMENT
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form and substance satisfactory to Coast in its sole and absolute discretion.
5.5 OPINION OF BORROWER'S COUNSEL. Coast shall have received an opinion
of Borrower's counsel, in form and substance satisfactory to Coast in its
sole and absolute discretion.
5.6 PRIORITY OF COAST'S LIENS. Coast shall have received the results of
"of record" searches satisfactory to Coast in its sole and absolute
discretion, reflecting its Uniform Commercial Code filings against Borrower
indicating that Coast has a perfected, first priority lien in and upon all of
the Collateral, subject only to Permitted Liens.
5.7 INSURANCE. Coast shall have received copies of the insurance
binders or certificates evidencing Borrower's compliance with Section 8.2
hereof, including lender's loss payee endorsements.
5.8 BORROWER'S EXISTENCE. Coast shall have received copies of
Borrower's articles or certificate of incorporation and all amendments
thereto, and a Certificate of Good Standing, each certified by the Secretary
of State of the state of Borrower's organization, and dated a recent date
prior to the Closing Date, and Coast shall have received Certificates of
Foreign Qualification for Borrower from the Secretary of State of each state
wherein the failure to be so qualified could have a Material Adverse Effect.
5.9 ORGANIZATIONAL DOCUMENTS. Coast shall have received copies of
Borrower's By-laws and all amendments thereto, and Coast shall have received
copies of the resolutions of the board of directors of Borrower, authorizing
the execution and delivery of this Agreement and the other documents
contemplated hereby, and authorizing the transactions contemplated hereunder
and thereunder, and authorizing specific officers of Borrower to execute the
same on behalf of Borrower, in each case certified by the Secretary or other
acceptable officer of Borrower as of the Closing Date.
5.10 TAXES. Coast shall have received evidence from Borrower that
Borrower has complied with all tax withholding and Internal Revenue Service
regulations, in form and substance satisfactory to Coast in its sole and
absolute discretion and that all taxes are current.
5.11 DUE DILIGENCE. Coast shall have completed its due diligence with
respect to Borrower.
5.12 OTHER DOCUMENTS AND AGREEMENTS. Coast shall have received such
other agreements, instruments and documents as Coast may require in
connection with the transactions contemplated hereby, all in form and
substance satisfactory to Coast in Coast's sole and absolute discretion, and
in form for filing in the appropriate filing office, including, but not
limited to, those documents listed in Section 5 of the Schedule.
6. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE BORROWER.
In order to induce Coast to enter into this Agreement and to make Loans,
Borrower represents and warrants to Coast as follows, and Borrower covenants
that the following representations will continue to be true, and that
Borrower will at all times comply with all of the following covenants:
6.1 EXISTENCE AND AUTHORITY. Borrower is and will continue to be, duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its organization. Borrower is and will continue to be
qualified and licensed to do business in all jurisdictions in which any
failure to do so would have a Material Adverse Effect. The execution,
delivery and performance by Borrower of this Agreement, and all other
documents contemplated hereby (a) have been duly and validly authorized, (b)
are enforceable against Borrower in accordance with their terms (except as
enforcement may be limited by equitable principles and by bankruptcy,
insolvency, reorganization, moratorium or similar laws relating to creditors'
rights generally), and (c) do not violate Borrower's articles or certificate
of incorporation, or Borrower's by-laws, or any law or any material agreement
or instrument which is binding upon Borrower or its property, and (d) do not
constitute grounds for acceleration of any material indebtedness or
obligation under any material agreement or instrument which is binding upon
Borrower or its property.
6.2 NAME; TRADE NAMES AND STYLES. The name of Borrower set forth in the
heading to this Agreement is its correct name. Listed on the Schedule are
all prior names of Borrower and all of Borrower's present and prior trade
names. Borrower shall give Coast thirty (30) days' prior written notice
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COAST BUSINESS CREDIT LOAN AND SECURITY AGREEMENT
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before changing its name or doing business under any other name. Borrower
has complied, and will in the future comply, with all laws relating to the
conduct of business under a fictitious business name.
6.3 PLACE OF BUSINESS; LOCATION OF COLLATERAL. The address set forth
in the heading to this Agreement is Borrower's chief executive office. In
addition, Borrower has places of business and Collateral is located only at the
locations set forth on the Schedule. Borrower will give Coast at least thirty
(30) days' prior written notice before opening any additional place of business,
changing its chief executive office, or moving any of the Collateral to a
location other than Borrower's Address or one of the locations set forth on the
Schedule.
6.4 TITLE TO COLLATERAL; PERMITTED LIENS. Borrower is now, and will
at all times in the future be, the sole owner of all the Collateral, except for
items of Equipment which are leased by Borrower. The Collateral now is and will
remain free and clear of any and all liens, charges, security interests,
encumbrances and adverse claims, except for Permitted Liens. Coast now has, and
will continue to have, a first-priority perfected and enforceable security
interest in all of the Collateral, subject only to the Permitted Liens, and
Borrower will at all times defend Coast and the Collateral against all claims of
others. None of the Collateral now is or will be affixed to any real property
in such a manner, or with such intent, as to become a fixture. Borrower is not
and will not become a lessee under any real property lease pursuant to which the
lessor may obtain any rights in any of the Collateral and no such lease now
prohibits, restrains, impairs or will prohibit, restrain or impair Borrower's
right to remove any Collateral from the leased premises. Whenever any
Collateral is located upon premises in which any third party has an interest
(whether as owner, mortgagee, beneficiary under a deed of trust, lien or
otherwise), Borrower shall, whenever requested by Coast, use its best efforts to
cause such third party to execute and deliver to Coast, in form acceptable to
Coast, such waivers and subordinations as Coast shall specify, so as to ensure
that Coast's rights in the Collateral are, and will continue to be, superior to
the rights of any such third party. Borrower will keep in full force and
effect, and will comply with all the terms of, any lease of real property where
any of the Collateral now or in the future may be located.
6.5 MAINTENANCE OF COLLATERAL. Borrower will maintain the Collateral
in good working condition, and Borrower will not use the Collateral for any
unlawful purpose. Borrower will immediately advise Coast in writing of any
material loss or damage to the Collateral.
6.6 BOOKS AND RECORDS. Borrower has maintained and will maintain at
Borrower's Address complete and accurate books and records, comprising an
accounting system in accordance with GAAP.
6.7 FINANCIAL CONDITION, STATEMENTS AND REPORTS. All financial
statements now or in the future delivered to Coast have been, and will be,
prepared in conformity with GAAP (except, in the case of unaudited financial
statements, for the absence of footnotes and subject to normal year-end
adjustments) and now and in the future will fairly reflect the financial
condition of Borrower, at the times and for the periods therein stated. Between
the last date covered by any such statement provided to Coast and the date
hereof, there has been no Material Adverse Effect. Borrower is now and will
continue to be Solvent.
6.8 TAX RETURNS AND PAYMENTS; PENSION CONTRIBUTIONS. Borrower has
timely filed, and will timely file, all tax returns and reports required by
foreign, federal, state and local law, and Borrower has timely paid, and will
timely pay, all foreign, federal, state and local taxes, assessments, deposits
and contributions now or in the future owed by Borrower. Borrower may, however,
defer payment of any contested taxes, provided that Borrower (i) in good faith
contests Borrower's obligation to pay the taxes by appropriate proceedings
promptly and diligently instituted and conducted, (ii) notifies Coast in writing
of the commencement of, and any material development in, the proceedings, and
(iii) posts bonds or takes any other steps required to keep the contested taxes
from becoming a lien upon any of the Collateral. As of the date hereof,
Borrower is unaware of any claims or adjustments proposed for any of Borrower's
prior tax years which could result in additional taxes becoming due and payable
by Borrower. Borrower has paid, and shall continue to pay all amounts necessary
to fund all present and future pension, profit sharing and deferred compensation
plans in accordance with their terms, and Borrower has not and will not withdraw
from participation in, permit partial or complete termination of, or permit the
occurrence of any other event with respect to, any such plan which
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COAST BUSINESS CREDIT LOAN AND SECURITY AGREEMENT
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could result in any liability of Borrower, including any liability to the
Pension Benefit Guaranty Corporation or its successors or any other
governmental agency. Borrower shall, at all times, utilize the services of an
outside payroll service providing for the automatic deposit of all payroll
taxes payable by Borrower.
6.9 COMPLIANCE WITH LAW. Borrower has complied, and will comply, in
all material respects, with all provisions of all material foreign, federal,
state and local laws and regulations relating to Borrower, including, but not
limited to, the Fair Labor Standards Act, and those relating to Borrower's
ownership of real or personal property, the conduct and licensing of
Borrower's business, and environmental matters.
6.10 LITIGATION. Except as disclosed in the Schedule, there is no
claim, suit, litigation, proceeding or investigation pending or (to best of
Borrower's knowledge) threatened by or against or affecting Borrower in any
court or before any governmental agency (or any basis therefor known to
Borrower) which may result, either separately or in the aggregate, in a
Material Adverse Effect. Borrower will promptly inform Coast in writing of
any claim, proceeding, litigation or investigation in the future threatened
or instituted by or against Borrower involving an amount set forth on the
Schedule.
6.11 USE OF PROCEEDS. All proceeds of all Loans shall be used solely
for lawful business purposes. Borrower is not purchasing or carrying any
"margin stock" (as defined in Regulation G of the Board of Governors of the
Federal Reserve System) and no part of the proceeds of any Loan will be used
to purchase or carry any "margin stock" or to extend credit to others for the
purpose of purchasing or carrying any "margin stock."
6.12 COMPUTER ASSOCIATES. The Obligations of Borrower to Coast shall at
all times constitute permitted Indebtedness as permitted in Section 7(e) of
that certain Floating Rate Convertible Subordinated Note Due 1998 ("Floating
Rate Convertible Note") in the face amount of $10,000,000 made by Borrower in
favor of Computer Associates International, Inc. dated April 3, 1995.
7. RECEIVABLES.
7.1 REPRESENTATIONS RELATING TO RECEIVABLES. Borrower represents and
warrants to Coast as follows: Each Receivable with respect to which Loans
are requested by Borrower shall, on the date each Loan is requested and made,
represent an undisputed bona fide existing unconditional obligation of the
Account Debtor created by the sale, delivery and acceptance of goods or the
rendition of services in the ordinary course of Borrower's business.
7.2 REPRESENTATIONS RELATING TO DOCUMENTS AND LEGAL COMPLIANCE.
Borrower represents and warrants to Coast as follows: All statements made
and all unpaid balances appearing in all invoices, instruments and other
documents evidencing the Receivables are and shall be true and correct and
all such invoices, instruments and other documents and all of Borrower's
books and records are and shall be genuine and in all respects what they
purport to be. All sales and other transactions underlying or giving rise to
each Receivable shall fully comply with all applicable laws and governmental
rules and regulations. All signatures and indorsements on all documents,
instruments, and agreements relating to all Receivables are and shall be
genuine, and all such documents, instruments and agreements are and shall be
legally enforceable in accordance with their terms.
7.3 SCHEDULES AND DOCUMENTS RELATING TO RECEIVABLES. Borrower shall
deliver to Coast via facsimile, unless otherwise directed by Coast, at such
locations and at such intervals as Coast may request, transaction reports and
loan requests, schedules of Receivables, and schedules of collections, all on
Coast's standard forms; provided, however, that Borrower's failure to execute
and deliver the same shall not affect or limit Coast's security interest and
other rights in all of Borrower's Receivables, nor shall Coast's failure to
advance or lend against a specific Receivable affect or limit Coast's
security interest and other rights therein. Loan requests received after
10:30 A.M. Los Angeles, California time, will not be considered by Coast
until the next Business Day. Together with each such schedule, or later if
requested by Coast, Borrower shall furnish Coast with copies (or, at Coast's
request, originals) of all contracts, orders, invoices, and other similar
documents, and all original shipping instructions, delivery receipts, bills
of lading, and other evidence of delivery, for any
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COAST BUSINESS CREDIT LOAN AND SECURITY AGREEMENT
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goods the sale or disposition of which gave rise to such Receivables, and
Borrower warrants the genuineness of all of the foregoing. Borrower shall
also furnish to Coast an aged accounts receivable trial balance in such form
and at such intervals as Coast shall request. In addition, Borrower shall
deliver to Coast the originals of all instruments, chattel paper, security
agreements, guarantees and other documents and property evidencing or
securing any Receivables, upon receipt thereof and in the same form as
received, with all necessary indorsements, all of which shall be with
recourse. Borrower shall also provide Coast with copies of all credit memos
as and when requested by Coast.
7.4 COLLECTION OF RECEIVABLES. Borrower shall have the right to
collect all Receivables, unless and until an Event of Default has occurred.
Borrower shall hold all payments on, and proceeds of, Receivables in trust
for Coast, and Borrower shall deliver all such payments and proceeds to Coast
within one (1) Business Day after receipt by Borrower, in their original
form, duly endorsed to Coast, to be applied to the Obligations in such order
as Coast shall determine. Coast may, in its discretion, require that all
proceeds of Collateral be deposited by Borrower into a lockbox account, or
such other "blocked account" as Coast may specify, pursuant to a blocked
account agreement in such form as Coast may specify. Coast or its designee
may, at any time, notify Account Debtors that Coast has been granted a
security interest in the Receivables.
7.5 REMITTANCE OF PROCEEDS. All proceeds arising from the disposition
of any Collateral shall be delivered to Coast within one (1) Business Day
after receipt by Borrower, in their original form, duly endorsed to Coast, to
be applied to the Obligations in such order as Coast shall determine.
Borrower agrees that it will not commingle proceeds of Collateral with any of
Borrower's other funds or property, but will hold such proceeds separate and
apart from such other funds and property and in an express trust for Coast.
Nothing in this Section limits the restrictions on disposition of Collateral
set forth elsewhere in this Agreement.
7.6 DISPUTES. Borrower shall notify Coast promptly of all disputes or
claims relating to Receivables. Borrower shall not forgive (completely or
partially), compromise or settle any Receivable for less than payment in
full, or agree to do any of the foregoing, except that Borrower may do so,
provided that: (a) Borrower does so in good faith, in a commercially
reasonable manner, in the ordinary course of business, and in arm's length
transactions, which are reported to Coast on the regular reports provided to
Coast; (b) no Default or Event of Default has occurred and is continuing; and
(c) taking into account all such discounts settlements and forgiveness, the
total outstanding Loans will not exceed the Credit Limit. Coast may, at any
time after the occurrence of an Event of Default, settle or adjust disputes
or claims directly with Account Debtors for amounts and upon terms which
Coast considers advisable in its reasonable credit judgment and, in all
cases, Coast shall credit Borrower's Loan account with only the net amounts
received by Coast in payment of any Receivables.
7.7 RETURNS. Provided no Event of Default has occurred and is
continuing, if any Account Debtor returns any Inventory to Borrower in the
ordinary course of its business, Borrower shall promptly determine the reason
for such return and promptly issue a credit memorandum to the Account Debtor
in the appropriate amount. In the event any attempted return occurs after
the occurrence of any Event of Default, Borrower shall (a) hold the returned
Inventory in trust for Coast, (b) segregate all returned Inventory from all
of Borrower's other property, (c) conspicuously label the returned Inventory
as subject to Coast's security interest, and (d) immediately notify Coast of
the return of any Inventory, specifying the reason for such return, the
location and condition of the returned Inventory, and on Coast's request
deliver such returned Inventory to Coast.
7.8 VERIFICATION. Coast may, from time to time, verify directly with
the respective Account Debtors the validity, amount and other matters
relating to the Receivables, by means of mail, telephone or otherwise, either
in the name of Borrower or Coast or such other name as Coast may choose.
7.9 NO LIABILITY. Coast shall not under any circumstances be
responsible or liable for any shortage or discrepancy in, damage to, or loss
or destruction of, any goods, the sale or other disposition of which gives
rise to a Receivable, or for any error, act, omission or delay of any kind
occurring in the settlement, failure to settle, collection or failure to
collect any Receivable, or for settling any Receivable in good faith for less
than the
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full amount thereof, nor shall Coast be deemed to be responsible for any of
Borrower's obligations under any contract or agreement giving rise to a
Receivable. Nothing herein shall, however, relieve Coast from liability for
its own gross negligence or willful misconduct.
8. ADDITIONAL DUTIES OF THE BORROWER.
8.1 FINANCIAL AND OTHER COVENANTS. Borrower shall at all times comply
with the financial and other covenants set forth in the Schedule.
8.2 INSURANCE. Borrower shall, at all times insure all of the tangible
personal property Collateral and carry such other business insurance, with
insurers reasonably acceptable to Coast, in such form and amounts as Coast
may reasonably require, and Borrower shall provide evidence of such insurance
to Coast, so that Coast is satisfied that such insurance is, at all times, in
full force and effect. All liability insurance policies of Borrower shall
name Coast as an additional insured, and all property casualty and related
insurance policies of Borrower shall name Coast as a loss payee thereon and
Borrower shall cause a lender's loss payee endorsement in form reasonably
acceptable to Coast. Upon receipt of the proceeds of any such insurance,
Coast shall apply such proceeds in reduction of the Obligations as Coast
shall determine in its sole discretion, except that, provided no Default or
Event of Default has occurred and is continuing, Coast shall release to
Borrower insurance proceeds with respect to Equipment totaling less than the
amount set forth in Section 8 of the Schedule, which shall be utilized by
Borrower for the replacement of the Equipment with respect to which the
insurance proceeds were paid. Coast may require reasonable assurance that
the insurance proceeds so released will be so used. If Borrower fails to
provide or pay for any insurance, Coast may, but is not obligated to, obtain
the same at Borrower's expense. Borrower shall promptly deliver to Coast
copies of all reports made to insurance companies.
8.3 REPORTS. Borrower, at its expense, shall provide Coast with the
written reports set forth in Section 8 of the Schedule, and such other
written reports with respect to Borrower (including budgets, sales
projections, operating plans and other financial documentation), as Coast
shall from time to time reasonably specify.
8.4 ACCESS TO COLLATERAL, BOOKS AND RECORDS. At reasonable times but
not less frequently than quarterly and on three (3) Business Day's notice (1
Business Day if an Event of Default has occurred and is continuing), Coast,
or its agents, shall have the right to perform Audits. Coast shall take
reasonable steps to keep confidential all confidential information obtained
in any Audit, but Coast shall have the right to disclose any such information
to its auditors, regulatory agencies, and attorneys, and pursuant to any
subpoena or other legal process. The Audits shall be at Borrower's expense
and the charge for the Audits shall be Seven Hundred Fifty Dollars ($750) per
person per day (or such higher amount as shall represent Coast's then current
standard charge for the same), plus reasonable out-of-pocket expenses.
Borrower will not enter into any agreement with any accounting firm, service
bureau or third party to store Borrower's books or records at any location
other than Borrower's Address, without first notifying Coast of the same and
obtaining the written agreement from such accounting firm, service bureau or
other third party to give Coast the same rights with respect to access to
books and records and related rights as Coast has under this Loan Agreement.
8.5 NEGATIVE COVENANTS. Borrower shall not, without Coast's prior
written consent, do any of the following:
(a) merge or consolidate with another entity, except in a transaction
in which (i) the owners of the Borrower hold at least fifty percent (50%) of
the ownership interest in the surviving entity immediately after such merger
or consolidation, and (ii) the Borrower is the surviving entity;
(b) acquire any assets, except (i) in the ordinary course of business,
or (ii) in a transaction or a series of transactions not involving the
payment of an aggregate amount in excess of the amount set forth in Section 8
of the Schedule;
(c) enter into any other transaction outside the ordinary course of
business;
(d) sell or transfer any Collateral, except for the sale of finished
Inventory in the ordinary course of Borrower's business, and except for the
sale of obsolete or unneeded Equipment in the ordinary course of business;
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(e) store any Inventory or other Collateral with any warehouseman or
other third party;
(f) sell any Inventory on a sale-or-return, guaranteed sale,
consignment, or other contingent basis;
(g) make any loans of any money or other assets, except (i) advances to
customers or suppliers in the ordinary course of business, (ii) travel
advances, employee relocation loans and other employee loans and advances in
the ordinary course of business, and (iii) loans to employees, officers and
directors for the purpose of purchasing equity securities of the Borrower;
(h) incur any debts, outside the ordinary course of business, which
would have a Material Adverse Effect;
(i) guarantee or otherwise become liable with respect to the
obligations of another party or entity;
(j) pay or declare any dividends or distributions on the ownership
interests in Borrower (except for dividends or distributions payable solely
in stock form of ownership interests in Borrower) provided that
notwithstanding anything to the contrary herein and so long as no Event of
Default has occurred and is continuing, Borrower may repurchase the stock of
any terminated officer, director or employee in an amount not to exceed the
then amount of Borrower's cash in banks located in the United States less the
Obligations (other than the Loans against the Eligible Foreign Receivables)
then owing to Coast;
(k) make any change in Borrower's capital structure which would have a
Material Adverse Effect; or
(l) dissolve or elect to dissolve.
Transactions permitted by the foregoing provisions of this Section are
only permitted if no Default or Event of Default is continuing or would occur
as a result of such transaction.
8.6 LITIGATION COOPERATION. Should any third-party suit or proceeding
be instituted by or against Coast with respect to any Collateral or relating
to Borrower, Borrower shall, without expense to Coast, make available
Borrower and its officers, employees and agents and Borrower's books and
records, to the extent that Coast may deem them reasonably necessary in order
to prosecute or defend any such suit or proceeding.
8.7 FURTHER ASSURANCES. Borrower agrees, at its expense, on request by
Coast, to execute all documents and take all actions, as Coast, may deem
reasonably necessary or useful in order to perfect and maintain Coast's
perfected security interest in the Collateral, and in order to fully
consummate the transactions contemplated by this Agreement.
9. TERM.
9.1 MATURITY DATE. This Agreement shall continue in effect until the
Maturity Date; provided that the Maturity Date shall automatically be
extended, and this Agreement shall automatically and continuously renew, for
successive additional terms of one year each, unless one party gives written
notice to the other, not less than 120 days prior to the Maturity Date or the
next Renewal Date, that such party elects to terminate this Agreement
effective on the Maturity Date or such next Renewal Date. If this Agreement
is renewed under this Section 9.1, Borrower shall pay to Coast a Renewal Fee
in the amount shown in Section 3 of the Schedule. The Renewal Fee shall be
due and payable on the Renewal Date and thereafter shall bear interest at a
rate equal to the rate applicable to the Receivable Loans.
9.2 EARLY TERMINATION. This Agreement may be terminated prior to the
Maturity Date as follows: (a) by Borrower, effective three (3) Business Days
after written notice of termination is given to Coast; or (b) by Coast at any
time after the occurrence of an Event of Default, without notice, effective
immediately. If this Agreement is terminated by Borrower or by Coast under
this Section 9.2, Borrower shall pay to Coast an Early Termination Fee in the
amount shown in Section 3 of the Schedule. The Early Termination Fee shall
be due and payable on the effective date of termination and thereafter shall
bear interest at a rate equal to the rate applicable to the Receivable Loans.
9.3 PAYMENT OF OBLIGATIONS. On the Maturity Date or on any earlier
effective date of termination, Borrower shall pay and perform in full
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COAST BUSINESS CREDIT LOAN AND SECURITY AGREEMENT
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all Obligations, whether evidenced by installment notes or otherwise, and
whether or not all or any part of such Obligations are otherwise then due and
payable. Notwithstanding any termination of this Agreement, all of Coast's
security interests in all of the Collateral and all of the terms and
provisions of this Agreement shall continue in full force and effect until
all Obligations have been paid and performed in full; provided that, without
limiting the fact that Loans are subject to the discretion of Coast, Coast
may, in its sole discretion, refuse to make any further Loans after
termination. No termination shall in any way affect or impair any right or
remedy of Coast, nor shall any such termination relieve Borrower of any
Obligation to Coast, until all of the Obligations have been paid and
performed in full. Upon payment and performance in full of all the
Obligations and termination of this Agreement, Coast shall promptly deliver
to Borrower termination statements, requests for reconveyances and such other
documents as may be required to fully terminate Coast's security interests.
10. EVENTS OF DEFAULT AND REMEDIES.
10.1 EVENTS OF DEFAULT. The occurrence of any of the following
events shall constitute an "Event of Default" under this Agreement, and
Borrower shall give Coast immediate written notice thereof:
(a) Any warranty, representation, statement, report or certificate made
or delivered to Coast by Borrower or any of Borrower's officers, employees or
agents, now or in the future, shall be untrue or misleading and results in a
Material Adverse Effect; or
(b) Borrower shall fail to pay when due any Loan or any interest
thereon or any other monetary Obligation; or
(c) the total Loans and other Obligations outstanding at any time shall
exceed the Credit Limit; or
(d) Borrower shall fail to deliver the proceeds of Collateral to Coast
as provided in Section 7.5 above, or shall fail to give Coast access to its
books and records or Collateral as provided in Section 8.4 above, or shall
breach any negative covenant set forth in Section 8.5 above; or
(e) Borrower shall fail to comply with the financial covenants (if any)
set forth in the Schedule or shall fail to perform any other non-monetary
Obligation which by its nature cannot be cured; or
(f) Borrower shall fail to perform any other non-monetary Obligation,
which failure is not cured within five (5) Business Days after the date due;
or
(g) Any levy, assessment, attachment, seizure, lien or encumbrance
(other than a Permitted Lien) is made on all or any part of the Collateral
which is not cured within ten (10) days after the occurrence of the same; or
(h) any default or event of default occurs under any obligation in
excess of $100,000 secured by a Permitted Lien, which is not cured within any
applicable cure period or waived in writing by the holder of the Permitted
Lien or if that certain Floating Rate Convertible Note is not converted to
equity within 30 days from the date hereof or if there is a declared default
or breach of the Floating Rate Convertible Note; or
(i) Borrower breaches any material contract or obligation, which has or
may reasonably be expected to have a Material Adverse Effect; or
(j) Dissolution, termination of existence, insolvency or business
failure of Borrower or any guarantor of any of the Obligations; or
appointment of a receiver, trustee or custodian, for all or any part of the
property of, assignment for the benefit of creditors by, or the commencement
of any proceeding by Borrower or any guarantor of any of the Obligations
under any reorganization, bankruptcy, insolvency, arrangement, readjustment
of debt, dissolution or liquidation law or statute of any jurisdiction, now
or in the future in effect; or
(k) the commencement of any proceeding against Borrower or any
guarantor of any of the Obligations under any reorganization, bankruptcy,
insolvency, arrangement, readjustment of debt, dissolution or liquidation law
or statute of any jurisdiction, now or in the future in effect, which is (i)
not timely controverted, or (ii) not cured by the dismissal thereof within
thirty (30) days after the date commenced; or
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COAST BUSINESS CREDIT LOAN AND SECURITY AGREEMENT
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(l) revocation or termination of, or limitation or denial of
liability upon, any guaranty of the Obligations or any attempt to do any of
the foregoing, or commencement of proceedings by any guarantor of any of the
Obligations under any bankruptcy or insolvency law; or
(m) revocation or termination of, or limitation or denial of
liability upon, any pledge of any certificate of deposit, securities or other
property or asset of any kind pledged by any third party to secure any or all
of the Obligations, or any attempt to do any of the foregoing, or
commencement of proceedings by or against any such third party under any
bankruptcy or insolvency law; or
(n) Borrower or any guarantor of any of the Obligations makes any
payment on account of any indebtedness or obligation which has been
subordinated to the Obligations, other than as permitted in the applicable
subordination agreement, or if any Person who has subordinated such
indebtedness or obligations terminates or in any way limits his subordination
agreement; or
(o) Except as permitted under Section 8.5(a), Borrower shall
suffer or experience any Change of Control without Coast's prior written
consent, which consent shall be in the discretion of Coast in the exercise of
its reasonable business judgment; or
(p) Borrower shall generally not pay its debts as they become due,
or Borrower shall conceal, remove or transfer any part of its property, with
intent to hinder, delay or defraud its creditors, or make or suffer any
transfer of any of its property which may be fraudulent under any bankruptcy,
fraudulent conveyance or similar law; or
(q) there shall be any Material Adverse Effect.
Coast may cease making any Loans or extending any credit hereunder during any
of the above cure periods.
10.2 REMEDIES. Upon the occurrence, and during the continuance, of any
Event of Default, Coast, at its option, and without notice or demand of any
kind (all of which are hereby expressly waived by Borrower), may do any one
or more of the following:
(a) Cease making Loans or otherwise extending credit to Borrower
under this Agreement or any other document or agreement;
(b) Accelerate and declare all or any part of the Obligations to
be immediately due, payable and performable, notwithstanding any deferred or
installment payments allowed by any instrument evidencing or relating to any
Obligation;
(c) Take possession of any or all of the Collateral wherever it
may be found, and for that purpose Borrower hereby authorizes Coast without
judicial process to enter onto any of Borrower's premises without
interference to search for, take possession of, keep, store or remove any of
the Collateral, and remain on the premises or cause a custodian to remain on
the premises in exclusive control thereof, without charge for so long as
Coast deems it reasonably necessary in order to complete the enforcement of
its rights under this Agreement or any other agreement; provided, however,
that should Coast seek to take possession of any of the Collateral by Court
process, Borrower hereby irrevocably waives:
(i) any bond and any surety or security relating thereto
required by any statute, court rule or otherwise as an incident to such
possession;
(ii) any demand for possession prior to the commencement
of any suit or action to recover possession thereof; and
(iii) any requirement that Coast retain possession of, and
not dispose of, any such Collateral until after trial or final judgment;
(d) Require Borrower to assemble any or all of the Collateral and
make it available to Coast at places designated by Coast which are reasonably
convenient to Coast and Borrower, and to remove the Collateral to such
locations as Coast may deem advisable;
(e) Complete the processing, manufacturing or repair of any
Collateral prior to a disposition thereof and, for such purpose and for the
purpose of removal, Coast shall have the right to use Borrower's premises,
vehicles, hoists, lifts, cranes, equipment and all other property without
charge.
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COAST BUSINESS CREDIT LOAN AND SECURITY AGREEMENT
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Coast is hereby granted a license or other right to use, without charge,
Borrower's labels, patents, copyrights, rights of use of any name, trade
secrets, trade names, trademarks, service marks, and advertising matter, or
any property of a similar nature, as it pertains to the Collateral, in
completing production of, advertising for sale, and selling any Collateral
and Borrower's rights under all licenses and all franchise agreements shall
inure to Coast's benefit;
(f) Sell, lease or otherwise dispose of any of the Collateral, in
its condition at the time Coast obtains possession of it or after further
manufacturing, processing or repair, at one or more public and/or private
sales, in lots or in bulk, for cash, exchange or other property, or on
credit, and to adjourn any such sale from time to time without notice other
than oral announcement at the time scheduled for sale. Coast shall have the
right to conduct such disposition on Borrower's premises without charge, for
such time or times as Coast deems reasonable, or on Coast's premises, or
elsewhere and the Collateral need not be located at the place of disposition.
Coast may directly or through any affiliated company purchase or lease any
Collateral at any such public disposition, and if permissible under
applicable law, at any private disposition. Any sale or other disposition of
Collateral shall not relieve Borrower of any liability Borrower may have if
any Collateral is defective as to title or physical condition or otherwise at
the time of sale;
(g) Demand payment of, and collect any Receivables and General
Intangibles comprising Collateral and, in connection therewith, Borrower
irrevocably authorizes Coast to endorse or sign Borrower's name on all
collections, receipts, instruments and other documents, to take possession of
and open mail addressed to Borrower and remove therefrom payments made with
respect to any item of the Collateral or proceeds thereof, and, in Coast's
sole discretion, to grant extensions of time to pay, compromise claims and
settle Receivables and the like for less than face value; and
(h) Demand and receive possession of any of Borrower's federal and
state income tax returns and the books and records utilized in the
preparation thereof or referring thereto.
All attorneys' fees, expenses, costs, liabilities and obligations
incurred by Coast (including attorneys' fees and expenses incurred in
connection with bankruptcy) with respect to the foregoing shall be due from
the Borrower to Coast on demand. Coast may charge the same to Borrower's loan
account, and the same shall thereafter bear interest at the same rate as is
applicable to the Receivable Loans. Without limiting any of Coast's rights
and remedies, from and after the occurrence of any Event of Default, the
interest rate applicable to the Obligations shall be increased by an
additional three percent per annum.
10.3 STANDARDS FOR DETERMINING COMMERCIAL REASONABLENESS. Borrower and
Coast agree that a sale or other disposition (collectively, "sale") of any
Collateral which complies with the following standards will conclusively be
deemed to be commercially reasonable:
(a) Notice of the sale is given to Borrower at least five (5) days
prior to the sale, and, in the case of a public sale, notice of the sale is
published at least five (5) days before the sale in a newspaper of general
circulation in the county where the sale is to be conducted;
(b) Notice of the sale describes the collateral in general,
non-specific terms;
(c) The sale is conducted at a place designated by Coast, with or
without the Collateral being present;
(d) The sale commences at any time between 8:00 a.m. and 6:00 p.m
Los Angeles, California time;
(e) Payment of the purchase price in cash or by cashier's check or
wire transfer is required; and
(f) With respect to any sale of any of the Collateral, Coast may
(but is not obligated to) direct any prospective purchaser to ascertain
directly from Borrower any and all information concerning the same.
Coast shall be free to employ other methods of noticing and selling the
Collateral, in its discretion, if they are commercially reasonable.
10.4 POWER OF ATTORNEY. Borrower grants to Coast an irrevocable power of
attorney
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COAST BUSINESS CREDIT LOAN AND SECURITY AGREEMENT
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coupled with an interest, authorizing and permitting Coast (acting through
any of its employees, attorneys or agents) at any time, at its option, but
without obligation, with or without notice to Borrower, and at Borrower's
expense, to do any or all of the following, in Borrower's name or otherwise,
but Coast agrees to exercise the following powers in a commercially
reasonable manner:
(a) Execute on behalf of Borrower any documents that Coast may, in
its sole discretion, deem advisable in order to perfect and maintain Coast's
security interest in the Collateral, or in order to exercise a right of
Borrower or Coast, or in order to fully consummate all the transactions
contemplated under this Agreement, and all other present and future
agreements;
(b) Execute on behalf of Borrower any document exercising,
transferring or assigning any option to purchase, sell or otherwise dispose
of or to lease (as lessor or lessee) any real or personal property which is
part of Coast's Collateral or in which Coast has an interest;
(c) Execute on behalf of Borrower, any invoices relating to any
Receivable, any draft against any Account Debtor and any notice to any
Account Debtor, any proof of claim in bankruptcy, any Notice of Lien, claim
of mechanic's, materialman's or other lien, or assignment or satisfaction of
mechanic's, materialman's or other lien;
(d) Take control in any manner of any cash or non-cash items of
payment or proceeds of Collateral; endorse the name of Borrower upon any
instruments, or documents, evidence of payment or Collateral that may come
into Coast's possession;
(e) Endorse all checks and other forms of remittances received by
Coast;
(f) Pay, contest or settle any lien, charge, encumbrance, security
interest and adverse claim in or to any of the Collateral, or any judgment
based thereon, or otherwise take any action to terminate or discharge the
same;
(g) Grant extensions of time to pay, compromise claims and settle
Receivables and General Intangibles for less than face value and execute all
releases and other documents in connection therewith;
(h) Pay any sums required on account of Borrower's taxes or to
secure the release of any liens therefor, or both;
(i) Settle and adjust, and give releases of, any insurance claim
that relates to any of the Collateral and obtain payment therefor;
(j) Instruct any third party having custody or control of any
books or records belonging to, or relating to, Borrower to give Coast the
same rights of access and other rights with respect thereto as Coast has
under this Agreement; and
(k) Take any action or pay any sum required of Borrower pursuant
to this Agreement and any other present or future agreements.
Any and all sums paid and any and all costs, expenses, liabilities,
obligations and attorneys' fees incurred by Coast (including attorneys' fees
and expenses incurred pursuant to bankruptcy) with respect to the foregoing
shall be added to and become part of the Obligations, and shall be payable on
demand. Coast may charge the foregoing to Borrower's loan account and the
foregoing shall thereafter bear interest at the same rate applicable to the
Receivable Loans. In no event shall Coast's rights under the foregoing power
of attorney or any of Coast's other rights under this Agreement be deemed to
indicate that Coast is in control of the business, management or properties
of Borrower. Borrower shall pay, indemnify, defend, and hold Coast and each
of its officers, directors, employees, counsel, agents, and attorneys-in-fact
(each, an "Indemnified Person") harmless (to the fullest extent permitted by
law) from and against any and all claims, demands, suits, actions,
investigations, proceedings, and damages, and all attorneys fees and
disbursements and other costs and expenses actually incurred in connection
therewith (as and when they are incurred and irrespective of whether suit is
brought), at any time asserted against, imposed upon, or incurred by any of
them in connection with or as a result of or related to the execution,
delivery, enforcement, performance, and administration of this Agreement and
any other Loan Documents or the transactions contemplated herein, and with
respect to any investigation, litigation, or proceeding related to
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COAST BUSINESS CREDIT LOAN AND SECURITY AGREEMENT
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this Agreement, any other Loan Document, or the use of the proceeds of the
credit provided hereunder (irrespective of whether any Indemnified Person is
a party thereto), or any act, omission, event or circumstance in any manner
related thereto (all the foregoing, collectively, the "Indemnified
Liabilities"). Borrower shall have no obligation to any Indemnified Person
hereunder with respect to any Indemnified Liability that a court of competent
jurisdiction finally determines to have resulted from the gross negligence or
willful misconduct of such Indemnified Person. This provision shall survive
the termination of this Agreement and the repayment of the Obligations.
10.5 APPLICATION OF PROCEEDS. All proceeds realized as the result of any
sale of the Collateral shall be applied by Coast first to the costs,
expenses, liabilities, obligations and attorneys' fees incurred by Coast in
the exercise of its rights under this Agreement, second to the interest due
upon any of the Obligations, and third to the principal of the Obligations,
in such order as Coast shall determine in its sole discretion. Any surplus
shall be paid to Borrower or other persons legally entitled thereto; Borrower
shall remain liable to Coast for any deficiency. If, Coast, in its sole
discretion, directly or indirectly enters into a deferred payment or other
credit transaction with any purchaser at any sale of Collateral, Coast shall
have the option, exercisable at any time, in its sole discretion, of either
reducing the Obligations by the principal amount of purchase price or
deferring the reduction of the Obligations until the actual receipt by Coast
of the cash therefor.
10.6 REMEDIES CUMULATIVE. In addition to the rights and remedies set
forth in this Agreement, Coast shall have all the other rights and remedies
accorded a secured party in equity, under the Code, and under all other
applicable laws, and under any other instrument or agreement now or in the
future entered into between Coast and Borrower, and all of such rights and
remedies are cumulative and none is exclusive. Exercise or partial exercise
by Coast of one or more of its rights or remedies shall not be deemed an
election, nor bar Coast from subsequent exercise or partial exercise of any
other rights or remedies. The failure or delay of Coast to exercise any
rights or remedies shall not operate as a waiver thereof, but all rights and
remedies shall continue in full force and effect until all of the Obligations
have been indefeasibly paid and performed.
11. GENERAL PROVISIONS.
11.1 INTEREST COMPUTATION. In computing interest on the Obligations, all
checks, wire transfers and other items of payment received by Coast
(including proceeds of Receivables and payment of the Obligations in full)
shall be deemed applied by Coast on account of the Obligations three (3)
Business Days after receipt by Coast of immediately available funds, and, for
purposes of the foregoing, any such funds received after 10:30 AM Los
Angeles, California time, on any day shall be deemed received on the next
Business Day. Coast shall be entitled to charge Borrower's account for such
three (3) Business Days of "clearance" or "float" at the rate(s) set forth in
Section 3 of the Schedule on all checks, wire transfers and other items
received by Coast, regardless of whether such three (3) Business Days of
"clearance" or "float" actually occur, and shall be deemed to be the
equivalent of charging three (3) Business Days of interest on such
collections. This across-the-board three (3) Business Day clearance or float
charge on all collections is acknowledged by the parties to constitute an
integral aspect of the pricing of Coast's financing of Borrower.
Notwithstanding the foregoing, if a lock box or blocked account is
established in form and substance acceptable in the discretion of Coast, the
float or clearance days in this Section 11.1 shall be reduced to one (1)
Business Day. Coast shall not, however, be required to credit Borrower's
account for the amount of any item of payment which is unsatisfactory to
Coast in its sole discretion, and Coast may charge Borrower's loan account
for the amount of any item of payment which is returned to Coast unpaid.
11.2 APPLICATION OF PAYMENTS. Subject to Section 7.5 hereof, all
payments with respect to the Obligations may be applied, and in Coast's sole
discretion reversed and re-applied, to the Obligations, in such order and
manner as Coast shall determine in its sole discretion.
11.3 CHARGES TO ACCOUNTS. Coast may, in its discretion, require that
Borrower pay monetary Obligations in cash to Coast, or charge them to
Borrower's Loan account, in which event they will bear interest from the date
due to the date paid at the same rate applicable to the Loans.
11.4 MONTHLY ACCOUNTINGS. Coast shall provide Borrower monthly with an
account of advances, charges, expenses and payments made
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pursuant to this Agreement. Such account shall be deemed correct, accurate
and binding on Borrower and an account stated (except for reverses and
reapplications of payments made and corrections of errors discovered by
Coast), unless Borrower notifies Coast in writing to the contrary within
thirty (30) days after each account is rendered, describing the nature of any
alleged errors or omissions.
11.5 NOTICES. All notices to be given under this Agreement shall be in
writing and shall be given either personally or by reputable private delivery
service or by regular first-class mail, facsimile or certified mail return
receipt requested, addressed to Coast or Borrower at the addresses shown in
the heading to this Agreement, or at any other address designated in writing
by one party to the other party. Notices to Coast shall be directed to the
Commercial Finance Division, to the attention of the Division Manager or the
Division Credit Manager. All notices shall be deemed to have been given upon
delivery in the case of notices personally delivered, faxed (at time of
confirmation of transmission), or at the expiration of one (1) Business Day
following delivery to the private delivery service, or two (2) Business Days
following the deposit thereof in the United States mail, with postage prepaid.
11.6 SEVERABILITY. Should any provision of this Agreement be held by any
court of competent jurisdiction to be void or unenforceable, such defect
shall not affect the remainder of this Agreement, which shall continue in
full force and effect.
11.7 INTEGRATION. This Agreement and such other written agreements,
documents and instruments as may be executed in connection herewith are the
final, entire and complete agreement between Borrower and Coast and supersede
all prior and contemporaneous negotiations and oral representations and
agreements, all of which are merged and integrated in this Agreement. THERE
ARE NO ORAL UNDERSTANDINGS, REPRESENTATIONS OR AGREEMENTS BETWEEN THE PARTIES
WHICH ARE NOT SET FORTH IN THIS AGREEMENT OR IN OTHER WRITTEN AGREEMENTS
SIGNED BY THE PARTIES IN CONNECTION HEREWITH.
11.8 WAIVERS. The failure of Coast at any time or times to require
Borrower to strictly comply with any of the provisions of this Agreement or
any other present or future agreement between Borrower and Coast shall not
waive or diminish any right of Coast later to demand and receive strict
compliance therewith. Any waiver of any Default shall not waive or affect
any other Default, whether prior or subsequent, and whether or not similar.
None of the provisions of this Agreement or any other agreement now or in the
future executed by Borrower and delivered to Coast shall be deemed to have
been waived by any act or knowledge of Coast or its agents or employees, but
only by a specific written waiver signed by an authorized officer of Coast
and delivered to Borrower. Borrower waives demand, protest, notice of
protest and notice of default or dishonor, notice of payment and nonpayment,
release, compromise, settlement, extension or renewal of any commercial
paper, instrument, account, General Intangible, document or guaranty at any
time held by Coast on which Borrower is or may in any way be liable, and
notice of any action taken by Coast, unless expressly required by this
Agreement.
11.9 NO LIABILITY FOR ORDINARY NEGLIGENCE. Neither Coast, nor any of
its directors, officers, employees, agents, attorneys or any other Person
affiliated with or representing Coast shall be liable for any claims,
demands, losses or damages, of any kind whatsoever, made, claimed, incurred
or suffered by Borrower or any other party through the ordinary negligence of
Coast, or any of its directors, officers, employees, agents, attorneys or any
other Person affiliated with or representing Coast, but nothing herein shall
relieve Coast from liability for its own gross negligence or willful
misconduct.
11.10 AMENDMENT. The terms and provisions of this Agreement may not be
waived or amended, except in a writing executed by Borrower and a duly
authorized officer of Coast.
11.11 TIME OF ESSENCE. Time is of the essence in the performance by
Borrower of each and every obligation under this Agreement.
11.12 ATTORNEYS FEES, COSTS AND CHARGES. Borrower shall reimburse Coast
for all attorneys' fees (including attorneys' fees and expenses incurred
pursuant to bankruptcy) and all filing, recording, search, title insurance,
appraisal, audit, and other costs incurred by Coast, pursuant to, or in
connection with, or relating to this Agreement (whether or not a lawsuit is
filed), including, but not limited to, any attorneys' fees and costs
(including attorneys' fees and expenses incurred pursuant to bankruptcy)
Coast incurs in order to do the
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following: prepare and negotiate this Agreement and the documents relating to
this Agreement; obtain legal advice in connection with this Agreement or
Borrower; enforce, or seek to enforce, any of its rights; prosecute actions
against, or defend actions by, Account Debtors; commence, intervene in, or
defend any action or proceeding; initiate any complaint to be relieved of the
automatic stay in bankruptcy; file or prosecute any probate claim, bankruptcy
claim, third-party claim, or other claim; examine, audit, copy, and inspect
any of the Collateral or any of Borrower's books and records; protect, obtain
possession of, lease, dispose of, or otherwise enforce Coast's security
interest in, the Collateral; and otherwise represent Coast in any litigation
relating to Borrower. If either Coast or Borrower files any lawsuit against
the other predicated on a breach of this Agreement, the prevailing party in
such action shall be entitled to recover its costs and attorneys' fees
(including attorneys' fees and expenses incurred pursuant to bankruptcy),
including (but not limited to) attorneys' fees and costs incurred in the
enforcement of, execution upon or defense of any order, decree, award or
judgment. Borrower shall also pay Coast's standard charges for returned
checks and for wire transfers, in effect from time to time. All attorneys'
fees, costs and charges (including attorneys' fees and expenses incurred
pursuant to bankruptcy) and other fees, costs and charges to which Coast may
be entitled pursuant to this Agreement may be charged by Coast to Borrower's
loan account and shall thereafter bear interest at the same rate as the
Receivable Loans.
11.13 BENEFIT OF AGREEMENT. The provisions of this Agreement shall be
binding upon and inure to the benefit of the respective successors, assigns,
heirs, beneficiaries and representatives of Borrower and Coast; PROVIDED,
HOWEVER, that Borrower may not assign or transfer any of its rights under
this Agreement without the prior written consent of Coast, and any prohibited
assignment shall be void. No consent by Coast to any assignment shall
release Borrower from its liability for the Obligations. Coast may assign
its rights and delegate its duties hereunder by the sale of assignment or
participation interests, all without the consent of Borrower.
11.14 PUBLICITY. Coast is hereby authorized, at its expense, to issue
appropriate press releases and to cause a tombstone to be published
announcing the consummation of this transaction and the aggregate amount
thereof.
11.15 PARAGRAPH HEADINGS; CONSTRUCTION. Paragraph headings are only used
in this Agreement for convenience. Borrower and Coast acknowledge that the
headings may not describe completely the subject matter of the applicable
paragraph, and the headings shall not be used in any manner to construe,
limit, define or interpret any term or provision of this Agreement. The term
"including", whenever used in this Agreement, shall mean "including (but not
limited to)". This Agreement has been fully reviewed and negotiated between
the parties and no uncertainty or ambiguity in any term or provision of this
Agreement shall be construed strictly against Coast or Borrower under any
rule of construction or otherwise.
11.16 GOVERNING LAW; JURISDICTION; VENUE. This Agreement and all acts
and transactions hereunder and all rights and obligations of Coast and
Borrower shall be governed by the internal laws of the State of California,
without regard to its conflicts of law principles. As a material part of the
consideration to Coast to enter into this Agreement, Borrower (a) agrees that
all actions and proceedings relating directly or indirectly to this Agreement
shall, at Coast's option, be litigated in courts located within California,
and that the exclusive venue therefor shall be Los Angeles County; (b)
consents to the jurisdiction and venue of any such court and consents to
service of process in any such action or proceeding by personal delivery or
any other method permitted by law; and (c) waives any and all rights Borrower
may have to object to the jurisdiction of any such court, or to transfer or
change the venue of any such action or proceeding.
11.17 MUTUAL WAIVER OF JURY TRIAL. BORROWER AND COAST EACH HEREBY WAIVE
THE RIGHT TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING BASED UPON, ARISING
OUT OF, OR IN ANY WAY RELATING TO, THIS AGREEMENT OR ANY OTHER PRESENT OR
FUTURE INSTRUMENT OR AGREEMENT BETWEEN COAST AND BORROWER, OR ANY CONDUCT,
ACTS OR OMISSIONS OF COAST OR BORROWER OR ANY OF THEIR DIRECTORS, OFFICERS,
EMPLOYEES, AGENTS, ATTORNEYS OR ANY OTHER PERSONS AFFILIATED WITH COAST OR
BORROWER, IN ALL OF THE FOREGOING
19
<PAGE>
COAST BUSINESS CREDIT LOAN AND SECURITY AGREEMENT
- ------------------------------------------------------------------------------
CASES, WHETHER SOUNDING IN CONTRACT OR TORT OR OTHERWISE.
BORROWER:
CENTURA SOFTWARE CORPORATION
By__________________________________
President or Vice President
COAST:
COAST BUSINESS CREDIT,
a division of Southern Pacific Bank
By__________________________________
Title:______________________________
20
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
COAST
SCHEDULE TO
LOAN AND SECURITY AGREEMENT
BORROWER: CENTURA SOFTWARE CORPORATION
ADDRESS: 975 ISLAND DRIVE
REDWOOD SHORES, CALIFORNIA 94065
DATE: JANUARY 19, 1998
This Schedule forms an integral part of the Loan and Security Agreement
between Coast Business Credit, a division of Southern Pacific Bank, and the
above-borrower of even date.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECTION 2 - CREDIT FACILITIES
SECTION 2.1 - CREDIT LIMIT: Loans in a total amount at any time
outstanding not to exceed the lesser of a
total of Five Million Dollars ($5,000,000) at
any one time outstanding (the "Maximum Dollar
Amount"), or the sum of (a) and (b) below:
(a) Receivable Loans in an amount not to
exceed 70% of the amount of Borrower's
Eligible Receivables (as defined in
Section 1 of the Agreement), provided
that for Eligible Foreign Accounts, the
advance rate shall not exceed 60% and,
except as permitted in the discretion of
Coast, advances against Eligible
Receivables owing from account debtors
located in the United Kingdom shall not
exceed $1,000,000 in the aggregate
outstanding at any one time and advances
owing from account debtors located in
the European continent shall not exceed
$1,000,000 outstanding at any one time,
plus
(b) Equipment Acquisition Loans, in minimum
advances of One Hundred Thousand Dollars
($100,000), at three month interest only
followed by a 36 month amortization of
principal plus interest with the
remaining balance due on January 31,
2000, in a total amount not to exceed
the lesser of:
(1) 80% of the invoice cost of new
Equipment (after subtracting taxes
and installation charges), or 80%
of the appraised liquidation value
of used Equipment acquired by
Borrower
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<PAGE>
COAST BUSINESS CREDIT SCHEDULE TO LOAN AND SECURITY AGREEMENT
- -------------------------------------------------------------------------------
(after subtracting taxes
and installation charges), in each
case to be located in the United
States, or
(2) Five Hundred Thousand Dollars
($500,000)
The Equipment Acquisition Loans shall
not be available unless Borrower has
achieved and maintained a Total Debt
Service Coverage Ratio of not less than
1.25:1, measured on a fiscal quarterly
basis.
Total Debt Service Coverage Ratio shall
mean the quotient of (x) EBITDA less all
capital expenditures permitted hereunder
and actually made, except any portion
thereof financed through indebtedness
permitted hereunder and all taxes paid
during such period, divided by (y) the
sum of all principal, interest and other
payments made or required to be made by
Borrower on indebtedness during such
period, including any fees and charges
owed by Borrower in connection with any
such indebtedness.
"EBITDA" shall mean, for any period, the
net income for such period of Borrower
determined in accordance with GAAP
(excluding any extraordinary income
items, including, without limitation,
gain on sale of assets, income relating
to foreign exchange, swap or other
derivative transactions and changes in
GAAP), plus the following items, to the
extent deducted from the revenues of
Borrower in the calculation of net
income or loss: (i) depreciation,
(ii) amortization of intangibles and any
other non-cash items, (iii) cash
interest expense (excluding any interest
paid-in-kind) and (iv) tax expense.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECTION 3 - INTEREST AND FEES
SECTION 3.1 - INTEREST RATE: A rate equal to the Prime Rate plus
2.25% per annum, calculated on the basis
of a 360-day year for the actual number
of days elapsed, provided that in the
event Borrower achieves and maintains a
Total Debt Service Coverage Ratio (as
defined above) of at least 1.5:1
measured on a quarterly basis following
two consecutive quarters of full
compliance with all the terms and
conditions in this Agreement and
provided no Event of Default has
occurred and is continuing, the rate
over the Prime Rate shall be reduced to
2.0%. If under the same terms and
conditions as set forth in the preceding
sentence the Total Debt Service Coverage
Ratio is at least 1.75:1, the rate over
the Prime Rate shall be reduced to
1.75%. The interest rate applicable to
all Loans shall be adjusted monthly as
of the first day of each month, and the
interest to be charged for each month
shall be based on the highest Prime Rate
in effect during the prior month, but in
no event shall the rate of interest
charged on any Loans in any month be
less than 9% per annum.
SECTION 3.1 - MINIMUM MONTHLY Based on utilization of 40% of the
INTEREST: Maximum Dollar Amount based on daily
outstandings.
22
<PAGE>
COAST BUSINESS CREDIT SCHEDULE TO LOAN AND SECURITY AGREEMENT
- -------------------------------------------------------------------------------
SECTION 3.2 - LOAN FEE: 2.0% of the Maximum Dollar Amount, such
amount being fully earned on the Closing
Date, and payable 1.0 of the Maximum
Dollar Amount on the Closing Date and
the balance on the first anniversary of
the Closing Date.
SECTION 3.2 - FACILITY FEE: $5,200,. per quarter, payable on the
Closing Date (prorated for any partial
quarter at the beginning of the term of
this Agreement) and continuing on the
first day of each quarter thereafter.
SECTION 9.1 - RENEWAL FEE: .5% of the Maximum Dollar Amount per
year.
SECTION 9.2 - EARLY TERMINATION An amount equal to three percent (3%) of
FEE: the Maximum Dollar Amount (as defined in
the Schedule), if termination occurs on
or before the first anniversary of the
effective date of this Agreement and two
percent (2%) of the Maximum Dollar
Amount, if termination occurs after the
first anniversary of the effective date
of this Agreement.
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
SECTION 5 - CONDITIONS PRECEDENT
SECTION 5.2 - MINIMUM $500,000 at funding
AVAILABILITY:
SECTION 5.13 - OTHER DOCUMENTS 1. UCC-1 financing statements, fixture
AND AGREEMENTS: filings and termination statements;
2. Security Agreements (including
those covering copyrights, patents
and trademarks).
SECTION 5.14 - OTHER CONDITIONS: 1. Coast shall have a first priority
perfected security interest in all
the assets of Borrower.
2. All of Borrower's software shall
have been registered with the
federal copyright office together
with a first priority mortgage of
the software in favor of Coast.
3. Coast shall have obtained such
guaranties (in such form as Coast
shall request) from such of
Borrower's foreign subsidiaries as
shall be required by Coast.
4. Coast shall have reviewed and
approved in its discretion
Borrower's distributor's
agreements.
5. Coast's obligations under this
Agreement shall be subject to a
re-audit of Borrower if required by
Coast and with results satisfactory
to Coast in its discretion.
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SECTION 6 - REPRESENTATIONS, WARRANTIES AND COVENANTS
SECTION 6.2 - PRIOR NAMES OF Gupta Corporation.
BORROWER:
SECTION 6.2 - PRIOR TRADE NAMES None.
OF BORROWER:
23
<PAGE>
COAST BUSINESS CREDIT SCHEDULE TO LOAN AND SECURITY AGREEMENT
- -------------------------------------------------------------------------------
SECTION 6.2 - EXISTING TRADE NAMES None.
OF BORROWER:
SECTION 6.3 - OTHER LOCATIONS AND 400 Riverpark Drive
ADDRESSES: North Reading, Massachusetts 01864
Sales Offices in Redwood City,
California
Los Angeles, California
Chicago, Illinois
Atlanta, Georgia
Dallas, Texas
Iselin, New Jersey
Lake Oswego, Oregon
Sterling, Colorado
SECTION 6.10 - MATERIAL ADVERSE None.
LITIGATION:
SECTION 6.10 - FUTURE CLAIMS AND Borrower will promptly inform Coast
LITIGATION: in writing of any claim,
proceeding, litigation or
investigation in the future
threatened or instituted by or
against Borrower involving any
single claim of Fifty Thousand
Dollars ($50,000) or more, or
involving One Hundred Thousand
Dollars ($100,000) or more in the
aggregate.
_______________________________________________________________________________
SECTION 8 - ADDITIONAL DUTIES OF BORROWER
SECTION 8.1 - OTHER PROVISIONS 1. Borrower shall at all times
AND COVENANTS: have a minimum Adjusted Net
Worth of not less than
{$8,000,000}.
2. Borrower shall at all times
maintain all original sales
documentation at its chief
executive office.
3. Without otherwise limiting the
right of Coast to create
reserves, Coast shall have the
right to create a reserve for
the Lotus Development accounts
payable past due balance.
SECTION 8.2 - INSURANCE: Subject to the limitations set
forth in Section 8.2 of the
Agreement, Coast shall release to
Borrower insurance proceeds with
respect to Equipment totaling less
than One Hundred Thousand Dollars
($100,000).
SECTION 8.3 - REPORTING: Borrower shall provide Coast with
the following:
1. Monthly Receivable agings,
aged by invoice date and by
customer in alphabetical
order, within ten (10) days
after the end of each month
together with a monthly
deferred revenue listing to be
sorted by customer in
alphabetical order.
2. Monthly accounts payable
agings, aged by invoice date,
and outstanding or held check
registers within ten (10) days
after the end of each month.
3. Monthly internally prepared
financial statements, as soon
as available, and in any event
within thirty (30) days after
the end of each month.
24
<PAGE>
COAST BUSINESS CREDIT SCHEDULE TO LOAN AND SECURITY AGREEMENT
- -------------------------------------------------------------------------------
4. Quarterly internally prepared
financial statements, as soon
as available, and in any event
within forty-five (45) days
after the end of each fiscal
quarter of Borrower.
5. Quarterly customer lists,
including customer name,
address, and phone number.
6. Annual financial statements,
as soon as available, and in
any event within ninety (90)
days following the end of
Borrower's fiscal year,
containing the unqualified
opinion of, and certified by,
an independent certified
public accountant acceptable
to Coast.
SECTION 8.5 - NEGATIVE COVENANTS One Hundred Thousand Dollars
(ACQUIRED ASSETS): ($100,000).
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
SECTION 9 - TERM
SECTION 9.1 - MATURITY DATE: the last Business Day of the month
two (2) years from the Closing
Date, subject to automatic renewal
as provided in Section 9.1 of the
Agreement, and early termination as
provided in Section 9.2 of the
Agreement.
25
<PAGE>
CENTURA SOFTWARE CORPORATION
COMMON STOCK AND WARRANT PURCHASE AGREEMENT
FEBRUARY 27, 1998
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
1. Purchase and Sale of Common Stock and Warrants. . . . . . . . . . . . . . . 1
1.1 Sale and Issuance of Common Stock and Warrants. . . . . . . . . . . . 1
1.2 Closing; Delivery . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2. Representations and Warranties of the Company . . . . . . . . . . . . . . . 2
2.1 Organization, Good Standing and Qualification . . . . . . . . . . . . 2
2.2 Capitalization. . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.3 Authorization . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.4 Valid Issuance of Securities. . . . . . . . . . . . . . . . . . . . . 3
2.5 Litigation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.6 Compliance with Other Instruments . . . . . . . . . . . . . . . . . . 3
2.7 SEC Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
3. Representations and Warranties of the Purchasers. . . . . . . . . . . . . . 4
3.1 Authorization . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
3.2 Purchase Entirely for Own Account . . . . . . . . . . . . . . . . . . 4
3.3 Disclosure of Information . . . . . . . . . . . . . . . . . . . . . . 4
3.4 Restricted Securities . . . . . . . . . . . . . . . . . . . . . . . . 5
3.5 Legends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
3.6 Accredited Investor . . . . . . . . . . . . . . . . . . . . . . . . . 5
4. Registration of Securities. . . . . . . . . . . . . . . . . . . . . . . . . 5
5. Resale Restrictions.. . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
6. Conditions of the Purchasers' Obligations at Closing. . . . . . . . . . . . 9
6.1 Representations and Warranties. . . . . . . . . . . . . . . . . . . . 9
6.2 Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
6.3 Compliance Certificate. . . . . . . . . . . . . . . . . . . . . . . .10
6.4 Qualifications. . . . . . . . . . . . . . . . . . . . . . . . . . . .10
6.5 Opinion of Company Counsel. . . . . . . . . . . . . . . . . . . . . .10
7. Conditions of the Company's Obligations at Closing. . . . . . . . . . . . .10
7.1 Representations and Warranties. . . . . . . . . . . . . . . . . . . .10
7.2 Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10
7.3 Qualifications. . . . . . . . . . . . . . . . . . . . . . . . . . . .10
8. Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10
8.1 Survival of Warranties. . . . . . . . . . . . . . . . . . . . . . . .10
8.2 Transfer; Successors and Assigns. . . . . . . . . . . . . . . . . . .10
8.3 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . .11
8.4 Counterparts. . . . . . . . . . . . . . . . . . . . . . . . . . . . .11
-i-
<PAGE>
TABLE OF CONTENTS
PAGE
8.5 Titles and Subtitles. . . . . . . . . . . . . . . . . . . . . . . . .11
8.6 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11
8.7 Company Advisor / Payment of Fees . . . . . . . . . . . . . . . . . .11
8.8 Attorney's Fees . . . . . . . . . . . . . . . . . . . . . . . . . . .11
8.9 Amendments and Waivers. . . . . . . . . . . . . . . . . . . . . . . .12
8.10 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . .12
8.11 Delays or Omissions. . . . . . . . . . . . . . . . . . . . . . . . .12
8.12 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . .12
8.13 Corporate Securities Law . . . . . . . . . . . . . . . . . . . . . .12
8.14 Confidentiality. . . . . . . . . . . . . . . . . . . . . . . . . . .13
8.15 Exculpation Among Purchasers . . . . . . . . . . . . . . . . . . . .13
8.16 Advice of Counsel. . . . . . . . . . . . . . . . . . . . . . . . . .13
</TABLE>
-ii-
<PAGE>
CENTURA SOFTWARE CORPORATION
COMMON STOCK AND WARRANT PURCHASE AGREEMENT
This Common Stock and Warrant Purchase Agreement (the "AGREEMENT") is made
as of the 27th day of February, 1998 by and between Centura Software
Corporation, a California corporation (the "COMPANY") and the investors listed
on EXHIBIT A attached hereto (each a "PURCHASER" and together the "PURCHASERS").
The parties hereby agree as follows:
1. PURCHASE AND SALE OF COMMON STOCK AND WARRANTS.
1.1 SALE AND ISSUANCE OF COMMON STOCK AND WARRANTS. Subject to the
terms and conditions of this Agreement, each Purchaser agrees to purchase at the
Closing and the Company agrees to sell and issue to each Purchaser at the
Closing that number of shares of Common Stock indicated with respect to such
Purchaser on EXHIBIT A attached hereto at a purchase price of $1.06 per share
and a warrant in the form attached hereto as EXHIBIT B to purchase that number
of shares of Common Stock indicated with respect to such Purchaser on EXHIBIT A
at a purchase price of $1.25 per share of Common Stock issuable upon exercise of
the warrant. The shares of Common Stock and the warrants issued to the
Purchaser pursuant to this Agreement shall be hereinafter referred to as the
"STOCK" and the "WARRANTS," respectively, and the shares of Common Stock
issuable upon exercise of the Warrants shall be hereinafter referred to as the
"WARRANT STOCK." The Stock, the Warrants and the Warrant Stock shall be
hereinafter referred to as the "SECURITIES."
1.2 CLOSING; DELIVERY.
(a) The purchase and sale of the Stock and the Warrants shall
take place on February __, 1998, or at such other time as the Company and the
Purchasers mutually agree upon, orally or in writing (which time is designated
as the "CLOSING").
(b) At the Closing, each Purchaser shall cause the purchase
price of the Stock and the Warrants being purchased to be delivered to the
escrow agent as provided in the Escrow Agreement attached hereto as Exhibit E
(the "ESCROW AGREEMENT"), and the Company shall cause a certificate representing
the Stock being purchased by each Purchaser and a Warrant for each Purchaser
exercisable for the applicable number of shares of Common Stock of the Company
for such Purchaser to be delivered to the escrow agent as provided in the Escrow
Agreement. Upon the satisfaction of all the conditions set forth in Sections 6
and 7 hereof, the escrow agent shall be instructed to release the purchase price
to the Company, and the certificate representing the Stock and the Warrants to
each Purchaser all in accordance with the terms of the Escrow Agreement.
2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company hereby
represents and warrants to each Purchaser that, except as set forth on a
Schedule of Exceptions
<PAGE>
attached hereto as EXHIBIT C, which exceptions shall be
deemed to be representations and warranties as if made hereunder:
2.1 ORGANIZATION, GOOD STANDING AND QUALIFICATION. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of the State of California and has all requisite corporate power and authority
to carry on its business.
2.2 CAPITALIZATION. The authorized capital of the Company consists,
or will consist, immediately prior to the Closing, of 60,000,000 shares of
Common Stock, $0.01 par value per share, of which 15,780,886 shares were issued
and outstanding as of February 9, 1998, and 2,000,000 shares of Preferred Stock,
$0.01 par value per share, none of which are issued or outstanding. 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 (other than rights of first
refusal held by the Company) under applicable law, the Articles of Incorporation
or Bylaws of the Company, or any agreement to which the Company 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. The Company is
concurrently with the Closing of the issuance and sale of the Securities
hereunder closing an agreement providing for the conversion of approximately
$12.2 million of outstanding indebtedness into shares of Common Stock of the
Company at a conversion price of $1.06 per share. The Company has also reserved
(i) an aggregate of 2,000,000 shares of Common Stock issuable to employees and
consultants pursuant to the Company's 1995 Stock Option Plan, of which 1,164,947
shares are issuable upon exercise of outstanding options under such plan, (ii)
an aggregate of 2,657,399 shares of Common Stock issuable to employees and
consultants pursuant to the Company's 1986 Stock Option Plan, of which 2,657,399
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 the Company's 1992 Employee Stock Purchase Plan, of which no shares
are available for future issuance under such plan, (iv) 500,000 shares of Common
Stock issuable to non-employee directors pursuant to Company's 1996 Directors'
Stock Option Plan, of which 300,000 shares are issuable upon exercise of
outstanding options under such plan, (v) non-plan options issued to the
Company's Chief Executive Officer, Chief Financial Officer and Vice President of
Marketing to purchase up to an aggregate of 1,500,000 shares of Common Stock,
(vi) up to 450,000 shares of Common Stock issuable upon exercise of warrants
granted or to be granted to certain third parties, including vendors, suppliers
and financial and investment advisors of the Company, prior to inclusion of the
shares of Common Stock issuable upon exercise of the Warrants being purchased
and sold hereunder and a Warrant being issued to Computer Associates
International, Inc. concurrently on the date of the Closing.
2.3 AUTHORIZATION. All corporate action on the part of the Company,
its officers, directors and shareholders necessary for the authorization,
execution and delivery of this Agreement and the Warrants (collectively, the
"TRANSACTION AGREEMENTS"), the performance of all obligations of the Company
hereunder and thereunder and the authorization, issuance and delivery of the
Securities has been taken or will be taken prior to the Closing, and the
Transaction Agreements, when executed and delivered by the Company, shall
constitute valid
-2-
<PAGE>
and legally binding obligations of the Company, enforceable
against the Company in accordance with their terms except (i) as limited by
applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent
conveyance, and other laws of general application affecting enforcement of
creditors' rights generally, as limited by laws relating to the availability of
specific performance, injunctive relief, or other equitable remedies, or (ii) to
the extent the indemnification provisions contained in Section 4(g) herein below
may be limited by applicable federal or state securities laws.
2.4 VALID ISSUANCE OF SECURITIES. The Stock and the Warrants that
are being issued to the Purchasers hereunder, when issued and paid for in
accordance with this Agreement, and the shares of Common Stock issuable upon
exercise of the Warrants, when issued and paid for in accordance with the
Warrants, will be validly issued, fully paid, and nonassessable, and not subject
to any preemptive rights or rights of first refusal under applicable law, the
Articles of Incorporation or Bylaws of the Company, or any agreement to which
the Company is a party or by which the Company is bound, and are free of any
liens or encumbrances other than liens or encumbrances created by or imposed
upon the holders thereof; provided, however, that the Warrants (and the shares
of Common Stock issuable upon exercise thereof) may be subject to restrictions
on transfer as set forth in this Agreement, the Warrants, the Registration
Statement on Form S-3 to be filed with the Securities and Exchange Commission
pursuant to Section 4 hereunder, (the "RIGHTS AGREEMENT"), or the Articles of
Incorporation or Bylaws of the Company. Based in part upon the representations
of the Purchasers in this Agreement, the Stock and the Warrants will be issued
in compliance with all applicable federal and state securities laws.
2.5 LITIGATION. There is no action, suit, proceeding or
investigation pending or, to the Company's knowledge, currently threatened
against the Company or any of its subsidiaries that is not disclosed in the
Reports (as defined in Section 2.6 below) and that would have a material adverse
effect on the Company or that questions the validity of the Transaction
Agreements or the right of the Company to enter into them, or to consummate the
transactions contemplated thereby.
2.6 COMPLIANCE WITH OTHER INSTRUMENTS. The execution, delivery and
performance of the Transaction Agreements and the consummation of the
transactions contemplated thereby will not result in any violation or default of
any provisions of the Articles of Incorporation or Bylaws of the Company or of
any instrument, judgment, order, writ, decree or contract to which the Company
is a party or by which the Company is bound or, to the Company's knowledge, of
any provision of federal or state statute, rule or regulation applicable to the
Company, or be in conflict with or constitute, with or without the passage of
time and giving of notice, either a default under any such provision,
instrument, judgment, order, writ, decree or contract or an event which results
in the creation of any lien, charge or encumbrance upon any assets of the
Company.
2.7 SEC REPORTS. The Company has filed with the Securities and
Exchange Commission (the "COMMISSION") via Edgar its Annual Report on Form 10-K
for the year ended December 31, 1996 and its Quarterly Reports on Form 10-Q for
the first three quarters of the
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<PAGE>
year ended December 31, 1997 (the "REPORTS"), and such Reports are available
to Purchaser through Edgar in electronic format. As of their respective
filing dates, the Reports complied in all material respects with the
requirements of the Securities Exchange Act of 1934, as amended, and none of
the Reports 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 Commission and provided to Purchaser prior to the
date hereof.
3. REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS. Each Purchaser
hereby represents and warrants to the Company that:
3.1 AUTHORIZATION. Such Purchaser has full power and authority to
enter into this Agreement. The Transaction Agreements, when executed and
delivered by the Purchaser, will constitute valid and legally binding
obligations of the Purchaser, enforceable in accordance with their terms, except
(a) as limited by applicable bankruptcy, insolvency, reorganization, moratorium,
fraudulent conveyance, and any other laws of general application affecting
enforcement of creditors' rights generally, and as limited by laws relating to
the availability of a specific performance, injunctive relief, or other
equitable remedies, or (b) to the extent the indemnification provisions
contained in Section 4(g) herein below may be limited by applicable federal or
state securities laws.
3.2 PURCHASE ENTIRELY FOR OWN ACCOUNT. This Agreement is made with
the Purchaser in reliance upon the Purchaser's representation to the Company,
which by the Purchaser's execution of this Agreement, the Purchaser hereby
confirms, that the Securities to be acquired by the Purchaser will be acquired
for investment for the Purchaser's own account, not as a nominee or agent, and
not with a view to the resale or distribution of any part thereof, and that the
Purchaser has no present intention of selling, granting any participation in, or
otherwise distributing the same. By executing this Agreement, the Purchaser
further represents that the Purchaser does not presently have any contract,
undertaking, agreement or arrangement with any person to sell, transfer or grant
participation to such person or to any third person, with respect to any of the
Securities. The Purchaser has not been formed for the specific purpose of
acquiring the Securities.
3.3 DISCLOSURE OF INFORMATION. The Purchaser has had an opportunity
to discuss the Company's business, management, financial affairs and the terms
and conditions of the offering of the Stock and the Warrants with the Company's
management and has had an opportunity to review the Company's facilities. The
Purchaser understands that such discussions, and any other written information
delivered by the Company to the Purchaser, were intended to describe the aspects
of the Company's business which it believes to be material.
3.4 RESTRICTED SECURITIES. The Purchaser understands that the
Securities are characterized as "restricted securities" under applicable U.S.
federal and state securities laws inasmuch as they are being acquired from the
Company in a transaction not involving a public offering and that, pursuant to
these laws and applicable regulations, the Purchaser must hold the
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<PAGE>
Securities indefinitely unless they are registered with the Securities and
Exchange Commission and qualified by state authorities, or an exemption from
such registration and qualification requirements is available. The Purchaser
further acknowledges that if an exemption from registration or qualification
is available, it may be conditioned on various requirements including, but
not limited to, the time and manner of sale, the holding period for the
Securities, and on requirements relating to the Company which are outside of
the Purchaser's control, and which the Company is under no obligation and may
not be able to satisfy. In this connection, Purchaser represents that it is
familiar with SEC Rule 144, as presently in effect, and understands the
resale limitations imposed thereby and by the Securities Act of 1933, as
amended (the "SECURITIES ACT").
3.5 LEGENDS. The Purchaser understands that the Securities, and any
securities issued in respect thereof or exchange therefor, may bear one or all
of the following legends:
(a) "THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AND HAVE BEEN ACQUIRED FOR
INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR
DISTRIBUTION THEREOF. NO SUCH SALE OR DISTRIBUTION MAY BE EFFECTED WITHOUT AN
EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL IN A
FORM REASONABLY SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT
REQUIRED UNDER THE SECURITIES ACT OF 1933."
(b) Any legend set forth in the other Transaction Agreements.
(c) Any legend required by the Blue Sky laws of any state to the
extent such laws are applicable to the shares represented by the certificate so
legended.
3.6 ACCREDITED INVESTOR. The Purchaser is an accredited investor as
defined in Rule 501(a) of Regulation D promulgated under the Securities Act.
4. REGISTRATION OF SECURITIES.
(a) As soon as possible after the Closing, the Company shall use its
reasonable best efforts to prepare and file a registration statement on Form S-3
(the "REGISTRATION STATEMENT") with the Commission under the Act to register the
resale of the Stock and the Warrant Stock (collectively, the "REGISTRABLE
SECURITIES") and thereafter shall use its best efforts to secure the
effectiveness of such Registration Statement.
(b) The Company shall pay all Registration Expenses (as defined
below) in connection with any registration, qualification or compliance
hereunder, and Purchaser or any transferee of the Registrable Securities (each,
a "HOLDER") shall pay all Selling Expenses (as defined below) and other expenses
that are not Registration Expenses relating to the Registrable Securities resold
by Holder. "Registration Expenses" shall mean all expenses, except for Selling
Expenses, incurred by the Company in complying with the registration provisions
herein
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<PAGE>
described, including, without limitation, all registration, qualification
and filing fees, printing expenses, fees and disbursements of counsel for the
Company, blue sky fees and expenses and the expense of any special audits
incident to or required by any such registration. "Selling Expenses" shall mean
all selling commissions, brokerage or underwriting fees and stock transfer taxes
applicable to the Registrable Securities and all fees and disbursements of
counsel for Holder.
(c) In the case of any registration effected by the Company pursuant
to these registration provisions, and subject to the limitations on registration
set forth in Section 4(d) below, the Company will use commercially reasonable
efforts to: (i) keep such registration effective until the earlier of (A) two
(2) years after the date of the Closing or (B) such date as the Company shall be
satisfied that then-current Holders may sell all of their Registrable Securities
then outstanding within a three (3) month period; (ii) prepare and file with the
Commission such amendments and supplements to such Registration Statement and
the prospectus used in connection with such Registration Statement as may be
necessary to comply with the provisions of the Act with respect to the
disposition of all securities covered by such Registration Statement; (iii)
furnish such number of prospectuses and other documents incident thereto,
including any amendment of or supplement to the prospectus, as a Holder from
time to time may reasonably request; (iv) register and qualify the securities
covered by such Registration Statement under such other securities or Blue Sky
laws of such jurisdictions as shall be reasonably requested by the Holders,
provided that the Company shall not be required in connection therewith or as a
condition thereto to qualify to do business or to file a general consent to
service of process in any such states or jurisdictions; (v) cause all such
Registrable Securities registered as described herein to be listed on each
securities exchange and quoted on each quotation service on which similar
securities issued by the Company are then listed or quoted; and (vi) otherwise
use commercially reasonable efforts to comply with all applicable rules and
regulations of the Commission.
(d) The Company may, by written notice to Holder, delay the filing or
effectiveness of, or suspend, the Registration Statement, and require that
Holder immediately cease sales of shares pursuant to such Registration Statement
in any period during which the Company is engaged in any activity or transaction
or preparations or negotiations for any activity or transaction ("COMPANY
ACTIVITY") that the Company desires to keep confidential for business reasons,
if the Company determines in good faith that the public disclosure requirements
imposed on the Company under the Act in connection with the Registration
Statement would require disclosure of the Company Activity; provided, however,
that (A) the Company shall use commercially reasonable efforts to minimize the
length of any such period of delay or suspension, (B) any such delay or
suspension shall be applied in the same manner to any other resale registration
statement then in effect, (C) no such suspension period shall extend longer than
forty-five (45) consecutive calendar days, (D) no such suspension period may be
imposed within forty-five (45) days following the completion of a prior
suspension period, and (E) the Company shall not impose suspension periods
which, in the aggregate, exceed ninety (90) days in any twelve (12) month
period. If the Company delays or suspends the Registration Statement or
requires Holder to cease sales of shares pursuant to this Section 4(d), the
Company shall, as promptly as practicable following the termination of the
circumstance which entitled the
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<PAGE>
Company to do so, take such actions as may be necessary to file or reinstate
the effectiveness of the Registration Statement and/or give written notice to
Holder authorizing it to resume sales pursuant to such Registration
Statement. If as a result thereof the prospectus included in the
Registration Statement has been amended to comply with the requirements of
the Act, the Company shall enclose such revised prospectus with the notice to
Holders given pursuant to this Section 4(d), and Holder shall make no offers
or sales of shares pursuant to the Registration Statement other than by means
of such revised prospectus.
(e) If Holder shall propose to sell any Registrable Securities
pursuant to the Registration Statement, it shall notify the Company of its
intent to do so at least three (3) full business days prior to such sale, and
the provision of such notice to the Company shall conclusively be deemed to
establish an agreement by Holder to comply with the registration provisions
herein described. Such notice shall be deemed to constitute a representation
that any information required to be included in the Registration Statement and
previously supplied by Holder is accurate as of the date of such notice. When
Holder is entitled to sell and gives notice of its intent to sell in compliance
with the foregoing, the Company shall promptly, furnish to Holder a reasonable
number of copies of a supplement to or an amendment of such prospectus as may be
necessary so that, as thereafter delivered to the Holders of such shares, such
prospectus shall not include an untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading or incomplete in the light of the
circumstances then existing. Holder agrees that the Company may impose a legend
setting forth the provisions of Sections 4(d) and 4(e) on the Registrable
Securities.
(f) With a view to making available to the holders the benefits of
Rule 144 promulgated under the Act and any other rule or regulation of the
Commission that may at any time permit Holder to sell Registrable Securities to
the public without registration or pursuant to a registration on Form S-3, the
Company hereby covenants and agrees to: (i) make and keep public information
available, as those terms are understood and defined in Rule 144, at all times
after the closing; and (ii) file with the Commission in a timely manner all
reports and other documents required of the Company under the Act and Exchange
Act.
(g) Indemnification.
(i) To the extent permitted by law, the Company will
indemnify and hold harmless Holder, any underwriter (as defined in the Act) for
Holder, its officers, directors, shareholders or partners and each person, if
any, who controls Holder or underwriter within the meaning of the Act or the
Exchange Act, against any losses, claims, damages, or liabilities to which they
may become subject under the Act, the Exchange Act or other federal or state
law, insofar as such losses, claims, damages, or liabilities (or actions in
respect thereof) arise out of or are based upon any of the following statements,
omissions or violations (collectively a "VIOLATION"): (A) any untrue statement
or alleged untrue statement of a material fact contained in such Registration
Statement, including any preliminary prospectus or final prospectus contained
therein or any amendments or supplements thereto or (B) the omission or alleged
omission to state therein a material fact required to be stated therein, or
necessary to make the statements therein not misleading; and the Company will
pay to each such Holder,
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<PAGE>
underwriter or controlling person, as incurred, any legal or other expenses
reasonably incurred by them in connection with investigating or defending any
such loss, claim, damage, liability, or action; provided, however, that the
indemnity agreement contained in this Section 4(g)(i) shall not apply to
amounts paid in settlement of any such loss, claim, damage, liability, or
action if such settlement is effected without the consent of the Company
(which consent shall not be unreasonably withheld), nor shall the Company be
liable in any such case for any such loss, claim, damage, liability, or
action to the extent that it arises out of or is based upon a Violation which
occurs in reliance upon and in conformity with written information furnished
expressly for use in connection with such registration by any such Holder,
underwriter or controlling person; further provided, however, that the
foregoing indemnity with respect to any untrue statement in or omission from
any preliminary prospectus shall not inure to the benefit of any Holder from
whom the person asserting any such losses, claims, damages or liabilities
purchased the Registrable Securities if a copy of the final prospectus or any
amendment thereto had not been sent or given to such person at or prior to
the written confirmation of the sale of such Registrable Securities to such
person if required by the Act and the untrue statement or omission of a
material fact contained in such preliminary prospectus was corrected in the
final prospectus or amendment and such final prospectus or amendment was
distributed to the Holder prior to such sale of Registrable Securities.
(ii) To the extent permitted by law, each selling Holder
will indemnify and hold harmless the Company, each of its directors, each of its
officers who has signed the Registration Statement, each person, if any, who
controls the Company within the meaning of the Act, any underwriter, any other
Holder selling securities in such Registration Statement and any controlling
person of any such underwriter or other Holder, against any losses, claims,
damages, or liabilities to which any of the foregoing persons may become
subject, under the Act, the Exchange Act or other federal or state law, insofar
as such losses, claims, damages, or liabilities (or actions in respect thereto)
arise out of or are based upon any Violation, in each case to the extent (and
only to the extent) that such Violation occurs in reliance upon and in
conformity with written information furnished by such Holder expressly for use
in connection with such registration; and each such Holder will pay, as
incurred, any legal or other expenses reasonably incurred by any person intended
to be indemnified pursuant to this subsection 4(g)(ii), in connection with
investigating or defending any such loss, claim, damage, liability, or action;
provided, however, that the indemnity agreement contained in this
subsection 4(g)(ii) shall not apply to amounts paid in settlement of any such
loss, claim, damage, liability or action if such settlement is effected without
the consent of the Holder, which consent shall not be unreasonably withheld;
provided, that, in no event shall any indemnity under this subsection 4(g)(ii)
exceed the net proceeds from the offering received by such Holder, except in the
case of willful fraud by such Holder.
(iii) Promptly after receipt by an indemnified party
under this Section 4(g) of notice of the commencement of any action (including
any governmental action), such indemnified party will, if a claim in respect
thereof is to be made against any indemnifying party under this Section 4(g),
deliver to the indemnifying party a written notice of the commencement thereof
and the indemnifying party shall have the right to participate in, and, to the
extent the indemnifying party so desires, jointly with any other indemnifying
party similarly
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<PAGE>
noticed, to assume the defense thereof with counsel mutually satisfactory to
the parties; provided, however, that an indemnified party (together with all
other indemnified parties which may be represented without conflict by one
counsel) shall have the right to retain one separate counsel, with the
reasonable fees and expenses to be paid by the indemnifying party, if
representation of such indemnified party by the counsel retained by the
indemnifying party would be inappropriate due to actual or potential
differing interests between such indemnified party and any other party
represented by such counsel in such proceeding. The failure to deliver
written notice to the indemnifying party within a reasonable time of the
commencement of any such action, if prejudicial to its ability to defend such
action, shall relieve such indemnifying party of any liability to the
indemnified party under this Section 4(g).
5. RESALE RESTRICTIONS. Holder agrees that it will not sell any
Registrable Securities issued hereunder until the effectiveness of the
Registration Statement to be filed pursuant to Section 4 above.
Notwithstanding the foregoing, the Company may suspend resales by the Holder
if an underwriter reasonably determines that such resales would adversely
affect the Company's ability to raise additional capital in a public offering
of the Company's equity securities and such underwriter issues a written
opinion to the Company to that effect. Any such suspension of resales by the
Holder pursuant to the foregoing sentence will not exceed 120 calendar days
commencing on the date of the secondary offering. The volume and resale
restrictions set forth in this Section 5 shall be set forth in any and all
Registration Statements brought effective pursuant to Section 4 above, and
the Company shall instruct its transfer agent, broker dealers and market
makers to enforce the volume restrictions set forth herein.
6. CONDITIONS OF THE PURCHASERS' OBLIGATIONS AT CLOSING. The obligations
of each Purchaser to the Company under this Agreement are subject to the
fulfillment, on or before the Closing, of each of the following conditions,
unless otherwise waived:
6.1 REPRESENTATIONS AND WARRANTIES. The representations and
warranties of the Company contained in Section 2 shall be true and correct in
all material respects on and as of the Closing with the same effect as though
such representations and warranties had been made on and as of the date of the
Closing.
6.2 PERFORMANCE. The Company shall have performed and complied with
all covenants, agreements, obligations and conditions contained in this
Agreement that are required to be performed or complied with by it on or before
the Closing.
6.3 COMPLIANCE CERTIFICATE. The President of the Company shall
deliver to the Purchasers at the Closing a certificate certifying that the
conditions specified in Sections 6.1 and 6.2 have been fulfilled.
6.4 QUALIFICATIONS. All authorizations, approvals or permits, if
any, of any governmental authority or regulatory body of the United States or of
any state that are required in connection with the lawful issuance and sale of
the Stock and the Warrants pursuant to this Agreement shall be obtained and
effective as of the Closing.
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<PAGE>
6.5 OPINION OF COMPANY COUNSEL. The Purchasers shall have received
from Venture Law Group, counsel for the Company, an opinion, dated as of the
Closing, in substantially the form of EXHIBIT D.
7. CONDITIONS OF THE COMPANY'S OBLIGATIONS AT CLOSING. The obligations
of the Company to each Purchaser under this Agreement are subject to the
fulfillment, on or before the Closing, of each of the following conditions,
unless otherwise waived:
7.1 REPRESENTATIONS AND WARRANTIES. The representations and
warranties of each Purchaser contained in Section 3 shall be true and correct in
all material respects on and as of the Closing with the same effect as though
such representations and warranties had been made on and as of the Closing.
7.2 PERFORMANCE. All covenants, agreements and conditions contained
in this Agreement to be performed by the Purchasers on or prior to the Closing
shall have been performed or complied with in all material respects.
7.3 QUALIFICATIONS. All authorizations, approvals or permits, if
any, of any governmental authority or regulatory body of the United States or of
any state that are required in connection with the lawful issuance and sale of
the Stock and the Warrants pursuant to this Agreement shall be obtained and
effective as of the Closing.
8. MISCELLANEOUS.
8.1 SURVIVAL OF WARRANTIES. Unless otherwise set forth in this
Agreement, the warranties, representations and covenants of the Company and the
Purchasers contained in or made pursuant to this Agreement shall survive the
execution and delivery of this Agreement and the Closing for a period of one (1)
year following the Closing.
8.2 TRANSFER; SUCCESSORS AND ASSIGNS. The terms and conditions of
this Agreement shall inure to the benefit of and be binding upon the respective
successors and assigns of the parties. Nothing in this Agreement, express or
implied, is intended to confer upon any party other than the parties hereto or
their respective successors and assigns any rights, remedies, obligations,
or liabilities under or by reason of this Agreement, except as expressly
provided in this Agreement.
8.3 GOVERNING LAW. This Agreement and all acts and transactions
pursuant hereto and the rights and obligations of the parties hereto shall be
governed, construed and interpreted in accordance with the laws of the State of
California, without giving effect to principles of conflicts of law.
8.4 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original and all of which
together shall constitute one instrument.
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<PAGE>
8.5 TITLES AND SUBTITLES. The titles and subtitles used in this
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
8.6 NOTICES. Any notice required or permitted by this Agreement
shall be in writing and shall be deemed sufficient upon delivery, when delivered
personally or by overnight courier or sent by telegram or fax, or forty-eight
(48) hours after being deposited in the U.S. mail, as certified or registered
mail, with postage prepaid, addressed to the party to be notified at such
party's address as set forth on the signature page or EXHIBIT A hereto, or as
subsequently modified by written notice, and if to the Company, with a copy to
Craig W. Johnson, Venture Law Group, 2800 Sand Hill Road, Menlo Park, CA 94025.
8.7 COMPANY ADVISOR / PAYMENT OF FEES. Purchaser represents that it
neither is nor will be obligated for any finder's fee or commissions to any
third party in connection with this transaction. The Company represents that it
has retained Rochon Capital Group, Ltd. ("ROCHON") as financial advisor in
connection with the transactions contemplated by the Transaction Agreements and
will be responsible for any fees payable to Rochon. The information provided to
Purchaser by the Company has not been subjected to independent verification by
Rochon, and no representation or warranty is made by Rochon as to the accuracy
or completeness of such information or the advisability of Purchaser entering
into this Agreement and consummating the transactions contemplated hereby.
Purchaser acknowledges that it has not relied on any statements made by Rochon
in connection with its decision to enter into and perform this Agreement and the
transactions contemplated hereby. The Company agrees to indemnify and to hold
harmless Purchaser from any liability for any compensation payable to Rochon
(and the costs and expenses of defending against such liability or asserted
liability) for which the Company is responsible. Each party agrees to indemnify
and hold harmless Rochon and its officers, directors, principals, employees and
agents (and their respective heirs, successors and assigns) from and against any
liability arising from this Agreement (and the costs and expenses of defending
against such liability or asserted liability), including the consummation of or
the failure to consummate any or all of the transactions contemplated hereby.
8.8 ATTORNEY'S FEES. If any action at law or in equity (including
arbitration) is necessary to enforce or interpret the terms of any of the
Transaction Agreements, the prevailing party shall be entitled to reasonable
attorney's fees, costs and necessary disbursements in addition to any other
relief to which such party may be entitled.
8.9 AMENDMENTS AND WAIVERS. Any term of this Agreement may be
amended or waived only with the written consent of the Company and the holders
of at least a majority of the Common Stock issued or issuable upon conversion of
the Stock and the Warrant Stock. Any amendment or waiver effected in accordance
with this Section 8.9 shall be binding upon the Purchasers and each transferee
of the Securities, each future holder of all such Securities, and the Company.
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<PAGE>
8.10 SEVERABILITY. If one or more provisions of this Agreement are
held to be unenforceable under applicable law, the parties agree to renegotiate
such provision in good faith. In the event that the parties cannot reach a
mutually agreeable and enforceable replacement for such provision, then (a) such
provision shall be excluded from this Agreement, (b) the balance of the
Agreement shall be interpreted as if such provision were so excluded and (c) the
balance of the Agreement shall be enforceable in accordance with its terms.
8.11 DELAYS OR OMISSIONS. No delay or omission to exercise any right,
power or remedy accruing to any party under this Agreement, upon any breach or
default of any other party under this Agreement, shall impair any such right,
power or remedy of such non-breaching or non-defaulting party nor shall it be
construed to be a waiver of any such breach or default, or an acquiescence
therein, or of or in any similar breach or default thereafter occurring; nor
shall any waiver of any single breach or default be deemed a waiver of any other
breach or default theretofore or thereafter occurring. Any waiver, permit,
consent or approval of any kind or character on the part of any party of any
breach or default under this Agreement, or any waiver on the part of any party
of any provisions or conditions of this Agreement, must be in writing and shall
be effective only to the extent specifically set forth in such writing. All
remedies, either under this Agreement or by law or otherwise afforded to any
party, shall be cumulative and not alternative.
8.12 ENTIRE AGREEMENT. This Agreement, and the documents referred to
herein constitute the entire agreement between the parties hereto pertaining to
the subject matter hereof, and any and all other written or oral agreements
relating to the subject matter hereof existing between the parties hereto are
expressly canceled.
8.13 CORPORATE SECURITIES LAW. THE SALE OF THE SECURITIES WHICH ARE
THE SUBJECT OF THIS AGREEMENT HAS NOT BEEN QUALIFIED WITH THE COMMISSIONER OF
CORPORATIONS OF THE STATE OF CALIFORNIA AND THE ISSUANCE OF THE SECURITIES OR
THE PAYMENT OR RECEIPT OF ANY PART OF THE CONSIDERATION THEREFOR PRIOR TO THE
QUALIFICATION IS UNLAWFUL, UNLESS THE SALE OF SECURITIES IS EXEMPT FROM THE
QUALIFICATION BY SECTION 25100, 25102 OR 25105 OF THE CALIFORNIA CORPORATIONS
CODE. THE RIGHTS OF ALL PARTIES TO THIS AGREEMENT ARE EXPRESSLY CONDITIONED
UPON THE QUALIFICATION BEING OBTAINED UNLESS THE SALE IS SO EXEMPT.
8.14 CONFIDENTIALITY. Each party hereto agrees that, except with the
prior written permission of the other party, it shall at all times keep
confidential and not divulge, furnish or make accessible to anyone any
confidential information, knowledge or data concerning or relating to the
business or financial affairs of the other parties to which such party has been
or shall become privy by reason of this Agreement, discussions or negotiations
relating to this Agreement, the performance of its obligations hereunder or the
ownership of Stock or Warrants purchased hereunder. The provisions of this
Section 6.15 shall be in addition to, and not in substitution for, the
provisions of any separate nondisclosure agreement executed by the parties
hereto with respect to the transactions contemplated hereby.
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<PAGE>
8.15 EXCULPATION AMONG PURCHASERS. Each Purchaser acknowledges that
it is not relying upon any person, firm or corporation, other than the Company
and its officers and directors, in making its investment or decision to invest
in the Company. Each Purchaser agrees that no Purchaser nor the respective
controlling persons, officers, directors, partners, agents, or employees of any
Purchaser shall be liable to any other Purchaser for any action heretofore or
hereafter taken or omitted to be taken by any of them in connection with the
purchase of the Securities.
8.16 ADVICE OF COUNSEL. Each party to this Agreement acknowledges
that Venture Law Group represents and is legal counsel for the Company only, and
that Venture Law Group does not currently represent or render legal advice or
services to any of the Purchasers as individuals nor has it done so in the past.
Accordingly, each party to this Agreement hereby acknowledges that it has had an
opportunity to seek advice of independent legal counsel of its choosing, and has
read and understood all of the terms and provisions of this Agreement. This
Agreement shall not be construed against any party by reason of the drafting or
preparation hereof,
[Signature Pages Follow]
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<PAGE>
The parties have executed this Common Stock and Warrant Purchase Agreement
as of the date first written above.
COMPANY:
CENTURA SOFTWARE CORPORATION
By: /s/ John Bowman
-----------------------------
Name: John Bowman
-----------------------------
(print)
Title: CFO
----------------------------
By: /s/ Scott Broomfield
-------------------------------
Name: Scott Broomfield
-----------------------------
(print)
Title: CEO
----------------------------
Address: 975 Island Drive
Redwood Shores, CA 94065
FAX: 650-596-4376
PURCHASERS:
Alfred University
----------------------------------
(Print name of Purchaser)
By: /s/ Seymour L. Goldblatt
-----------------------------
Name: Seymour L. Goldblatt
-----------------------------
(print)
Title: President of S(2) Technology
------------------------------
Investment Advisor for Alfred University
----------------------------------------
Address:
See Attached
SIGNATURE PAGE TO PURCHASE AGREEMENT
<PAGE>
PURCHASERS
Core Technology Fund, Inc.
----------------------------------
(Print name of Purchaser)
By: /s/ Seymour L. Goldblatt
-----------------------------
Name: Seymour L. Goldblatt
-----------------------------
(print)
Title: President of S(2) Technology
-------------------------------
Managing Director of Core
-------------------------------
Address:
See Attached
Executive Technology LP
----------------------------------
(Print name of Purchaser)
By: /s/ Seymour L. Goldblatt
-----------------------------
Name: Seymour L. Goldblatt
-----------------------------
(print)
Title: President of S(2) Technology
-----------------------------
Which is the Gen'l Ptr. of Exec. Tech
-------------------------------------
Address:
See Attached
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<PAGE>
PURCHASERS:
Foundation Partners
----------------------------------
(Print name of Purchaser)
By: /s/ Seymour L. Goldblatt
-----------------------------
Name: Seymour L. Goldblatt
-----------------------------
(print)
Title: President of S(2) Technology
-----------------------------
Investment Advisor for Foundation
---------------------------------
Address:
See Attached
The Matrix Technology Group N.V.
----------------------------------
(Print name of Purchaser)
By: /s/ Seymour L. Goldblatt
-----------------------------
Name: Seymour L. Goldblatt
-----------------------------
(print)
Title: President of S(2) Technology
----------------------------
Managing Director of Matrix
---------------------------
Address:
See Attached
-3-
<PAGE>
PURCHASERS:
Rochester Institute of Technology
----------------------------------
(Print name of Purchaser)
By: /s/ Seymour L. Goldblatt
-----------------------------
Name: Seymour L. Goldblatt
-----------------------------
(print)
Title: President of S(2) Technology
----------------------------
Investment Advisor for RIT
--------------------------
Address:
See Attached
Scitech Investment Ptrs L.P.
----------------------------------
(Print name of Purchaser)
By: /s/ Seymour L. Goldblatt
-----------------------------
Name: Seymour L. Goldblatt
-----------------------------
(print)
Title: President of S(2) Technology
----------------------------
Which is Gen'l Ptr. of Sci-tech
-------------------------------
Address:
See Attached
-4-
<PAGE>
PURCHASERS:
SG Partners LP
----------------------------------
(Print name of Purchaser)
By: /s/ Seymour L. Goldblatt
-----------------------------
Name: Seymour L. Goldblatt
-----------------------------
(print)
Title: President of S(2) Technology
----------------------------
Which is Gen'l Ptr. of SG
--------------------------
Address:
See Attached
Tampsco II Partnership
----------------------------------
(Print name of Purchaser)
By: /s/ Seymour L. Goldblatt
-----------------------------
Name: Seymour L. Goldblatt
-----------------------------
(print)
Title: President of S(2) Technology
----------------------------
Investment Advisor for Tampsco
------------------------------
Address:
See Attached
-5-
<PAGE>
PURCHASERS:
Yale University
----------------------------------
(Print name of Purchaser)
By: /s/ Seymour L. Goldblatt
-----------------------------
Name: Seymour L. Goldblatt
-----------------------------
(print)
Title: President of S(2) Technology
----------------------------
Investment Advisor for Yale
---------------------------
Address:
See Attached
SIGNATURE PAGE TO PURCHASE AGREEMENT
<PAGE>
PURCHASERS:
Yale University Retirement Plan for Staff
Employees
----------------------------------
(Print name of Purchaser)
By: /s/ Seymour L. Goldblatt
-----------------------------
Name: Seymour L. Goldblatt
-----------------------------
(print)
Title: President of S(2) Technology
----------------------------
Investment Advisor for Yale
---------------------------
Address:
See Attached
Camelot Capital LP
----------------------------------
(Print name of Purchaser)
By: /s/ Scott Smith
-----------------------------
Name: Scott Smith
-----------------------------
(print)
Title: GP
----------------------------
Address:
Camelot Offshore Fund Ltd.
----------------------------------
(Print name of Purchaser)
By: /s/ Scott Smith
-----------------------------
Name: Scott Smith
-----------------------------
(print)
Title: Managing Director
----------------------------
Address:
-2-
<PAGE>
PURCHASER:
Dean Witter Reynolds, Custodian For
John W. Bowman Ira Rollover-4-2-92
----------------------------------
(Print name of Purchaser)
By: /s/ John Bowman
-----------------------------
Name: John Bowman
-----------------------------
(print)
Title:
----------------------------
Address:
c/o Marian Lesnewski
Dean Witter Retirement Plan Maintenance
5 World Trade Center, 6th Floor
New York, NY 10048
Scott Broomfield
----------------------------------
(Print name of Purchaser)
By: /s/ Scott Broomfield
-------------------------------
Name: Scott Broomfield
-----------------------------
(print)
Title: CEO
----------------------------
Address:
1921 Adelaide Way
San Jose, CA 95125
-3-
<PAGE>
PURCHASERS:
JOHN B. GRIFFIN
----------------------------------
(Print name of Purchaser)
By: /s/ John B. Griffin
-----------------------------
Name: John B. Griffin
-----------------------------
(print)
Title: MR
----------------------------
Address:
"Akenfield"
35 Greenhill Road
Otford
Kent TN14 5RR
UK
Larry Hill
----------------------------------
(Print name of Purchaser)
By: /s/ Larry Hill
-----------------------------
Name: Larry Hill
-----------------------------
(print)
Title:
----------------------------
Address:
816 Mountain View Drive
Lafayette, CA 94549
-4-
<PAGE>
PURCHASERS:
Kenneth Kneis
----------------------------------
(Print name of Purchaser)
By: /s/ Kenneth Kneis
-----------------------------
Name: Kenneth Kneis
-----------------------------
(print)
Title:
----------------------------
Address:
560 Montwood Circle
Redwood City, CA 94061
William H. Lane III and Kathleen M. Lane
Trust DTD December 26, 1995
----------------------------------
(Print name of Purchaser)
By: /s/ W. H. Lane
------------------------------
Name: W. H. Lane
-----------------------------
(print)
Title: Trustee
----------------------------
Address:
10695 Magdalena
Los Altos Hills, CA 94024
-5-
<PAGE>
EXHIBITS
Exhibit A - Schedule of Purchasers
Exhibit B - Form of Warrant
Exhibit C - Schedule of Exceptions to Representations and Warranties
Exhibit D - Form of Legal Opinion of Venture Law Group
Exhibit E - Form of Escrow Agreement
<PAGE>
CENTURA SOFTWARE CORPORATION
NOTE CONVERSION AGREEMENT
FEBRUARY 27, 1998
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
1. Conversion of Principal and Interest Indebtedness . . . . . . . . . . . . . 1
1.1 Issuance of Common Stock. . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Delivery into Escrow. . . . . . . . . . . . . . . . . . . . . . . . . 2
1.3 Purchase and Sale Irrevocable . . . . . . . . . . . . . . . . . . . . 2
1.4 Closing; Delivery . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2. Representations and Warranties of the Company . . . . . . . . . . . . . . . 3
2.1 Organization, Good Standing and Qualification . . . . . . . . . . . . 3
2.2 Capital Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.3 Authorization . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.4 Intentionally Omitted . . . . . . . . . . . . . . . . . . . . . . . . 4
2.5 Compliance with Other Instruments . . . . . . . . . . . . . . . . . . 4
2.6 SEC Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.7 Compliance with SmallCap Continued Listing Requirements . . . . . . . 5
2.8 Absence of Certain Changes. . . . . . . . . . . . . . . . . . . . . . 5
2.9 Absence of Litigation . . . . . . . . . . . . . . . . . . . . . . . . 6
2.10 No Undisclosed Events, Liabilities, Developments or Circumstances. . 6
2.11 No General Solicitation. . . . . . . . . . . . . . . . . . . . . . . 6
2.12 Employee Relations . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.13 Intellectual Property Rights . . . . . . . . . . . . . . . . . . . . 6
2.14 Title. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.15 Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.16 Regulatory Permits . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.17 Internal Accounting Controls . . . . . . . . . . . . . . . . . . . . 7
2.18 No Materially Adverse Contracts, Etc . . . . . . . . . . . . . . . . 7
2.19 Tax Status . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.20 Transactions With Affiliates . . . . . . . . . . . . . . . . . . . . 8
2.21 Consent. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
3. Representations and Warranties of Purchaser . . . . . . . . . . . . . . . . 8
3.1 Authorization . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
3.2 Purchase Entirely for Own Account . . . . . . . . . . . . . . . . . . 9
3.3 Accredited Investor . . . . . . . . . . . . . . . . . . . . . . . . . 9
3.4 Restricted Securities . . . . . . . . . . . . . . . . . . . . . . . . 9
3.5 Further Limitations on Disposition. . . . . . . . . . . . . . . . . . 9
3.6 Legends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10
3.7 Disclosure of Information . . . . . . . . . . . . . . . . . . . . . .10
3.8 Membership of the Purchaser . . . . . . . . . . . . . . . . . . . . .11
4. Registration of Securities. . . . . . . . . . . . . . . . . . . . . . . . .11
4.1 Rights Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . .11
<PAGE>
TABLE OF CONTENTS
(continued)
Page
----
4.2 Prohibition on Hedging. . . . . . . . . . . . . . . . . . . . . . . .11
5. Covenants of the Company. . . . . . . . . . . . . . . . . . . . . . . . . .11
5.1 Nomination of Directors . . . . . . . . . . . . . . . . . . . . . . .11
5.2 Bylaws Amendments . . . . . . . . . . . . . . . . . . . . . . . . . .12
5.3 Amendment to Preferred Shares Rights Agreement. . . . . . . . . . . .12
5.4 Form D and Blue Sky . . . . . . . . . . . . . . . . . . . . . . . . .12
5.5 Reporting Status. . . . . . . . . . . . . . . . . . . . . . . . . . .13
5.6 Financial Information . . . . . . . . . . . . . . . . . . . . . . . .13
5.7 Listing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .13
5.8 Filing of Form 8-K. . . . . . . . . . . . . . . . . . . . . . . . . .13
5.9 Private Placement . . . . . . . . . . . . . . . . . . . . . . . . . .14
5.10 Coast Consent. . . . . . . . . . . . . . . . . . . . . . . . . . . .14
5.10 Coast Consent. . . . . . . . . . . . . . . . . . . . . . . . . . . .14
6. Covenants of the Purchaser. . . . . . . . . . . . . . . . . . . . . . . . .14
7. Conditions of the Purchaser's Obligations at the Closing. . . . . . . . . .14
7.1 Representations and Warranties. . . . . . . . . . . . . . . . . . . .14
7.2 Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14
7.3 Compliance Certificate. . . . . . . . . . . . . . . . . . . . . . . .14
7.4 Qualifications. . . . . . . . . . . . . . . . . . . . . . . . . . . .15
7.5 Opinion of Company Counsel. . . . . . . . . . . . . . . . . . . . . .15
7.6 NASD Confirmation . . . . . . . . . . . . . . . . . . . . . . . . . .15
7.7 Release . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .15
7.8 Schedule of Exceptions. . . . . . . . . . . . . . . . . . . . . . . .15
8. Conditions of the Company's Obligations at Closing. . . . . . . . . . . . .15
8.1 Representations and Warranties. . . . . . . . . . . . . . . . . . . .15
8.2 Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . .15
8.3 Qualifications. . . . . . . . . . . . . . . . . . . . . . . . . . . .15
8.4 Note and Other Evidence of Principal Indebtedness . . . . . . . . . .16
8.5 NASD Confirmation . . . . . . . . . . . . . . . . . . . . . . . . . .16
9. Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .16
9.1 Survival of Warranties. . . . . . . . . . . . . . . . . . . . . . . .16
9.2 Transfer; Successors and Assigns. . . . . . . . . . . . . . . . . . .16
9.3 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . .16
9.4 Counterparts. . . . . . . . . . . . . . . . . . . . . . . . . . . . .16
9.5 Titles and Subtitles. . . . . . . . . . . . . . . . . . . . . . . . .16
9.6 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .16
8.7 Company Advisor / Payment of Fees . . . . . . . . . . . . . . . . . .17
9.8 Fees and Expenses . . . . . . . . . . . . . . . . . . . . . . . . . .17
-ii-
<PAGE>
TABLE OF CONTENTS
(continued)
Page
----
9.9 Attorney's Fees . . . . . . . . . . . . . . . . . . . . . . . . . . .17
9.10 Amendments and Waivers . . . . . . . . . . . . . . . . . . . . . . .17
9.11 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . .18
9.12 Delays or Omissions. . . . . . . . . . . . . . . . . . . . . . . . .18
9.13 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . .18
9.14 Corporate Securities Law . . . . . . . . . . . . . . . . . . . . . .18
9.15 Confidentiality. . . . . . . . . . . . . . . . . . . . . . . . . . .18
</TABLE>
-iii-
<PAGE>
CENTURA SOFTWARE CORPORATION
NOTE CONVERSION AGREEMENT
This Note Conversion Agreement (the "AGREEMENT") is made as of the 27th
day of February 1998 by and between Centura Software Corporation, a
California corporation (the "COMPANY"), and Newport Acquisition Company No. 2
LLC, a Delaware limited liability company (the "PURCHASER").
Recitals
Whereas, the Company and Computer Associates International, Inc. a
Delaware corporation (the "SELLER" or "CA"), entered into that certain Note
Purchase Agreement dated March 31, 1995 (the "PRIOR AGREEMENT") and that
certain Floating Rate Convertible Subordinated Note Due 1998 in the principal
amount of $10,000,000 (the "PRINCIPAL INDEBTEDNESS") dated as of April 3,
1995 in the form attached hereto as EXHIBIT A (the "NOTE");
Whereas, the Company, the Purchaser and the Seller have entered into a
Note Purchase and Sale Agreement (the "PURCHASE AGREEMENT") of even date
herewith pursuant to which the Purchaser has agreed to purchase the Note and
all accrued interest thereunder (the "INTEREST INDEBTEDNESS") and all of
Seller's rights and obligations pursuant to the Prior Agreement;
and the Seller has agreed to sell the Note and the Interest Indebtedness to
the Purchaser and to assign to Purchaser all of its rights and obligations
under the Note and the Prior Agreement and the Company has agreed, in
consideration of CA's release of the Company with respect to the Note as set
forth in a Warrant Purchase Agreement of even date herewith between Seller
and the Company in the form attached hereto as EXHIBIT B ("WARRANT PURCHASE
AGREEMENT"), to deliver and sell to the Seller concurrently at a price of
$0.001 per share a warrant in the form attached hereto as EXHIBIT B (the
"WARRANT") to purchase up to 500,000 shares of the Company's Common Stock at
an exercise price of $1.906 per share; and
Whereas, the Company and the Purchaser desire to convert the Principal
Indebtedness and Interest Indebtedness under the Note to equity securities of
the Company simultaneously with the Closing of the Purchase Agreement.
Now, therefore, for good and valuable consideration, the parties hereby
agree as follows:
1. CONVERSION OF PRINCIPAL AND INTEREST INDEBTEDNESS.
1.1 ISSUANCE OF COMMON STOCK. Subject to the terms and conditions
of this Agreement, at the Closing, in consideration for the cancellation of
all Principal Indebtedness and Interest Indebtedness under the Note and any
other instrument evidencing such indebtedness, the Company shall issue and
sell to the Purchaser and the Purchaser shall purchase a total of 11,415,094
shares of the Company's Common Stock. The shares of Common Stock issuable
upon the conversion hereunder (the "CONVERSION STOCK") shall also be
hereinafter referred to as the "STOCK" or the "SECURITIES."
<PAGE>
1.2 DELIVERY INTO ESCROW. On the basis of the representations,
warranties, terms and conditions contained herein, on the date hereof each
party shall deliver to the financial entity or other entity mutually agreed
to by the Parties (the "ESCROW AGENT"), pursuant to an agreement in the form
attached hereto as EXHIBIT C (the "ESCROW AGREEMENT"), the following:
(a) Seller shall deliver the original signature Note;
(b) Purchaser shall deliver $6 million in cash or by wire
transfer;
(c) The Company shall deliver an affidavit executed by an
officer of the Company setting forth the Interest Indebtedness on the Note
calculated through February 27, 1998 and certified as correct by an officer
of the Seller (the "INTEREST AFFIDAVIT"); and
(d) Seller, Purchaser and the Company shall deliver each of
the other items required to be delivered by each of them pursuant to the
terms of the Escrow Agreement.
1.3 PURCHASE AND SALE IRREVOCABLE. The Company and Purchaser each
acknowledge and agree that by its delivery of the respective consideration
set forth above in Section 1.1 to the Escrow Agent, it shall have made an
irrevocable commitment to close the purchase, sale and assignment
transactions contemplated hereunder subject to the fulfillment of the terms
and conditions of this Agreement, the Purchase Agreement, and the Escrow
Agreement.
1.4 CLOSING; DELIVERY.
(a) The issuance and sale of the Conversion Stock hereunder
shall take place at the offices of Venture Law Group, 2800 Sand Hill Road,
Menlo Park, California, at 2:00 p.m., on February __, 1998, or at such other
time and place as the Company and the Purchaser mutually agree upon, orally
or in writing (which time and place are designated as the "CLOSING"),
provided that such Closing occurs simultaneously with the closing of the
Purchase Agreement pursuant to the terms and conditions thereof (without
waiver of any term or condition thereof).
(b) At the Closing, in consideration for the conversion of the
Principal and Interest Indebtedness by the Purchaser, the Company shall
instruct the Escrow Agent to deliver to the Purchaser a stock certificate
representing the Conversion Stock being issued.
(c) At the Closing, in consideration for the issuance of the
Conversion Stock by the Company, the Purchaser shall instruct the Escrow
Agent to deliver to the Company for cancellation the Note and the Interest
Affidavit as defined in Section 1.2.(a) of the Purchase Agreement, setting
forth the Interest Indebtedness under the Note.
2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company hereby
represents and warrants to the Purchaser that, except as set forth on a
Schedule of Exceptions attached hereto as EXHIBIT D, which exceptions shall
be deemed to be representations and warranties as if made hereunder:
-2-
<PAGE>
2.1 ORGANIZATION, GOOD STANDING AND QUALIFICATION. The Company is
a corporation duly organized, validly existing and in good standing under the
laws of the State of California and has all requisite corporate power and
authority to carry on its business.
2.2 CAPITAL STOCK. The authorized capital of the Company consists,
or will consist, immediately prior to the Closing, of 60,000,000 shares of
Common Stock, $0.01 par value per share, of which 15,780,886 shares were
issued and outstanding as of February 9, 1998, and 2,000,000 shares of
Preferred Stock, $0.01 par value per share, none of which are issued or
outstanding. 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 (other than rights of first refusal held by the Company and
specifically described in the Schedule of Exceptions) under applicable law,
the Articles of Incorporation or Bylaws of the Company, or any agreement to
which the Company 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. The Company has also reserved (i) an
aggregate of 2,000,000 shares of Common Stock issuable to employees and
consultants pursuant to the Company's 1995 Stock Option Plan, of which
1,164,947 shares are issuable upon exercise of outstanding options under such
plan, (ii) an aggregate of 2,657,399 shares of Common Stock issuable to
employees and consultants pursuant to the Company's 1986 Stock Option Plan,
of which 2,657,399 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 the Company's 1992 Employee Stock Purchase
Plan, of which no shares are available for future issuance under such plan,
(iv) 500,000 shares of Common Stock issuable to non-employee directors
pursuant to Company's 1996 Directors' Stock Option Plan, of which 300,000
shares are issuable upon exercise of outstanding options under such plan, (v)
non-plan options issued to the Company's Chief Executive Officer, Chief
Financial Officer and Vice President of Marketing to purchase up to an
aggregate of 1,500,000 shares of Common Stock, (vi) up to 450,000 shares of
Common Stock issuable upon exercise of warrants granted or to be granted to
certain third parties, including vendors, suppliers and financial and
investment advisors of the Company, prior to inclusion of the Warrant for
500,000 shares of Common Stock to be issued to the Seller. The shares of
Conversion Stock have been duly authorized and, when issued and paid for in
accordance with this Agreement, will be validly issued, fully paid, and
nonassessable, and not subject to any preemptive rights or rights of first
refusal under applicable law, the Articles of Incorporation or Bylaws of the
Company, or any agreement to which the Company is a party or by which the
Company is bound, and are free of any taxes, claims, liens, charges or
encumbrances other than taxes, claims, liens, charges or encumbrances created
by or imposed upon the holders thereof; provided, however, that the
Conversion Stock may be subject to restrictions on transfer as set forth in
this Agreement. There are no agreements or arrangements under which the
Company is obligated to register the sale of any of its securities under the
Securities Act of 1933, as amended (the "1933 ACT"). There are no
outstanding securities of the Company which contain any
-3-
<PAGE>
redemption or similar provisions, and there are no contracts, commitments,
understandings or arrangements by which the Company is or may become bound to
redeem a security of the Company. There are no securities or instruments
containing anti-dilution or similar provisions that will be triggered by the
issuance of the Conversion Stock. There are no outstanding securities or
instruments of the Company which contain any redemption or similar
provisions, and there are on contracts, commitments, understandings or
arrangements by which the Company is or may become bound to redeem a security
of the Company. The Company does not have any stock appreciation rights or
"phantom stock" plans or agreements or any similar plan or agreement. Other
than as set forth in the Reports, the Company has no subsidiaries or equity
interest in any other entity. The Company has furnished to the Purchaser true
and correct copies of the Company's Articles of Incorporation, as amended and
as in effect on the date hereof (the "ARTICLES OF INCORPORATION"), and the
Company's Bylaws, as amended and as in effect on the date hereof (the
"BYLAWS"), and the terms of all securities convertible into or exercisable
for Common Stock and the material rights of the holders thereof in respect
thereto. The execution, delivery and performance by the Company of the
Transaction Agreements will not cause the conversion rights or exercise
rights of any securities convertible into or exercisable for Common Stock to
be accelerated.
2.3 AUTHORIZATION. The execution, delivery and performance by the
Company of this Agreement and the Investor Rights Agreement attached hereto
as EXHIBIT E (the "RIGHTS AGREEMENT" and together with the Agreement and the
Purchase Agreement, the "TRANSACTION AGREEMENTS") are within the Company's
corporate power and have been duly authorized by all requisite action by the
Company. The Transaction Agreements have been duly executed and delivered by
the Company and this Agreement constitutes, and the Rights Agreement when
executed and delivered in accordance with this Agreement will constitute, the
valid and binding obligation of the Company, enforceable in accordance with
their respective 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.
2.4 INTENTIONALLY OMITTED.
2.5 COMPLIANCE WITH OTHER INSTRUMENTS. The execution, delivery and
performance of the Transaction Agreements and the consummation of the
transactions contemplated thereby will not result in any violation or default
of any provisions of the Articles of Incorporation or Bylaws of the Company
or of any instrument, judgment, order, writ, decree or contract to which the
Company is a party or by which the Company is bound or, to the Company's
knowledge, of any provision of federal or state statute, rule or regulation
applicable to the Company, or be in conflict with or constitute, with or
without the passage of time and giving of notice, either a default under any
such provision, instrument, judgment, order, writ, decree or contract or an
event which results in the creation of any lien, charge or encumbrance upon
any assets of the Company.
2.6 SEC REPORTS. The Company has filed with the Securities and
Exchange Commission (the "COMMISSION") via Edgar its Annual Report on Form
10-K for the year ended December 31, 1996 and its Quarterly Reports on Form
10-Q for the first three quarters of the year ended December 31, 1997 (the
"REPORTS"), and such Reports are available to Purchaser through Edgar in
electronic format. As of their respective filing dates, the Reports complied
in all material respects with the requirements of the Securities Exchange Act
of 1934, as amended, and none of the Reports contained any untrue statement
of a material fact or omitted to state a
-4-
<PAGE>
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 Commission and provided to Purchaser prior to the
date hereof. No other information provided by or on behalf of the Company to
the Purchaser which is not included in the Reports, including, but not
limited to, information referred to in Section 2.2 of this Agreement,
contains any untrue statement of a material fact or omits to state any
material fact necessary in order to make the statements therein, in light of
the circumstance under which they are or were made, not misleading. Neither
the Company nor any of its officers, directors, employees or agents have
provided the Purchaser with any material, nonpublic information.
2.7 COMPLIANCE WITH SMALLCAP CONTINUED LISTING REQUIREMENTS. After
giving effect to the transactions contemplated hereunder and a private
placement of the Company's equity securities scheduled to close concurrently
with the Closing, on the Closing Date the Company will have (a) net tangible
assets in excess of $2,000,000, (b) a public float of in excess of 500,000
shares, (c) a market value for the public float in excess of $1,000,000, (d)
in excess of 300 shareholders, (e) at least two market makers for its
registered securities and (f) corporate governance standards duly adopted by
its Board of Directors which the Company reasonably believes satisfy
published requirements for The Nasdaq SmallCap Market. After giving effect
to the transactions contemplated hereunder and the private placement
referenced above, the Company reasonably believes that (A) on the Closing
Date the Company will be in compliance with all other requirements, other
than the $1.00 per share bid price maintenance requirement, imposed by Nasdaq
upon the Company with respect to the continued listing of the Common Stock
for quotation on The Nasdaq SmallCap Market, and (B) the Common Stock of the
Company will continue to be listed for quotation on The Nasdaq SmallCap
Market.
2.8 ABSENCE OF CERTAIN CHANGES. Since September 30, 1997, there
has been no material adverse change and no material adverse development in
the business, properties, operations, financial condition, results of
operations or prospects of the Company. The Company has not taken any steps,
and does not currently expect to take any steps, to seek protection pursuant
to any bankruptcy law nor does the Company have any knowledge or reason to
believe that its creditors intend to initiate involuntary bankruptcy
proceedings. Since September 30, 1997 the Company has not declared or paid
any dividends, sold any assets outside of the ordinary course of business or
had material capital expenditures.
2.9 ABSENCE OF LITIGATION. There is no action, suit, proceeding,
inquiry or investigation before or by any court, public board, government
agency, self-regulatory organization or body pending or, to the knowledge of
the Company, threatened against or affecting the Company, its Common Stock or
any of the Company's officers or directors in their capacities as such or
that questions the validity of the Transaction Agreements or the right of the
Company to enter into them, or to consummate the transactions contemplated
thereby.
2.10 NO UNDISCLOSED EVENTS, LIABILITIES, DEVELOPMENTS OR
CIRCUMSTANCES. No event, liability, development or circumstance has occurred
or exists, or to the Company's knowledge is contemplated to occur, with
respect to the Company or its business, properties,
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prospects, operations or financial condition, that would be required to be
disclosed by the Company under applicable securities laws on a registration
statement filed with the SEC relating to an issuance and sale by the Company
of its Common Stock and which has not been publicly announced.
2.11 NO GENERAL SOLICITATION. Neither the Company, nor any of its
affiliates, nor any person acting on its or their behalf, has engaged in any
form of general solicitation or general advertising (within the meaning of
Regulation D under the 1933 Act) in connection with the offer or sale of the
Conversion Stock.
2.12 EMPLOYEE RELATIONS. The Company is not involved in any union
labor dispute nor, to the knowledge of the Company, is any such dispute
threatened. None of the Company's employees is a member of a union, the
Company is not a party to a collective bargaining agreement, and the Company
believes that its relations with is employees are good. No executive officer
(as defined in Rule 501(f) of the 1933 Act) has notified the Company that
such officer intends to leave the Company or otherwise terminate such
officer's employment with the Company.
2.13 INTELLECTUAL PROPERTY RIGHTS. The Company owns or possesses
adequate rights or licenses to use all trademarks, trade names, service
marks, service mark registrations, service names, patents, patent rights,
copyrights, inventions, licenses, approvals, governmental authorizations,
trade secrets and rights necessary to conduct its business as now conducted.
None of the Company's trademarks, trade names, service marks, service mark
registrations, service names, patents, patent rights, copyrights, inventions,
licenses, approvals, government authorizations, trade secrets or other
intellectual property rights have expired or terminated. The Company does
not have any knowledge of any infringement by the Company of trademarks,
trade name rights, patents, patent rights, copyrights, inventions, licenses,
service names, service marks, service mark registrations, trade secret or
other similar rights of others, or of any such development of similar or
identical trade secrets or technical information by others, other than
technology underlying competitive products in the market, and there is no
claim, action or proceeding being made or brought against, or to the
Company's knowledge, being threatened against the Company regarding
trademarks, trade names, patents, patent rights, invention, copyright,
license, service names, service marks, service mark registrations, trade
secrets or other infringements; and the Company is unaware of any facts or
circumstances which might give rise to any of the foregoing. The Company has
taken reasonable security measures to protect the secrecy, confidentiality
and value of all of its intellectual properties.
2.14 TITLE. The Company has good and marketable title to all real
property and good and marketable title to all personal property owned by it
which is material to the business of the Company free and clear of all liens,
claims, charges, encumbrances and defects such as do not materially affect
the value of such property and do not interfere with the use made and
proposed to made of such property by the Company. Any real property and
facilities held under lease by the Company is held by it under valid,
subsisting and enforceable leases with such exceptions as are not material
and do not interfere with the use made and proposed to be made of such
property and buildings by the Company.
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2.15 INSURANCE. The Company is insured by insurers of recognized
financial responsibility against such losses and risks and in such amounts as
management of the Company believes to be prudent and customary in the
businesses in which the Company is engaged. The Company has not been refused
any insurance coverage sought or applied for and the Company has no reason to
believe that it will not be able to renew its existing insurance coverage as
and when such coverage expires or to obtain similar coverage from similar
insurers as may be necessary to continue its business at a cost that would
not materially and adversely affect the condition, financial or otherwise, or
the earnings, business or operations of the Company.
2.16 REGULATORY PERMITS. The Company possesses, to its knowledge,
all certificates, authorizations and permits issued by the appropriate
federal, state or foreign regulatory authorities necessary to conduct its
business, and the Company has not received any notice of proceedings relating
to the revocation or modification of any such certificate, authorization or
permit.
2.17 INTERNAL ACCOUNTING CONTROLS. The Company maintains a system
of internal accounting controls sufficient to provide reasonable assurance
that (i) transactions are executed in accordance with management's general or
specific authorizations, (ii) transactions are recorded as necessary to
permit preparation of financial statements in conformity with generally
accepted accounting principles and to maintain asset accountability, (iii)
access to assets is permitted only in accordance with management's general or
specific authorization and (iv) the recorded accountability for assets is
compared with the existing assets at reasonable intervals and appropriate
action is taken with respect to any differences.
2.18 NO MATERIALLY ADVERSE CONTRACTS, ETC. The Company is not
subject to any charter, corporate or other legal restriction, or any
judgment, decree, order, rule or regulation which in the reasonable business
judgment of the Company's officers, who were appointed as officers of the
Company on December 5, 1997, has or could reasonably be expected in the
future to have a material adverse effect on the Company. The Company is not
a party to any contract, agreement or arrangement which in the reasonable
business judgment of the Company's officers, who were appointed as officers
of the Company on December 5, 1997, has or could reasonably be expected to
have a material adverse effect on the Company.
2.19 TAX STATUS. The Company has made or filed all tax returns,
reports and declarations required by any jurisdiction to which it is subject
(unless and only to the extent that the Company has set aside on its books
provisions reasonably adequate for the payment of all unpaid and unreported
taxes) and has paid all taxes and other governmental assessments and charges
that are material in amount, and has set aside on its books provisions
reasonably adequate for the payment of all taxes for periods subsequent to
the periods to which such returns, reports or declarations apply. There are
no unpaid taxes in any material amount claimed to be due by the taxing
authority of any jurisdiction, and the officers of the Company know of no
basis for any such claim.
2.20 TRANSACTIONS WITH AFFILIATES. None of the officers, directors,
or employees of the Company is presently a party to any transaction with the
Company (other than
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for services as employees, officers and directors), including any contract,
agreement or arrangement providing for the furnishing of services to or by,
providing for rental of real or personal property to or from, or otherwise
requiring payments to or from any officer, director or such employee or, to
the knowledge of the Company, any corporation, partnership, trust or other
entity in which any officer, director, or any such employee has a substantial
interest or is an officer, director, trustee or partner.
2.21 CONSENT. Coast Business Credit is the sole holder of Senior
Indebtedness under the Note. The Company has obtained the oral consent of
such holders of Senior Indebtedness under the Note to the transactions
contemplated hereunder and under the Transaction Agreements and will use best
efforts to obtain the written consent of such holder prior to the Closing.
2.22 ENVIRONMENT LAWS. To its knowledge, the Company (i) is in
compliance with any and all applicable foreign, federal, state and local laws
and regulations relating to the protection of human health and safety, the
environment or hazardous or toxic substances or wastes, pollutants or
contaminants ("ENVIRONMENTAL LAWS"), (ii) has received all permits, licenses
and other approvals required of it under applicable Environmental Laws to
conduct its respective businesses and (iii) is in compliance with all terms
and conditions of any such permit, license or approval where, in each of the
three foregoing cases, the failure to so comply would have individually or in
the aggregate, a material adverse effect on the Company.
3. REPRESENTATIONS AND WARRANTIES OF PURCHASER. The Purchaser hereby
represents and warrants to the Company that:
3.1 AUTHORIZATION. The execution, delivery and performance by the
Purchaser of the Transaction Agreements are within the Purchaser's limited
liability company power and have been duly authorized by all requisite action
by the Purchaser. The Transaction Agreements have been duly executed and
delivered by the Purchaser and this Agreement constitutes, and the Rights
Agreement when executed and delivered in accordance with this Agreement will
constitute, the valid and binding obligation of the Purchaser, enforceable in
accordance with their respective 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.
3.2 PURCHASE ENTIRELY FOR OWN ACCOUNT. The Purchaser is acquiring
the shares of Conversion Stock hereunder for investment for the Purchaser's
own account, and not as a nominee or agent, and not with a view to the resale
or distribution of any part thereof. Purchaser has no present intention of
selling, granting any participation in, or otherwise distributing the
Securities other than to members of the Purchaser as of the date hereof.
3.3 ACCREDITED INVESTOR. The Purchaser is an accredited investor
as defined in Rule 501(a) of Regulation D promulgated under the 1933 Act.
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3.4 RESTRICTED SECURITIES. Purchaser understands that the Securities
are characterized as "restricted securities" under the federal securities laws
inasmuch as they are being acquired from the Company in a transaction not
involving a public offering and that under such laws and applicable regulations
such Securities may be resold without registration under the 1933 Act, only in
certain limited circumstances. In this connection, Purchaser represents that it
is familiar with SEC Rule 144, as presently in effect, and understands the
resale limitations imposed thereby and by the Act.
3.5 FURTHER LIMITATIONS ON DISPOSITION. Notwithstanding anything to
the contrary contained in Section 3.5 of the Purchase Agreement, without in any
way limiting the representations set forth in this Agreement, Purchaser further
agrees not to make any disposition of all or any portion of the Securities
unless and until:
(a) There is then in effect a Registration Statement under the
1933 Act covering such proposed disposition and such disposition is made in
accordance with such Registration Statement; or
(b) (i) Purchaser shall have notified the Company of the
proposed disposition and shall have furnished the Company with such
information as is necessary to effect the proposed disposition, (ii) the
transferee has agreed in writing for the benefit of the Company to be bound
by this Section 3, and (iii) if reasonably requested by the Company,
Purchaser shall have furnished the Company with an opinion of counsel,
reasonably satisfactory to the Company, that such disposition will not
require registration under the 1933 Act.
3.6 LEGENDS. Purchaser understands that the Securities, and any
securities issued in respect thereof or exchange therefor, may bear one or
all of the following legends, if applicable:
(a) "THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR
HYPOTHECATED IN THE ABSENCE OF A REGISTRATION STATEMENT IN EFFECT WITH
RESPECT TO THE SECURITIES UNDER SUCH ACT OR AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED OR UNLESS
SOLD PURSUANT TO RULE 144 OF SUCH ACT."
(b) Any legend required by the laws of the State of
California, including any legend required by the California Department of
Corporations.
(c) Any legend required by the Blue Sky laws of any other
state to the extent such laws are applicable to the shares represented by the
certificate so legended.
(d) Any legend required by the Company's Shareholder Rights
Plan.
The legends set forth in subparagraphs (a), (b) and (c) above shall be
removed upon application to the Company after the one year anniversary date
of this Agreement and the Company shall
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promptly issue a certificate without such legends to the holder of Securities
upon which it is stamped and shall remove all stop transfer orders and other
transfer restrictions communicated to the Company's transfer agent, if (i)
such Securities are registered for sale under the 1933 Act, (ii) in
connection with a sale transaction, such holder provides the Company with an
opinion of counsel, in a generally acceptable form, to the effect that a
public sale, assignment or transfer of the Securities may be made without
registration under the 1933 Act or (iii) such holder provides the Company
with reasonable assurances that the Securities can be sold pursuant to Rule
144 and the Company's counsel has reasonably determined that the legends set
forth in subparagraphs (a), (b) and (c) above may be removed under Rule 144;
provided however, that in the event Purchaser is granted piggy-back
registration rights in connection with an equity offering by the Company
prior to the one year anniversary date of this Agreement, the legends set
forth in subparagraphs (a), (b) and (c) above shall be removed upon
application to the Company and the Company shall issue a certificate without
such legends to the holder of Securities upon which it is stamped.
3.7 DISCLOSURE OF INFORMATION. Purchaser has had an opportunity to
discuss the Company's business, management, financial affairs and the terms
and conditions of the offering of the Securities with the Company's
management and has had an opportunity to review the Company's Reports.
Purchaser understands that such discussions, as well as the written
information issued by the Company, were intended to describe the aspects of
the Company's business which it believes to be material.
3.8 MEMBERSHIP OF THE PURCHASER. EXHIBIT F attached hereto
contains a true and complete list of all of the members of the Purchaser.
4. REGISTRATION OF SECURITIES.
4.1 RIGHTS AGREEMENT. The Company and the Purchaser will enter
into an Investor Rights Agreement in the form attached hereto as EXHIBIT E,
setting forth the obligations and the rights of the parties, respectively,
with respect to registration of the Securities.
4.2 PROHIBITION ON HEDGING. During the period commencing with the
date that is two (2) weeks prior to the Closing and continuing through the
date on which the Purchaser holds 5% or less of the Conversion Stock acquired
hereunder, the Purchaser hereby agrees that it shall not directly or
indirectly engage in short sales, derivative transactions or any similar
hedging techniques or strategies involving any Common Stock of the Company.
5. COVENANTS OF THE COMPANY. The Company agrees that:
5.1 NOMINATION OF DIRECTORS. On or before the Closing date,
effective upon the consummation of the transaction contemplated hereunder,
the Company shall have (i) adopted an amendment to its Bylaws setting the
number of directors on its Board of Directors at seven (7) and (ii) appointed
two (2) new directors to its Board of Directors, each of whom shall have been
nominated by the Purchaser at least three (3) business days prior to the
Closing Date, provided that such individuals are reasonably acceptable to the
Company. Provided that the Purchaser and/or one or more of the persons listed
on EXHIBIT F continues to hold greater than 25% of the issued and outstanding
stock of the Company as of the record date for the mailing of
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proxy materials to shareholders in connection with the Company's annual
meeting of shareholders, the Company shall recommend in such proxy materials
that shareholders at each such meeting elect two (2) individuals to its Board
of Directors who were nominated by the Purchaser (or the holders of a
majority of the Conversion Stock if the Purchaser has been dissolved) and the
Company shall at each such meeting cause its designated proxyholder to vote
proxies received from shareholders in favor of such nominees, provided that
such nominees are reasonably acceptable to the Company. Provided that the
Purchaser and/or one or more of the persons listed on EXHIBIT F continues to
hold greater than 15% but less than or equal to 25% of the issued and
outstanding stock of the Company as of the record date for the mailing of
proxy materials to shareholders in connection with the Company's annual
meeting of shareholders, the Company shall recommend in such proxy materials
that shareholders at each such meeting elect one (1) individual to its Board
of Directors who was nominated by the Purchaser (or the holders of a majority
of the Conversion Stock if the Purchaser has been dissolved) and the Company
shall at each such meeting cause its designated proxyholder to vote proxies
received from shareholders in favor of such nominee, provided that such
nominee is reasonably acceptable to the Company. In the event the Company
increases its Board size above seven (7) directors prior to the next annual
meeting of shareholders, the Company shall not be required to nominate or
recommend election of additional Purchaser candidates to the Company's Board
of Directors other than as set forth above in this Section 5.1, provided that
the number of directors who are officers, employees, or paid full-time
consultants of the Company is not greater than two (2). The Compensation
Committee of the Board of Directors shall be comprised of three (3) directors
and shall include one (1) director who was nominated to the Board by the
Purchaser.
5.2 BYLAWS AMENDMENTS. On or before the Closing date, effective
upon the consummation of the transaction contemplated hereunder, the Company
shall have adopted an amendment to its Bylaws providing that a two-thirds
super majority vote of directors be required to approve any of the following
actions:
(i) consolidation or merger of the Company with or into any
other corporation in which securities possessing more than fifty percent
(50%) of the total combined voting power of the Company's outstanding
securities are transferred to a person or persons different from the persons
holding those securities immediately prior to such transaction (other than a
consolidation or merger in which the surviving entity is the Company or one
of its wholly-owned subsidiaries) or transfer or sale of all or substantially
all of the assets of the Company; or
(ii) an increase in the Company's secured indebtedness to an
aggregate amount in excess of $15 million.
The Company agrees that it will not amend the foregoing super majority bylaws
amendment without obtaining the prior written consent of the Purchaser (or
the holders of a majority of the Conversion Stock if the Purchaser has been
dissolved) so long as the Purchaser and/or one or more of the persons listed
on EXHIBIT F continues to hold at least 7.5% of the issued and outstanding
capital stock of the Company.
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5.3 AMENDMENT TO PREFERRED SHARES RIGHTS AGREEMENT. On or before
the Closing Date, the Company shall have taken all appropriate action to
ensure that (a) the sale of the Conversion Stock to Purchaser hereunder is
not deemed to be a Triggering Event as that term is defined in Section 1(y)
of the Preferred Shares Rights Agreement dated August 3, 1994 between the
Company and Chemical Trust Company of California (the "RIGHTS PLAN"), (b)
neither the Purchaser nor any of its members, Affiliates, Associates,
representatives or control persons shall be deemed an "Acquiring Person"
under the Rights Plan and (c) the Purchaser nominees to the Board of
Directors shall be deemed "Continuing Directors" under the Rights Plan.
5.4 FORM D AND BLUE SKY. The Company agrees to file a Form D with
respect to the Conversion Stock as required under Regulation D and to provide
a copy thereof to the Purchaser promptly after such filing. The Company
shall, on or before the Closing Date, take such action as the Company shall
reasonably determine is necessary to qualify the Conversion Stock for, or
obtain exemption for the Conversion Stock for, sale to the Purchaser at the
Closing pursuant to this Agreement under applicable securities or "Blue Sky"
laws of the states of the United States, and shall provide evidence of any
such action so taken to the Purchaser on or prior to the Closing Date. The
Company shall make all filings and reports relating to the offer and sale of
the Conversion Stock required under applicable securities or "Blue Sky" laws
of applicable states of the United States following the Closing Date.
5.5 REPORTING STATUS. Until the date as of which the Holders (as
that term is defined in the Rights Agreement) may sell all of the Conversion
Shares without restriction pursuant to Rule 144(k) promulgated under 1933 Act
(or successor thereto), the Company shall file all reports required to be
filed with the SEC pursuant to the Securities Exchange Act of 1934, as
amended (the "1934 ACT"), and until that date, the Company shall not
terminate its status as an issuer required to file reports under the 1934 Act
even if the 1934 Act, or the rules and regulations thereunder would otherwise
permit such termination, unless the reporting requirements of Rule 144(k)
have also been amended to permit the Holders to sell the Conversion Shares
without restriction.
5.6 FINANCIAL INFORMATION. The Company shall file with the SEC via
Edgar all registration statements and all reports required pursuant to the
1933 Act and the 1934 Act, including without limitation, its Annual Reports
on Form 10-K, its Quarterly Reports on Form 10-Q, Current Reports on Form 8-K
and any registration statements (including those on Form S-8) or amendments
and such reports will be available to the Purchaser via Edgar. The Company
shall deliver to the Purchaser copies of any notices and other information
made available or given to the shareholders of the Company generally,
contemporaneously with the making available or giving thereof to the
shareholders.
5.7 LISTING. The Company shall use its best efforts to maintain
the inclusion for quotation on The Nasdaq SmallCap Market of its Common
Stock, and without limiting the generality of the foregoing, the Company
shall use its best efforts to arrange for at least two market makers to
register with the NASD or any other comparable exchange as such with respect
to the Common Stock. The Company shall not knowingly take any action which
would be
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reasonably expected to result in the removal of the Common Stock from
quotation on The Nasdaq SmallCap Market. At such time as the Company is able
to satisfy the listing requirements on the Nasdaq National Market System
("NNM") and the Company's management reasonably believes that the Company
will be able to continue to comply with the continued listing requirements of
the NNM thereafter, the Company shall use its reasonable efforts to secure
designation and quotation of its outstanding Common Stock on the NNM. The
Company shall promptly report to its Board of Directors information or
notices it receives regarding the continued eligibility of its Common Stock
for quotation on any automated quotation system or securities exchange.
5.8 FILING OF FORM 8-K. Within five (5) business days following
the Closing Date, the Company shall file a Form 8-K with the SEC describing
the terms of the transactions contemplated by the Transaction Agreements and
the Note Purchase Agreement in the form specified by the 1934 Act.
5.9 PRIVATE PLACEMENT. Concurrently with the Closing of the
transactions contemplated hereunder, the Company will consummate a private
placement of Common Stock of the Company, at not less than $1.06 per share
(with up to 25% warrant coverage at an exercise price of at least $1.25 per
share), resulting in gross proceeds to the Company of at least $1,000,000.
5.10 COAST CONSENT. The Company shall have obtained from Coast, as
a condition to the Closing, a written consent by Coast to the Company's
execution, delivery and performance of the Transaction Agreements and a
waiver, effective upon the Closing, of any defaults by the Company under its
debt facility with Coast occurring prior to the Closing Date.
6. COVENANTS OF THE PURCHASER. In the event that a shareholder vote is
solicited by the Company to amend and restate its Articles of Incorporation,
the Purchaser agrees to vote in favor of proposed amendments to effect any of
the following measures:
(a) a reverse stock split of the Company's capital stock in a ratio
reasonably recommended by the Company's executive management;
(b) reincorporation of the Company into Delaware; and
(c) an increase in the total number of authorized shares of the
Company's Common Stock, provided however that the Purchaser shall not be
obligated to vote in favor of such an amendment unless the authorized number
of the Company's Common Stock has been reduced to a number that is less than
60 million as the result of a reverse stock split pursuant to subsection 6(a)
above.
7. CONDITIONS OF THE PURCHASER'S OBLIGATIONS AT THE CLOSING. The
obligations of the Purchaser under this Agreement are subject to the
fulfillment, on or before the Closing, of each of the following conditions,
unless otherwise waived:
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7.1 REPRESENTATIONS AND WARRANTIES. The representations and
warranties of the Company contained in Section 2 shall be true and correct on
and as of the Closing with the same effect as though such representations and
warranties had been made on and as of the date of the Closing.
7.2 PERFORMANCE. The Company shall have performed and complied
with all covenants, agreements, obligations and conditions contained in this
Agreement that are required to be performed or complied with by it on or
before the Closing.
7.3 COMPLIANCE CERTIFICATE. The President of the Company shall
deliver to the Purchaser at the Closing a certificate ("OFFICER'S COMPLIANCE
CERTIFICATE") certifying that (a) the conditions specified in Sections 5.1,
5.2, 5.3, 7.1 and 7.2 have been fulfilled and (b) all conditions of the
Company's obligations under the Purchase Agreement and the Warrant Purchase
Agreement have been fulfilled or waived.
7.4 QUALIFICATIONS. All authorizations, approvals or permits, if
any, of any governmental authority or regulatory body of the United States or
of any state that are required in connection with the lawful issuance and
sale of the Securities pursuant to this Agreement shall be obtained and
effective as of the Closing.
7.5 OPINION OF COMPANY COUNSEL. The Purchaser shall have received
from Venture Law Group, counsel for the Company, an opinion, dated as of the
Closing, in substantially the form of EXHIBIT G.
7.6 NASD CONFIRMATION. The Company shall have received
confirmation from the National Association of Securities Dealers, Inc. (the
"NASD") that approval by the Company's shareholders is not required prior to
the consummation of the actions (including without limitation, the issuance
of the Securities to Purchaser) contemplated hereunder.
7.7 RELEASE. CA shall have executed and delivered the Warrant
Purchase Agreement.
7.8 SCHEDULE OF EXCEPTIONS. The Company shall have delivered the
final Schedule of Exceptions, reasonably approved by Purchaser, in the form
attached as EXHIBIT D.
8. CONDITIONS OF THE COMPANY'S OBLIGATIONS AT CLOSING. The obligations
of the Company under this Agreement are subject to the fulfillment, on or
before the Closing, of each of the following conditions, unless otherwise
waived:
8.1 REPRESENTATIONS AND WARRANTIES. The representations and
warranties of the Purchaser contained in Section 3 shall be true and correct
in all material respects on and as of the Closing with the same effect as
though such representations and warranties had been made on and as of the
Closing.
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8.2 PERFORMANCE. All covenants, agreements and conditions
contained in this Agreement to be performed by the Purchaser on or prior to
the Closing shall have been performed or complied with in all material
respects.
8.3 QUALIFICATIONS. All authorizations, approvals or permits, if
any, of any governmental authority or regulatory body of the United States or
of any state that are required in connection with the lawful issuance and
sale of the Securities pursuant to this Agreement shall be obtained and
effective as of the Closing.
8.4 NOTE AND OTHER EVIDENCE OF PRINCIPAL INDEBTEDNESS. The
Purchaser shall have delivered to the Company for cancellation the originally
executed Note and any other related documents or instruments, including the
Interest Affidavit, evidencing indebtedness under the Note.
8.5 NASD CONFIRMATION. The Company shall have received
confirmation from the NASD that approval by the Company's shareholder is not
required prior to the consummation of the actions (including without
limitation, the issuance of the Securities to Purchaser) contemplated
hereunder.
9. MISCELLANEOUS.
9.1 SURVIVAL OF WARRANTIES. Unless otherwise set forth in this
Agreement, the warranties, representations and covenants of the Company and
the Purchaser contained in or made pursuant to this Agreement shall survive
the execution and delivery of this Agreement and the Closing for a period of
two (2) years following the Closing.
9.2 TRANSFER; SUCCESSORS AND ASSIGNS. The terms and conditions of
this Agreement shall inure to the benefit of and be binding upon the
respective successors and assigns of the parties and successive holders of
all or any portion of the Conversion Stock and their respective successors
and assigns. Nothing in this Agreement, express or implied, is intended to
confer upon any party other than the parties hereto, holders of Conversion
Stock, or their respective successors and assigns any rights, remedies,
obligations, or liabilities under or by reason of this Agreement, except as
expressly provided in this Agreement.
9.3 GOVERNING LAW. This Agreement and all acts and transactions
pursuant hereto and the rights and obligations of the parties hereto shall be
governed, construed and interpreted in accordance with the laws of the State
of California, without giving effect to principles of conflicts of law.
9.4 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original and all of which
together shall constitute one instrument.
9.5 TITLES AND SUBTITLES. The titles and subtitles used in this
Agreement are used for convenience of reference only and are not to be
considered in construing or interpreting this Agreement.
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9.6 NOTICES. Any notice required or permitted by this Agreement
shall be in writing and shall be deemed sufficient upon delivery, when
delivered personally or by overnight courier or sent by telegram or fax
(provided that electronic confirmation of transmission has been received), or
forty-eight (48) hours after being deposited in the US mail, as certified or
registered mail, with postage prepaid, addressed to the party to be notified
at such party's address as set forth on the signature page hereto, or as
subsequently modified by written notice, and (a) if to the Company, with a
copy to Craig W. Johnson, Venture Law Group, 2800 Sand Hill Road, Menlo Park,
CA 94025 or (b) if to the Purchaser, with a copy to William Caraccio,
Pillsbury Madison & Sutro LLP, 2550 Hanover Street, Palo Alto, CA 94304.
9.7 COMPANY ADVISOR / PAYMENT OF FEES. Purchaser represents that it
neither is nor will be obligated for any finder's fee or commissions to any
third party in connection with this transaction. The Company represents that
it has retained Rochon Capital Group, Ltd. ("ROCHON") as its advisor in
connection with the transactions contemplated by this Agreement and the Note
Purchase and Sale Agreement. Purchaser acknowledges that Rochon has acted
solely as an advisor to the Company, and has in no way acted for or on behalf
of Purchaser in connection herewith. The information provided to Purchaser
by the Company (or by Purchaser) has not been subjected to independent
verification by Rochon, and no representation or warranty is made by Rochon
as to the accuracy or completeness of such information or the advisability of
Purchaser entering into this Agreement and consummating the transactions
contemplated hereby. Purchaser acknowledges that it has not relied on any
statements made by Rochon in connection with its decision to enter into and
perform this Agreement and the transactions contemplated hereby. The Company
agrees to indemnify and to hold harmless Purchaser from any liability for any
compensation payable to Rochon (and the costs and expenses of defending
against such liability or asserted liability) in connection with the
transactions contemplated hereby. Each Party agrees to hold Rochon harmless
and the Company agrees to indemnify Rochon and its officers, directors,
principals, employees and agents (and their respective heirs, successors and
assigns) from and against any liability arising from this Agreement,
including the consummation of or the failure to consummate any or all of the
transactions contemplated hereby, except to the extent such liability results
from the gross negligence or willful misconduct of Rochon.
9.8 FEES AND EXPENSES. The Company shall pay the reasonable fees
and expenses of legal, accounting and financial advisors for the Purchaser
incurred with respect to this Agreement and the transactions contemplated
hereby, provided such fees and expenses do not exceed $45,000 in the
aggregate, of which reimbursement for legal fees shall not exceed $30,000,
reimbursement for fees incurred as a result of due diligence conducted by
individuals or entitles not affiliated with prospective purchasers of the
Company's capital stock shall not exceed $10,000 and reimbursement of travel
expenses shall not exceed $5,000.
9.9 ATTORNEY'S FEES. If any action at law or in equity (including
arbitration) is necessary to enforce or interpret the terms of any of the
Agreements, the prevailing party shall be entitled to reasonable attorney's
fees, costs and necessary disbursements in addition to any other relief to
which such party may be entitled.
-16-
<PAGE>
9.10 AMENDMENTS AND WAIVERS. Any term of this Agreement may be
amended or waived only with the written consent of the Company and the
holders of at least two thirds (2/3) of the Conversion Stock. Any amendment
or waiver effected in accordance with this Section 9.10 shall be binding upon
the Purchaser and each transferee of the Conversion Stock and the Company.
9.11 SEVERABILITY. If one or more provisions of this Agreement are
held to be unenforceable under applicable law, the parties agree to
renegotiate such provision in good faith. In the event that the parties
cannot reach a mutually agreeable and enforceable replacement for such
provision, then (a) such provision shall be excluded from this Agreement, (b)
the balance of the Agreement shall be interpreted as if such provision were
so excluded and (c) the balance of the Agreement shall be enforceable in
accordance with its terms.
9.12 DELAYS OR OMISSIONS. No delay or omission to exercise any
right, power or remedy accruing to any party under this Agreement, upon any
breach or default of any other party under this Agreement, shall impair any
such right, power or remedy of such non-breaching or non-defaulting party nor
shall it be construed to be a waiver of any such breach or default, or an
acquiescence therein, or of or in any similar breach or default thereafter
occurring; nor shall any waiver of any single breach or default be deemed a
waiver of any other breach or default theretofore or thereafter occurring.
Any waiver, permit, consent or approval of any kind or character on the part
of any party of any breach or default under this Agreement, or any waiver on
the part of any party of any provisions or conditions of this Agreement, must
be in writing and shall be effective only to the extent specifically set
forth in such writing. All remedies, either under this Agreement or by law
or otherwise afforded to any party, shall be cumulative and not alternative.
9.13 ENTIRE AGREEMENT. This Agreement, and any transaction
documents referred to herein constitute the entire agreement between the
parties hereto pertaining to the subject matter hereof, and any and all other
written or oral agreements or commitments relating to the subject matter
hereof existing between the parties hereto (except for any confidentiality
provisions or terms contained therein) are expressly superseded hereby and
canceled.
9.14 CORPORATE SECURITIES LAW. THE SALE OF THE SECURITIES WHICH ARE
THE SUBJECT OF THIS AGREEMENT HAS NOT BEEN QUALIFIED WITH THE COMMISSIONER OF
CORPORATIONS OF THE STATE OF CALIFORNIA AND THE ISSUANCE OF THE SECURITIES OR
THE PAYMENT OR RECEIPT OF ANY PART OF THE CONSIDERATION THEREFOR PRIOR TO THE
QUALIFICATION IS UNLAWFUL, UNLESS THE SALE OF SECURITIES IS EXEMPT FROM THE
QUALIFICATION BY SECTION 25100, 25102 OR 25105 OF THE CALIFORNIA CORPORATIONS
CODE. THE RIGHTS OF ALL PARTIES TO THIS AGREEMENT ARE EXPRESSLY CONDITIONED
UPON THE QUALIFICATION BEING OBTAINED UNLESS THE SALE IS SO EXEMPT.
9.15 CONFIDENTIALITY. Each party hereto agrees that, except with
the prior written permission of the other parties, it shall at all times keep
confidential and not divulge, furnish or make accessible to anyone, including
without limitation CA, any confidential
-17-
<PAGE>
information, knowledge or data concerning or relating to the business or
financial affairs of the other parties to which such party has been or shall
become privy by reason of the Transaction Agreements, discussions or
negotiations relating to the terms of the Transaction Agreements, the
performance of its obligations hereunder or the ownership of Securities
purchased hereunder, except for such disclosure as is required by law. The
parties acknowledge and agree that the Company will file reports with the
Securities and Exchange Commission from time to time following the
consummation of the transactions hereunder and that press releases may also
be required or desirable, provided that such press releases will contain only
such information as may be required for proper disclosure in the opinion of
legal counsel to the Company. This Section 9.15 shall not prohibit the
disclosure by Purchaser to its members and permitted assignees of the
Conversion Stock of such information, knowledge or data, provided each
recipient thereof agrees to be bound by the confidentiality covenants
hereunder.
[Signature Pages Follow]
-18-
<PAGE>
The parties have executed this Note Conversion Agreement as of the date
first written above.
COMPANY:
CENTURA SOFTWARE CORPORATION
By: /s/ Scott R. Broomfield
-----------------------------------------
Name: Scott R. Broomfield
(print)
Title: CEO
Address: 975 Island Drive
Redwood Shores, CA 94065
Telephone: (650) 596-3400
Fax: (650) 596-4986
PURCHASER:
NEWPORT ACQUISITION
COMPANY NO. 2 LLC
By: Crossroads Capital Partners LLC,
as Managing Member
By: /s/ James A. Skelton
-----------------------------------------
Name: James A. Skelton
(print)
Title: Principal
Address: 1600 Dove Street
Suite 300
Newport Beach, CA 92660
Telephone: (714) 261-1600
Fax: (714) 261-1655
SIGNATURE PAGE TO CONVERSION AGREEMENT
<PAGE>
EXHIBITS
Exhibit A Note
Exhibit B Form of Warrant Purchase Agreement and Warrant
Exhibit C Form of Escrow Agreement
Exhibit D Schedule of Exceptions to Representations and Warranties
Exhibit E Form of Investor Rights Agreement
Exhibit F Purchaser Members
Exhibit G Form of Legal Opinion of Venture Law Group
<PAGE>
WARRANT PURCHASE AGREEMENT
FEBRUARY 27, 1998
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
1. Purchase and Sale of the Warrant. . . . . . . . . . . . . . . . . . . . . . 1
1.1 Deliver into Escrow . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Closing; Delivery.. . . . . . . . . . . . . . . . . . . . . . . . . . 2
2. Representations and Warranties of the Company . . . . . . . . . . . . . . . 2
2.1 Organization, Good Standing and Qualification . . . . . . . . . . . . 2
2.2 Capital Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.3 Authorization . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.4 Litigation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.5 Compliance with Other Instruments . . . . . . . . . . . . . . . . . . 3
2.6 SEC Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Representations and Warranties of CA . . . . . . . . . . . . . . . . . . . . . 4
3.1 Authorization . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
3.2 Purchase Entirely for Own Account . . . . . . . . . . . . . . . . . . 4
3.3 Accredited Investor . . . . . . . . . . . . . . . . . . . . . . . . . 4
3.4 Restricted Securities . . . . . . . . . . . . . . . . . . . . . . . . 4
3.5 Further Limitations on Disposition. . . . . . . . . . . . . . . . . . 5
3.6 Legends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
3.7 Disclosure of Information . . . . . . . . . . . . . . . . . . . . . . 5
4. Registration of Securities. . . . . . . . . . . . . . . . . . . . . . . . . 6
5. Resale Restrictions.. . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
6. Release of Claims.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
6.1. Release of Claims in Connection With the Note.. . . . . . . . . . . . . .10
6.2. Civil Code Section 1542.. . . . . . . . . . . . . . . . . . . . . . . . .10
7. Conditions of CA's Obligations at the Closing . . . . . . . . . . . . . . .10
7.1 Representations and Warranties. . . . . . . . . . . . . . . . . . . .10
7.2 Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11
7.3 Compliance Certificates . . . . . . . . . . . . . . . . . . . . . . .11
7.4 Qualifications. . . . . . . . . . . . . . . . . . . . . . . . . . . .11
7.5 Escrow Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . .11
7.6 Delivery into Escrow. . . . . . . . . . . . . . . . . . . . . . . . .11
8. Conditions of the Company's Obligations at the Closing. . . . . . . . . . .11
8.1 Representations and Warranties. . . . . . . . . . . . . . . . . . . .11
-i-
<PAGE>
TABLE OF CONTENTS
(continued)
Page
8.2 Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11
8.3 Qualifications. . . . . . . . . . . . . . . . . . . . . . . . . . . .11
8.4 Escrow Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . .12
8.5 Delivery into Escrow. . . . . . . . . . . . . . . . . . . . . . . . .12
8.6 Note Purchase Agreement . . . . . . . . . . . . . . . . . . . . . . .12
9. Miscellaneous.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12
9.1 Survival of Warranties. . . . . . . . . . . . . . . . . . . . . . . .12
9.2 Transfer; Successors and Assigns. . . . . . . . . . . . . . . . . . .12
9.3 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . .12
9.4 Counterparts. . . . . . . . . . . . . . . . . . . . . . . . . . . . .12
9.5 Titles and Subtitles. . . . . . . . . . . . . . . . . . . . . . . . .12
9.6 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12
9.7 Company Advisor / Payment of Fees . . . . . . . . . . . . . . . . . .13
9.8 Fees and Expenses . . . . . . . . . . . . . . . . . . . . . . . . . .13
9.9 Attorney's Fees . . . . . . . . . . . . . . . . . . . . . . . . . . .13
9.10 Amendments and Waivers . . . . . . . . . . . . . . . . . . . . . . .13
9.11 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . .13
9.12 Delays or Omissions. . . . . . . . . . . . . . . . . . . . . . . . .14
9.13 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . .14
9.14 Corporate Securities Law . . . . . . . . . . . . . . . . . . . . . .14
9.15 Confidentiality. . . . . . . . . . . . . . . . . . . . . . . . . . .14
</TABLE>
-ii-
<PAGE>
WARRANT PURCHASE AGREEMENT
This Warrant Purchase Agreement (the "AGREEMENT") is made as of the 27th
day of February 1998 by and between Computer Associates International, Inc., a
Delaware corporation ("CA" or "HOLDER"), and Centura Software Corporation, a
California corporation (the "COMPANY"). Hereinafter, CA and the Company may
also be referred to collectively as the "Parties" and each may be referred to as
a "Party."
Recitals
Whereas, the Company and CA entered into that certain Note Purchase
Agreement dated March 31, 1995 (the "PRIOR AGREEMENT")and that certain
Floating Rate Convertible Subordinated Note Due 1998 in the principal amount
of $10,000,000 (the "PRINCIPAL INDEBTEDNESS") dated as of April 3, 1995 (the
"NOTE");
Whereas, CA has entered into a Note Purchase and Sale Agreement to sell
the Note;
Whereas, the Company has agreed to issue and sell to CA and CA has
agreed to purchase at a purchase price of $0.001 per share a warrant to
purchase 500,000 shares of the Company's Common Stock (the "WARRANT") at an
exercise price of $1.906 per share; and
Whereas, as additional consideration for issuance of the Warrant by the
Company CA has agreed to release the Company from any and all claims it may
have against the Company as a result of: (i) the alleged breach by the
Company of any representations, warranties, or covenants it made to CA
pursuant to the Prior Agreement and (ii) any subsequent loss incurred by CA
in connection with CA's sale of the Note pursuant to the Note Purchase
Agreement.
Now, therefore, for good and valuable consideration, the parties hereby
agree as follows:
1. PURCHASE AND SALE OF THE WARRANT.
1.1 DELIVERY INTO ESCROW. On the basis of the representations,
warranties, terms and conditions contained herein, on the date hereof each
Party shall deliver to the financial entity or other entity mutually agreed
to by the Parties (the "ESCROW AGENT"), pursuant to an agreement in the form
attached hereto as Exhibit A (the "ESCROW AGREEMENT"), the following:
(a) CA shall deliver $500 in cash or by check or by wire
transfer for purchase of the Warrant; and
(b) The Company shall deliver the fully executed Warrant in
the form attached hereto as EXHIBIT B.
1.2 CLOSING; DELIVERY.
<PAGE>
(a) The purchase and sale of the Warrant pursuant to the
terms of this Agreement shall take place at the offices of Venture Law Group,
2800 Sand Hill Road, Menlo Park, California, at 2:00 p.m., on February __,
1998, or at such other time and place as the Parties mutually agree upon,
orally or in writing (which time and place are designated as the "Closing").
(b) At the Closing, in consideration for the release of
claims contained herein and the payment of $500 by CA, the Company shall
instruct the Escrow Agent to deliver to CA the Warrant, and in consideration
for the Warrant, CA shall have delivered to the Company an executed copy of
this Agreement, including the release of claims contained herein, and shall
instruct the Escrow Agent to deliver to the Company $500.
2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company hereby
represents and warrants to CA that, except as set forth on a Schedule of
Exceptions attached hereto as Exhibit C, which exceptions shall be deemed to
be representations and warranties as if made hereunder:
2.1 ORGANIZATION, GOOD STANDING AND QUALIFICATION. The Company is
a corporation duly organized, validly existing and in good standing under the
laws of the State of California and has all requisite corporate power and
authority to carry on its business.
2.2 CAPITAL STOCK. The authorized capital of the Company
consists, or will consist, immediately prior to the Closing, of 60,000,000
shares of Common Stock, $0.01 par value per share, of which 15,780,886 shares
were issued and outstanding as of February 9, 1998, and 2,000,000 shares of
Preferred Stock, $0.01 par value per share, none of which are issued or
outstanding. 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 (other than rights of first refusal held by the Company) under
applicable law, the Articles of Incorporation or Bylaws of the Company, or
any agreement to which the Company 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. The Company has also
reserved (i) an aggregate of 2,000,000 shares of Common Stock issuable to
employees and consultants pursuant to the Company's 1995 Stock Option Plan,
of which 1,164,947 shares are issuable upon exercise of outstanding options
under such plan, (ii) an aggregate of 2,657,399 shares of Common Stock
issuable to employees and consultants pursuant to the Company's 1986 Stock
Option Plan, of which 2,657,399 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 the Company's 1992 Employee
Stock Purchase Plan, of which no shares are available for future issuance
under such plan, (iv) 500,000 shares of Common Stock issuable to non-employee
directors pursuant to Company's 1996 Directors' Stock Option Plan, of which
300,000 shares are issuable upon exercise of outstanding options under such
plan, (v) non-plan options issued to the Company's Chief Executive Officer,
Chief Financial Officer and Vice President of Marketing to purchase up to an
aggregate of 1,500,000 shares of Common Stock, (vi) up to 450,000 shares of
Common Stock issuable upon exercise of warrants granted or to be granted to
certain third parties, including vendors, suppliers and financial and
investment
-2-
<PAGE>
advisors of the Company, prior to inclusion of the shares of Common Stock
issuable upon exercise of the Warrant being purchased and sold hereunder.
The Warrant, when issued and paid for in accordance with this Agreement, and
the shares of Common Stock issuable upon exercise thereof, when issued and
paid for in accordance with the Warrant, will be validly issued, fully paid,
and nonassessable, and not subject to any preemptive rights or rights of
first refusal under applicable law, the Articles of Incorporation or Bylaws
of the Company, or any agreement to which the Company is a party or by which
the Company is bound, and are free of any liens or encumbrances other than
liens or encumbrances created by or imposed upon the holders thereof;
provided, however, that the Warrant (and the shares of Common Stock issuable
upon exercise thereof) may be subject to restrictions on transfer as set
forth in this Agreement, the Warrant, the Registration Statement on Form S-3
to be filed with the Securities and Exchange Commission pursuant to Section 4
hereunder, (the "RIGHTS AGREEMENT"), or the Articles of Incorporation or
Bylaws of the Company.
2.3 AUTHORIZATION. The execution, delivery and performance by the
Company of this Agreement, the Escrow Agreement, the Warrant and the Rights
Agreement (collectively, the "TRANSACTION AGREEMENTS") are within the
Company's corporate power and have been duly authorized by all requisite
action by the Company. The Transaction Agreements have been duly executed
and delivered by the Company and this Agreement constitutes, and the Escrow
Agreement, the Warrant and Rights Agreement when executed and delivered in
accordance with this Agreement, will constitute the valid and binding
obligation of the Company, enforceable in accordance with their respective
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.
2.4 LITIGATION. There is no action, suit, proceeding or
investigation pending or, to the Company's knowledge, currently threatened
against the Company or any of its subsidiaries that is not disclosed in the
Reports and that would have a material adverse effect on the Company or that
questions the validity of the Transaction Agreements or the right of the
Company to enter into them, or to consummate the transactions contemplated
thereby.
2.5 COMPLIANCE WITH OTHER INSTRUMENTS. The execution, delivery
and performance of the Transaction Agreements and the consummation of the
transactions contemplated thereby will not result in any violation or default
of any provisions of the Articles of Incorporation or Bylaws of the Company
or of any instrument, judgment, order, writ, decree or contract to which the
Company is a party or by which the Company is bound or, to the Company's
knowledge, of any provision of federal or state statute, rule or regulation
applicable to the Company, or be in conflict with or constitute, with or
without the passage of time and giving of notice, either a default under any
such provision, instrument, judgment, order, writ, decree or contract or an
event which results in the creation of any lien, charge or encumbrance upon
any assets of the Company.
2.6 SEC REPORTS. The Company has filed with the Securities and
Exchange Commission (the "COMMISSION") via Edgar its Annual Report on Form 10-K
for the year ended
-3-
<PAGE>
December 31, 1996 and its Quarterly Reports on Form 10-Q for the first three
quarters of the year ended December 31, 1997 (the "REPORTS"), and such
Reports are available to CA through Edgar in electronic format. As of their
respective filing dates, the Reports complied in all material respects with
the requirements of the Securities Exchange Act of 1934, as amended, and none
of the Reports 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 Commission and provided to CA prior to the date
hereof.
3. REPRESENTATIONS AND WARRANTIES OF CA. CA hereby represents and
warrants to the Company that:
3.1 AUTHORIZATION. The execution, delivery and performance by CA
of the Transaction Agreements are within CA's corporate power and have been
duly authorized by all requisite action by CA. The Transaction Agreements
have been duly executed and delivered by CA and this Agreement constitutes,
and the Escrow Agreement, the Warrant and the Rights Agreement when executed
and delivered in accordance with this Agreement, will constitute the valid
and binding obligation of the CA, enforceable in accordance with their
respective 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.
3.2 PURCHASE ENTIRELY FOR OWN ACCOUNT. CA is acquiring the
Warrant (and the shares of Common Stock issuable upon exercise thereof (the
"WARRANT STOCK", together with the Warrant, the "Securities")) hereunder for
investment for CA's own account, and not as a nominee or agent, and not with
a view to the resale or distribution of any part thereof. CA has no present
intention of selling, granting any participation in, or otherwise
distributing the foregoing.
3.3 ACCREDITED INVESTOR. CA is an accredited investor as defined
in Rule 501(a) of Regulation D promulgated under the Securities Act.
3.4 RESTRICTED SECURITIES. CA understands that the Warrant and
the Warrant Stock are characterized as "restricted securities" under the
federal securities laws inasmuch as they are being acquired from the Company
in a transaction not involving a public offering and that under such laws and
applicable regulations such Warrant and the Warrant Stock may be resold
without registration under the Securities Act of 1933, as amended (the
"ACT"), only in certain limited circumstances. In this connection, CA
represents that it is familiar with SEC Rule 144, as presently in effect, and
understands the resale limitations imposed thereby and by the Act.
3.5 FURTHER LIMITATIONS ON DISPOSITION. Without in any way
limiting the representations set forth above, CA further agrees not to make
any disposition of all or any portion of the Warrant and the Warrant Stock
unless and until:
-4-
<PAGE>
(a) There is then in effect a Registration Statement under
the Act covering such proposed disposition and such disposition is made in
accordance with such Registration Statement; or
(b) (i) The transferee has agreed in writing for the benefit
of the Company to be bound by this Section 3; (ii) CA shall have notified the
Company of the proposed disposition and shall have furnished the Company with
such information as is necessary to effect the proposed disposition, and
(iii) if reasonably requested by the Company, CA shall have furnished the
Company with an opinion of counsel, reasonably satisfactory to the Company,
that such disposition will not require registration under the Act.
3.6 LEGENDs. CA understands that the Warrant and the Warrant
Stock, and any securities issued in respect thereof or exchange therefor, may
bear one or all of the following legends:
(a) "THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR
HYPOTHECATED IN THE ABSENCE OF A REGISTRATION STATEMENT IN EFFECT WITH
RESPECT TO THE SECURITIES UNDER SUCH ACT OR AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED OR UNLESS
SOLD PURSUANT TO RULE 144 OF SUCH ACT."
(b) Any legend required by the laws of the State of
California, including any legend required by the California Department of
Corporations.
(c) Any legend required by the Blue Sky laws of any other
state to the extent such laws are applicable to the shares represented by the
certificate so legended.
(d) Any legend referring to the Company's Shareholder Rights
Plan.
3.7 DISCLOSURE OF INFORMATION. CA has had an opportunity to
discuss the Company's business, management, financial affairs and the terms
and conditions of the offering of the Warrant and the Warrant Stock with the
Company's management and has had an opportunity to review the Company's
Reports. CA understands that such discussions, as well as the written
information issued by the Company, were intended to describe the aspects of
the Company's business which it believes to be material.
4. REGISTRATION OF SECURITIES.
(a) As soon as reasonably practicable after the Closing, but in no
event later than 60 days after the Closing, the Company shall use its
reasonable efforts to prepare and file a registration statement on Form S-3
(the "REGISTRATION STATEMENT") with the Commission under the Act to register
the resale of the Common Stock issuable upon exercise of the Warrant
("REGISTRABLE SECURITIES") and thereafter shall use its best efforts to
secure the effectiveness of such Registration Statement as soon as possible
and to maintain its effectiveness thereafter.
-5-
<PAGE>
(b) The Company shall pay all Registration Expenses (as defined
below) in connection with any registration, qualification or compliance
hereunder, and CA or any transferee of the Registrable Securities (each, a
"HOLDER") shall pay all Selling Expenses (as defined below) and other
expenses that are not Registration Expenses relating to the Registrable
Securities resold by Holder. "Registration Expenses" shall mean all expenses,
except for Selling Expenses, incurred by the Company in complying with the
registration provisions herein described, including, without limitation, all
registration, qualification and filing fees, printing expenses, fees and
disbursements of counsel for the Company, blue sky fees and expenses and the
expense of any special audits incident to or required by any such
registration. "Selling Expenses" shall mean all selling commissions,
brokerage or underwriting fees and stock transfer taxes applicable to the
Registrable Securities and all fees and disbursements of counsel for Holder.
(c) In the case of any registration effected by the Company
pursuant to these registration provisions, and subject to the limitations on
registration set forth in Section 4(d) below, the Company will use
commercially reasonable efforts to: (i) keep such registration effective
until the earlier of (A) one (1) year after the date of the Closing or (B)
such date as the Company shall be satisfied that then-current Holders may
sell all of their Registrable Securities then outstanding within a three (3)
month period; (ii) prepare and file with the Commission such amendments and
supplements to such Registration Statement and the prospectus used in
connection with such Registration Statement as may be necessary to comply
with the provisions of the Act with respect to the disposition of all
securities covered by such Registration Statement; (iii) furnish such number
of prospectuses and other documents incident thereto, including any amendment
of or supplement to the prospectus, as a Holder from time to time may
reasonably request; (iv) register and qualify the securities covered by such
Registration Statement under such other securities or Blue Sky laws of such
jurisdictions as shall be reasonably requested by the Holders, provided that
the Company shall not be required in connection therewith or as a condition
thereto to qualify to do business or to file a general consent to service of
process in any such states or jurisdictions; (v) cause all such Registrable
Securities registered as described herein to be listed on each securities
exchange and quoted on each quotation service on which similar securities
issued by the Company are then listed or quoted; and (vi) otherwise use
commercially reasonable efforts to comply with all applicable rules and
regulations of the Commission.
(d) The Company may, by written notice to Holder, delay the filing
or effectiveness of, or suspend, the Registration Statement, and require that
Holder immediately cease sales of shares pursuant to such Registration
Statement in any period during which the Company is engaged in any activity
or transaction or preparations or negotiations for any activity or
transaction ("COMPANY ACTIVITY") that the Company desires to keep
confidential for business reasons, if the Company determines in good faith
that the public disclosure requirements imposed on the Company under the Act
in connection with the Registration Statement would require disclosure of the
Company Activity; provided, however, that (A) the Company shall use
commercially reasonable efforts to minimize the length of any such period of
delay or suspension, and (B) any such delay or suspension shall be applied in
the same manner to any other resale registration statement then in effect.
If the Company delays or suspends the
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Registration Statement or requires Holder to cease sales of shares pursuant
to this Section 4(d), the Company shall, as promptly as practicable following
the termination of the circumstance which entitled the Company to do so, take
such actions as may be necessary to file or reinstate the effectiveness of
the Registration Statement and/or give written notice to Holder authorizing
it to resume sales pursuant to such Registration Statement. If as a result
thereof the prospectus included in the Registration Statement has been
amended to comply with the requirements of the Act, the Company shall enclose
such revised prospectus with the notice to Holders given pursuant to this
Section 4(d), and Holder shall make no offers or sales of shares pursuant to
the Registration Statement other than by means of such revised prospectus.
(e) If Holder shall propose to sell any Registrable Securities
pursuant to the Registration Statement, it shall notify the Company of any
such sale within one business day after such sale and the provision of such
notice to the Company shall conclusively be deemed to establish an agreement
by Holder to comply with the registration provisions herein described. Such
notice shall be deemed to constitute a representation that any information
required to be included in the Registration Statement and previously supplied
by Holder is accurate as of the date of such notice. When Holder is entitled
to sell and gives notice of its intent to sell in compliance with the
foregoing, the Company shall promptly, furnish to Holder a reasonable number
of copies of a supplement to or an amendment of such prospectus as may be
necessary so that, as thereafter delivered to the Holders of such shares,
such prospectus shall not include an untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to
make the statements therein not misleading or incomplete in the light of the
circumstances then existing. Holder agrees that the Company may impose a
legend setting forth the provisions of this Section 4(e) on the Registrable
Securities.
(f) With a view to making available to the holders the benefits of
Rule 144 promulgated under the Act and any other rule or regulation of the
Commission that may at any time permit Holder to sell Registrable Securities
to the public without registration or pursuant to a registration on Form S-3,
the Company hereby covenants and agrees to: (i) make and keep public
information available, as those terms are understood and defined in Rule 144,
at all times after the closing; and (ii) file with the Commission in a timely
manner all reports and other documents required of the Company under the Act
and Exchange Act.
(g) Indemnification.
(i) To the extent permitted by law, the Company will
indemnify and hold harmless Holder, any underwriter (as defined in the Act)
for Holder, its officers, directors, shareholders or partners and each
person, if any, who controls Holder or underwriter within the meaning of the
Act or the Exchange Act, against any losses, claims, damages, or liabilities
to which they may become subject under the Act, the Exchange Act or other
federal or state law, insofar as such losses, claims, damages, or liabilities
(or actions in respect thereof) arise out of or are based upon any of the
following statements, omissions or violations (collectively a "VIOLATION"):
(A) any untrue statement or alleged untrue statement of a material fact
contained in such Registration Statement, including any preliminary
prospectus or final prospectus contained therein or any amendments or
supplements thereto or (B) the omission
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or alleged omission to state therein a material fact required to be stated
therein, or necessary to make the statements therein not misleading; and the
Company will pay to each such Holder, underwriter or controlling person, as
incurred, any legal or other expenses reasonably incurred by them in
connection with investigating or defending any such loss, claim, damage,
liability, or action; provided, however, that the indemnity agreement
contained in this Section 4(g)(i) shall not apply to amounts paid in
settlement of any such loss, claim, damage, liability, or action if such
settlement is effected without the consent of the Company (which consent
shall not be unreasonably withheld), nor shall the Company be liable in any
such case for any such loss, claim, damage, liability, or action to the
extent that it arises out of or is based upon a Violation which occurs in
reliance upon and in conformity with written information furnished expressly
for use in connection with such registration by any such Holder, underwriter
or controlling person; further provided, however, that the foregoing
indemnity with respect to any untrue statement in or omission from any
preliminary prospectus shall not inure to the benefit of any Holder from whom
the person asserting any such losses, claims, damages or liabilities
purchased the Registrable Securities if a copy of the final prospectus or any
amendment thereto had not been sent or given to such person at or prior to
the written confirmation of the sale of such Registrable Securities to such
person if required by the Act and the untrue statement or omission of a
material fact contained in such preliminary prospectus was corrected in the
final prospectus or amendment and such final prospectus or amendment was
distributed to the Holder prior to such sale of Registrable Securities.
(ii) To the extent permitted by law, each selling Holder
will indemnify and hold harmless the Company, each of its directors, each of
its officers who has signed the Registration Statement, each person, if any,
who controls the Company within the meaning of the Act, any underwriter, any
other Holder selling securities in such Registration Statement and any
controlling person of any such underwriter or other Holder, against any
losses, claims, damages, or liabilities to which any of the foregoing persons
may become subject, under the Act, the Exchange Act or other federal or state
law, insofar as such losses, claims, damages, or liabilities (or actions in
respect thereto) arise out of or are based upon any Violation, in each case
to the extent (and only to the extent) that such Violation occurs in reliance
upon and in conformity with written information furnished by such Holder
expressly for use in connection with such registration; and each such Holder
will pay, as incurred, any legal or other expenses reasonably incurred by any
person intended to be indemnified pursuant to this subsection 4(g)(ii), in
connection with investigating or defending any such loss, claim, damage,
liability, or action; provided, however, that the indemnity agreement
contained in this subsection 4(g)(ii) shall not apply to amounts paid in
settlement of any such loss, claim, damage, liability or action if such
settlement is effected without the consent of the Holder, which consent shall
not be unreasonably withheld; provided, that, in no event shall any indemnity
under this subsection 4(g)(ii) exceed the net proceeds from the offering
received by such Holder, except in the case of willful fraud by such Holder.
(iii) Promptly after receipt by an indemnified party
under this Section 4(g) of notice of the commencement of any action
(including any governmental action), such indemnified party will, if a claim
in respect thereof is to be made against any indemnifying party under this
Section 4(g), deliver to the indemnifying party a written notice of the
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commencement thereof and the indemnifying party shall have the right to
participate in, and, to the extent the indemnifying party so desires, jointly
with any other indemnifying party similarly noticed, to assume the defense
thereof with counsel mutually satisfactory to the parties; provided, however,
that an indemnified party (together with all other indemnified parties which
may be represented without conflict by one counsel) shall have the right to
retain one separate counsel, with the reasonable fees and expenses to be paid
by the indemnifying party, if representation of such indemnified party by the
counsel retained by the indemnifying party would be inappropriate due to
actual or potential differing interests between such indemnified party and
any other party represented by such counsel in such proceeding. The failure
to deliver written notice to the indemnifying party within a reasonable time
of the commencement of any such action, if prejudicial to its ability to
defend such action, shall relieve such indemnifying party of any liability to
the indemnified party under this Section 4(g).
5. RESALE RESTRICTIONS. Holder agrees that it will not sell any
Registrable Securities issued hereunder until 90 calendar days after the
Closing and the earlier to occur of; (i) effectiveness of the Registration
Statement to be filed pursuant to Section 4 above; and (ii) the first
anniversary of the issuance of the Warrant. Holder further agrees that,
notwithstanding anything in this Agreement to the contrary, the maximum
number of Registrable Securities which may be sold by Holder in open market
transactions on any day (including sales pursuant to Rule 144 under the Act)
shall not exceed twenty-five percent (25%) of the average daily trading
volume of the Company's Common Stock as calculated over the immediately
preceding twenty (20) consecutive trading days. Notwithstanding the
foregoing, the Company may suspend resales by the Holder pursuant to a
Registration Statement if an underwriter reasonably determines that such
resales would adversely affect the Company's ability to raise additional
capital in a secondary offering of the Company's equity securities and such
underwriter issues a written opinion to the Company to that effect. Any such
suspension of resales by the Holder pursuant to the foregoing sentence will
not exceed 120 calendar days commencing on the date of the secondary
offering. The volume and resale restrictions set forth in this Section 5
shall be set forth in any and all Registration Statements brought effective
pursuant to Section 4 above, and the Company shall instruct its transfer
agent, broker dealers and market makers to enforce the volume restrictions
set forth herein.
6. RELEASE OF CLAIMS.
6.1 RELEASE OF CLAIMS IN CONNECTION WITH THE NOTE. In
consideration for the obligations of the Company set forth in this Agreement,
CA, on behalf of itself, and its respective officers, directors, employees,
shareholders, attorneys, accountants, predecessor and successor corporations,
affiliates, subsidiaries, representatives, transferees and assigns, hereby
fully and forever releases the Company and its respective officers,
directors, employees, shareholders, attorneys, accountants, predecessor and
successor corporations, affiliates, subsidiaries, representatives,
transferees and assigns from any claim, duty, obligation or cause of action
relating to any matters of any kind, whether known or unknown, suspected or
unsuspected, that it may possess arising from any omissions, acts or facts
that have occurred up until and including the date of the Closing of this
Agreement including, without limitation:
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(a) any and all claims in connection with the Company's
representations, warranties and covenants under the Note Purchase Agreement;
(b) any and all claims relating to or arising from CA's purchase
of the Note from the Company and subsequent sale of the Note at a loss; and
(c) any and all claims for attorney's fees and costs.
The Company and CA agree that the release set forth in this section shall be
and remain in effect in all respects as a complete and general release as to
the matters released. This release does not extend to any obligations
incurred under this Agreement.
6.2. CIVIL CODE SECTION 1542. The parties represent that they are
not aware of any claim by either of them other than the claims that are
released by this Agreement. CA acknowledges that it is familiar with the
provisions of California Civil Code Section 1542, which provides as follows:
A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES
NOT KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT THE TIME OF EXECUTING THE
RELEASE, WHICH IF KNOWN BY HIM MUST HAVE MATERIALLY AFFECTED HIS
SETTLEMENT WITH THE DEBTOR.
CA, being aware of such code section, agrees to waive any rights it may
have thereunder, as well as under any similar provision under New York state
law, or other applicable state law, statute or common law principles of
similar effect.
7. CONDITIONS OF CA'S OBLIGATIONS AT THE CLOSING. The obligations of
CA under this Agreement are subject to the fulfillment, on or before the
Closing, of each of the following conditions, unless otherwise waived:
7.1 REPRESENTATIONS AND WARRANTIES. The representations and
warranties of the Company contained in Section 2 shall be true and correct in
all material respects on and as of the Closing with the same effect as though
such representations and warranties had been made on and as of the date of
the Closing.
7.2 PERFORMANCE. The Company shall have performed and complied
with all covenants, agreements, obligations and conditions contained in this
Agreement that are required to be performed or complied with by it on or
before the Closing.
7.3 COMPLIANCE CERTIFICATES. The President of the Company shall
deliver at the Closing a certificate certifying that the conditions specified
in Sections 7.1 and 7.2 have been fulfilled.
7.4 QUALIFICATIONS. All authorizations, approvals or permits, if
any, of any governmental authority or regulatory body of the United States or of
any state that are required in
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connection with the lawful issuance and sale of the Securities, pursuant to
this Agreement shall be obtained and effective as of the Closing.
7.5 ESCROW AGREEMENT. The Company, CA and the Escrow Agent shall
have executed and entered into the Escrow Agreement.
7.6 DELIVERY INTO ESCROW. Each Party shall have delivered to the
Escrow Agent its respective consideration for the transactions contemplated
hereunder in accordance with the provisions of Section 1.1 hereof.
8. CONDITIONS OF THE COMPANY'S OBLIGATIONS AT THE CLOSING. The
obligations of the Company under this Agreement are subject to the
fulfillment, on or before the Closing, of each of the following conditions,
unless otherwise waived:
8.1 REPRESENTATIONS AND WARRANTIES. The representations and
warranties of CA contained in Section 3 shall be true and correct in all
material respects on and as of the Closing with the same effect as though
such representations and warranties had been made on and as of the date of
the Closing.
8.2 PERFORMANCE. CA shall have performed and complied with all
covenants, agreements, obligations and conditions contained in this Agreement
that are required to be performed or complied with by it on or before the
Closing.
8.3 QUALIFICATIONS. All authorizations, approvals or permits, if
any, of any governmental authority or regulatory body of the United States or
of any state that are required in connection with the lawful issuance and
sale of the Securities pursuant to this Agreement shall be obtained and
effective as of the Closing.
8.4 ESCROW AGREEMENT. The Company, CA and the Escrow Agent shall
have executed and entered into the Escrow Agreement.
8.5 DELIVERY INTO ESCROW. Each Party shall have delivered to the
Escrow Agent its respective consideration for the transactions contemplated
hereunder in accordance with the provisions of Section 1.1 hereof.
8.6 NOTE PURCHASE AGREEMENT. The Note Purchase Agreement by and
between the Company, NAC and CA of even date herewith shall have closed
immediately prior to or concurrently with the Closing hereunder.
9. MISCELLANEOUS.
9.1 SURVIVAL OF WARRANTIES. Unless otherwise set forth in this
Agreement, the warranties, representations and covenants of the Company and
CA contained in or made pursuant to this Agreement shall survive the
execution and delivery of this Agreement and the Closing for a period of one
(1) year following the Closing.
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<PAGE>
9.2 TRANSFER; SUCCESSORS AND ASSIGNS. The terms and conditions of
this Agreement shall inure to the benefit of and be binding upon the
respective successors and assigns of the Parties. Nothing in this Agreement,
express or implied, is intended to confer upon any party other than the
Parties hereto or their respective successors and assigns any rights,
remedies, obligations, or liabilities under or by reason of this Agreement,
except as expressly provided in this Agreement.
9.3 GOVERNING LAW. This Agreement and all acts and transactions
pursuant hereto and the rights and obligations of the parties hereto shall be
governed, construed and interpreted in accordance with the laws of the State
of California, without giving effect to principles of conflicts of law.
9.4 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original and all of which
together shall constitute one instrument.
9.5 TITLES AND SUBTITLES. The titles and subtitles used in this
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
9.6 NOTICES. Any notice required or permitted by this Agreement
shall be in writing and shall be deemed sufficient upon delivery, when
delivered personally or by overnight courier or sent by telegram or fax
(provided that electronic confirmation of transmission has been received), or
forty-eight (48) hours after being deposited in the U.S. mail, as certified
or registered mail, with postage prepaid, addressed to the party to be
notified at such party's address as set forth on the signature page hereto,
or as subsequently modified by written notice, and if to the Company, with a
copy to Craig W. Johnson, Venture Law Group, 2800 Sand Hill Road, Menlo Park,
CA 94025.
9.7 COMPANY ADVISOR / PAYMENT OF FEES. CA represents that it
neither is nor will be obligated for any finder's fee or commissions to any
third party in connection with this transaction. The Company represents that
it has retained Rochon Capital Group, Ltd. ("ROCHON") as its advisor in
connection with the transactions contemplated by this Agreement and the Note
Purchase and Sale Agreement. CA acknowledges that Rochon has acted solely as
an advisor to the Company, and has in no way acted for or on behalf of CA in
connection herewith. The information provided to CA by the Company (or by CA)
has not been subjected to independent verification by Rochon, and no
representation or warranty is made by Rochon as to the accuracy or
completeness of such information or the advisability of CA entering into this
Agreement and consummating the transactions contemplated hereby. CA
acknowledges that it has not relied on any statements made by Rochon in
connection with its decision to enter into and perform this Agreement and the
transactions contemplated hereby. The Company agrees to indemnify and to
hold harmless CA from any liability for any compensation payable to Rochon
(and the costs and expenses of defending against such liability or asserted
liability) in connection with the transactions contemplated hereby. The
Company agrees to indemnify and hold harmless Rochon and its officers,
directors, principals, employees and agents (and their respective heirs,
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successors and assigns) from and against any liability arising from this
Agreement, including the consummation of or the failure to consummate any or
all of the transactions contemplated hereby, except to the extent such
liability results from the gross negligence or willful misconduct of Rochon.
9.8 FEES AND EXPENSES. Each Party shall pay its own expenses
incurred with respect to this Agreement and the transactions contemplated
hereby, provided, however, that the Company shall pay the fees incurred with
respect to services provided by the Escrow Agent.
9.9 ATTORNEY'S FEES. If any action at law or in equity (including
arbitration) is necessary to enforce or interpret the terms of any of the
Agreements, the prevailing party shall be entitled to reasonable attorney's
fees, costs and necessary disbursements in addition to any other relief to
which such party may be entitled.
9.10 AMENDMENTS AND WAIVERS. Any term of this Agreement may be
amended or waived only with the written consent of the Company and CA. Any
amendment or waiver effected in accordance with this Section 9.10 shall be
binding upon CA and each transferee of the Warrant (or the Common Stock
issuable upon conversion thereof) and the Company.
9.11 SEVERABILITY. If one or more provisions of this Agreement are
held to be unenforceable under applicable law, the Parties agree to
renegotiate such provision in good faith. In the event that the Parties
cannot reach a mutually agreeable and enforceable replacement for such
provision, then (a) such provision shall be excluded from this Agreement, (b)
the balance of the Agreement shall be interpreted as if such provision were
so excluded and (c) the balance of the Agreement shall be enforceable in
accordance with its terms.
9.12 DELAYS OR OMISSIONS. No delay or omission to exercise any
right, power or remedy accruing to any party under this Agreement, upon any
breach or default of any other party under this Agreement, shall impair any
such right, power or remedy of such non-breaching or non-defaulting party nor
shall it be construed to be a waiver of any such breach or default, or an
acquiescence therein, or of or in any similar breach or default thereafter
occurring; nor shall any waiver of any single breach or default be deemed a
waiver of any other breach or default theretofore or thereafter occurring.
Any waiver, permit, consent or approval of any kind or character on the part
of any party of any breach or default under this Agreement, or any waiver on
the part of any party of any provisions or conditions of this Agreement, must
be in writing and shall be effective only to the extent specifically set
forth in such writing. All remedies, either under this Agreement or by law
or otherwise afforded to any party, shall be cumulative and not alternative.
9.13 ENTIRE AGREEMENT. This Agreement, and any transaction
documents referred to herein constitute the entire agreement between the
parties hereto pertaining to the subject matter hereof, and any and all other
written or oral agreements or commitments relating to the subject matter
hereof existing between the parties hereto (except for any confidentiality
provisions or terms contained therein) are expressly superseded hereby and
canceled.
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9.14 CORPORATE SECURITIES LAW. THE SALE OF THE SECURITIES WHICH
ARE THE SUBJECT OF THIS AGREEMENT HAS NOT BEEN QUALIFIED WITH THE
COMMISSIONER OF CORPORATIONS OF THE STATE OF CALIFORNIA AND THE ISSUANCE OF
THE SECURITIES OR THE PAYMENT OR RECEIPT OF ANY PART OF THE CONSIDERATION
THEREFOR PRIOR TO THE QUALIFICATION IS UNLAWFUL, UNLESS THE SALE OF
SECURITIES IS EXEMPT FROM THE QUALIFICATION BY SECTION 25100, 25102 OR 25105
OF THE CALIFORNIA CORPORATIONS CODE. THE RIGHTS OF ALL PARTIES TO THIS
AGREEMENT ARE EXPRESSLY CONDITIONED UPON THE QUALIFICATION BEING OBTAINED
UNLESS THE SALE IS SO EXEMPT.
9.15 CONFIDENTIALITY. Each Party hereto agrees that, except with
the prior written permission of the other Parties, it shall at all times keep
confidential and not divulge, furnish or make accessible to anyone any
confidential information, knowledge or data concerning or relating to the
business or financial affairs of the other Parties to which such Party has
been or shall become privy by reason of the Transaction Agreements,
discussions or negotiations relating to the Transaction Agreements, the
performance of its obligations hereunder or the ownership of Securities
purchased hereunder, except for such disclosure as is required by law.
[Signature Pages Follow]
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<PAGE>
The parties have executed this Warrant Purchase Agreement as of the date
first written above.
COMPANY:
CENTURA SOFTWARE CORPORATION
By: /s/Scott Broomfiel
-------------------------------------
Name: Scott Broomfield
-----------------------------------
(print)
Title: CEO
----------------------------------
Address: 975 Island Drive
Redwood Shores, CA 94065
Telephone: (650) 596-3400
Fax: (650) 596-4986
WARRANT HOLDER:
COMPUTER ASSOCIATES
INTERNATIONAL, INC.
By: /s/Ira Zar
-------------------------------------
Name: Ira Zar
-----------------------------------
(print)
Title: SVP
-----------------------------------
Address: One Computer Associates Plaza
Islandia, NY 11788-7000
Telephone: (516) 342-5224
Fax: (516) 342-5329
<PAGE>
EXHIBITS
<TABLE>
<S> <C>
Exhibit A - Form of Escrow Agreement
Exhibit B - Form of Common Stock Warrant
Exhibit C - Schedule of Exceptions to Representations and Warranties
</TABLE>
<PAGE>
INVESTOR RIGHTS AGREEMENT
THIS INVESTOR RIGHTS AGREEMENT (this "Agreement") is made and entered
into as of this 27th day of February, 1998 by and between NEWPORT ACQUISITION
COMPANY NO. 2, LLC., a Delaware limited liability company ("Newport") and
CENTURA SOFTWARE CORPORATION, a California corporation (the "Company").
RECITALS:
A. THE HOLDER. Newport is a limited liability company duly organized
and in good standing under the laws of the State of Delaware with its
principal executive offices located in Newport Beach, California.
B. THE COMPANY. The Company is an existing corporation, formed under
the laws of the State of California, with its principal executive offices
located in Redwood Shores, California.
C. CORPORATE APPROVALS. Each of the parties to this Agreement has
obtained all necessary corporate and member approvals for the execution and
delivery of this Agreement.
D. ARM'S-LENGTH RELATIONSHIP. The parties to this Agreement intend to
conduct their relationships hereunder on an arm's-length basis.
E. PRIVATE PLACEMENT EXCHANGE. The Company intends to complete the
issuance to Newport of 11,415,094 shares of the Company's Common Stock, $.01
par value per share (the "Common Shares"), in exchange for all of Newport's
right, title and interest in that certain Floating Rate Convertible
Subordinated Note Due 1998 of the Company, including all principal
indebtedness and accrued interest indebtedness thereunder (the "Note")
pursuant to an exchange offering exempt from the registration requirements of
the Securities Act of 1933, as amended (the "Private Placement"). Newport
acquired the Note from Computer Associates International, Inc. ("CA")
pursuant to that certain Note Purchase and Sale Agreement dated the date
hereof by and among Newport, CA and the Company.
F. INVESTOR RIGHTS. In conjunction with the Private Placement, the
Holder and the Company desire to enter into this Agreement to provide certain
registration and other investor rights as provided herein.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein contained, and for other good and valuable consideration had
and received, the receipt and sufficiency of which is hereby acknowledged,
the parties hereto agree as follows:
1. DEFINITIONS. As used herein, the following terms shall have the
following respective meanings:
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"Affiliate" shall mean any Person that directly or indirectly controls,
is controlled by, or is under common control with such Person. A Person
shall be deemed to control another Person if such Person owns five percent
(5%) or more of any equity interest in the "controlled" Person or possesses,
directly or indirectly, the power to direct or cause the direction of the
management or policies of the controlled Person, whether through ownership of
stock or partnership or member interests, by contract, agreement or
understanding (whether oral or written), or otherwise.
"Common Shares" shall have the meaning set forth in Recital E of this
Agreement.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
"Holders" shall mean Newport, each of the Persons listed on Schedule 1
attached hereto and made a part hereof, any Affiliate of Newport or of any of
the Persons listed on Schedule 1 (other than the Company) and any transferee
or assignee under Section 10 hereof, and any combination of one or more such
Holders.
"NASD" shall mean the National Association of Securities Dealers, Inc.
"Other Holders" shall mean Persons (other than Holders) who are holders
of record of equity securities of the Company who subsequent to the date
hereof acquire more than five percent (5%) of the outstanding shares of
Common Stock pursuant to a transaction with the Company and to whom the
Company grants registration rights pursuant to a written agreement in
connection with such transaction.
"Person" shall mean any individual, corporation, association,
partnership, group (as defined in section 13(d)(3) of the Exchange Act),
limited liability company, joint venture, business trust or unincorporated
organization, or a government or any agency or political subdivision thereof.
"Registrable Shares" shall mean the Common Shares and any shares of
capital stock issued or issuable with respect to the Common Shares as a
result of any stock split, stock dividend, recapitalization, exchange or
similar event or otherwise. As to any particular Registrable Share, such
Registrable Share shall cease to be a Registrable Share when (w) it shall
have been sold, transferred or otherwise disposed of or exchanged pursuant to
a registration statement under the Securities Act; (x) it may be distributed
to the public, together with all other Registrable Shares held by the Holder
of such share, during any ninety (90) day period pursuant to and in
compliance with all applicable requirements of Rule 144 (or any successor
provision) under the Securities Act; (y) it shall have been sold or
transferred in a private transaction to a Person other than a Designated
Transferee (as defined in Section 10 below); or (z) it shall have been sold,
transferred or otherwise disposed of in violation of this Agreement.
"Registration Expenses" shall have the meaning set forth in Section 0
hereof.
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"SEC" shall mean the Securities and Exchange Commission or any successor
agency thereto.
"Securities Act" shall mean the Securities Act of 1933, as amended.
2. INCIDENTAL REGISTRATIONS.
(a) RIGHT TO INCLUDE REGISTRABLE SHARES. On or after June 1, 1998 (the
"Rights Commencement Date"), each time the Company shall determine to file a
registration statement under the Securities Act in connection with a proposed
offer and sale for cash of any equity securities (other than an offering of
debt securities which are convertible into equity securities) by the Company,
the Company will give prompt written notice of its determination to each
Holder and of such Holder's rights under this Section 0, at least twenty (20)
days prior to the anticipated filing date of such registration statement.
Upon the written request of each Holder made within fifteen (15) days after
the receipt of any such notice from the Company (which request shall specify
the Registrable Shares intended to be disposed of by such Holder), the
Company will use its best efforts to effect the registration under the
Securities Act of all Registrable Shares which the Company has been so
requested to register by the Holders thereof, to the extent required to
permit the disposition of the Registrable Shares so to be registered;
PROVIDED, HOWEVER, that (i) if, at any time after giving written notice of
its intention to register any securities and prior to the effective date of
the registration statement filed in connection with such registration, the
Company shall determine for any reason not to proceed with the proposed
registration of the securities to be sold by it, the Company may, at its
election, give written notice of such determination to each Holder of
Registrable Shares and thereupon shall be relieved of its obligation to
register any Registrable Shares in connection with such registration (but not
from its obligation to pay the Registration Expenses in connection
therewith), and (ii) if such registration involves an underwritten offering,
all Holders of Registrable Shares requesting to be included in the Company's
registration must sell their Registrable Shares to the underwriters on the
same terms and conditions as apply to the Company, with such differences,
including any with respect to indemnification and liability insurance, as may
be customary or appropriate in combined primary and secondary offerings. If
a registration requested pursuant to this Section 2(a) involves an
underwritten public offering, any Holder of Registrable Shares requesting to
be included in such registration may elect, in writing at least five (5) days
prior to the effective date of the registration statement filed in connection
with such registration, not to register such securities in connection with
such registration. No registration effected under this Section 0 shall
relieve the Company of its obligations to effect the registration under
Section 0 hereof.
(b) PRIORITY IN INCIDENTAL REGISTRATION. If a registration pursuant to
this Section 0 involves an underwritten offering and the managing underwriter(s)
in good faith advise(s) the Company in writing that, in its opinion, the number
of securities which the Company, the Holders and any other Persons intend to
include in such registration exceeds the largest number of securities which can
be sold in such offering without having an adverse effect on such offering
(including the price at which such securities can be sold), then the Company
will include in such registration (i) first, the securities the Company proposes
to sell for its own
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account; (ii) second, to the extent that the number of securities which the
Company proposes to sell is less than the number of securities which the
Company has been advised can be sold in such offering without having the
adverse effect referred to above, such number of Registrable Shares which the
Holders have requested to be included in such registration pursuant to
Section 2(a) hereof; PROVIDED, HOWEVER, that the aggregate value of the
Registrable Securities to be included in such registration by the Holders may
not be so reduced to less than twenty-five percent (25%) of the total value
of all securities included in such registration; and (iii) third, to the
extent that the number of securities which are to be included in such
registration pursuant to clauses (i) and (ii) is, in the aggregate, less than
the number of securities which the Company has been advised can be sold in
such offering without having the adverse effect referred to above, such
number of other securities requested to be included in the offering for the
account of any Other Holders which, in the opinion of such managing
underwriter(s), can be sold without having the adverse effect referred to
above. The number of Registrable Shares included in such registration
statement shall be allocated pro rata among the Holders based on the number
of Registrable Shares held by each Holder.
3. HOLDBACK AGREEMENTS.
(a) If any registration of Registrable Shares shall be in connection
with a Qualified Public Offering (defined below), the Holders shall not
effect any public sale or distribution (except in connection with such public
offering), of any Registrable Securities (other than as part of such
underwritten public offering) during the one hundred twenty (120) day period
(or such lesser period as the managing underwriter(s) may permit) beginning
on the effective date of such registration, if, and to the extent, the
managing underwriter(s) of any such offering determine(s) such action is
necessary or desirable to effect such offering. A "Qualified Public
Offering" is defined herein as a firm commitment, underwritten public
offering registered under the Securities Act (other than a registration
relating solely to a transaction under Rule 145 under the Securities Act or
to an employee benefit plan of the Company), at a price per share of at least
$2.00 and with aggregate proceeds to the Company and/or any selling
shareholders (before deduction for underwriters' discounts and expenses) of
at least $7,500,000.
(b) If any registration of Registrable Shares shall be in connection
with a Qualified Public Offering, the Company shall not effect any public
sale or distribution (except in connection with such public offering) of any
of its equity securities or of any security convertible into or exchangeable
or exercisable for any of its equity securities (in each case other than as
part of such underwritten public offering) during the one hundred twenty
(120) day period (or such lesser period as the managing underwriter(s) may
permit) beginning on the effective date of such registration, and the Company
shall use its best efforts to cause each member of the management of the
Company who holds any equity security and each other holder of five percent
(5%) or more of the outstanding shares of any equity security, or of any
security convertible into or exchangeable or exercisable for any equity
security, of the Company purchased from the Company (at any time other than
in a public offering) to so agree.
(c) In the event of any discretionary waiver or termination of the
restrictions set forth in the agreements described in Section 3(b) above by
the Company or the representatives
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of the underwriters, the number of shares subject to such waiver shall be
allocated among all persons subject to such agreements and to all Holders pro
rata based on the number of securities held.
4. REGISTRATION.
(a) MANDATORY REGISTRATION. The Company shall prepare and, no later
than 305 days after the date of issuance of the Common Shares (the "Filing
Deadline"), file with the SEC a registration statement on Form S-3 covering
the resale of all of the Registrable Shares, or such lesser amount of
Registrable Shares as the Holders shall in their discretion notify the
Company to register. In the event that Form S-3 is unavailable for such a
registration, the Company shall use such other form as is available for such
a registration, subject to the further provisions of this Section 4(a). The
Company shall use its best efforts to have the registration statement
declared effective no later than 365 days after the date of issuance of the
Common Shares and in any event shall have the registration declared effective
no later than 380 days after the date of issuance of the Common Shares. In
the event that Form S-3 is not available for the registration of Registrable
Shares hereunder, the Company shall (i) register the sale of the Registrable
Shares on another appropriate form and (ii) undertake to register the
Registrable Shares on Form S-3 as soon as such form is available, provided
that the Company shall maintain the effectiveness of the registration
statement then in effect until such time as a registration statement on Form
S-3 covering the Registrable Shares has been declared effective by the SEC.
No securities other than Registrable Shares will be included in any
registration statement filed pursuant to this Section 4(a) subject to Section
4(e) below. The Company shall keep a registration statement described in
this Section 4(a) hereof effective pursuant to Rule 415 promulgated under the
Securities Act at all times until the earlier of (i) the date as of which
each of the Holders may sell all of the Registrable Shares held by such
Holder without restriction pursuant to Rule 144(k) promulgated under the
Securities Act or (ii) the date on which the Holders shall have sold all the
Registrable Shares to the public (the"Registration Period"). The
registration statement (including any amendments or supplements thereto and
prospectuses contained therein) shall not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein,
or necessary to make the statements therein, in light of the circumstances in
which they were made, not misleading.
(b) BLACK-OUT PERIODS. If (i) in the good faith judgment of the Board
of Directors of the Company, the disclosure which would be required in
connection with the mandatory registration under Section 4(a) above would be
seriously detrimental to the Company and the Board of Directors of the
Company concludes by a duly adopted resolution that, as a result, it is
essential at such time to defer the filing of such registration statement or
to suspend the sale of securities thereunder, and (ii) the Company shall
furnish to such Holders a certificate signed by the President of the Company
stating that in the good faith judgment of the Board of Directors of the
Company it would be seriously detrimental to the Company for such
registration statement to be filed or for securities to be sold thereunder in
the near future and that it is, therefore, essential to defer the filing of
such registration statement or to suspend the sale of securities thereunder,
then the Company shall have the right to defer such filing or suspend the
sale of securities thereunder for the period during which such disclosure
would be seriously
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detrimental (a "Black-out Period"); PROVIDED, HOWEVER, that (A) the Company
shall not have the right to impose any Black-out Periods for ninety (90) days
following the effectiveness of the registration statement filed pursuant to
Section 4(a) above, (B) no Black-out Period shall extend longer than
forty-five (45) consecutive calendar days, (C) no Black-out Period may be
imposed within forty-five (45) days following the completion of a prior
Black-out Period, and (D) the Company shall not impose Black-out Periods
which, in the aggregate, exceed ninety (90) days in any twelve (12) month
period. The Holders acknowledge and agree that the Company may impose a
legend setting forth the provisions of this Section 4(b) on the Registrable
Shares.
(c) SUBSEQUENT REGISTRATIONS. In the event fewer than all of the
Registrable Shares are covered by the registration effectuated pursuant to
Section 4(a) above, then, commencing six (6) months following the effective
date of such registration, upon the written request of the Holders of at
least fifty percent (50%) of the Registrable Shares not so covered that the
Company effect the registration of all or part of such Registrable Shares not
so covered, and specifying the amount and the intended method of disposition
thereof, the Company will promptly give notice of such requested registration
to all other Holders of Registrable Shares not so covered and, as
expeditiously as possible, use its best efforts to effect the registration
under the Securities Act of: (i) the Registrable Shares which the Company has
been so requested to register by such requesting Holders; and (ii) all other
Registrable Shares which the Company has been requested to register by any
other Holder thereof by written request received by the Company within thirty
(30) days after the giving of such written notice by the Company; PROVIDED,
HOWEVER, that the Company shall not be required to effect more than one (1)
registration pursuant to this Section 4(c); PROVIDED, FURTHER, that the
Company shall not be obligated to file a registration statement relating to a
registration request under this Section 4(c), (x) if the registration request
is delivered after delivery of a notice by the Company of an intended
registration and prior to the effective date of the registration statement
referred to in such notice, provided that the Company is actively employing
in good faith all reasonable efforts to cause such registration statements to
become effective, or (y) within a period of ninety (90) days after the
effective date of any other registration statement of the Company pursuant to
which the Holders included Registrable Shares.
(d) REGISTRATION STATEMENT FORM. If any registration pursuant to this
Section 0 shall be in connection with an underwritten public offering, and if
the managing underwriter(s) shall advise the Company in writing that, in its
opinion, the use of a form of registration statement other than on Form S-3
is of material importance to the success of such proposed offering, then such
registration shall be effected on such other form.
(e) PRIORITY IN REQUESTED REGISTRATIONS. If any registration pursuant
to this Section 0 involves an underwritten offering and the managing
underwriter(s) in good faith advise(s) the Company in writing that, in its
opinion, the number of securities requested to be included in such
registration (including securities of the Company which are not Registrable
Shares) exceeds the largest number of securities which can be sold in such
offering without having an adverse effect on such offering (including the
price at which such securities can be sold), then the Company will include in
such registration (i) first, one hundred percent (100%) of the Registrable
Shares requested to be registered pursuant to Section 4(a) hereof (provided
that if
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the number of Registrable Shares requested to be registered pursuant to
Section 4(a) hereof exceeds the number which the Company has been advised can
be sold in such offering without having the adverse effect referred to above,
the number of such Registrable Shares to be included in such registration by
the Holders shall be allocated pro rata among such Holders on the basis of
the relative number of Registrable Shares each such Holder has requested to
be included in such registration); (ii) second, to the extent that the number
of Registrable Shares requested to be registered pursuant to Section 4(a)
hereof is less than the number of securities which the Company has been
advised can be sold in such offering without having the adverse effect
referred to above, such number of shares of equity securities the Company
requests to be included in such registration, and (iii) third, to the extent
that the number of Registrable Shares requested to be included in such
registration pursuant to Section 4(a) hereof and the securities which the
Company proposes to sell for its own account are, in the aggregate, less than
the number of equity securities which the Company has been advised can be
sold in such offering without having the adverse effect referred to above,
such number of other securities proposed to be sold by any Other Holder
which, in the opinion of such managing underwriter(s), can be sold without
having the adverse effect referred to above (provided that if the number of
such securities of such Other Holder requested to be registered exceeds the
number which the Company has been advised can be sold in such offering
without having the adverse effect referred to above, the number of such
securities to be included in such registration pursuant to this Section 4(d)
shall be allocated pro rata among all such Other Holders on the basis of the
relative number of securities each such Other Holder has requested to be
included in such registration).
(f) ADDITIONAL RIGHTS. If the Company at any time grants to any other
holders of equity securities of the Company any rights to request the Company
to effect the registration of any such shares of equity securities on terms
more favorable to such holders than the terms set forth in this Section 4 and
in Section 5 hereof, the terms of this Section 4 and of Section 5 hereof
shall be deemed amended or supplemented to the extent necessary to provide
the Holders such more favorable rights and benefits. In no event shall the
Company grant to any person any rights to request the Company to effect the
registration of any shares of equity securities of the Company on terms which
would have the effect of delaying the effectiveness of or reducing the number
of shares covered by any registration statements effectuated pursuant to
Section 2 and this Section 4.
5. REGISTRATION PROCEDURES.
(a) Whenever a Holder has requested that any Registrable Shares be
registered pursuant to Section 2(a) or 4(c) or at such time as the Company is
obligated to file and maintain the effectiveness of a registration statement
with the SEC pursuant to Section 4(a), the Company shall use its best efforts
to effect the registration of the Registrable Shares in accordance with the
intended method of disposition thereof and, pursuant thereto, the Company
shall have the following obligations:
(i) prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used in
connection therewith as
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may be necessary to keep such registration statement effective for
the Registration Period and to comply with the provisions of the
Securities Act, the Exchange Act, and the rules and regulations
promulgated thereunder with respect to the disposition of all the
securities covered by such registration statement during such
period in accordance with the intended methods of disposition by
the Holders thereof set forth in such registration statement;
PROVIDED, HOWEVER, that (A) before filing a registration statement
(including an initial filing) or prospectus, or any amendments or
supplements thereto, the Company will furnish to one counsel (the
"Holder Counsel") selected by the Holders of a majority of the
Registrable Shares covered by such registration statement copies
of all documents proposed to be filed at least seven days prior to
their filing with the SEC, which documents will be subject to the
review and comment of such counsel, and (B) the Company will
notify each Holder of Registrable Shares covered by such
registration statement of any stop order issued or threatened by
the SEC, any other order suspending the use of any preliminary
prospectus or of the suspension of the qualification of the
registration statement for offering or sale in any jurisdiction,
and take all reasonable actions required to prevent the entry of
such stop order, other order or suspension or to remove it if
entered;
(ii) the Company shall furnish to the Holder Counsel, without
charge, any correspondence from the SEC or the staff of the SEC to the
Company or its representatives relating to any registration statement;
(iii) furnish without charge to each Holder and each
underwriter, if applicable, of Registrable Shares covered by such
registration statement such number of copies of the registration
statement and of each amendment and supplement thereto (in each case
including all exhibits), such number of copies of the prospectus
included in such registration statement (including each preliminary
prospectus and summary prospectus), in conformity with the
requirements of the Securities Act, and such other documents as each
Holder of Registrable Shares covered by such registration statement
may reasonably request in order to facilitate the disposition of the
Registrable Shares by such Holder;
(iv) use its best efforts to register or qualify such
Registrable Shares covered by such registration statement under the
state securities or blue sky laws of such jurisdictions as each Holder
of Registrable Shares covered by such registration statement and, if
applicable, each underwriter, may reasonably request, and do any and
all other acts and things which may be reasonably necessary to
consummate the disposition in such jurisdictions of the Registrable
Shares owned by such Holder, except that the Company shall not for any
purpose be required to qualify generally to do business as a foreign
corporation in any jurisdiction where, but for the requirements of
this clause (iv), it would not be obligated to be so qualified (the
Company shall promptly notify Holder
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Counsel and each Holder of the receipt by the Company of any
notification with respect to the suspension of the registration or
qualification of any of the Registrable Shares for sale under the
securities or "blue sky" laws of any jurisdiction in the United
States or its receipt of actual notice of the initiation or
threatening of any proceeding for such purpose);
(v) use its best efforts to cause such Registrable Shares
covered by such registration statement to be registered with or
approved by such other governmental agencies or authorities as may be
necessary to enable the Holders thereof to consummate the disposition
of such Registrable Shares;
(vi) if at any time an event shall have occurred as the result
of which any prospectus relating to any Registrable Shares as then in
effect would include an untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary to
make the statements therein not misleading, immediately give written
notice thereof to each Holder and the managing underwriter or
underwriters, if any, of such Registrable Shares and prepare and
furnish to each such Holder a reasonable number of copies of an
amended or supplemental prospectus as may be necessary so that, as
thereafter delivered to the purchasers of such Registrable Shares,
such prospectus shall not include an untrue statement of material fact
or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading;
(vii) either (A) list any portion of such Registrable Shares not
already listed on any securities exchange on which similar securities
of the Company are then listed, and enter into customary agreements
including a listing application and indemnification agreement in
customary form, or (B) maintain the inclusion for quotation on The
Nasdaq SmallCap Market for the Registrable Shares and, at such time as
the Company is able to satisfy the listing requirements on the Nasdaq
National Market System and the Company's management reasonably
believes the Company will be able to continue to comply with such
requirements, use its best efforts to secure designation and quotation
of all the Registrable Shares on the Nasdaq National Market System,
and, without limiting the generality of the foregoing, use its best
efforts to arrange for at least two market makers to register with the
NASD as such with respect to the Registrable Shares, and provide a
transfer agent and registrar for such Registrable Shares covered by
such registration statement not later than the effective date of such
registration statement;
(viii) enter into such customary agreements (including an
underwriting agreement in customary form) and take such other actions
as each Holder of Registrable Shares being sold or the underwriter or
underwriters, if any, reasonably request in order to expedite or
facilitate the disposition of such Registrable Shares, including
customary indemnification and opinions;
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(ix) use its best efforts to obtain a "cold comfort" letter or
letters from the Company's independent public accountants in customary
form and covering matters of the type customarily covered by "cold
comfort" letters as the Holders of the Registrable Shares being sold
or the underwriters retained by such Holders shall reasonably request,
provided that this provision shall only apply with respect to an
underwritten registration;
(x) make available for inspection by representatives of any
Holder, by any underwriter participating in any disposition to be
effected pursuant to such registration statement and by any attorney,
accountant or other agent retained by such Holders or any such
underwriter, all financial and other records pertinent corporate
documents and properties of the Company and its subsidiaries'
officers, directors and employees to supply all information and
respond to all inquiries reasonably requested by such Holders or any
such representative, underwriter, attorney, accountant or agent in
connection with such registration statement;
(xi) promptly prior to the filing of any document which is to be
incorporated by reference into the registration statement or the
prospectus (after initial filing of the registration statement), if
such document is not available to the public electronically via EDGAR,
provide copies of such document to counsel to the Holders and to the
managing underwriter(s), if any, and make the Company's
representatives available for discussion of such document;
(xii) otherwise use its best efforts to comply with all
applicable rules and regulations of the SEC, and make available to its
security holders, as soon as reasonably practicable after the
effective date of the registration statement, an earning statement
which shall satisfy the provisions of section 11(a) of the Securities
Act and the rules and regulations promulgated thereunder;
(xiii) not later than the effective date of the applicable
registration statement, use its best efforts to provide a CUSIP number
for any portion of such Registrable Shares not already included in a
CUSIP number for similar securities of the Company, and provide the
applicable transfer agents with printed certificates for the
Registrable Shares which are in a form eligible for deposit with the
Depository Trust Company;
(xiv) notify counsel for the Holders of Registrable Shares
included in such registration statement and the managing underwriter
or underwriters, if any, immediately and confirm the notice in
writing, (A) when the registration statement, or any post-effective
amendment to the registration statement, shall have become effective,
or any supplement or amendment to the prospectus shall have been
filed, (B) of the receipt of any comments from the SEC and (C) of any
request of the SEC to amend the registration statement or amend or
supplement the prospectus or for additional information;
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(xv) in the event the Company and the Holders who hold at least
two-thirds of the Registrable Shares mutually agree to an underwritten
offering for one or more offerings of Registrable Shares under Section
4(a) hereof, enter into and perform its obligations under an
underwriting agreement, in usual and customary form, including, but
not limited to, customary indemnification and contribution
obligations, with the underwriters (without limiting the generality of
the foregoing, if the underwriters for marketing or other reasons
request the inclusion in the registration statement of information
which is not required under the Securities Act to be included in a
registration statement on the applicable form for such registration,
the Company nonetheless will provide such information as may be
reasonably requested for inclusion by the underwriters in such
registration statement);
(xvi) use its best efforts to prevent the issuance of any stop
order or other suspension of effectiveness of a registration
statement, or the suspension of the qualification of any of the
Registrable Shares for sale in any jurisdiction and, if such an order
or suspension is used, use its best efforts to obtain the withdrawal
of such order or suspension at the earliest possible time;
(xvii) cooperate with each of the Holders and, to the extent
applicable, any managing underwriter or underwriters, to facilitate
the timely preparation and delivery of certificates (not bearing any
restrictive legend) representing the Registrable Shares offered and
sold pursuant to a registration statement and enable such certificates
to be in such denominations or amounts, as the case may be, as the
managing underwriter or underwriters, if any, or, if there is no
managing underwriter or underwriters, each of the Holders may
reasonably request and registered in such names as the managing
underwriter or underwriters, if any, or each of the Holders may
request;
(xviii) cooperate with each seller of Registrable Shares and
each underwriter, if any, participating in the disposition of such
Registrable Shares and their respective counsel in connection with any
filings required to be made with the NASD; and
(xix) take all other reasonable actions necessary or reasonably
requested by an Holder to expedite and facilitate disposition by such
Holder of Registrable Shares pursuant to a registration statement.
(b) Each Holder of Registrable Shares hereby agrees that, upon receipt
of any notice from the Company of the happening of any event of the type
described in Section 5(a)(vi) hereof, such Holder shall forthwith discontinue
disposition of such Registrable Shares covered by such registration statement
or related prospectus until such Holder's receipt of the copies of the
supplemental or amended prospectus contemplated by Section 5(a)(vi) hereof,
and, if so directed by the Company, such Holder will deliver to the Company
(at the Company's
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expense) all copies, other than permanent file copies then in such Holder's
possession, of the prospectus covering such Registrable Shares at the time of
receipt of such notice.
(c) Each Holder hereby agrees to provide the Company, upon receipt of
its request, with such information about such Holder to enable the Company to
comply with the requirements of the Securities Act and to execute such
certificates as the Company may reasonably request in connection with such
information and otherwise to satisfy any requirements of law.
6. UNDERWRITTEN REGISTRATIONS. Notwithstanding anything in this
Agreement to the contrary, the Company in its sole discretion shall determine
whether a registration on Form S-3 pursuant to Section 4 hereof shall be by
means of an underwritten offering. In the case of any underwritten offerings
pursuant to Section 2 and Section 4 hereof, the managing underwriter(s) that
will administer the offering shall be selected by the Company; PROVIDED,
HOWEVER, that such managing underwriter(s) shall be reasonably satisfactory
to the Holders of a majority of the Registrable Shares to be registered.
7. EXPENSES.
(a) Subject to Section 7(b), the Company shall pay all fees, costs and
expenses of all registrations pursuant to Section 2 and Section 0 hereof,
including all SEC and stock exchange or NASD registration and filing fees and
expenses, reasonable fees and expenses of any "qualified independent
underwriter" and its counsel as may be required by the rules of the NASD,
fees and expenses of compliance with securities or blue sky laws (including
reasonable fees and disbursements of counsel for the underwriters, if any, in
connection with blue sky qualifications of the Registrable Shares), rating
agency fees, printing expenses (including expenses of printing certificates
for Registrable Shares and prospectuses), messenger, telephone and delivery
expenses, the fees and expenses incurred in connection with the listing of
the securities to be registered on each securities exchange or national or
other market system on which similar securities issued by the Company are
then listed, fees and disbursements of counsel for the Company and all
independent certified public accountants (including the expenses of any
annual audit, special audit and "cold comfort" letters required by or
incident to such performance and compliance), the fees and disbursements of
the underwriters customarily paid by issuers or sellers of securities
(including expenses relating to "road shows" and other marketing activities),
the reasonable fees and expenses of special experts required to be retained
by the Company in connection with such registration, the reasonable fees and
expenses of other Persons required to be retained by the Company and the
reasonable fees and expenses, not to exceed $10,000 per registration
statement, of one counsel for the Holders (collectively, "Registration
Expenses");
(b) The Holders shall pay the following: (i) any underwriting or
selling discounts or commissions or transfer taxes, if any, attributable to
the sale of Registrable Shares by the Holders pursuant to this Agreement, and
(ii) except as set forth in subsection 7(a) above, all fees, costs and
expenses of counsel to the Holders pursuant to this Agreement in connection
with any registration pursuant to this Agreement.
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8. INDEMNIFICATION.
(a) INDEMNIFICATION BY THE COMPANY. In the event of any registration
of any securities of the Company under the Securities Act pursuant to Section
2 or 4 hereof, the Company will, and it hereby does, indemnify and hold
harmless, to the fullest extent permitted by law, each of the Holders of any
Registrable Shares covered by such registration statement, each Affiliate of
such Holder (other than the Company) and their respective partners, members,
Affiliates, directors and officers, each other Person who participates as an
underwriter in the offering or sale of such securities and each other Person,
if any, who controls such Holder or any such underwriter within the meaning
of the Securities Act (collectively, the "Indemnified Parties"), against any
and all losses, claims, damages or liabilities, joint or several, and
expenses (including any amounts paid in any settlement effected with the
Company's consent, which consent shall not be unreasonably withheld or
delayed) to which any Indemnified Party may become subject under the
Securities Act, state securities or blue sky laws, common law or otherwise,
insofar as such losses, claims, damages or liabilities (or actions or
proceedings in respect thereof, whether or not such Indemnified Party is a
party thereto) or expenses arise out of or are based upon any of the
following (each, a "Violation") (i) any untrue statement or alleged untrue
statement of any material fact contained in any registration statement under
which such securities were registered under the Securities Act, any
preliminary, final or summary prospectus contained therein, or any amendment
or supplement thereof, (ii) any omission or alleged omission to state therein
a material fact required to be stated therein or necessary to make the
statements therein not misleading or (iii) any violation by the Company of
any federal, state or common law rule or regulation applicable to the Company
and relating to action required of or inaction by the Company in connection
with any such registration, and the Company will promptly reimburse such
Indemnified Party for any legal or any other expenses reasonably incurred by
it in connection with investigating or defending any such loss, claim,
liability, action or proceeding; PROVIDED, HOWEVER, that the Company shall
not be liable to any Indemnified Party in any such case to the extent that
any such loss, claim, damage, liability (or action or proceeding in respect
thereof) or expense arises out of or is based upon any untrue statement or
alleged untrue statement or omission or alleged omission made in such
registration statement or amendment or supplement thereof or in any such
preliminary, final or summary prospectus in reliance upon and in conformity
with written information with respect to such Holder furnished to the Company
by such Holder specifically for use in the preparation thereof. Such
indemnity shall remain in full force and effect regardless of any
investigation made by or on behalf of such Holder or any Indemnified Party
and shall survive the transfer of such securities by such Holder.
(b) INDEMNIFICATION BY THE HOLDERS AND THE UNDERWRITERS. In the event
of any registration of any securities of the Company under the Securities Act
pursuant to Section 2 or 4 hereof, each Holder of Registerable Shares
included in the Securities as to which such registration is being effected
will, and it hereby does, indemnify and hold harmless, to the fullest extent
permitted by law, the Company, each Affiliate of the Company, each of its
directors, each of its officers who has signed the registration statement,
each Person, if any, who controls the Company within the meaning of the
Securities Act, any underwriter, any other
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Holder selling securities under such registration statement and any
controlling person of any such underwriter or other Holder (collectively, the
"Company Indemnified Parties"), against any and all losses, claims, damages
or liabilities, joint or several, and expenses (including amounts paid in any
settlement effected with the Holder's prior written consent, which consent
shall not be unreasonably withheld or delayed) to which any Company
Indemnified Party may become subject under the Securities Act, state
securities or blue sky laws, common law or otherwise, insofar as such losses,
claims, damages or liabilities (or actions or proceedings in respect thereof,
whether or not such Company Indemnified Party is a party thereto) or expenses
arise out of or are based upon any Violation, in each case to the extent (and
only to the extent) that such Violation occurs due to the Company's reliance
upon and in conformity with written information furnished by such Holder to
the Company under an instrument duly executed by such Holder and stated to be
specifically for use in connection with such registration statement,
preliminary, final or summary prospectus or amendment or supplement thereto;
and each such Holder will promptly reimburse such Company Indemnified Party
for any legal or any other expenses reasonably incurred by it in connection
with investigation or defending any such loss, claim, liability, action or
proceeding if it is judicially determined that there was such a Violation;
PROVIDED, HOWEVER, that each such Holder shall be severally, and not jointly,
liable under any such indemnification; PROVIDED, FURTHER, that no such Holder
shall be liable in any event for any indemnity claims in excess of the amount
of the net proceeds received by such Holder from the sale of its Registrable
Shares. The Company may further require, in connection with any underwritten
registration effectuated in accordance with Section 2 or 4 hereof, that the
Company shall have received an undertaking reasonably satisfactory to it from
the underwriter to indemnify and hold harmless (in the same manner and to the
same extent as set forth in this Section 8(b)) the Company with respect to
any statement or alleged statement in or omission or alleged omission from
such registration statement, any preliminary, final or summary prospectus
contained therein, or any amendment or supplement, if such statement or
alleged statement or omission or alleged omission was made in reliance upon
and in conformity with written information such underwriter furnished to the
Company specifically for use in the preparation of such registration
statement, preliminary, final or summary prospectus or amendment or
supplement. Such indemnity shall remain in full force and effect regardless
of any investigation made by or on behalf of the Company or any of the
Holders, or any of their respective Affiliates (other than the Company),
directors, officers or controlling Persons, and shall survive the transfer of
such securities by such Holder.
(c) NOTICES OF CLAIMS, ETC. Promptly after receipt by an indemnified
party hereunder of written notice of the commencement of any action or
proceeding with respect to which a claim for indemnification may be made
pursuant to this Section 8, such indemnified party will, if a claim in respect
thereof is to be made against an indemnifying party, give written notice to the
latter of the commencement of such action; PROVIDED, HOWEVER, that the failure
of the indemnified party to give notice as provided herein shall not relieve the
indemnifying party of its obligations under this Section 8, except to the extent
that the indemnifying party is actually materially prejudiced by such failure to
give notice. In case any such action is brought against an indemnified party,
the indemnifying party will be entitled to participate in and to assume the
defense thereof, with counsel satisfactory to such indemnified party, and after
notice from the indemnifying party to such indemnified party of its election so
to assume the defense thereof,
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<PAGE>
the indemnifying party will not be liable to such indemnified party for any
legal or other expenses subsequently incurred by the latter in connection
with the defense thereof other than reasonable costs of investigation;
PROVIDED, HOWEVER, that the indemnified party shall have the right, at the
sole cost and expense of the indemnifying party, to employ counsel to
represent the indemnified party and its respective controlling persons,
directors, officers, employees or agents who may be subject to liability
arising out of any claim in respect of which indemnity may be sought by the
indemnified party against such indemnifying party under this Section 8 if (i)
the employment of such counsel shall have been authorized in writing by such
indemnifying party in connection with the defense of such action, (ii) the
indemnifying party shall not have promptly employed counsel reasonably
satisfactory to the indemnified party to assume the defense of such action or
counsel, or (iii) any indemnified party shall have reasonably concluded that
there may be defenses available to such indemnified party or its respective
controlling persons, directors, officers, employees or agents which are in
conflict with or in addition to those available to an indemnifying party;
PROVIDED, FURTHER, that the indemnifying party shall not be obligated to pay
for more than the expenses of one firm of separate counsel for the
indemnified party. No indemnifying party will consent to entry of any
judgment or enter into any settlement which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
indemnified party of a release from all liability in respect to such claim or
litigation.
(d) If the indemnification provided for in this Section 8 shall for any
reason be unavailable to any indemnified party under Section 8(a) or 8(b)
hereof or is insufficient to hold it harmless in respect of any loss, claim,
damage or liability, or any action in respect of any loss, claim, damage or
liability, or any action in respect thereof referred to therein, then each
indemnifying party shall contribute to the amount paid or payable by such
indemnified party as a result of such loss, claim, damage or liability, or
action in respect thereof, (i) in such proportion as shall be appropriate to
reflect the relative benefits received by the indemnified party and
indemnifying party or (ii) if the allocation provided by clause (i) above is
not permitted by applicable law, in such proportion as is appropriate to
reflect not only the relative benefits referred to in clause (i) but also the
relative fault of the indemnified party and indemnifying party with respect
to the statements or omissions which resulted in such loss, claim, damage or
liability, or action in respect thereof, as well as any other relevant
equitable considerations. Notwithstanding any other provision of this
Section 8(d), no Holder of Registrable Shares shall be required to contribute
an amount greater than the dollar amount of the net proceeds received by such
Holder with respect to the sale of any such Registrable Shares. No person
guilty of fraudulent misrepresentation (within the meaning of section 11(f)
of the Securities Act) shall be entitled to contribution from any person who
was not guilty of such fraudulent misrepresentation.
(e) OTHER INDEMNIFICATION. Indemnification similar to that specified
in the preceding subdivisions of this Section 8 (with appropriate
modifications but subject to the same provisos set forth in Section 8(b)
above) shall be given by the Company and each Holder of Registrable Shares
with respect to any required registration or other qualification of
securities under any federal or state law or regulation other than the
Securities Act.
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<PAGE>
(f) NON-EXCLUSIVITY. The obligations of the parties under this Section
8 shall be in addition to any liability which any party may otherwise have to
any other party.
9. RULE 144. With a view to making available to the Holders the
benefits of Rule 144 promulgated under the Securities Act or any other
similar rule or regulation of the SEC that may at any time permit the Holders
to sell securities of the Company to the public without registration ("Rule
144"), the Company agrees to:
(a) make and keep public information available, as those terms
are understood and defined in Rule 144;
(b) file with the SEC in a timely manner all reports and other
documents required of the Company under the Exchange Act, so long as
the Company remains subject to such requirements and the filing of
such reports and other documents is required for the applicable
provisions of Rule 144; and
(c) furnish to each Holder so long as such Holder owns
Registrable Shares, promptly upon request, (i) a written statement by
the company that it has complied with the reporting requirements of
Rule 144, the Securities Act and the Exchange Act, (ii) a copy of the
most recent annual or quarterly report of the Company and such other
reports and documents so filed by the company, and (iii) such other
information as may be reasonably requested to permit the Holders to
sell such securities pursuant to Rule 144 without registration.
10. ASSIGNABILITY. This Agreement shall be binding upon and shall
inure to the benefit of the parties hereto and the Holders and their
respective successors and permitted assigns. Except as provided herein, no
party may assign any of its rights or delegate any of its duties under this
Agreement without the express consent of the other parties hereto. In
addition, and whether or not any express assignment shall have been made, the
provisions of this Agreement which are for the benefit of the Holders shall
also be for the benefit of and enforceable by any subsequent Holder, subject
to the provisions contained herein. Any Holder may assign any of its rights
or delegate any of its duties under this Agreement, in whole or in part,
without any prior consent of the Company only to a Person (a "Designated
Transferee") who is (a) an Affiliate, member or partner of a Holder, (b) a
family member of or a trust for the benefit of an individual Holder, or (c) a
transferee of at least 250,000 Registrable Shares (whether through purchase,
share exchange, bequest or otherwise) and who agrees to be bound by the terms
of this Agreement. Any purported assignment in violation of this Section 10
shall be void.
11. RIGHT OF FIRST REFUSAL. The Company hereby grants to each Holder
the right of first refusal to purchase a pro rata share of New Securities (as
defined in this Section 12) which the Company may, from time to time, propose
to sell and issue. A Holder's pro rata share, for purposes of this right of
first refusal, is the ratio of the number of shares of Common Stock owned by
such Holder immediately prior to the issuance of New Securities, to the total
number of shares of Common Stock outstanding immediately prior to the
issuance of New Securities. Each Holder shall have a right of over-allotment
such that if any Holder fails to exercise its
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right hereunder to purchase its pro rata share of New Securities, the Company
shall provide each Holder with prompt written notice of this event and the
other Holders may purchase the non-purchasing Holder's portion on a pro rata
basis within ten (10) days from the date of such notice. This right of first
refusal shall be subject to the following provisions:
(a) "New Securities" shall mean any capital stock (including Common
Stock and/or Preferred Stock) of the Company whether now authorized or not,
and rights, options or warrants to purchase such capital stock, and
securities of any type whatsoever that are, or may become, convertible into
capital stock; provided that the term "New Securities" does not include (i)
securities issued upon conversion of the warrants issued to CA on the date
hereof; (ii) securities issued to investors and securities issuable upon
exercise of the warrants issued to such investors in a private placement of
the Company's Common Stock in an aggregate offering amount of up to $2.5
million that will close as of the date hereof, (iii) securities issued
pursuant to the acquisition of another business entity or business segment of
any such entity by the Company by merger, purchase of substantially all the
assets or other reorganization whereby the Company will own more than fifty
percent (50%) of the voting power of such business entity or business segment
of any such entity; (iv) any borrowings, direct or indirect, from financial
institutions or other persons by the Company, whether or not presently
authorized, including any type of loan or payment evidenced by any type of
debt instrument, provided such borrowings do not have any equity features
including warrants, options or other rights to purchase capital stock and are
not convertible into capital stock of the Company; (v) securities issued to
employees, consultants, officers or directors of the Company pursuant to any
stock option, stock purchase or stock bonus plan, agreement or arrangement
existing on the date hereof or hereafter approved by the unanimous vote of
the Board of Directors or Compensation Committee; (vi) securities issued in
connection with obtaining bona fide lease financing, whether issued to a
lessor or guarantor; (vii) securities issued in a public offering of Common
Stock of the Company pursuant to a firm-commitment underwritten registration
under the Securities Act with an aggregate offering price to the public of at
least $10,000,000 and in which no single purchaser or group of affiliated
purchasers acquire in such offering greater than ten percent (10%) of the
shares sold in the offering or three (3%) of then outstanding equity
securities of the Company; and (viii) securities issued in connection with
any stock split, stock dividend or recapitalization of the Company.
(b) In the event the Company proposes to undertake an issuance of New
Securities, it shall give each Holder written notice of its intention,
describing the type of New Securities, and their price and the general terms
upon which the Company proposes to issue the same. Each Holder shall have
fifteen (15) days after any such notice is mailed or delivered to agree to
purchase up to such Holder's pro rata share of such New Securities for the
price and upon the terms specified in the notice by giving written notice to
the Company and stating therein the quantity of New Securities to be
purchased.
(c) In the event the Holders fail to exercise fully the right of first
refusal within such fifteen (15) day period and after the expiration of the
ten-day (10) period for the exercise of the over-allotment provisions of this
Section 12, the Company shall have sixty (60) days thereafter to sell or
enter into an agreement (pursuant to which the sale of New Securities covered
thereby
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<PAGE>
shall be closed, if at all, within ninety (90) days to sell the New
Securities respecting which the Holders' right of first refusal option set
forth in this Section 12 was not exercised, at a price and upon terms no more
favorable to the purchasers thereof than specified in the Company's notice to
Holders pursuant to Section 12(b). In the event the Company has not sold
within such 90-day period or entered into an agreement to sell the New
Securities in accordance with the foregoing within sixty (60) days from the
date of such agreement, the Company shall not thereafter issue or sell any
New Securities, without first again offering such securities to the Holders
in the manner provided in Section 12(b) above.
(d) The right of first refusal granted under this Agreement shall
expire on the earlier to occur of (i) two (2) years from the date of this
Agreement or (ii) the date the Holders as a group hold less than 15% of the
issued and outstanding capital stock of the Company.
12. NOTICES. Any and all notices, designations, consents, offers,
acceptances or any other communications shall be given in writing by either
(a) personal delivery to and receipted for by the addressee or by (b)
telecopy or registered or certified mail which shall be addressed, in the
case of the Company, to: Centura Software Corporation, 975 Island Drive,
Redwood Shores, California 94065, attention: Chief Financial Officer; in the
case of Holders, to the address or addresses thereof appearing on the books
of the Company or of the transfer agent and registrar for its Common Stock.
All such notices and communications shall be deemed to have been duly given
and effective: when delivered by hand, if personally delivered; two (2)
business days after being deposited in the mail, postage prepaid, if mailed;
and when receipt is acknowledged, if telecopied.
13. NO INCONSISTENT AGREEMENTS. The Company will not hereafter enter
into any agreement with respect to its securities which is inconsistent with
the rights granted to the Holders in this Agreement.
14. SPECIFIC PERFORMANCE. The Company acknowledges that the rights
granted to the Holders in this Agreement are of a special, unique and
extraordinary character, and that any breach of this Agreement by the Company
could not be compensated for by damages. Accordingly, if the Company
breaches its obligations under this Agreement, the Holders shall be entitled,
in addition to any other remedies that they may have, to enforcement of this
Agreement by a decree of specific performance requiring the Company to
fulfill its obligations under this Agreement.
15. SEVERABILITY. If any provision of this Agreement or any portion
thereof is finally determined by a court of competent jurisdiction to be
unlawful or unenforceable, such provision or portion thereof shall in no way
affect any other provision of this Agreement, the application of any such
provision and any other circumstances, and any portion of such invalidated
provision that is not invalidated by such a determination shall remain in
full force and effect.
16. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original and all of which,
together, shall constitute one and the same instrument.
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<PAGE>
17. DEFAULTS. A default by any party to this Agreement in such party's
compliance with any of the conditions or covenants hereof or performance of
any of the obligations of such party hereunder shall not constitute a default
by any other party.
18. AMENDMENTS, WAIVERS. This Agreement may not be amended, modified
or supplemented and no waivers of or consents to or departures from the
provisions hereof may be given unless consented to in writing by the Company
and the holders of two-thirds of the Registrable Shares; PROVIDED, HOWEVER,
that no such amendment, supplement, modification or waiver shall deprive any
Holder of any rights under Section 2 or 4 hereof without the consent of such
Holder.
19. CONSTRUCTION. The captions contained in this Agreement are for
reference purposes only and shall not constitute a part of this Agreement.
Unless the context requires otherwise, the use of the masculine shall include
the feminine, and the use of the singular shall include the plural. The word
"including" shall mean "including, but not limited to." The language used in
this Agreement will be deemed to be the language chosen by the parties to
express their mutual intent and no rules of strict construction will be
applied against any party.
20. ATTORNEYS' FEES. In any action or proceeding brought to enforce
any provision of this Agreement, or where any provision hereof is validly
asserted as a defense, the successful party shall be entitled to recover
reasonable attorneys' fees in addition to any other available remedy.
21. ADDITIONAL ACTIONS. Each party (including transferees and assigns
thereof) shall do and perform, or cause to be done and performed, all such
further acts and things, and shall execute and deliver all such other
agreements, certificates, instruments and documents, as any other party may
reasonably request in order to carry out the intent and accomplish the
purposes of this Agreement and the consummation of the transactions
contemplated hereby.
22. ENTIRE AGREEMENT. This Agreement, together with the Note Purchase
Agreement and Exchange Agreement, contains the entire agreement among the
parties hereto with respect to the transaction contemplated herein and
understandings among the parties relating to the subject matter hereof. Any
and all previous agreements and understandings between or among the parties
hereto regarding the subject matter hereof are, whether written or oral,
superseded by this Agreement.
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<PAGE>
23. GOVERNING LAW. This Agreement is made pursuant to and shall be
construed in accordance with the laws of the State of California without regard
to that state's conflicts of laws principles.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective authorized officers as of the date first written
above.
NEWPORT ACQUISITION COMPANY NO. 2 LLC
By Crossroads Capital Partners LLC, as
managing Member
By /s/ James A. Skelton
Name James A. Skelton
Title Principal
CENTURA SOFTWARE CORPORATION
By /s/ John Bowman
Name John Bowman
Title CFO
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<PAGE>
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AND HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT
WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF. NO
SUCH SALE OR DISTRIBUTION MAY BE EFFECTED WITHOUT AN EFFECTIVE REGISTRATION
STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL IN A FORM REASONABLY
SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE
SECURITIES ACT OF 1933.
- -------------------------------------------------------------------------------
Warrant No. CS98-21 Number of Shares: 283,019
Date of Issuance: February 27, 1998 (subject to adjustment)
CENTURA SOFTWARE CORPORATION
COMMON STOCK PURCHASE WARRANT
-----------------------------
Centura Software Corporation (the "COMPANY"), for value received, hereby
certifies that Rochon Capital Group, Ltd., or its registered assigns (the
"REGISTERED HOLDER"), is entitled, subject to the terms set forth below, to
purchase from the Company, at any time after the date hereof and on or before
the Expiration Date (as defined in Section 5 below), up to 283,019 shares (as
adjusted from time to time pursuant to the provisions of this Warrant) of
Common Stock of the Company, at a purchase price of $2.12 per share. The
shares purchasable upon exercise of this Warrant and the purchase price per
share, as adjusted from time to time pursuant to the provisions of this
Warrant, are sometimes hereinafter referred to as the "WARRANT STOCK" and the
"PURCHASE PRICE," respectively.
1. EXERCISE.
(a) MANNER OF EXERCISE. This Warrant may be exercised by the
Registered Holder, in whole or in part, by surrendering this Warrant, with
the purchase form appended hereto as EXHIBIT A duly executed by such
Registered Holder or by such Registered Holder's duly authorized attorney, at
the principal office of the Company, or at such other office or agency as the
Company may designate, accompanied by payment in full of the Purchase Price
payable in respect of the number of shares of Warrant Stock purchased upon
such exercise. The Purchase Price may be paid by cash, check or wire
transfer to the Registered Holder.
(b) EFFECTIVE TIME OF EXERCISE. Each exercise of this Warrant shall
be deemed to have been effected immediately prior to the close of business on
the day on which this Warrant shall have been surrendered to the Company as
provided in Section 1(a) above. At such time, the person or persons in whose
name or names any certificates for Warrant Stock shall be issuable upon such
exercise as provided in Section 1(d) below shall be deemed to have become the
holder or holders of record of the Warrant Stock represented by such
certificates.
(c) NET ISSUE EXERCISE.
(i) In lieu of exercising this Warrant in the manner provided
above in Section 1(a), the Registered Holder may elect to receive shares equal
to the value of this Warrant (or the portion thereof being canceled) by
surrender of this Warrant at the principal office of the
<PAGE>
Company together with notice of such election in which event the Company
shall issue to holder a number of shares of Common Stock computed using the
following formula:
X = Y (A - B)
---------
A
Where X = The number of shares of Common Stock to be issued to the
Registered Holder.
Y = The number of shares of Common Stock as to which the Warrant is
being exercised
A = The fair market value of one share of Common Stock (at the date of
such calculation).
B = The Purchase Price (as adjusted to the date of such calculation).
(ii) For purposes of this Section 1(c), the fair market value of
one share of Common Stock on the date of calculation shall mean:
(1) if the Company's Common Stock is traded on a securities
exchange, The Nasdaq Stock Market, or The Nasdaq SmallCap Market, the fair
market value shall be deemed to be the closing price on the trading day
immediately preceding the date of exercise of the Warrant; or
(2) if the Company's Common Stock is actively traded
over-the-counter, the fair market value shall be deemed to be the closing bid
or sales price (whichever is applicable) on the trading day immediately
preceding the date of exercise of the Warrant; or
(3) if neither (1) nor (2) is applicable, the fair market
value shall be at the highest price per share which the Company could obtain
on the date of calculation from a willing buyer (not a current employee or
director) for shares of Common Stock sold by the Company, from authorized but
unissued shares, as determined in good faith by the Board of Directors,
unless the Company is at such time subject to an acquisition as described in
Section 5(b) below, in which case the fair market value per share of Common
Stock shall be deemed to be the value of the consideration per share received
by the holders of such stock pursuant to such acquisition.
(d) DELIVERY TO HOLDER. As soon as practicable after the exercise of
this Warrant in whole or in part, and in any event within three (3) days
thereafter, the Company at its expense will cause to be issued in the name
of, and delivered to, the Registered Holder, or as such Holder (upon payment
by such Holder of any applicable transfer taxes) may direct:
(i) a certificate or certificates for the number of shares of
Warrant Stock to which such Registered Holder shall be entitled, and
<PAGE>
(ii) in case such exercise is in part only, a new warrant or
warrants (dated the date hereof) of like tenor, calling in the aggregate on
the face or faces thereof for the number of shares of Warrant Stock equal
(without giving effect to any adjustment therein) to the number of such
shares called for on the face of this Warrant minus the number of such
shares purchased by the Registered Holder upon such exercise as provided in
Section 1(a) above.
2. ADJUSTMENTS.
(a) STOCK SPLITS AND DIVIDENDS. If outstanding shares of the
Company's Common Stock shall be subdivided into a greater number of shares or
a dividend in Common Stock shall be paid in respect of Common Stock, the
Purchase Price in effect immediately prior to such subdivision or at the
record date of such dividend shall simultaneously with the effectiveness of
such subdivision or immediately after the record date of such dividend be
proportionately reduced. If outstanding shares of Common Stock shall be
combined into a smaller number of shares, the Purchase Price in effect
immediately prior to such combination shall, simultaneously with the
effectiveness of such combination, be proportionately increased. When any
adjustment is required to be made in the Purchase Price, the number of shares
of Warrant Stock purchasable upon the exercise of this Warrant shall be
changed to the number determined by dividing (i) an amount equal to the
number of shares issuable upon the exercise of this Warrant immediately prior
to such adjustment, multiplied by the Purchase Price in effect immediately
prior to such adjustment, by (ii) the Purchase Price in effect immediately
after such adjustment.
(b) RECLASSIFICATION, ETC. In case of any reclassification or change
of the outstanding securities of the Company or of any reorganization of the
Company (or any other corporation the stock or securities of which are at the
time receivable upon the exercise of this Warrant) or any similar corporate
reorganization or merger or conveyance on or after the date hereof, then and
in each such case the holder of this Warrant, upon the exercise hereof at any
time after the consummation of such reclassification, change, reorganization,
merger or conveyance, shall be entitled to receive, in lieu of the stock or
other securities and property receivable upon the exercise hereof prior to
such consummation, the stock or other securities or property to which such
holder would have been entitled upon such consummation if such holder had
exercised this Warrant immediately prior thereto, all subject to further
adjustment as provided in Section 2(a); and in each such case, the terms of
this Section 2 shall be applicable to the shares of stock or other securities
properly receiv-able upon the exercise of this Warrant after such
consummation.
(c) ADJUSTMENT CERTIFICATE. When any adjustment is required to be
made in the Purchase Price, the Company shall promptly mail to the Registered
Holder a certificate setting forth the Purchase Price after such adjustment
and setting forth a brief statement of the facts requiring such adjustment.
Such certificate shall also set forth the kind and amount of stock or other
securities or property into which this Warrant shall be exercisable following
the occurrence of any of the events specified in Section 2(a) or 2(b) above.
3. TRANSFERS.
(a) UNREGISTERED SECURITY. Each holder of this Warrant acknowledges
that this Warrant and the Warrant Stock have not been registered under the
Securities Act, and agrees not to sell, pledge, distribute, offer for sale,
transfer or otherwise dispose of this Warrant or any Warrant
<PAGE>
Stock issued upon its exercise in the absence of (i) an effective
registration statement under the Act as to this Warrant or such Warrant Stock
and registration or qualification of this Warrant or such Warrant Stock under
any applicable U.S. federal or state securities law then in effect or (ii) an
opinion of counsel, satisfactory to the Company, that such registration and
qualification are not required. Each certificate or other instrument for
Warrant Stock issued upon the exercise of this Warrant shall bear a legend
substantially to the foregoing effect until such time as the registration of
the Warrant Stock is effective or until such time as the Warrant Stock has
been held by the holder (after giving effect to permissible tacking under
Rule 144) for at least two years, at and after which time no legend shall be
required.
(b) TRANSFERABILITY. Subject to the provisions of Section 3(a)
hereof, this Warrant and all rights hereunder are transferable, in whole or
in part, upon surrender of the Warrant with a properly executed assignment
(in the form of EXHIBIT B hereto) at the principal office of the Company,
PROVIDED, HOWEVER, that this Warrant may not be transferred in part unless
the transferee and any subsequent tranferee acquires the right to purchase at
least 25,000 shares (as adjusted pursuant to Section 2) of Warrant Stock
hereunder.
(c) WARRANT REGISTER. The Company will maintain a register
containing the names and addresses of the Registered Holders of this Warrant.
Until any transfer of this Warrant is made in the warrant register, the
Company may treat the Registered Holder of this Warrant as the absolute owner
hereof for all purposes; PROVIDED, HOWEVER, that if this Warrant is properly
assigned in blank, the Company may (but shall not be required to) treat the
bearer hereof as the absolute owner hereof for all purposes, notwithstanding
any notice to the contrary. Any Registered Holder may change such Registered
Holder's address as shown on the warrant register by written notice to the
Company requesting such change.
4. NO IMPAIRMENT. The Company will not, by amendment of its charter or
through reorganization, consolidation, merger, dissolution, sale of assets or
any other voluntary action, avoid or seek to avoid the observance or
performance of any of the terms of this Warrant, but will (subject to Section
13 below) at all times in good faith assist in the carrying out of all such
terms and in the taking of all such action as may be necessary or appropriate
in order to protect the rights of the holder of this Warrant against
impairment.
5. TERMINATION. This Warrant (and the right to purchase securities upon
exercise hereof) shall terminate upon the earliest to occur of the following
(the "EXPIRATION DATE"): (a) February 27, 2003, or (b) the effective date of
the sale, conveyance, disposal, or encumbrance of all or substantially all of
the Company's property or business or the Company's merger into or
consolidation with any other corporation (other than a wholly-owned
subsidiary corporation) or any other transaction or series of related
transactions in which more than fifty percent (50%) of the voting power of
the Company is disposed of, PROVIDED that this Section 5(b) shall not apply a
merger effected exclusively for the purpose of changing the domicile of the
Company.
6. NOTICES OF CERTAIN TRANSACTIONS. In case:
(a) the Company shall take a record of the holders of its Common
Stock (or other stock or securities at the time deliverable upon the exercise
of this Warrant) for the purpose of entitling or enabling them to receive any
dividend or other distribution, or to receive any right to
<PAGE>
subscribe for or purchase any shares of stock of any class or any other
securities, or to receive any other right, to subscribe for or purchase any
shares of stock of any class or any other securities, or to receive any other
right, or
(b) of any capital reorganization of the Company, any
reclassification of the capital stock of the Company, any consolidation or
merger of the Company, any consolidation or merger of the Company with or
into another corporation (other than a consolidation or merger in which the
Company is the surviving entity), or any transfer of all or substantially all
of the assets of the Company, or
(c) of the voluntary or involuntary dissolution, liquidation or
winding-up of the Company,
then, and in each such case, the Company will mail or cause to be mailed to
the Registered Holder of this Warrant a notice specifying, as the case may
be, (i) the date on which a record is to be taken for the purpose of such
dividend, distribution or right, and stating the amount and character of such
dividend, distribution or right, or (ii) the effective date on which such
reorganization, reclassification, consolidation, merger, transfer,
dissolution, liquidation or winding-up is to take place, and the time, if any
is to be fixed, as of which the holders of record of Common Stock (or such
other stock or securities at the time deliverable upon such reorganization,
reclassification, consolidation, merger, transfer, dissolution, liquidation
or winding-up) are to be determined. Such notice shall be mailed at least
ten (10) days prior to the record date or effective date for the event
specified in such notice.
7. RESERVATION OF STOCK. The Company will at all times reserve and keep
available, solely for the issuance and delivery upon the exercise of this
Warrant, such shares of Warrant Stock and other stock, securities and
property, as from time to time shall be issuable upon the exercise of this
Warrant.
8. EXCHANGE OF WARRANTS. Upon the surrender by the Registered Holder of
any Warrant or Warrants, properly endorsed, to the Company at the principal
office of the Company, the Company will, subject to the provisions of Section
3 hereof, issue and deliver to or upon the order of such Holder, at the
Company's expense, a new Warrant or Warrants of like tenor, in the name of
such Registered Holder or as such Registered Holder (upon payment by such
Registered Holder of any applicable transfer taxes) may direct, calling in
the aggregate on the face or faces thereof for the number of shares of Common
Stock called for on the face or faces of the Warrant or Warrants so
surrendered.
9. REPLACEMENT OF WARRANTS. Upon receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant and (in the case of loss, theft or destruction) upon delivery of
an indemnity agreement (with surety if reasonably required) in an amount
reasonably satisfactory to the Company, or (in the case of mutilation) upon
surrender and cancellation of this Warrant, the Company will issue, in lieu
thereof, a new Warrant of like tenor.
10. NOTICES. Any notice required or permitted by this Warrant shall be
in writing and shall be deemed sufficient upon receipt, when delivered
personally or by courier, overnight delivery service or confirmed facsimile,
or forty-eight (48) hours after being deposited in the regular mail as
<PAGE>
certified or registered mail (airmail if sent internationally) with postage
prepaid, addressed (a) if to the Registered Holder, to the address of the
Registered Holder most recently furnished in writing to the Company and (b)
if to the Company, to the address set forth below or subsequently modified by
written notice to the Registered Holder.
11. NO RIGHTS AS SHAREHOLDER. Until the exercise of this Warrant, the
Registered Holder of this Warrant shall not have or exercise any rights by
virtue hereof as a shareholder of the Company.
12. NO FRACTIONAL SHARES. No fractional shares of Common Stock will be
issued in connection with any exercise hereunder. In lieu of any fractional
shares which would otherwise be issuable, the Company shall pay cash equal to
the product of such fraction multiplied by the fair market value of one share
of Common Stock on the date of exercise, as determined in good faith by the
Company's Board of Directors.
13. AMENDMENT OR WAIVER. Any term of this Warrant may be amended or
waived only by an instrument in writing signed by the party against which
enforcement of the amendment or waiver is sought.
14. HEADINGS. The headings in this Warrant are for purposes of reference
only and shall not limit or otherwise affect the meaning of any provision of
this Warrant.
15. GOVERNING LAW. This Warrant shall be governed, construed and
interpreted in accordance with the laws of the State of California, without
giving effect to principles of conflicts of law.
16. REGISTRATION OF SECURITIES.
(a) As soon as possible after the original date of issuance of this
Warrant, the Company shall use its best efforts to prepare and file a
registration statement on Form S-3 (the "REGISTRATION STATEMENT") with the
Commission under the Act to register the resale of the Common Stock issuable
upon exercise of the Warrant ("REGISTRABLE SECURITIES") and thereafter shall
use its best efforts to secure the effectiveness of such Registration
Statement.
(b) The Company shall pay all Registration Expenses (as defined
below) in connection with any registration, qualification or compliance
hereunder, and Purchaser or any transferee of the Registrable Securities
(each, a "HOLDER") shall pay all Selling Expenses (as defined below) and
other expenses that are not Registration Expenses relating to the Registrable
Securities resold by Holder. "Registration Expenses" shall mean all expenses,
except for Selling Expenses, incurred by the Company in complying with the
registration provisions herein described, including, without limitation, all
registration, qualification and filing fees, printing expenses, fees and
disbursements of counsel for the Company and the Holder (in an amount for
Holder's counsel not to exceed $5,000), blue sky fees and expenses and the
expense of any special audits incident to or required by any such
registration. "Selling Expenses" shall mean all selling commissions,
brokerage or underwriting fees and stock transfer taxes applicable to the
Registrable Securities and all fees and disbursements of counsel for Holder
in excess of $5,000.
<PAGE>
(c) In the case of any registration effected by the Company pursuant
to these registration provisions, and subject to the limitations on
registration set forth in Section 16(d) below, the Company will use
commercially reasonable efforts to: (i) keep such registration effective
until two (2) years after the issuance date set forth on page 1 hereof; (ii)
prepare and file with the Commission such amendments and supplements to such
Registration Statement and the prospectus used in connection with such
Registration Statement as may be necessary to comply with the provisions of
the Act with respect to the disposition of all securities covered by such
Registration Statement; (iii) furnish such number of prospectuses and other
documents incident thereto, including any amendment of or supplement to the
prospectus, as a Holder from time to time may reasonably request; (iv)
register and qualify the securities covered by such Registration Statement
under such other securities or Blue Sky laws of such jurisdictions as shall
be reasonably requested by the Holders, provided that the Company shall not
be required in connection therewith or as a condition thereto to qualify to
do business or to file a general consent to service of process in any such
states or jurisdictions; (v) cause all such Registrable Securities registered
as described herein to be listed on each securities exchange and quoted on
each quotation service on which similar securities issued by the Company are
then listed or quoted; and (vi) otherwise use commercially reasonable efforts
to comply with all applicable rules and regulations of the Commission.
(d) The Company may, by written notice to Holder, delay the filing or
effectiveness of, or suspend, the Registration Statement, and require that
Holder immediately cease sales of shares pursuant to such Registration
Statement in any period during which the Company is engaged in any activity
or transaction or preparations or negotiations for any activity or
transaction ("COMPANY ACTIVITY") that the Company desires to keep
confidential for business reasons, if the Company determines in good faith
that the public disclosure requirements imposed on the Company under the Act
in connection with the Registration Statement would require disclosure of the
Company Activity; provided, however, that (A) the Company shall use
commercially reasonable efforts to minimize the length of any such period of
delay or suspension, (B) any such delay or suspension shall be applied in the
same manner to any other resale registration statement then in effect, (C) no
such suspension period shall extend longer than forty-five (45) consecutive
calendar days, (D) no such suspension period may be imposed within forty-five
(45) days following the completion of a prior suspension period, and (E) the
Company shall not impose suspension periods which, in the aggregate, exceed
ninety (90) days in any twelve (12) month period. If the Company delays or
suspends the Registration Statement or requires Holder to cease sales of
shares pursuant to this Section 4(d), the Company shall, as promptly as
practicable following the termination of the circumstance which entitled the
Company to do so, take such actions as may be necessary to file or reinstate
the effectiveness of the Registration Statement and/or give written notice to
Holder authorizing it to resume sales pursuant to such Registration
Statement. If as a result thereof the prospectus included in the
Registration Statement has been amended to comply with the requirements of
the Act, the Company shall enclose such revised prospectus with the notice to
Holders given pursuant to this Section 4(d), and Holder shall make no offers
or sales of shares pursuant to the Registration Statement other than by means
of such revised prospectus. If the Company delays or suspends the
Registration Statement or requires Holder to cease sales of shares pursuant
to this Section 4(d), the Company shall extend the period during which it
maintains effectiveness of the Registration Statement by the number of days
of any such period of delay or suspension.
<PAGE>
(e) Holder hereby agrees to comply with the registration provisions
herein described. Holder will only sell Registrable Securities at such time
that information required to be included in the Registration Statement and
previously supplied by Holder is accurate. The Company shall furnish to
Holder a reasonable number of copies of a supplement to or an amendment of
such prospectus as may be necessary so that, as thereafter delivered to the
Holders of such shares, such prospectus shall not include an untrue statement
of a material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading or
incomplete in the light of the circumstances then existing. Holder agrees
that the Company may impose a legend setting forth the provisions of
Section 16(e) on the Registrable Securities during the period of registration.
(f) With a view to making available to the holders the benefits of
Rule 144 promulgated under the Act and any other rule or regulation of the
Commission that may at any time permit Holder to sell Registrable Securities
to the public without registration or pursuant to a registration on Form S-3,
the Company hereby covenants and agrees to: (i) make and keep public
information available, as those terms are understood and defined in Rule 144,
at all times after the issuance of this Warrant; and (ii) file with the
Commission in a timely manner all reports and other documents required of the
Company under the Act and Exchange Act.
(g) Indemnification.
(i) To the extent permitted by law, the Company will indemnify
and hold harmless Holder, any underwriter (as defined in the Act) for Holder,
its officers, directors, shareholders or partners and each person, if any,
who controls Holder or underwriter within the meaning of the Act or the
Exchange Act, against any losses, claims, damages, or liabilities to which
they may become subject under the Act, the Exchange Act or other federal or
state law, insofar as such losses, claims, damages, or liabilities (or
actions in respect thereof) arise out of or are based upon any of the
following statements, omissions or violations (collectively a "VIOLATION"):
(A) any untrue statement or alleged untrue statement of a material fact
contained in such Registration Statement, including any preliminary
prospectus or final prospectus contained therein or any amendments or
supplements thereto or (B) the omission or alleged omission to state therein
a material fact required to be stated therein, or necessary to make the
statements therein not misleading; and the Company will pay to each such
Holder, underwriter or controlling person, as incurred, any legal or other
expenses reasonably incurred by them in connection with investigating or
defending any such loss, claim, damage, liability, or action; provided,
however, that the indemnity agreement contained in this Section 16(g)(i)
shall not apply to amounts paid in settlement of any such loss, claim,
damage, liability, or action if such settlement is effected without the
consent of the Company (which consent shall not be unreasonably withheld),
nor shall the Company be liable in any such case for any such loss, claim,
damage, liability, or action to the extent that it arises out of or is based
upon a Violation which occurs in reliance upon and in conformity with written
information furnished expressly for use in connection with such registration
by any such Holder, underwriter or controlling person; further provided,
however, that the foregoing indemnity with respect to any untrue statement
in or omission from any preliminary prospectus shall not inure to the benefit
of any Holder from whom the person asserting any such losses, claims, damages
or liabilities purchased the Registrable Securities if a copy of the final
prospectus or any amendment thereto had not been sent or given to such person
at or prior to the written confirmation of the sale
<PAGE>
of such Registrable Securities to such person if required by the Act and the
untrue statement or omission of a material fact contained in such preliminary
prospectus was corrected in the final prospectus or amendment and such final
prospectus or amendment was distributed to the Holder prior to such sale of
Registrable Securities.
(ii) To the extent permitted by law, each selling Holder will
indemnify and hold harmless the Company, each of its directors, each of its
officers who has signed the Registration Statement, each person, if any, who
controls the Company within the meaning of the Act, any underwriter, any
other Holder selling securities in such Registration Statement and any
controlling person of any such underwriter or other Holder, against any
losses, claims, damages, or liabilities to which any of the foregoing persons
may become subject, under the Act, the Exchange Act or other federal or state
law, insofar as such losses, claims, damages, or liabilities (or actions in
respect thereto) arise out of or are based upon any Violation, in each case
to the extent (and only to the extent) that such Violation occurs in reliance
upon and in conformity with written information furnished by such Holder
expressly for use in connection with such registration; and each such Holder
will pay, as incurred, any legal or other expenses reasonably incurred by any
person intended to be indemnified pursuant to this subsection 16(g)(ii), in
connection with investigating or defending any such loss, claim, damage,
liability, or action; provided, however, that the indemnity agreement
contained in this subsection 16 (g)(ii) shall not apply to amounts paid in
settlement of any such loss, claim, damage, liability or action if such
settlement is effected without the consent of the Holder, which consent shall
not be unreasonably withheld; provided, that, in no event shall any indemnity
under this subsection 16(g)(ii) exceed the net proceeds from the offering
received by such Holder, except in the case of willful fraud by such Holder.
(iii) Promptly after receipt by an indemnified party under this
Section 16(g) of notice of the commencement of any action (including any
governmental action), such indemnified party will, if a claim in respect
thereof is to be made against any indemnifying party under this Section
16(g), deliver to the indemnifying party a written notice of the commencement
thereof and the indemnifying party shall have the right to participate in,
and, to the extent the indemnifying party so desires, jointly with any other
indemnifying party similarly noticed, to assume the defense thereof with
counsel mutually satisfactory to the parties; provided, however, that an
indemnified party (together with all other indemnified parties which may be
represented without conflict by one counsel) shall have the right to retain
one separate counsel, with the reasonable fees and expenses to be paid by the
indemnifying party, if representation of such indemnified party by the
counsel retained by the indemnifying party would be inappropriate due to
actual or potential differing interests between such indemnified party and
any other party represented by such counsel in such proceeding. The failure
to deliver written notice to the indemnifying party within a reasonable time
of the commencement of any such action, if and only if prejudicial to its
ability to defend such action, shall relieve such indemnifying party of any
liability to the indemnified party under this Section 16(g).
17. RESALE RESTRICTIONS. Holder agrees that it will not sell any
Registrable Securities issued hereunder until the effectiveness of the
Registration Statement to be filed pursuant to Section 16 above.
Notwithstanding the foregoing, the Company may suspend resales by the Holder
if an underwriter reasonably determines that such resales would adversely
affect the Company's ability to raise additional capital in a public offering
of the Company's equity securities
<PAGE>
and such underwriter issues a written opinion to the Company to that effect.
Any such suspension of resales by the Holder pursuant to the foregoing
sentence will not exceed 120 calendar days commencing on the date of the
secondary offering. The volume and resale restrictions set forth in this
Section 17 shall be set forth in any and all Registration Statements brought
effective pursuant to Section 16 above, and the Company shall instruct its
transfer agent, broker dealers and market makers to enforce the volume
restrictions set forth herein. If the Company suspends resales by the Holder
pursuant to this Section 17, the Company shall extend the period during which
it maintains effectiveness of the Registration Statement by the number of
days of any such period of suspension.
[SIGNATURE PAGE FOLLOWS]
<PAGE>
Executed as of the date first set forth herein above.
CENTURA SOFTWARE CORPORATION
By /s/ John Bowman
-------------------------
Title: CFO
---------------------
Address: 975 Island Drive
Redwood Shores, CA 94065
Fax Number:(650)-596-4376
<PAGE>
EXHIBIT A
---------
PURCHASE FORM
-------------
To: Centura Software Corporation Dated:
The undersigned, pursuant to the provisions set forth in the attached
Warrant No. CS-[WarrantNo], hereby irrevocably elects to purchase _______
shares of the Common Stock covered by such Warrant and herewith makes payment
of $_________, representing the full purchase price for such shares at the
price per share provided for in such Warrant.
The undersigned further acknowledges that it has reviewed the
representations and warranties contained in Section 4 of the Purchase
Agreement (as defined in the Warrant) and by its signature below hereby makes
such representations and warranties to the Company. Defined terms contained
in such representations and warranties shall have the meanings assigned to
them in the Purchase Agreement, PROVIDED that the term "Seller" shall refer
to the undersigned and the term "Securities" shall refer to the Warrant Stock.
Signature:
-----------------------------
Address:
-----------------------------
<PAGE>
EXHIBIT B
---------
ASSIGNMENT FORM
---------------
FOR VALUE RECEIVED, _________________________________________ hereby
sells, assigns and transfers all of the rights of the undersigned under the
attached Warrant with respect to the number of shares of Common Stock covered
thereby set forth below, unto:
NAME OF ASSIGNEE ADDRESS/FAX NUMBER NO. OF SHARES
- ------------------------ ------------------------ ------------------------
Dated: Signature:
----------------------------- -----------------------------
-----------------------------
Witness: -------------------------------
<PAGE>
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AND HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT
WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF. NO
SUCH SALE OR DISTRIBUTION MAY BE EFFECTED WITHOUT AN EFFECTIVE REGISTRATION
STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL IN A FORM REASONABLY
SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE
SECURITIES ACT OF 1933.
- -------------------------------------------------------------------------------
Warrant No. CS98-22 Number of Shares: 71,698
Date of Issuance: February 27, 1998 (subject to adjustment)
CENTURA SOFTWARE CORPORATION
COMMON STOCK PURCHASE WARRANT
-----------------------------
Centura Software Corporation (the "COMPANY"), for value received, hereby
certifies that Rochon Capital Group, Ltd., or its registered assigns (the
"REGISTERED HOLDER"), is entitled, subject to the terms set forth below, to
purchase from the Company, at any time after the date hereof and on or before
the Expiration Date (as defined in Section 5 below), up to 71,698 shares (as
adjusted from time to time pursuant to the provisions of this Warrant) of
Common Stock of the Company, at a purchase price of $2.12 per share. The
shares purchasable upon exercise of this Warrant and the purchase price per
share, as adjusted from time to time pursuant to the provisions of this
Warrant, are sometimes hereinafter referred to as the "WARRANT STOCK" and the
"PURCHASE PRICE," respectively.
1. EXERCISE.
(a) MANNER OF EXERCISE. This Warrant may be exercised by the
Registered Holder, in whole or in part, by surrendering this Warrant, with
the purchase form appended hereto as EXHIBIT A duly executed by such
Registered Holder or by such Registered Holder's duly authorized attorney, at
the principal office of the Company, or at such other office or agency as the
Company may designate, accompanied by payment in full of the Purchase Price
payable in respect of the number of shares of Warrant Stock purchased upon
such exercise. The Purchase Price may be paid by cash, check or wire
transfer to the Registered Holder.
(b) EFFECTIVE TIME OF EXERCISE. Each exercise of this Warrant shall
be deemed to have been effected immediately prior to the close of business on
the day on which this Warrant shall have been surrendered to the Company as
provided in Section 1(a) above. At such time, the person or persons in whose
name or names any certificates for Warrant Stock shall be issuable upon such
exercise as provided in Section 1(d) below shall be deemed to have become the
holder or holders of record of the Warrant Stock represented by such
certificates.
(c) NET ISSUE EXERCISE.
(i) In lieu of exercising this Warrant in the manner provided
above in Section 1(a), the Registered Holder may elect to receive shares equal
to the value of this Warrant (or the portion thereof being canceled) by
surrender of this Warrant at the principal office of the
<PAGE>
Company together with notice of such election in which event the Company
shall issue to holder a number of shares of Common Stock computed using the
following formula:
X = Y (A - B)
---------
A
Where X = The number of shares of Common Stock to be issued to the
Registered Holder.
Y = The number of shares of Common Stock as to which the Warrant is
being exercised
A = The fair market value of one share of Common Stock (at the date of
such calculation).
B = The Purchase Price (as adjusted to the date of such calculation).
(ii) For purposes of this Section 1(c), the fair market value of
one share of Common Stock on the date of calculation shall mean:
(1) if the Company's Common Stock is traded on a securities
exchange, The Nasdaq Stock Market, or The Nasdaq SmallCap Market, the fair
market value shall be deemed to be the closing price on the trading day
immediately preceding the date of exercise of the Warrant; or
(2) if the Company's Common Stock is actively traded
over-the-counter, the fair market value shall be deemed to be the closing bid
or sales price (whichever is applicable) on the trading day immediately
preceding the date of exercise of the Warrant; or
(3) if neither (1) nor (2) is applicable, the fair market
value shall be at the highest price per share which the Company could obtain
on the date of calculation from a willing buyer (not a current employee or
director) for shares of Common Stock sold by the Company, from authorized but
unissued shares, as determined in good faith by the Board of Directors,
unless the Company is at such time subject to an acquisition as described in
Section 5(b) below, in which case the fair market value per share of Common
Stock shall be deemed to be the value of the consideration per share received
by the holders of such stock pursuant to such acquisition.
(d) DELIVERY TO HOLDER. As soon as practicable after the exercise of
this Warrant in whole or in part, and in any event within three (3) days
thereafter, the Company at its expense will cause to be issued in the name
of, and delivered to, the Registered Holder, or as such Holder (upon payment
by such Holder of any applicable transfer taxes) may direct:
(i) a certificate or certificates for the number of shares of
Warrant Stock to which such Registered Holder shall be entitled, and
<PAGE>
(ii) in case such exercise is in part only, a new warrant or
warrants (dated the date hereof) of like tenor, calling in the aggregate on
the face or faces thereof for the number of shares of Warrant Stock equal
(without giving effect to any adjustment therein) to the number of such
shares called for on the face of this Warrant minus the number of such
shares purchased by the Registered Holder upon such exercise as provided in
Section 1(a) above.
2. ADJUSTMENTS.
(a) STOCK SPLITS AND DIVIDENDS. If outstanding shares of the
Company's Common Stock shall be subdivided into a greater number of shares or
a dividend in Common Stock shall be paid in respect of Common Stock, the
Purchase Price in effect immediately prior to such subdivision or at the
record date of such dividend shall simultaneously with the effectiveness of
such subdivision or immediately after the record date of such dividend be
proportionately reduced. If outstanding shares of Common Stock shall be
combined into a smaller number of shares, the Purchase Price in effect
immediately prior to such combination shall, simultaneously with the
effectiveness of such combination, be proportionately increased. When any
adjustment is required to be made in the Purchase Price, the number of shares
of Warrant Stock purchasable upon the exercise of this Warrant shall be
changed to the number determined by dividing (i) an amount equal to the
number of shares issuable upon the exercise of this Warrant immediately prior
to such adjustment, multiplied by the Purchase Price in effect immediately
prior to such adjustment, by (ii) the Purchase Price in effect immediately
after such adjustment.
(b) RECLASSIFICATION, ETC. In case of any reclassification or change
of the outstanding securities of the Company or of any reorganization of the
Company (or any other corporation the stock or securities of which are at the
time receivable upon the exercise of this Warrant) or any similar corporate
reorganization or merger or conveyance on or after the date hereof, then and in
each such case the holder of this Warrant, upon the exercise hereof at any time
after the consummation of such reclassification, change, reorganization, merger
or conveyance, shall be entitled to receive, in lieu of the stock or other
securities and property receivable upon the exercise hereof prior to such
consummation, the stock or other securities or property to which such holder
would have been entitled upon such consummation if such holder had exercised
this Warrant immediately prior thereto, all subject to further adjustment as
provided in Section 2(a); and in each such case, the terms of this Section 2
shall be applicable to the shares of stock or other securities properly receiv-
able upon the exercise of this Warrant after such consummation.
(c) ADJUSTMENT CERTIFICATE. When any adjustment is required to be
made in the Purchase Price, the Company shall promptly mail to the Registered
Holder a certificate setting forth the Purchase Price after such adjustment
and setting forth a brief statement of the facts requiring such adjustment.
Such certificate shall also set forth the kind and amount of stock or other
securities or property into which this Warrant shall be exercisable following
the occurrence of any of the events specified in Section 2(a) or 2(b) above.
3. TRANSFERS.
(a) UNREGISTERED SECURITY. Each holder of this Warrant acknowledges
that this Warrant and the Warrant Stock have not been registered under the
Securities Act, and agrees not to sell, pledge, distribute, offer for sale,
transfer or otherwise dispose of this Warrant or any Warrant
<PAGE>
Stock issued upon its exercise in the absence of (i) an effective
registration statement under the Act as to this Warrant or such Warrant Stock
and registration or qualification of this Warrant or such Warrant Stock under
any applicable U.S. federal or state securities law then in effect or (ii) an
opinion of counsel, satisfactory to the Company, that such registration and
qualification are not required. Each certificate or other instrument for
Warrant Stock issued upon the exercise of this Warrant shall bear a legend
substantially to the foregoing effect until such time as the registration of
the Warrant Stock is effective or until such time as the Warrant Stock has
been held by the holder (after giving effect to permissible tacking under
Rule 144) for at least two years, at and after which time no legend shall be
required.
(b) TRANSFERABILITY. Subject to the provisions of Section 3(a)
hereof, this Warrant and all rights hereunder are transferable, in whole or
in part, upon surrender of the Warrant with a properly executed assignment
(in the form of EXHIBIT B hereto) at the principal office of the Company,
PROVIDED, HOWEVER, that this Warrant may not be transferred in part unless
the transferee and any subsequent tranferee acquires the right to purchase at
least 25,000 shares (as adjusted pursuant to Section 2) of Warrant Stock
hereunder.
(c) WARRANT REGISTER. The Company will maintain a register
containing the names and addresses of the Registered Holders of this Warrant.
Until any transfer of this Warrant is made in the warrant register, the
Company may treat the Registered Holder of this Warrant as the absolute owner
hereof for all purposes; PROVIDED, HOWEVER, that if this Warrant is properly
assigned in blank, the Company may (but shall not be required to) treat the
bearer hereof as the absolute owner hereof for all purposes, notwithstanding
any notice to the contrary. Any Registered Holder may change such Registered
Holder's address as shown on the warrant register by written notice to the
Company requesting such change.
4. NO IMPAIRMENT. The Company will not, by amendment of its charter or
through reorganization, consolidation, merger, dissolution, sale of assets or
any other voluntary action, avoid or seek to avoid the observance or
performance of any of the terms of this Warrant, but will (subject to Section
13 below) at all times in good faith assist in the carrying out of all such
terms and in the taking of all such action as may be necessary or appropriate
in order to protect the rights of the holder of this Warrant against
impairment.
5. TERMINATION. This Warrant (and the right to purchase
securities upon exercise hereof) shall terminate upon the earliest to occur
of the following (the "EXPIRATION DATE"): (a) February 27, 2003, or (b) the
effective date of the sale, conveyance, disposal, or encumbrance of all or
substantially all of the Company's property or business or the Company's
merger into or consolidation with any other corporation (other than a
wholly-owned subsidiary corporation) or any other transaction or series of
related transactions in which more than fifty percent (50%) of the voting
power of the Company is disposed of, PROVIDED that this Section 5(b) shall
not apply a merger effected exclusively for the purpose of changing the
domicile of the Company.
6. NOTICES OF CERTAIN TRANSACTIONS. In case:
(a) the Company shall take a record of the holders of its Common
Stock (or other stock or securities at the time deliverable upon the exercise
of this Warrant) for the purpose of entitling or enabling them to receive any
dividend or other distribution, or to receive any right to
<PAGE>
subscribe for or purchase any shares of stock of any class or any other
securities, or to receive any other right, to subscribe for or purchase any
shares of stock of any class or any other securities, or to receive any other
right, or
(b) of any capital reorganization of the Company, any
reclassification of the capital stock of the Company, any consolidation or
merger of the Company, any consolidation or merger of the Company with or
into another corporation (other than a consolidation or merger in which the
Company is the surviving entity), or any transfer of all or substantially all
of the assets of the Company, or
(c) of the voluntary or involuntary dissolution, liquidation or
winding-up of the Company,
then, and in each such case, the Company will mail or cause to be mailed to
the Registered Holder of this Warrant a notice specifying, as the case may
be, (i) the date on which a record is to be taken for the purpose of such
dividend, distribution or right, and stating the amount and character of such
dividend, distribution or right, or (ii) the effective date on which such
reorganization, reclassification, consolidation, merger, transfer,
dissolution, liquidation or winding-up is to take place, and the time, if any
is to be fixed, as of which the holders of record of Common Stock (or such
other stock or securities at the time deliverable upon such reorganization,
reclassification, consolidation, merger, transfer, dissolution, liquidation
or winding-up) are to be determined. Such notice shall be mailed at least
ten (10) days prior to the record date or effective date for the event
specified in such notice.
7. RESERVATION OF STOCK. The Company will at all times reserve and keep
available, solely for the issuance and delivery upon the exercise of this
Warrant, such shares of Warrant Stock and other stock, securities and
property, as from time to time shall be issuable upon the exercise of this
Warrant.
8. EXCHANGE OF WARRANTS. Upon the surrender by the Registered Holder of
any Warrant or Warrants, properly endorsed, to the Company at the principal
office of the Company, the Company will, subject to the provisions of Section
3 hereof, issue and deliver to or upon the order of such Holder, at the
Company's expense, a new Warrant or Warrants of like tenor, in the name of
such Registered Holder or as such Registered Holder (upon payment by such
Registered Holder of any applicable transfer taxes) may direct, calling in
the aggregate on the face or faces thereof for the number of shares of Common
Stock called for on the face or faces of the Warrant or Warrants so
surrendered.
9. REPLACEMENT OF WARRANTS. Upon receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant and (in the case of loss, theft or destruction) upon delivery of
an indemnity agreement (with surety if reasonably required) in an amount
reasonably satisfactory to the Company, or (in the case of mutilation) upon
surrender and cancellation of this Warrant, the Company will issue, in lieu
thereof, a new Warrant of like tenor.
10. NOTICES. Any notice required or permitted by this Warrant shall be
in writing and shall be deemed sufficient upon receipt, when delivered
personally or by courier, overnight delivery service or confirmed facsimile,
or forty-eight (48) hours after being deposited in the regular mail as
<PAGE>
certified or registered mail (airmail if sent internationally) with postage
prepaid, addressed (a) if to the Registered Holder, to the address of the
Registered Holder most recently furnished in writing to the Company and (b)
if to the Company, to the address set forth below or subsequently modified by
written notice to the Registered Holder.
11. NO RIGHTS AS SHAREHOLDER. Until the exercise of this Warrant, the
Registered Holder of this Warrant shall not have or exercise any rights by
virtue hereof as a shareholder of the Company.
12. NO FRACTIONAL SHARES. No fractional shares of Common Stock will be
issued in connection with any exercise hereunder. In lieu of any fractional
shares which would otherwise be issuable, the Company shall pay cash equal to
the product of such fraction multiplied by the fair market value of one share
of Common Stock on the date of exercise, as determined in good faith by the
Company's Board of Directors.
13. AMENDMENT OR WAIVER. Any term of this Warrant may be amended or
waived only by an instrument in writing signed by the party against which
enforcement of the amendment or waiver is sought.
14. HEADINGS. The headings in this Warrant are for purposes of reference
only and shall not limit or otherwise affect the meaning of any provision of
this Warrant.
15. GOVERNING LAW. This Warrant shall be governed, construed and
interpreted in accordance with the laws of the State of California, without
giving effect to principles of conflicts of law.
16. REGISTRATION OF SECURITIES.
(a) As soon as possible after the original date of issuance of this
Warrant, the Company shall use its best efforts to prepare and file a
registration statement on Form S-3 (the "REGISTRATION STATEMENT") with the
Commission under the Act to register the resale of the Common Stock issuable
upon exercise of the Warrant ("REGISTRABLE SECURITIES") and thereafter shall
use its best efforts to secure the effectiveness of such Registration
Statement.
(b) The Company shall pay all Registration Expenses (as defined
below) in connection with any registration, qualification or compliance
hereunder, and Purchaser or any transferee of the Registrable Securities
(each, a "HOLDER") shall pay all Selling Expenses (as defined below) and
other expenses that are not Registration Expenses relating to the Registrable
Securities resold by Holder. "Registration Expenses" shall mean all expenses,
except for Selling Expenses, incurred by the Company in complying with the
registration provisions herein described, including, without limitation, all
registration, qualification and filing fees, printing expenses, fees and
disbursements of counsel for the Company and the Holder (in an amount for
Holder's counsel not to exceed $5,000), blue sky fees and expenses and the
expense of any special audits incident to or required by any such
registration. "Selling Expenses" shall mean all selling commissions,
brokerage or underwriting fees and stock transfer taxes applicable to the
Registrable Securities and all fees and disbursements of counsel for Holder
in excess of $5,000.
<PAGE>
(c) In the case of any registration effected by the Company pursuant
to these registration provisions, and subject to the limitations on
registration set forth in Section 16(d) below, the Company will use
commercially reasonable efforts to: (i) keep such registration effective
until two (2) years after the issuance date set forth on page 1 hereof; (ii)
prepare and file with the Commission such amendments and supplements to such
Registration Statement and the prospectus used in connection with such
Registration Statement as may be necessary to comply with the provisions of
the Act with respect to the disposition of all securities covered by such
Registration Statement; (iii) furnish such number of prospectuses and other
documents incident thereto, including any amendment of or supplement to the
prospectus, as a Holder from time to time may reasonably request; (iv)
register and qualify the securities covered by such Registration Statement
under such other securities or Blue Sky laws of such jurisdictions as shall
be reasonably requested by the Holders, provided that the Company shall not
be required in connection therewith or as a condition thereto to qualify to
do business or to file a general consent to service of process in any such
states or jurisdictions; (v) cause all such Registrable Securities registered
as described herein to be listed on each securities exchange and quoted on
each quotation service on which similar securities issued by the Company are
then listed or quoted; and (vi) otherwise use commercially reasonable efforts
to comply with all applicable rules and regulations of the Commission.
(d) The Company may, by written notice to Holder, delay the filing or
effectiveness of, or suspend, the Registration Statement, and require that
Holder immediately cease sales of shares pursuant to such Registration
Statement in any period during which the Company is engaged in any activity
or transaction or preparations or negotiations for any activity or
transaction ("COMPANY ACTIVITY") that the Company desires to keep
confidential for business reasons, if the Company determines in good faith
that the public disclosure requirements imposed on the Company under the Act
in connection with the Registration Statement would require disclosure of the
Company Activity; provided, however, that (A) the Company shall use
commercially reasonable efforts to minimize the length of any such period of
delay or suspension, (B) any such delay or suspension shall be applied in the
same manner to any other resale registration statement then in effect, (C) no
such suspension period shall extend longer than forty-five (45) consecutive
calendar days, (D) no such suspension period may be imposed within forty-five
(45) days following the completion of a prior suspension period, and (E) the
Company shall not impose suspension periods which, in the aggregate, exceed
ninety (90) days in any twelve (12) month period. If the Company delays or
suspends the Registration Statement or requires Holder to cease sales of
shares pursuant to this Section 4(d), the Company shall, as promptly as
practicable following the termination of the circumstance which entitled the
Company to do so, take such actions as may be necessary to file or reinstate
the effectiveness of the Registration Statement and/or give written notice to
Holder authorizing it to resume sales pursuant to such Registration
Statement. If as a result thereof the prospectus included in the
Registration Statement has been amended to comply with the requirements of
the Act, the Company shall enclose such revised prospectus with the notice to
Holders given pursuant to this Section 4(d), and Holder shall make no offers
or sales of shares pursuant to the Registration Statement other than by means
of such revised prospectus. If the Company delays or suspends the
Registration Statement or requires Holder to cease sales of shares pursuant
to this Section 4(d), the Company shall extend the period during which it
maintains effectiveness of the Registration Statement by the number of days
of any such period of delay or suspension.
<PAGE>
(e) Holder hereby agrees to comply with the registration provisions
herein described. Holder will only sell Registrable Securities at such time
that information required to be included in the Registration Statement and
previously supplied by Holder is accurate. The Company shall furnish to
Holder a reasonable number of copies of a supplement to or an amendment of
such prospectus as may be necessary so that, as thereafter delivered to the
Holders of such shares, such prospectus shall not include an untrue statement
of a material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading or
incomplete in the light of the circumstances then existing. Holder
agrees that the Company may impose a legend setting forth the provisions of
Section 16(e) on the Registrable Securities during the period of registration.
(f) With a view to making available to the holders the benefits of
Rule 144 promulgated under the Act and any other rule or regulation of the
Commission that may at any time permit Holder to sell Registrable Securities
to the public without registration or pursuant to a registration on Form S-3,
the Company hereby covenants and agrees to: (i) make and keep public
information available, as those terms are understood and defined in Rule 144,
at all times after the issuance of this Warrant; and (ii) file with the
Commission in a timely manner all reports and other documents required of the
Company under the Act and Exchange Act.
(g) INDEMNIFICATION.
(i) To the extent permitted by law, the Company will indemnify
and hold harmless Holder, any underwriter (as defined in the Act) for Holder,
its officers, directors, shareholders or partners and each person, if any,
who controls Holder or underwriter within the meaning of the Act or the
Exchange Act, against any losses, claims, damages, or liabilities to which
they may become subject under the Act, the Exchange Act or other federal or
state law, insofar as such losses, claims, damages, or liabilities (or
actions in respect thereof) arise out of or are based upon any of the
following statements, omissions or violations (collectively a "Violation"):
(A) any untrue statement or alleged untrue statement of a material fact
contained in such Registration Statement, including any preliminary
prospectus or final prospectus contained therein or any amendments or
supplements thereto or (B) the omission or alleged omission to state therein
a material fact required to be stated therein, or necessary to make the
statements therein not misleading; and the Company will pay to each such
Holder, underwriter or controlling person, as incurred, any legal or other
expenses reasonably incurred by them in connection with investigating or
defending any such loss, claim, damage, liability, or action; provided,
however, that the indemnity agreement contained in this Section 16(g)(i)
shall not apply to amounts paid in settlement of any such loss, claim,
damage, liability, or action if such settlement is effected without the
consent of the Company (which consent shall not be unreasonably withheld),
nor shall the Company be liable in any such case for any such loss, claim,
damage, liability, or action to the extent that it arises out of or is based
upon a Violation which occurs in reliance upon and in conformity with written
information furnished expressly for use in connection with such registration
by any such Holder, underwriter or controlling person; further provided,
however, that the foregoing indemnity with respect to any untrue statement
in or omission from any preliminary prospectus shall not inure to the benefit
of any Holder from whom the person asserting any such losses, claims, damages
or liabilities purchased the Registrable Securities if a copy of the final
prospectus or any amendment thereto had not been sent or given to such person
at or prior to the written confirmation of the sale
<PAGE>
of such Registrable Securities to such person if required by the Act and the
untrue statement or omission of a material fact contained in such preliminary
prospectus was corrected in the final prospectus or amendment and such final
prospectus or amendment was distributed to the Holder prior to such sale of
Registrable Securities.
(ii) To the extent permitted by law, each selling Holder will
indemnify and hold harmless the Company, each of its directors, each of its
officers who has signed the Registration Statement, each person, if any, who
controls the Company within the meaning of the Act, any underwriter, any
other Holder selling securities in such Registration Statement and any
controlling person of any such underwriter or other Holder, against any
losses, claims, damages, or liabilities to which any of the foregoing persons
may become subject, under the Act, the Exchange Act or other federal or state
law, insofar as such losses, claims, damages, or liabilities (or actions in
respect thereto) arise out of or are based upon any Violation, in each case
to the extent (and only to the extent) that such Violation occurs in reliance
upon and in conformity with written information furnished by such Holder
expressly for use in connection with such registration; and each such Holder
will pay, as incurred, any legal or other expenses reasonably incurred by any
person intended to be indemnified pursuant to this subsection 16(g)(ii), in
connection with investigating or defending any such loss, claim, damage,
liability, or action; provided, however, that the indemnity agreement
contained in this subsection 16 (g)(ii) shall not apply to amounts paid in
settlement of any such loss, claim, damage, liability or action if such
settlement is effected without the consent of the Holder, which consent shall
not be unreasonably withheld; provided, that, in no event shall any indemnity
under this subsection 16(g)(ii) exceed the net proceeds from the offering
received by such Holder, except in the case of willful fraud by such Holder.
(iii) Promptly after receipt by an indemnified party under this
Section 16(g) of notice of the commencement of any action (including any
governmental action), such indemnified party will, if a claim in respect
thereof is to be made against any indemnifying party under this Section
16(g), deliver to the indemnifying party a written notice of the commencement
thereof and the indemnifying party shall have the right to participate in,
and, to the extent the indemnifying party so desires, jointly with any other
indemnifying party similarly noticed, to assume the defense thereof with
counsel mutually satisfactory to the parties; provided, however, that an
indemnified party (together with all other indemnified parties which may be
represented without conflict by one counsel) shall have the right to retain
one separate counsel, with the reasonable fees and expenses to be paid by the
indemnifying party, if representation of such indemnified party by the
counsel retained by the indemnifying party would be inappropriate due to
actual or potential differing interests between such indemnified party and
any other party represented by such counsel in such proceeding. The failure
to deliver written notice to the indemnifying party within a reasonable time
of the commencement of any such action, if and only if prejudicial to its
ability to defend such action, shall relieve such indemnifying party of any
liability to the indemnified party under this Section 16(g).
17. RESALE RESTRICTIONS. Holder agrees that it will not sell any
Registrable Securities issued hereunder until the effectiveness of the
Registration Statement to be filed pursuant to Section 16 above.
Notwithstanding the foregoing, the Company may suspend resales by the Holder if
an underwriter reasonably determines that such resales would adversely affect
the Company's ability to raise additional capital in a public offering of the
Company's equity securities
<PAGE>
and such underwriter issues a written opinion to the Company to that effect.
Any such suspension of resales by the Holder pursuant to the foregoing
sentence will not exceed 120 calendar days commencing on the date of the
secondary offering. The volume and resale restrictions set forth in this
Section 17 shall be set forth in any and all Registration Statements brought
effective pursuant to Section 16 above, and the Company shall instruct its
transfer agent, broker dealers and market makers to enforce the volume
restrictions set forth herein. If the Company suspends resales by the Holder
pursuant to this Section 17, the Company shall extend the period during which
it maintains effectiveness of the Registration Statement by the number of
days of any such period of suspension.
[SIGNATURE PAGE FOLLOWS]
<PAGE>
Executed as of the date first set forth herein above.
CENTURA SOFTWARE CORPORATION
By /s/ John Bowman
-------------------------
Title: CFO
-------------------------
Address: 975 Island Drive
Redwood Shores, CA 94065
Fax Number: (650)-596-4376
<PAGE>
EXHIBIT A
---------
PURCHASE FORM
-------------
To: Centura Software Corporation Dated:
The undersigned, pursuant to the provisions set forth in the attached
Warrant No. CS-[WarrantNo], hereby irrevocably elects to purchase _______
shares of the Common Stock covered by such Warrant and herewith makes payment
of $_________, representing the full purchase price for such shares at the
price per share provided for in such Warrant.
The undersigned further acknowledges that it has reviewed the
representations and warranties contained in Section 4 of the Purchase Agreement
(as defined in the Warrant) and by its signature below hereby makes such
representations and warranties to the Company. Defined terms contained in such
representations and warranties shall have the meanings assigned to them in the
Purchase Agreement, PROVIDED that the term "Seller" shall refer to the
undersigned and the term "Securities" shall refer to the Warrant Stock.
Signature:
-----------------------------
Address:
-----------------------------
<PAGE>
EXHIBIT B
---------
ASSIGNMENT FORM
---------------
FOR VALUE RECEIVED, _________________________________________ hereby
sells, assigns and transfers all of the rights of the undersigned under the
attached Warrant with respect to the number of shares of Common Stock covered
thereby set forth below, unto:
NAME OF ASSIGNEE ADDRESS/FAX NUMBER NO. OF SHARES
- ------------------------ ------------------------ ------------------------
Dated: Signature:
----------------------------- -----------------------------
-----------------------------
Witness: -------------------------------
<PAGE>
CENTURA SOFTWARE CORPORATION
----------------------------
1998 EMPLOYEE STOCK OPTION PLAN
-------------------------------
1. PURPOSES OF THE PLAN. The purposes of this 1998 Employee Stock
Option Plan are to attract and retain the best available personnel for
positions of substantial responsibility, to provide additional incentive to
the Employees and Consultants of the Company and to promote the success of
the Company's business. Options granted hereunder shall be Nonstatutory
Stock Options.
2. DEFINITIONS. As used herein, the following definitions shall apply:
(a) "ADMINISTRATOR" shall mean the Board or any of its Committees
appointed pursuant to Section 4 of the Plan.
(b) "BOARD" shall mean the Board of Directors of the Company.
(c) "CODE" shall mean the Internal Revenue Code of 1986, as amended.
(d) "COMMITTEE" shall mean the Committee appointed by the Board of
Directors in accordance with paragraph (a) of Section 4 of the Plan, if one
is appointed. The Committee members shall not be required to be Board
members.
(e) "COMMON STOCK" shall mean the Common Stock of the Company.
(f) "COMPANY" shall mean Centura Software Corporation, a California
corporation.
(g) "CONSULTANT" shall mean any person who is engaged by the Company
or any Parent or Subsidiary to render consulting services and is compensated
for such consulting services, excluding any Officers, Named Executives and
Directors.
(h) "CONTINUOUS STATUS AS AN EMPLOYEE OR CONSULTANT" shall mean the
absence of any interruption or termination of service as an Employee or
Consultant. Continuous Status as an Employee or Consultant shall not be
considered interrupted in the case of sick leave, military leave, or any
other leave of absence approved by the Board; provided that such leave is for
a period of not more than 90 days or reemployment upon the expiration of such
leave is guaranteed by contract or statute.
(i) "DIRECTOR" shall mean a member of the Board.
(j) "EMPLOYEE" shall mean any person who is employed by the Company
or any Parent or Subsidiary of the Company, excluding any Officers, Named
Executives and Directors. Notwithstanding the foregoing, an Officer who was
not previously employed by the Company and for whom an Option grant is an
inducement essential to the Officer's entering into an employment
relationship or contract with the Company, shall be treated as an Employee for
<PAGE>
purposes of the Option grant made to the Officer in connection with
commencement of the Officer's employment with the Company.
(k) "EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as
amended.
(l) "FAIR MARKET VALUE" shall mean, as of any date, the value of
Common Stock determined as follows:
(i) If the Common Stock is listed on any established stock
exchange or a national market system including without limitation the
National Market of the National Association of Securities Dealers, Inc.
Automated Quotation ("Nasdaq") System, its Fair Market Value shall be the
closing sales price for such stock as quoted on such exchange on system for
the last market trading day PRIOR TO THE DATE OF DETERMINATION (if for a
given day no sales were reported, the closing bid on that day shall be used),
as such price is reported in THE WALL STREET JOURNAL or such other source as
the Administrator deems reliable;
(ii) If the Common Stock is quoted on the Nasdaq System (but not
on the National Market thereof) or regularly quoted by a recognized
securities dealer but selling prices are not reported, its Fair Market Value
shall be the mean between the bid and asked prices for the Common Stock or;
(iii) In the absence of an established market for the Common
Stock, the Fair Market Value thereof shall be determined in good faith by the
Administrator.
(m) "NAMED EXECUTIVE" shall mean any individual who, on the last day
of the Company's fiscal year, is the chief executive officer of the Company
(or is acting in such capacity) or among the four highest compensated
officers of the Company (other than the chief executive officer). Such
officer status shall be determined pursuant to the executive compensation
disclosure rules under the Exchange Act.
(n) "NONSTATUTORY STOCK OPTION" shall mean an Option not intended to
qualify as an Incentive Stock Option, as designated in the applicable option
agreement. "INCENTIVE STOCK OPTION" shall mean an Option intended to qualify as
an incentive stock option within the meaning of Section 422 of the Code, as
designated in the applicable option agreement.
(o) "OFFICER" shall mean a person who is appointed or elected by the
Board of Directors as an officer of the Company, including but not limited to a
person who is an officer of the Company within the meaning of Section 16 of the
Exchange Act and the rules and regulations promulgated thereunder.
(p) "OPTION" shall mean a stock option granted pursuant to the Plan.
(q) "OPTIONED STOCK" shall mean the Common Stock subject to an
Option.
<PAGE>
(r) "OPTIONEE" shall mean an Employee or Consultant who receives an
Option.
(s) "PARENT" shall mean a "parent corporation," whether now or
hereafter existing, as defined in Section 424(e) of the Code.
(t) "PLAN" shall mean this 1998 Employee Stock Option Plan.
(u) "RULE 16b-3" shall mean Rule 16b-3 promulgated under the Exchange
Act as the same may be amended from time to time, or any successor provision.
(v) "SHARE" shall mean a share of the Common Stock, as adjusted in
accordance with Section 11 of the Plan.
(w) "SUBSIDIARY" shall mean a "subsidiary corporation," whether now
or hereafter existing, as defined in Section 424(f) of the Code.
3. STOCK SUBJECT TO THE PLAN. Subject to the provisions of Section 11
of the Plan, the maximum aggregate number of shares which may be optioned and
sold under the Plan is 1,415,000 shares of Common Stock. The Shares may be
authorized, but unissued, or reacquired Common Stock.
If an Option should expire or become unexercisable for any reason
without having been exercised in full, the unpurchased Shares which were
subject thereto shall, unless the Plan shall have been terminated, become
available for future grant under the Plan. Notwithstanding any other
provision of the Plan, shares issued under the Plan and later repurchased by
the Company shall not become available for future grant or sale under the
Plan.
4. ADMINISTRATION OF THE PLAN.
(a) COMPOSITION OF ADMINISTRATOR. The Plan shall be administered by
(A) the Board or (B) a Committee designated by the Board, which Committee
shall be constituted in such a manner as to satisfy the legal requirements
relating to the administration of nonstatutory stock option plans, if any, of
applicable securities laws and the Code (collectively, the "Applicable
Laws"). If a Committee has been appointed pursuant to this Section 4(a), such
Committee shall continue to serve in its designated capacity until otherwise
directed by the Board. From time to time the Board may increase the size of
any Committee and appoint additional members thereof, remove members (with or
without cause) and appoint new members in substitution therefor, fill
vacancies (however caused) and remove all members of a Committee and
thereafter directly administer the Plan, all to the extent permitted by the
Applicable Laws.
(b) POWERS OF THE ADMINISTRATOR. Subject to the provisions of the
Plan, and in the case of a Committee, the specific duties delegated by, or
limitations of authority imposed by, the Board to or on such Committee, the
Administrator shall have the authority, in its discretion:
(i) to grant Options under the Plan;
<PAGE>
(ii) to determine, upon review of relevant information and in
accordance with Section 2(l) of the Plan, the fair market value of the Common
Stock;
(iii) to determine the exercise price per share of Options to
be granted, which exercise price shall be determined in accordance with
Section 9(a) of the Plan;
(iv) to determine the Employees or Consultants to whom, and the
time or times at which, Options shall be granted and the number of shares to
be represented by each Option;
(v) to interpret the Plan;
(vi) to approve forms of agreement for use under the Plan;
(vii) to determine the terms and provisions of each Option
granted (which need not be identical) and, with the consent of the holder
thereof, modify or amend each Option;
(viii) to accelerate or defer (with the consent of the Optionee)
the exercise date of any Option;
(ix) to authorize any person to execute on behalf of the Company
any instrument required to effectuate the grant of an Option previously
granted by the Administrator; and
(x) to make all other determinations deemed necessary or
advisable for the administration of the Plan.
(c) EFFECT OF ADMINISTRATOR'S DECISION. All decisions, determinations
and interpretations of the Administrator shall be final and binding on all
Optionees and any other holders of any Options granted under the Plan.
5. ELIGIBILITY.
(a) Options may be granted only to Employees and Consultants. An
Employee or Consultant who has been granted an Option may, if Optionee is
otherwise eligible, be granted an additional Option or Options.
(b) Each Option shall be designated in the written option agreement
as a Nonstatutory Stock Option.
(c) The Plan shall not confer upon any Optionee any right with
respect to continuation of employment or consulting relationship with the
Company, nor shall it interfere in any way with Optionee's right or the
Company's right to terminate Optionee's employment or consulting relationship
at any time, with or without cause.
<PAGE>
6. TERM OF PLAN. The Plan shall become effective upon its adoption by
the Board of Directors. It shall continue in effect for a term of ten (10)
years unless sooner terminated under Section 14 of the Plan.
7. TERM OF OPTION. The term of each Nonstatutory Stock Option shall be
ten (10) years from the date of grant thereof or such shorter term as may be
provided in the Nonstatutory Stock Option Agreement.
8. EXERCISE PRICE AND CONSIDERATION.
(a) The per Share exercise price for the Shares to be issued pursuant
to exercise of an Option shall be such price as is determined by the
Administrator, but shall be no less than 85% of the fair market value per
Share on the date of grant.
(b) The consideration to be paid for the Shares to be issued upon
exercise of an Option, including the method of payment, shall be determined
by the Administrator and may consist entirely of (1) cash, (2) check, (3)
promissory note, (4) other Shares of Common Stock which (i) either have been
owned by the Optionee for more than six (6) months on the date of surrender
or were not acquired, directly or indirectly, from the Company, and (ii) have
a fair market value on the date of surrender equal to the aggregate exercise
price of the Shares as to which said Option shall be exercised, (5) delivery
of a properly executed exercise notice together with irrevocable instructions
to a broker to deliver promptly to the Company the amount of sale or loan
proceeds required to pay the exercise price, or (6) any combination of such
methods of payment. In making its determination as to the type of
consideration to accept, the Administrator shall consider if acceptance of
such consideration may be reasonably expected to benefit the Company.
9. EXERCISE OF OPTION.
(a) PROCEDURE FOR EXERCISE; RIGHTS AS A SHAREHOLDER. Any Option
granted hereunder shall be exercisable at such times and under such
conditions as determined by the Administrator, including performance criteria
with respect to the Company and/or the Optionee, and as shall be permissible
under the terms of the Plan.
An Option may not be exercised for a fraction of a Share.
An Option shall be deemed to be exercised when written notice of such
exercise has been given to the Company in accordance with the terms of the
Option by the person entitled to exercise the Option and full payment for the
Shares with respect to which the Option is exercised has been received by the
Company. Full payment may, as authorized by the Administrator, consist of
any consideration and method of payment allowable under Section 9(b) of the
Plan. Until the issuance (as evidenced by the appropriate entry on the books
of the Company or of a duly authorized transfer agent of the Company) of the
stock certificate evidencing such Shares, no right to vote or receive
dividends or any other rights as a shareholder shall exist with respect to
the Optioned Stock, notwithstanding the exercise of the Option. The Company
shall issue (or cause to be issued) such stock certificate promptly upon
exercise of the
<PAGE>
Option. No adjustment will be made for a dividend or other right for which
the record date is prior to the date the stock certificate is issued, except
as provided in Section 11 of the Plan.
Exercise of an Option in any manner shall result in a decrease in the
number of Shares which thereafter may be available, both for purposes of the
Plan and for sale under the Option, by the number of Shares as to which the
Option is exercised.
(b) TERMINATION OF STATUS AS AN EMPLOYEE OR CONSULTANT. In the event
of termination of an Optionee's Continuous Status as an Employee or
Consultant, such Optionee may, but only within thirty (30) days (or such
other period of time, not exceeding six (6) months, as is determined by the
Administrator) after the date of such termination (but in no event later than
the date of expiration of the term of such Option as set forth in the Option
Agreement), exercise Optionee's Option to the extent that Optionee was
entitled to exercise it at the date of such termination. To the extent that
Optionee was not entitled to exercise the Option at the date of such
termination, or if Optionee does not exercise such Option (which Optionee was
entitled to exercise) within the time specified herein, the Option shall
terminate.
(c) DISABILITY OF OPTIONEE. Notwithstanding the provisions of
Section 10(b) above, in the event of termination of an Optionee's Continuous
Status as an Employee or Consultant as a result of Optionee's total and
permanent disability (as defined in Section 22(e)(3) of the Code), Optionee
may, but only within twelve (12) months (but in no event later than the date
of expiration of the term of such Option as set forth in the Option
Agreement), from the date of such termination (but in no event later than the
date of expiration of the term of such Option as set forth in the Option
Agreement), exercise Optionee's Option to the extent Optionee was entitled to
exercise it at the date of such termination. To the extent that Optionee was
not entitled to exercise the Option at the date of termination, or if
Optionee does not exercise such Option (which Optionee was entitled to
exercise) within the time specified herein, the Option shall terminate.
(d) DEATH OF OPTIONEE. In the event of termination of an Optionee's
Continuance Status as an Employee or Consultant as a result of the death of
an Optionee, the Option may be exercised, at any time within twelve (12)
months following the date of death (but in no event later than the date of
expiration of the term of such Option as set forth in the Option Agreement),
by the Optionee's estate or by a person who acquired the right to exercise
the Option by bequest or inheritance, but only to the extent of the right to
exercise the Option at the date of death. To the extent that Optionee was
not entitled to exercise the Option at the date of death, or if Optionee does
not exercise such Option to the extent so entitled within the time specified
herein, the Option shall terminate.
10. NON-TRANSFERABILITY OF OPTIONS. The Option may not be sold, pledged,
assigned, hypothecated, transferred, or disposed of in any manner other than
by will or by the laws of descent or distribution; PROVIDED, that the
Administrator may in its discretion grant transferable Nonstatutory Stock
Options pursuant to option agreements specifying (i) the manner in which such
Nonstatutory Stock Options are transferable and (ii) that any such transfer
shall be subject to the Applicable Laws. The designation of a beneficiary by
an Optionee will not constitute a
<PAGE>
transfer. An Option may be exercised, during the lifetime of the Optionee,
only by the Optionee or a transferee permitted by this Section 11.
11. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION OR MERGER.
(a) ADJUSTMENTS. Subject to any required action by the shareholders
of the Company, the number of shares of Common Stock covered by each
outstanding Option, and the number of shares of Common Stock which have been
authorized for issuance under the Plan but as to which no Options have yet
been granted or which have been returned to the Plan upon cancellation or
expiration of an Option, and the price per share of Common Stock covered by
each such outstanding Option, shall be proportionately adjusted for any
increase or decrease in the number of issued shares of Common Stock resulting
from a stock split, reverse stock split, stock dividend, combination or
reclassification of the Common Stock, or any other increase or decrease in
the number of issued shares of Common Stock effected without receipt of
consideration by the Company; provided, however, that conversion of any
convertible securities of the Company shall not be deemed to have been
"effected without receipt of consideration." Such adjustment shall be made by
the Administrator, whose determination in that respect shall be final,
binding and conclusive. Except as expressly provided herein, no issuance by
the Company of shares of stock of any class, or securities convertible into
shares of stock of any class, shall affect, and no adjustment by reason
thereof shall be made with respect to, the number or price of shares of
Common Stock subject to an Option.
(b) CORPORATE TRANSACTIONS. In the event of the proposed dissolution
or liquidation of the Company, the Option will terminate immediately prior to
the consummation of such proposed action, unless otherwise provided by the
Administrator. The Administrator may, in the exercise of its sole discretion
in such instances, declare that any Option shall terminate as of a date fixed
by the Administrator and give each Optionee the right to exercise Optionee's
Option as to all or any part of the Optioned Stock, including Shares as to
which the Option would not otherwise be exercisable. In the event of a
proposed sale of all or substantially all of the assets of the Company, or
the merger of the Company with or into another corporation, the Option shall
be assumed or an equivalent option shall be substituted by such successor
corporation or a parent or subsidiary of such successor corporation, unless
such successor corporation does not agree to assume the Option or to
substitute an equivalent option, in which case the Administrator shall, in
lieu of such assumption or substitution, provide for the Optionee to have the
right to exercise the Option as to all of the Optioned Stock, including
Shares as to which the Option would not otherwise be exercisable. If the
Administrator makes an Option fully exercisable in lieu of assumption or
substitution in the event of a merger or sale of assets, the Administrator
shall notify the Optionee that the Option shall be fully exercisable for a
period of fifteen (15) days from the date of such notice, and the Option will
terminate upon the expiration of such period.
12. TIME OF GRANTING OPTIONS. The date of grant of an Option shall, for
all purposes, be the date on which the Administrator makes the determination
granting such Option. Notice of the determination shall be given to each
Employee or Consultant to whom an Option is so granted within a reasonable time
after the date of such grant.
<PAGE>
13. AMENDMENT AND TERMINATION OF THE PLAN.
(a) AMENDMENT AND TERMINATION. The Board may amend or terminate the
Plan from time to time in such respects as the Board may deem advisable
(b) EFFECT OF AMENDMENT OR TERMINATION. Any such amendment or
termination of the Plan shall not adversely affect Options already granted
(except to the extent contemplated by such Options) and such Options shall
remain in full force and effect, unless mutually agreed otherwise between the
Optionee and the Board (or other body then administering the Plan), which
agreement must be in writing and signed by the Optionee and the Company.
14. CONDITIONS UPON ISSUANCE OF SHARES. Shares shall not be issued
pursuant to the exercise of an Option unless the exercise of such Option and
the issuance and delivery of such Shares pursuant thereto shall comply with
all relevant provisions of law, including, without limitation, the Securities
Act of 1933, as amended, the Exchange Act, the rules and regulations
promulgated thereunder, and the requirements of any stock exchange upon which
the Shares may then be listed, and shall be further subject to the approval
of counsel for the Company with respect to such compliance.
As a condition to the exercise of an Option, the Company may require the
person exercising such Option to represent and warrant at the time of any
such exercise that the Shares are being purchased only for investment and
without any present intention to sell or distribute such Shares if, in the
opinion of counsel for the Company, such a representation is required by any
of the aforementioned relevant provisions of law.
15. RESERVATION OF SHARES. The Company, during the term of this Plan,
will at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan. The inability of the
Company to obtain authority from any regulatory body having jurisdiction, which
authority is deemed by the Company's counsel to be necessary to the lawful
issuance and sale of any Shares hereunder, shall relieve the Company of any
liability in respect of the failure to issue or sell such Shares as to which
such requisite authority shall not have been obtained.
16. OPTION AGREEMENT. Options shall be evidenced by written option
agreements in such form as the Administrator shall approve.
17. INFORMATION TO OPTIONEES. The Company shall provide to each Optionee
upon request, during the period for which such Optionee has one or more Options
outstanding, copies of all annual reports and other information which are
provided to all shareholders of the Company.
18. WITHHOLDING TAXES. As a condition to the exercise of Options granted
hereunder, the Optionee shall make such arrangements as the Administrator may
require for the satisfaction of any federal, state, local or foreign
withholding tax obligations that may arise in connection
<PAGE>
with the exercise, receipt or vesting of such Option. The Company shall not
be required to issue any Shares under the Plan until such obligations are
satisfied.
19. STOCK WITHHOLDING TO SATISFY WITHHOLDING TAX OBLIGATIONS. At the
discretion of the Administrator, Optionees may satisfy withholding
obligations as provided in this paragraph. When an Optionee incurs tax
liability in connection with an Option which tax liability is subject to tax
withholding under applicable tax laws, and the Optionee is obligated to pay
the Company an amount required to be withheld under applicable tax laws, the
Optionee may satisfy the withholding tax obligation by one or some
combination of the following methods: (a) by cash payment, or (b) out of
Optionee's current compensation, or (c) if permitted by the Administrator, in
its discretion, by surrendering to the Company Shares that (i) in the case of
Shares previously acquired from the Company, have been owned by the Optionee
for more than six months on the date of surrender, and (ii) have a fair
market value on the date of surrender equal to or less than Optionee's
marginal tax rate times the ordinary income recognized, or (d) by electing to
have the Company withhold from the Shares to be issued upon exercise of the
Option that number of Shares having a fair market value equal to the amount
required to be withheld. For this purpose, the fair market value of the
Shares to be withheld shall be determined on the date that the amount of tax
to be withheld is to be determined (the "Tax Date").
All elections by an Optionee to have Shares withheld to satisfy tax
withholding obligations shall be made in writing in a form acceptable to the
Administrator and shall be subject to the following restrictions:
(a) the election must be made on or prior to the applicable Tax Date;
(b) once made, the election shall be irrevocable as to the particular
Shares of the Option as to which the election is made; and
(c) all elections shall be subject to the consent or disapproval of
the Administrator.
In the event the election to have Shares withheld is made by an Optionee
and the Tax Date is deferred under Section 83 of the Code because no election
is filed under Section 83(b) of the Code, the Optionee shall receive the full
number of Shares with respect to which the Option is exercised but such
Optionee shall be unconditionally obligated to tender back to the Company the
proper number of Shares on the Tax Date.
<PAGE>
CENTURA SOFTWARE CORPORATION
----------------------------
1998 EMPLOYEE STOCK OPTION PLAN
-------------------------------
NOTICE OF NONSTATUTORY STOCK OPTION GRANT
-----------------------------------------
Optionee's Name and Address:
[Optionee]
- ---------------------------------------
- ---------------------------------------
You have been granted an option to purchase Common Stock of Centura
Software Corporation (the "Company"), as follows:
Board Approval Date: [BoardApprovalDate]
Date of Grant (Later of Board
Approval Date or
Commencement of
Employment/Consulting): [GrantDate]
Exercise Price Per Share: [PricePerShare]
Total Number of Shares Granted: [TotalShares]
Total Price of Shares Granted: [TotalPrice]
Term/Expiration Date: [ExpirationDate]
Vesting Commencement Date: [VestingStartDate]
Vesting Schedule:
Termination Period: Option may be exercised for a period of
30 days after termination of
employment or consulting relationship
except as set out in Sections 7 and 8
of the Stock Option Agreement (but in
no event later than the Expiration
Date).
<PAGE>
By your signature and the signature of the Company's representative
below, you and the Company agree that this option is granted under and
governed by the terms and conditions of the Centura Software Corporation 1998
Employee Stock Option Plan and the Stock Option Agreement, all of which are
attached and made a part of this document.
OPTIONEE: CENTURA SOFTWARE CORPORATION
By:
- ------------------------------------- -----------------------------------
Signature
Title:
- ------------------------------------- --------------------------------
Print Name
<PAGE>
CENTURA SOFTWARE CORPORATION
----------------------------
1998 EMPLOYEE STOCK OPTION PLAN
-------------------------------
NONSTATUTORY STOCK OPTION AGREEMENT
-----------------------------------------
1. GRANT OF OPTION. Centura Software Corporation, a California
corporation (the "COMPANY"), hereby grants to the Optionee named in the
Notice of Stock Option Grant attached to this Agreement ("OPTIONEE"), an
option (the "OPTION") to purchase the total number of shares of Common Stock
(the "SHARES") set forth in the Notice of Stock Option Grant, at the exercise
price per share set forth in the Notice of Stock Option Grant (the "EXERCISE
PRICE") subject to the terms, definitions and provisions of the 1998 Employee
Stock Option Plan (the "PLAN") adopted by the Company, which is incorporated
in this Agreement by reference. In the event of a conflict between the terms
of the Plan and the terms of this Agreement, the terms of the Plan shall
govern. Unless otherwise defined in this Agreement, the terms used in this
Agreement shall have the meanings defined in the Plan.
This Option is intended to be a Nonstatutory Stock Option.
2. EXERCISE OF OPTION. This Option shall be exercisable during its term
in accordance with the Vesting Schedule set out in the Notice of Stock Option
Grant and with the provisions of Sections 9 and 10 of the Plan as follows:
(a) RIGHT TO EXERCISE.
(i) This Option may not be exercised for a fraction of a share.
(ii) In the event of Optionee's death, disability or other
termination of employment, the exercisability of the Option is governed
by Sections 6, 7 and 8 below, subject to the limitations contained in
paragraph (iii).
(iii) In no event may this Option be exercised after the date of
expiration of the term of this Option as set forth in the Notice of Stock
Option Grant.
(b) METHOD OF EXERCISE.
(i) This Option shall be exercisable by delivering to the Company
a written notice of exercise (in the form attached as EXHIBIT A) which shall
state the election to exercise the Option, the number of Shares in respect of
which the Option is being exercised, and such other representations and
agreements as to the holder's investment intent with respect to such Shares
of Common Stock as may be required by the Company pursuant to the provisions
of the Plan. Such written notice shall be signed by Optionee and shall be
delivered in person or by certified mail to the Secretary of the Company.
The written notice shall be accompanied by payment of the Exercise Price.
This Option shall be deemed to be exercised upon receipt by the Company of
such written notice accompanied by the Exercise Price.
<PAGE>
(ii) As a condition to the exercise of this Option, Optionee agrees
to make adequate provision for federal, state or other tax withholding
obligations, if any, which arise upon the exercise of the Option or
disposition of Shares, whether by withholding, direct payment to the Company,
or otherwise.
(iii) No Shares will be issued pursuant to the exercise of an Option
unless such issuance and such exercise shall comply with all relevant
provisions of law and the requirements of any stock exchange upon which the
Shares may then be listed. Assuming such compliance, for income tax purposes
the Shares shall be considered transferred to Optionee on the date on which
the Option is exercised with respect to such Shares.
3. OPTIONEE'S REPRESENTATIONS. In the event the Shares purchasable
pursuant to the exercise of this Option have not been registered under the
Securities Act of 1933, as amended (the "SECURITIES ACT"), at the time this
Option is exercised, Optionee shall, if required by the Company, concurrently
with the exercise of all or any portion of this Option, deliver to the
Company an investment representation statement in customary form, a copy of
which is available for Optionee's review from the Company upon request.
4. METHOD OF PAYMENT. Payment of the Exercise Price shall be by any of
the following, or a combination of the following, at the election of
Optionee: (a) cash; (b) check; (c) surrender of other Shares of Common Stock
of the Company that (i) either have been owned by Optionee for more than six
(6) months on the date of surrender or were not acquired, directly or
indirectly, from the Company, and (ii) have a Fair Market Value on the date
of surrender equal to the aggregate exercise price of the Shares as to which
said Option shall be exercised; (d) authorization from the Company to retain
from the total number of Shares as to which the Option is exercised that
number of Shares having a Fair Market value on the date of exercise equal to
the exercise price for the total number of Shares as to which the Option is
exercised; or (e) if there is a public market for the Shares and they are
registered under the Securities Act, delivery of a properly executed exercise
notice together with irrevocable instructions to a broker to deliver promptly
to the Company the amount of sale or loan proceeds required to pay the
exercise price.
5. RESTRICTIONS ON EXERCISE. This Option may not be exercised if
the issuance of such Shares upon such exercise or the method of payment of
consideration for such shares would constitute a violation of any applicable
federal or state securities or other law or regulation, including any
rule under Part 207 of Title 12 of the Code of Federal Regulations
("REGULATION G") as promulgated by the Federal Reserve Board. As a condition
to the exercise of this Option, the Company may require Optionee to make any
representation and warranty to the Company as may be required by any
applicable law or regulation.
6. TERMINATION OF RELATIONSHIP. In the event of termination of
Optionee's Continuous Status as an Employee or Consultant, Optionee may, to
the extent otherwise so entitled at the date of such termination (the
"TERMINATION DATE"), exercise this Option during the Termination Period set
out in the Notice of Stock Option Grant. To the extent that Optionee was not
entitled to exercise this Option at the date of such termination, or if
Optionee does not
<PAGE>
exercise this Option within the time specified in the Notice of Stock Option
Grant, the Option shall terminate.
7. DISABILITY OF OPTIONEE. Notwithstanding the provisions of Section 6
above, in the event of termination of Optionee's Continuous Status as an
Employee or Consultant as a result of total and permanent disability (as
defined in Section 22(e)(3) of the Code), Optionee may, but only within six
(6) months from the date of termination of employment (but in no event later
than the date of expiration of the term of this Option as set forth in
Section 10 below), exercise the Option to the extent otherwise so entitled at
the date of such termination. To the extent that Optionee was not entitled
to exercise the Option at the date of termination, or if Optionee does not
exercise such Option (to the extent otherwise so entitled) within the time
specified in this Agreement, the Option shall terminate.
8. DEATH OF OPTIONEE. In the event of the death of Optionee:
(a) during the term of this Option and while an Employee of the
Company and having been in Continuous Status as an Employee or Consultant
since the date of grant of the Option, the Option may be exercised, at any
time within six (6) months following the date of death (but in no event later
than the date of expiration of the term of this Option as set forth in
Section 10 below), by Optionee's estate or by a person who acquired the right
to exercise the Option by bequest or inheritance, but only to the extent of
the right to exercise that would have accrued had Optionee continued living
and remained in Continuous Status as an Employee or Consultant three (3)
months after the date of death, subject to the limitation contained in
Section 2(i)(d) above in the case of an Incentive Stock Option; or
(b) within thirty (30) days after the termination of Optionee's
Continuous Status as an Employee or Consultant, the Option may be exercised,
at any time within six (6) months following the date of death (but in no
event later than the date of expiration of the term of this Option as set
forth in Section 10 below), by Optionee's estate or by a person who acquired
the right to exercise the Option by bequest or inheritance, but only to the
extent of the right to exercise that had accrued at the date of termination.
9. NON-TRANSFERABILITY OF OPTION. This Option may not be transferred in
any manner otherwise than by will or by the laws of descent or distribution.
The designation of a beneficiary does not constitute a transfer. An Option may
be exercised during the lifetime of Optionee only by Optionee or a transferee
permitted by this section. The terms of this Option shall be binding upon the
executors, administrators, heirs, successors and assigns of Optionee.
10. TERM OF OPTION. This Option may be exercised only within the term set
out in the Notice of Stock Option Grant, and may be exercised during such term
only in accordance with the Plan and the terms of this Option.
11. NO ADDITIONAL EMPLOYMENT RIGHTS. Optionee understands and agrees
that the vesting of Shares pursuant to the Vesting Schedule is earned only by
continuing as an Employee or Consultant at the will of the Company (not
through the act of being hired, being granted this Option or acquiring Shares
under this Agreement). Optionee further acknowledges and agrees
<PAGE>
that nothing in this Agreement, nor in the Plan which is incorporated in this
Agreement by reference, shall confer upon Optionee any right with respect to
continuation as an Employee or Consultant with the Company, nor shall it
interfere in any way with his or her right or the Company's right to
terminate his or her employment or consulting relationship at any time, with
or without cause.
12. TAX CONSEQUENCES. Optionee acknowledges that he or she has read the
brief summary set forth below of certain federal tax consequences of exercise
of this Option and disposition of the Shares under the law in effect as of
the date of grant. OPTIONEE UNDERSTANDS THAT THIS SUMMARY IS NECESSARILY
INCOMPLETE, AND THE TAX LAWS AND REGULATIONS ARE SUBJECT TO CHANGE. OPTIONEE
SHOULD CONSULT HIS OR HER OWN TAX ADVISER BEFORE EXERCISING THIS OPTION OR
DISPOSING OF THE SHARES.
(a) EXERCISE OF NONSTATUTORY STOCK OPTION. Optionee may incur
regular federal income tax liability upon the exercise of the Option.
Optionee will be treated as having received compensation income (taxable at
ordinary income tax rates) equal to the excess, if any, of the fair market
value of the Shares on the date of exercise over the Exercise Price. In
addition, if Optionee is an employee of the Company, the Company will be
required to withhold from Optionee's compensation or collect from Optionee
and pay to the applicable taxing authorities an amount equal to a percentage
of this compensation income at the time of exercise.
(b) DISPOSITION OF SHARES. Gain realized on the disposition of
Shares will be treated as long-term or short-term capital gain depending on
whether or not the disposition occurs more than one year after the exercise
date.
13. SIGNATURE. This Stock Option Agreement shall be deemed executed by
the Company and Optionee upon execution by such parties of the Notice of Stock
Option Grant attached to this Stock Option Agreement.
[REMAINDER OF PAGE LEFT INTENTIONALLY BLANK]
<PAGE>
EXHIBIT A
---------
NOTICE OF EXERCISE
------------------
To: Centura Software Corporation
Attn: Stock Option Administrator
Subject: NOTICE OF INTENTION TO EXERCISE NONSTATUTORY STOCK OPTION
---------------------------------------------------------
This is official notice that the undersigned ("OPTIONEE") intends to
exercise Optionee's option to purchase __________ shares of Centura Software
Corporation Common Stock, under and pursuant to the Company's 1998 Employee
Stock Option Plan and the Stock Option Agreement dated ___________, as
follows:
Grant Number:
-------------------------------------
Date of Purchase:
---------------------------------
Number of Shares:
---------------------------------
Purchase Price:
-----------------------------------
Method of Payment
of Purchase Price:
--------------------------------
Social Security No.:
----------------------------------
The shares should be issued as follows:
Name:
---------------------------------------------
Address:
------------------------------------------
------------------------------------------
------------------------------------------
Signed:
-------------------------------------------
Date:
---------------------------------------------
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration
Statements on Form S-8 (No. 33-83850 and No. 33-61294) of Centura Software
Corporation of our report dated February 10, 1998, except as to Note 13, which
is dated February 27, 1998, appearing on page 39 of this Annual Report on Form
10-K. We also consent to the reference to us under the heading "Selected
Financial Data" of this Annual Report on Form 10-K insofar as it relates to each
of the five years in the period ended December 31, 1997. However, it should be
noted that Price Waterhouse LLP has not prepared or certified such "Selected
Financial Data."
/s/ Price Waterhouse LLP
Price Waterhouse LLP
San Jose, California
March 30, 1998
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 3,974
<SECURITIES> 0
<RECEIVABLES> 16,191
<ALLOWANCES> 4,447
<INVENTORY> 259
<CURRENT-ASSETS> 19,066
<PP&E> 20,490
<DEPRECIATION> 16,979
<TOTAL-ASSETS> 28,200
<CURRENT-LIABILITIES> 37,298
<BONDS> 0
0
0
<COMMON> 70,636
<OTHER-SE> (80,590)
<TOTAL-LIABILITY-AND-EQUITY> 28,200
<SALES> 40,714
<TOTAL-REVENUES> 57,946
<CGS> 4,779
<TOTAL-COSTS> 12,218
<OTHER-EXPENSES> 44,498
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,039
<INCOME-PRETAX> (587)
<INCOME-TAX> 62
<INCOME-CONTINUING> (649)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (649)
<EPS-PRIMARY> (.04)
<EPS-DILUTED> (.04)
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<RESTATED>
<MULTIPLIER> 1,000
<S> <C> <C> <C>
<PERIOD-TYPE> 3-MOS 3-MOS 3-MOS
<FISCAL-YEAR-END> DEC-31-1997 DEC-31-1997 DEC-31-1997
<PERIOD-START> JAN-01-1997 APR-01-1997 JUL-01-1997
<PERIOD-END> MAR-31-1997 JUN-30-1997 SEP-30-1997
<CASH> 4,263 4,812 3,825
<SECURITIES> 1,565 565 0
<RECEIVABLES> 12,304 11,848 11,756
<ALLOWANCES> 2,780 2,931 2,888
<INVENTORY> 81 0 0
<CURRENT-ASSETS> 18,841 18,681 16,982
<PP&E> 19,055 20,863 21,078
<DEPRECIATION> 15,681 16,121 16,604
<TOTAL-ASSETS> 29,131 29,859 27,602
<CURRENT-LIABILITIES> 29,062 40,858 37,988
<BONDS> 0 0 0
0 0 0
0 0 0
<COMMON> 69,671 69,896 70,298
<OTHER-SE> (81,950) (81,751) (81,540)
<TOTAL-LIABILITY-AND-EQUITY> 29,131 29,859 27,602
<SALES> 9,514 11,790 9,371
<TOTAL-REVENUES> 13,600 16,104 13,698
<CGS> 1,366 1,301 906
<TOTAL-COSTS> 3,485 3,573 2,774
<OTHER-EXPENSES> 11,280 12,139 10,733
<LOSS-PROVISION> 0 0 0
<INTEREST-EXPENSE> 214 210 293
<INCOME-PRETAX> (2,055) 301 120
<INCOME-TAX> 10 25 10
<INCOME-CONTINUING> (2,065) 276 110
<DISCONTINUED> 0 0 0
<EXTRAORDINARY> 0 0 0
<CHANGES> 0 0 0
<NET-INCOME> (2,065) 276 110
<EPS-PRIMARY> (.14) .02 .01
<EPS-DILUTED> (.14) .02 .01
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<RESTATED>
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<S> <C> <C> <C> <C>
<C>
<PERIOD-TYPE> YEAR YEAR 3-MOS 3-MOS
3-MOS
<FISCAL-YEAR-END> DEC-31-1995 DEC-31-1996 DEC-31-1996 DEC-31-1996
DEC-31-1996
<PERIOD-START> JAN-01-1995 JAN-01-1996 JAN-01-1996 APR-10-1996
JUL-01-1996
<PERIOD-END> DEC-31-1995 DEC-31-1996 MAR-31-1996 JUN-30-1996
SEP-30-1996
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8,104
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3,366
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12,323
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3,054
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53
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23,988
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18,896
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14,633
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35,058
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45,847
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0
0 0 0 0
0
0 0 0 0
0
<COMMON> 57,577 63,047 57,781 57,882
58,025
<OTHER-SE> (81,634) (79,970) (81,295) (80,940)
(80,865)
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35,058
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10,414
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14,610
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1,047
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3,370
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10,990
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0
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211
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180
<INCOME-TAX> 1,073 478 162 31
83
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97
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0
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0
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0
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97
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<EPS-DILUTED> (3.62) .15 .03 .03
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