As filed with the Securities and Exchange Commission on May 12, 1999
SECURITIES ACT FILE NO. 333-77643
================================================================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
Amendment No. 1 to
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------
CENTURA SOFTWARE CORPORATION
(Exact name of registrant as specified in its charter)
---------------
Delaware 7372 94-2874178
(State or other jurisdiction of (Primary standard (I.R.S. employer
incorporation or organization) industrial identification
classification number)
code number)
975 Island Drive, Redwood Shores, California 94065 (650) 596-3400
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)
_____________
SCOTT R. BROOMFIELD
Centura Software Corporation
975 Island Drive
Redwood Shores, California 94065
(650) 596-3400
(Name, address, including zip code, and telephone number, including area
code, of agent for service)
_____________
Copies to:
RICHARD S. GREY, ESQ.
Orrick, Herrington & Sutcliffe LLP
Old Federal Reserve Bank Building
400 Sansome Street
San Francisco, California 94111
_____________
Approximate date of commencement of proposed sale to the public:
As soon as practicable after this Registration Statement becomes
effective and certain other conditions under the applicable merger
agreement are met or waived.
If the only securities registered on this Form are being offered in
connection with the formation of a holding company and there is compliance
with general Instruction G, check the following box. [ ]
The Registrant hereby amends this Registration Statement on such
date or dates as may be necessary to delay its effective date until the
Registrant shall file a further amendment which specifically states that
this Registration Statement shall thereafter become effective in
accordance with Section 8(a) of the Securities Act of 1933 or until the
Registration Statement shall become effective on such date as the
Commission, acting pursuant to said Section 8(a), may determine.
[RAIMA LOGO]
MERGER PROPOSED - YOUR VOTE IS IMPORTANT
Dear Stockholder:
The boards of directors of Raima Corporation and Centura Software
Corporation have agreed to a merger of their companies because they
believe the resulting combination will create an opportunity to achieve
significant operating synergies and better exploit the individual
companies' complementary products in the embedded database market. The
merger agreement provides that Raima will become a wholly owned
subsidiary of Centura. The combined company will be headquartered in
Redwood Shores, California.
If the merger is completed, the shares of Raima common stock issued
and outstanding at the time of the merger will be converted into (1) a
base number of Centura common shares, minus professional fees over a
certain dollar amount and a possible negative adjustment based on Raima's
balance sheet and (2) a possible cash payment from a positive adjustment
based also on Raima's balance sheet. See the section in this prospectus
entitled "The Merger - Structure of the Merger and Conversion of Raima
Common Stock" for a discussion of how the conversion of the Raima shares
will be calculated. The shares of Centura stock to be issued to Raima
stockholders will represent approximately 16.4% of the outstanding stock
of Centura after the merger, with the remainder being held by Centura's
existing stockholders.
The affirmative vote of the holders of shares representing at least
two-thirds of all outstanding shares of Raima stock is required to
approve the merger. Raima has scheduled a special meeting of its
stockholders to vote on the merger. We encourage you to exercise your
voting rights. However, several significant stockholders of Raima,
representing approximately 82% of the outstanding common stock, have
agreed to vote their shares in favor of the merger. Therefore, regardless
of other votes, the approval of the merger agreement is assured.
THE BOARD OF DIRECTORS OF RAIMA HAS UNANIMOUSLY DETERMINED THAT THE
MERGER IS IN THE BEST INTERESTS OF ITS STOCKHOLDERS AND RECOMMENDS THAT
ITS STOCKHOLDERS VOTE IN FAVOR OF APPROVING THE MERGER AGREEMENT.
All shares represented by each properly executed, unrevoked proxy
in the form accompanying this prospectus which is received by Raima in
time for its special meeting will be voted in the manner specified
therein. If the manner of voting is not specified in an executed proxy
received by Raima, the proxy will be voted for approval of the merger. An
abstention from voting will have the effect of a vote against the merger
because it is one less vote in favor.
The date, time and place of the meeting is as follows:
June 4, 1999
5:30 p.m.
Raima Corporation
4800 Columbia Center
701 Fifth Avenue
Seattle, WA 98104
This prospectus provides you with detailed information about the
proposed merger. We encourage you to read this entire document carefully.
/s/ Stephen P. Smith
Stephen P. Smith
Chief Executive Officer
THE MERGER INVOLVES RISKS TO RAIMA STOCKHOLDERS. SEE "RISK
FACTORS," BEGINNING ON PAGE 13.
Neither the Securities and Exchange Commission nor any state
securities regulators have approved the Centura common stock to be issued
under this prospectus or determined whether this prospectus is accurate
or adequate. Any representation to the contrary is a criminal offense.
This prospectus is dated May 13, 1999 and is first being
mailed to stockholders on or about May 13, 1999.
RAIMA CORPORATION
4800 COLUMBIA CENTER
701 FIFTH AVENUE
SEATTLE, WA 98104
________________________
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON JUNE 4, 1999
________________________
To Our Stockholders:
A special meeting of stockholders of Raima Corporation will be held
at the offices of Raima located at 4800 Columbia Center, 701 Fifth
Avenue, Seattle WA 98104, on June 4, 1999, commencing at 5:30
p.m., local time, for the following purposes:
1. To consider and vote on a proposal to adopt the
Agreement and Plan of Reorganization dated as of March 15, 1999
among Centura Software Corporation, a Delaware corporation, Centura
Subsidiary Corporation, a Delaware corporation, and Raima. Adoption
of the merger agreement and its implementation would effect the
following actions, among other matters:
(a) a wholly owned subsidiary of Centura will be
merged into Raima, resulting in Raima becoming a wholly owned
subsidiary of Centura,
(b) the shares of Raima common stock issued and
outstanding at the time of the merger will be converted into
(1) a base number of Centura common shares, minus
professional fees over a certain dollar amount and a possible
negative adjustment based on Raima's balance sheet and (2) a
possible cash payment from a positive adjustment based also
on Raima's balance sheet. See the section entitled "The
Merger-Structure of the Merger and Conversion of Raima
Common Stock" on page 33 for a discussion of how the
conversion of the Raima shares will be calculated.
2. To transact such other business as may properly come
before the meeting.
All Raima stockholders are cordially invited to attend the meeting
in person. However, to assure your representation at the meeting, you are
urged to mark, sign, date and return the enclosed proxy card as promptly
as possible in the postage prepaid envelope enclosed for that purpose.
Any Raima stockholder attending the meeting may vote in person even if he
or she returned a proxy.
Holders of outstanding shares of Raima common stock have the right
to dissent from the merger and, subject to certain conditions, receive
payment for their shares. These rights are described in greater detail in
the accompanying prospectus under the caption "The Merger-Rights of
Dissenting Stockholders," and are set forth in Sections 23B.13.010
through 23B.13.310 of the Washington Business Corporation Act, a copy of
which is attached as Annex B to this prospectus.
Stockholders of record as of the close of business on April 21,
1999 will be entitled to vote at the meeting and any adjournment or
postponement of it.
The merger and other important matters are explained in this
prospectus, which you are urged to read carefully. A copy of the merger
agreement is attached as Annex A.
By order of the board of directors,
/s/ Stephen P. Smith
Stephen P. Smith
Chief Executive Officer
Seattle, Washington
May 13, 1999
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE FILL IN, DATE AND
SIGN THE ENCLOSED PROXY CARD AND RETURN IT PROMPTLY IN THE ENCLOSED
RETURN ENVELOPE, WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED
STATES.
TABLE OF CONTENTS
QUESTIONS AND ANSWERS ABOUT THE CENTURA/RAIMA MERGER iv
WHO CAN HELP ANSWER YOUR QUESTIONS vii
SUMMARY 1
THE COMPANIES 1
RAIMA STOCKHOLDERS' MEETING 2
THE MERGER AND RELATED TRANSACTIONS 2
SUMMARY HISTORICAL FINANCIAL DATA 7
Selected Historical Financial Data of Centura 7
Selected Historical Financial Data of Raima 8
Summary Unaudited Pro Forma Condensed Combined
Consolidated Financial Data 9
UNAUDITED COMPARATIVE PER SHARE INFORMATION 10
MARKET PRICE AND DIVIDEND INFORMATION 11
Recent Closing Prices 11
Dividend Information 12
RISK FACTORS 13
The value of the consideration that Raima stockholders
receive will depend in part on the price of Centura's
common stock. 13
The price of Centura's common stock has been volatile. 13
Centura may have difficulty restructuring its operations
and integrating Raima into its business. 14
The impact of Centura's recent strategic changes is
uncertain. 14
Centura's new management team might not be successful in
executing its objectives. 14
Centura's future performance is substantially dependent on
the performance of its executive officers and key
product development, technical, sales, marketing and
management personnel. 15
Centura has experienced recent fluctuations in quarterly
and annual results. 15
Centura and Raima may not succeed in effectively
developing new products and keeping pace with rapid
technological changes. 17
Year 2000 problems may have an adverse effect on Centura's
and Raima's operations and ability to offer products and
services without interruption. 19
After the merger the combined company will face intense
competition. 19
Any termination or significant disruption of Centura's or
Raima's relationships with any of their resellers or
distributors, or the failure by such parties to renew
agreements with Centura or Raima, could materially and
adversely affect the combined company's business,
operating results and financial condition. 21
The combined company's continued success in international
markets is uncertain. 22
The success and ability of the combined company to compete
is dependent in part upon its proprietary technology. 22
SPECIAL MEETING OF RAIMA'S STOCKHOLDERS 24
Record Date 24
Voting at the Raima Special Meeting 24
Proxies 24
THE MERGER 26
Background Of The Merger 26
Joint Reasons For The Merger 28
Raima's Reasons for the Merger; Board Recommendation 29
Conflicts of Interests of Certain Persons in the Merger 32
Completion and Effectiveness of the Merger 33
Structure of the Merger and Conversion of Raima Common Stock 33
Escrow Arrangement 34
Exchange of Raima Stock Certificates for Centura Stock
Certificates and Cash 35
Material United States Federal Income Tax Consequences of
the Merger 36
Accounting Treatment of the Merger 38
Regulatory Filings and Approvals Required to Complete the
Merger 38
NASDAQ SmallCap Market Listing 39
Rights of Dissenting Stockholders 39
The Merger Agreement 40
Employment Agreements 47
Raima Employee Stock Options 48
Operations after the Merger 48
UNAUDITED PRO FORMA CONDENSED COMBINED CONSOLIDATED
FINANCIAL INFORMATION 50
INFORMATION REGARDING RAIMA 55
Overview 55
Management's Discussion and Analysis 59
Ownership of Raima Capital Stock 65
CERTAIN RELATIONSHIPS AND RELATED TRANSCTIONS 66
PRO FORMA OWNERSHIP OF CENTURA COMMON STOCK 67
COMPARISON OF RIGHTS OF HOLDERS OF RAIMA COMMON STOCK
AND CENTURA COMMON STOCK 68
Classes of Common Stock of Raima and Centura 68
Preferred Stock 68
Cumulative Voting 68
Number of Directors 68
Removal of Directors 69
Filling of Vacancies on the Board of Directors 69
Limits on Stockholder Action by Written Consent 69
Ability to Call Special Meetings 70
Advance Notice Provisions for Stockholder Nominations and Proposals 70
Amendment of Certificate or Articles of Incorporation 71
Amendment of Bylaws 72
State Anti-Takeover Statutes 72
Transactions With Officers or Directors. 72
Limitation of Liability of Directors 73
Indemnification of Directors and Officers 74
Certain Anti-Takeover Provisions 75
LEGAL OPINION 77
EXPERTS 77
WHERE YOU CAN FIND MORE INFORMATION 77
STATEMENTS REGARDING FORWARD-LOOKING INFORMATION 78
CONSOLIDATED FINANCIAL STATEMENTS OF RAIMA F-1
ANNEX A: AGREEMENT AND PLAN OF REORGANIZATION DATED MARCH 15, 1999 A-1
ANNEX B: WASHINGTON DISSENTERS' RIGHTS STATUTE B-1
QUESTIONS AND ANSWERS ABOUT THE CENTURA/RAIMA MERGER
Q. Why are the two companies proposing to merge?
A. Our companies are proposing to merge because we believe the
resulting combination will create an opportunity to achieve
significant operating synergies and better utilize the individual
companies' complementary products in the embedded database market.
Q. What will I receive in the merger?
A. Raima stockholders will receive (1) a total of approximately
5,800,000 shares of Centura common stock in exchange for all the
shares of Raima common stock outstanding, minus a number of shares
based on the amount of professional fees incurred by Raima in the
transaction over a certain dollar and a possible negative
adjustment based on Raima's balance sheet, and (2) a possible cash
payment from a positive adjustment based also on Raima's balance
sheet.
The merger agreement contains a condition that the average trading
price of Centura's common stock for 10 trading days prior to the
merger be at least $1.00. However, this condition may be waived by
both parties. The merger agreement also provides a cap of
$17,400,000 on the value of the Centura shares the Raima
stockholders may receive in the merger.
Centura will not issue fractional shares. Raima stockholders who
would otherwise be entitled to receive a fractional share will
instead receive cash based on the market value of the fractional
share of Centura stock.
In order to calculate the ratio of Centura shares to which you are
entitled for your Raima shares, divide the base number of Centura
shares the Raima stockholders would receive (minus adjustments) by
the number of outstanding shares of Raima stock at the time of
merger.
Example A:
If the number of Centura shares the Raima stockholders would
receive equals 4,761,600 (after adjustments) and the outstanding
shares of Raima stock equals 6,200,000, then the exchange ratio
would be
4,761,600
------------- = 0.768
6,200,000
Therefore you will receive 0.768 of a share of Centura common stock
for each share of Raima stock you own.
If you currently own 100 shares of Raima common stock, then after
the merger you will be entitled to receive 76 shares of Centura
common stock and a check for the market value of the 0.8 fractional
share.
The ratio of Centura shares to which you are entitled for your
Raima shares will vary depending on the adjustment to the base
number of Centura shares that Raima stockholders will receive in
the aggregate (based on the amount of professional fees and Raima's
balance sheet) and the number of outstanding shares of Raima at the
time of the merger. The dollar value of the shares you receive in
the exchange will also vary depending on the price of Centura
shares at the completion of the merger.
As stated in Example A, if you own 100 shares of Raima common
stock, you would be entitled to receive 76 shares of Centura common
stock and a check for the residual fractional amount. If the
trading price of Centura common stock at the time of the merger is
$2 per share, your 76 Centura shares would be worth $152. If the
trading price of Centura's common stock at the time of the merger
instead is $1 per share, you would still be entitled to receive 76
Centura shares, but they would then be worth $76.
However, as stated above, the average trading price of Centura's
common stock for 10 trading days prior to the merger must be at
least $1.00, unless the parties waive this condition.
In addition, if the average trading price of Centura for 10 trading
days prior to the merger is greater than $3.00 per share, then the
maximum total value of the Centura shares the Raima stockholders
would receive would be $17,400,000, and the base number of Centura
shares Raima stockholders would receive would be calculated as
follows:
$17,400,000
-------------
the average Centura
trading price
Example B:
If the average Centura trading price is $3.01 per share, then Raima
stockholders would receive the following base number of Centura
shares (before adjustments) in the aggregate:
$17,400,000
------------- = 5,780,730.897
$3.01
The number of Centura shares to which you are entitled for each
share of Raima stock you own would be calculated in the same manner
as in Example A above.
Q. What do I need to do now?
A. Just mail your signed proxy card in the enclosed return envelope as
soon as possible so that your shares will be counted at the special
meeting of Raima's stockholders.
Q. Does Raima's board recommend voting in favor of the merger?
A. Yes. The board of directors of Raima unanimously recommends voting
in favor of the adoption of the merger agreement.
Q. Can I change my vote after I have mailed my signed proxy card?
A. Yes. You can change your vote at any time before your proxy is
voted at the special meeting. You can do this three different ways.
First, you can send a written notice stating that you would like to
revoke your proxy. Second, you can complete and submit a new proxy
card. Raima stockholders choosing either of these options should
send their revocation letter or new proxy card to the Raima
corporate secretary at the address provided on page vii. The third
way you may change your vote is to attend the special meeting and
vote in person. Simply attending the meeting, however, will not
revoke your proxy. If you have instructed a broker to vote your
shares, you must follow the directions provided by your broker to
change those instructions.
Q. Should I send in my stock certificates now?
A. No. After the merger is completed, Centura will send Raima
stockholders written instructions for exchanging their share
certificates.
Q. When will I receive my Centura shares?
A. If the stockholders of Raima vote to adopt the merger agreement at
its special meeting, we expect the merger will be completed by
June 7, 1999.
Q: What will happen to stock options held by Raima employees?
A. Under the Raima Stock Option Plan, the vesting of each outstanding
option is accelerated so that it will become exercisable in full
immediately prior to the merger. If any options are not exercised
on the effective date of the merger, they will automatically
terminate.
WHO CAN HELP ANSWER YOUR QUESTIONS
If you have more questions about the merger or would like
additional copies of this prospectus, you should contact:
Raima Corporation
4800 Columbia Center
701 Fifth Avenue
Seattle, WA 98104
Attention: Stephen P. Smith
(206) 515-9477
SUMMARY
This summary only highlights selected information from this
document and may not contain all of the information that is important to
you. To understand the merger fully and for a more complete description
of the legal terms of the merger, you should carefully read this entire
document and the documents to which we have referred you. See "Where You
Can Find More Information" on page 77.
THE COMPANIES
CENTURA SOFTWARE CORPORATION
975 Island Drive
Redwood Shores, California 94065
(650) 596-3400
Centura believes that it is a leading provider of enterprise-scale
client/server and internet application development and deployment
software. Centura offers four major product lines: SQLBase, Centura Team
Developer, SQLWindows and SQLHost. SQLBase consists of small-footprint
database products that help businesses deploy decentralized applications
easily and cost-effectively. Centura Team Developer helps customers
develop and deploy 32-bit client/server applications in traditional two
and multi-tiered client/server environments as well as the internet and
corporate intranet environments. Created specifically to meet the needs
of organizations seeking the power to move from workgroup and enterprise
pilot projects into large enterprise applications, Centura Team Developer
delivers client/server application scalability, internet integration, and
drag and drop data replication facilities. SQLWindows is an open 16 bit
client/server development environment for creating multi-database
applications on desktop platforms. SQLHost allows organizations to
integrate DB2 or legacy data into a client/server environment without
compromising performance, control, or security.
Centura's products enable customers to obtain the benefits of PC
client/server computing, while preserving their investments in corporate
data sources. Centura has established stratified distribution channels
that provide broad market coverage for its products and address the
specific needs of its varied customer segments worldwide. Centura's
products are used in at least 75 countries by organizations including
Automatic Data Processing (ADP), Baan, BMW, CAMData, Citibank N.A.,
Clarus, Computer Associates, Daimler-Benz, Deutsche Bank, Ford Motor
Company, IFS, Infra Corporation (Help Desk Systems), Norfolk Southern,
Ontario Hydro, Lilly Software, Siemens-Nixdorf Information System AG
(Siemens-Nixdorf), Station, Telia, The Southern Company, United Airlines,
United Parcel Service (UPS), Xerox and the governments of Australia,
France, Mexico, the United Kingdom and the United States.
RAIMA CORPORATION
4800 Columbia Center
701 Fifth Avenue
Seattle, Washington 98104
(206) 515-9477
Raima Corporation is a privately held company which develops and
markets database management systems. Raima's principal products are Raima
Database Manager, a fast, small footprint database management system, and
Velocis Database Server, a client/server SQL database with support for
multiple database models and application programming interfaces. Raima
also has developed a report writer product, Raima Report Writer, which
enables users to access information stored in Raima Database Manager. In
addition, Raima provides consulting and training through its subsidiary,
Vista Development Corporation.
RAIMA STOCKHOLDERS' MEETING
The Raima Special Meeting
The Raima special meeting will be held at Raima's offices at
4800 Columbia Center, 701 Fifth Avenue, Seattle Washington, 98104, at
5:30 p.m., local time, on June 4, 1999. At the Raima special meeting,
Raima stockholders will be asked to adopt the merger agreement.
Raima's Recommendation to Stockholders
The Raima board believes that the merger is fair to you and in your
best interest and unanimously recommends that you vote FOR the proposal
to approve the merger agreement. For more information on why the Raima
board recommends the merger and possible conflicts of interest of the
Raima directors, see pages 29 and 32, respectively.
Record Date; Voting Power
You are entitled to vote at the special meeting if you owned
shares of Raima as of the close of business on May 12, 1999, which is the
record date.
On the record date, there were 6,557,528 shares of Raima common
stock entitled to vote at the Raima special meeting. Raima stockholders
will have one vote for each share of Raima common stock they owned on the
record date.
Raima Vote Required
In order to approve the merger, two-thirds of the outstanding
shares of Raima common stock must vote in favor of adopting the merger
agreement. Several Raima stockholders, who together hold a total of
5,079,910 shares of Raima common stock as of March 15, 1999, representing
approximately 82% of the outstanding shares of Raima common stock, have
agreed to vote their shares in favor of the merger. Accordingly, approval
of the merger agreement by Raima stockholders is assured. For more
information on the Raima special meeting, see page 24.
THE MERGER AND RELATED TRANSACTIONS
THE MERGER AGREEMENT IS ATTACHED TO THIS PROSPECTUS AS ANNEX A. WE
ENCOURAGE YOU TO READ THE MERGER AGREEMENT CAREFULLY, AS IT IS THE LEGAL
DOCUMENT WHICH GOVERNS THE MERGER OF CENTURA AND RAIMA.
Ownership of Centura Following The Merger
Immediately following the merger, former Raima stockholders will
own approximately 16% of the combined company.
Management and Board Of Directors of Centura Following the Merger
If the merger is completed, the current directors and executive
officers of Centura will continue to be the directors and executive
officers of Centura; however, Centura will cause Thomas R. Clark, a
current director of Raima, to be appointed to its board and, in
connection with its next two annual meetings thereafter, will nominate
and recommend for election to its board Mr. Clark or another designee
agreed upon by certain significant Raima stockholders. Please refer to
the section entitled "The Merger-Operations after the Merger" on page 48.
Interests of Executive Officers and Directors of Raima in the Merger
(Page 32)
In considering the Raima board's recommendation that you vote in
favor of the merger, you should be aware that some officers and directors
of Raima have benefits that provide them with interests in the merger
that are different from the interests of Raima stockholders. Please refer
to pages 32 and 47 for more information.
Merger Consideration
The shares of Raima common stock issued and outstanding at the time
of the merger will be converted into (1) a base number of Centura common
shares, minus professional fees incurred by Raima over a certain dollar
amount and a possible negative adjustment based on Raima's balance sheet
and (2) a possible cash payment from a positive adjustment based also on
Raima's balance sheet. See the section entitled "The Merger-Structure
of the Merger and Conversion of Raima Common Stock" on page 33 for a
discussion of how the conversion of the Raima shares will be calculated.
Escrow Arrangement (Page 34)
On the day of the merger, Centura will pay to each holder of Raima
stock 80% of the shares of Centura common stock and 80% of the cash to
which such stockholder is entitled to receive. The 20% balance of stock
and cash will be deposited in an escrow account to cover any
indemnification claims. Approximately 50% of the escrowed stock will be
released after 6 months, and the remainder of the escrowed stock and all
of the escrowed cash will be released after 12 months, in each case
subject to amounts needed to satisfy pending claims.
Conditions to the Merger (Page 44)
The completion of the merger depends upon meeting a number of
conditions, including the following:
o the requisite number of Raima's stockholders shall have voted in
favor of the merger;
o Raima stockholders holding no more than 6% of the outstanding
Raima stock will have exercised their dissenters' rights, as
further described in the section entitled "The Merger-Rights
of Dissenting Stockholders" on page 39;
o at the closing, the representations and warranties of each of
Centura and Raima shall be true in all material respects and
each of the companies shall have performed their covenants in
the merger agreement;
o certain Raima key employees will have entered into employment
agreements with Centura;
o the arithmetic mean of the closing sale price of Centura common
stock on the Nasdaq SmallCap Market for each of the ten (10)
trading days before the merger, shall not be less than $1.00 per
share;
o Centura shall be in compliance with all of the requirements for
continued listing of its common stock on the Nasdaq SmallCap
Market;
o five days have passed since Centura has issued a press release
containing news adverse to Centura; and
o PricewaterhouseCoopers LLP will have delivered an unqualified
opinion regarding Raima's audited financial statements for
fiscal years ended December 31, 1998 and 1997.
Each of the conditions to the merger may be waived by the company
entitled to assert the condition.
Employment Agreements (Page 47)
As a condition to the merger, Centura will enter into employment
agreements with Stephen P. Smith, Randall L. Merilatt, Wayne L. Warren,
all of whom are directors and principal stockholders of Raima, and Steven
T. Graves, who is President and Chief Operating Officer of Raima. Mr.
Smith will be employed as Vice President, Business Development of
Centura; Mr. Graves will be employed as Vice President, Worldwide
Consulting of Centura; and Messrs. Warren and Merilatt will be employed
as Senior Database Architects of Centura.
Termination of the Merger Agreement (Page 46)
Centura and Raima can mutually agree to terminate the merger
agreement without completing the merger, and either of them can terminate
the merger agreement by written notice if the merger is not completed by
June 7, 1999.
Payment of Expenses upon Termination (Page 46)
Each party shall pay the other's legal, accounting and advisory
expenses incurred in connection with the merger if the agreement is
terminated because of a breach by that party. The merger agreement
requires Centura to pay up to $100,000 of Raima's legal, accounting and
advisory fees and expenses incurred in connection with the merger if the
merger agreement is terminated for any reason other than a breach by the
parties to the agreement.
When the Merger Takes Effect (Page 33)
The merger will become effective when all necessary documentation
has been filed in Delaware and Washington. Such documentation will be
filed promptly upon satisfaction or waiver of each of the conditions
provided in the merger agreement.
Exchange of Stock Certificates (Page 35)
After completion of the merger, Raima stockholders will no longer
have any rights as Raima stockholders. Once the merger is effective,
Centura will mail instructions for the exchange of certificates to all
Raima stockholders. Raima stockholders who turn in their Raima stock
certificates will receive Centura stock certificates and cash, if
applicable, from the transfer agent as quickly as is feasible.
Comparison of Rights Under Applicable Laws (Page 68)
Centura is incorporated in the State of Delaware, and Raima is
incorporated in the State of Washington. After the merger, the rights of
Raima stockholders will be governed by Centura's certificate of
incorporation and bylaws. There are important differences between
Centura's and Raima's governing documents of which you should be aware.
Accounting Treatment (Page 38)
The merger will be accounted for by Centura as a purchase in
accordance with generally accepted accounting principles. Application of
the purchase method of accounting for the merger will reduce Centura's
pre-tax earnings for approximately 5 years. The reported results of
operations of Centura will include the results of Raima from and after
the closing date of the merger. The assets, including intangible assets,
and liabilities of Raima will be recorded at their fair values as of the
closing date of the merger. Any excess of the purchase consideration over
the fair values of the assets and liabilities of Raima will be recorded
as goodwill and amortized over a 5-year period.
Federal Income Tax Consequences (Page 36)
We have structured the merger so that it is not expected that
Centura, Raima and their stockholders should recognize any gain or loss
for federal income tax purposes as a result of the merger, except for
taxes on cash received by Raima stockholders in the merger. However,
there may be a possibility that the merger as structured will not be tax
free to you. In that event, you would be treated as selling your Raima
common stock to Centura in a fully taxable transaction, resulting in
capital gain or loss measured by the difference between the value of the
Centura common stock and cash you received in the merger and your tax
basis in the Raima common stock.
TAX MATTERS ARE VERY COMPLICATED AND THE TAX CONSEQUENCES OF THE
MERGER TO YOU WILL DEPEND ON THE FACTS OF YOUR OWN SITUATION. YOU SHOULD
CONSULT YOUR TAX ADVISORS FOR A FULL UNDERSTANDING OF THE TAX
CONSEQUENCES OF THE MERGER TO YOU.
Dissenter and Appraisal Rights (Page 39)
Under Washington law, Raima stockholders have dissenters' rights
and a right to an appraisal of the value of their shares in connection
with the merger.
Listing of Centura Common Stock
Prior to the merger, Centura will obtain approval to have the
shares of Centura stock to be issued in the merger listed on the Nasdaq
SmallCap Market.
Trademarks
Centura, the Centura logo, Centura Ranger, Gupta, the Gupta logo,
Gupta Powered, the Gupta Powered logo, Fast Facts, Quest, QuickObjects,
SQL/API, SQLBase,SQLBase SafeGuarde, SQLBase Safeguarde Max, SQLBase
Ranger, SQLConsole, SQLGateway, SQLHost, SQLNetwork, SQLRouter and
SQLTalk are trademarks of Centura and are registered in certain
jurisdictions. SQLWindows, TeamWindows, ReportWindows, and EditWindows
are trademarks exclusively used and licensed by Centura.
Raima, Raima Database Manager, Raima Object Manager, Raima Report
Writer and Velocis Database Server are trademarks of Raima.
SUMMARY HISTORICAL FINANCIAL DATA
Centura is providing the following information to aid you in your
analysis of the financial aspects of the merger. Centura derived this
information from its historical audited financial statements for the
fiscal years ended December 31, 1994 through December 31, 1998. This
information is only a summary and you should read it in conjunction with
Centura's consolidated financial statements (and related notes) contained
in the most recent annual report for Centura which has been incorporated
in this prospectus by reference.
Selected Historical Financial Data of Centura
(in thousands, except per share data)
<TABLE>
<CAPTION>
Consolidated Statement of Operations Data:
Year Ended December 31,
-------------------------------------------------
1998 1997 1996 1995 1994
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Net revenues.............................. $53,497 $57,946 $63,233 $65,714 $56,532
Operating income (loss)................... 3,895 1,230 2,484 (42,993) (32,981)
Net income (loss) from continuing
operations(1)........................... 2,115 (649) 2,027 (44,079) (31,841)
Basic net income (loss) per share(1)...... $0.08 ($0.04) $0.15 ($3.62) ($2.66)
Basic weighted average common shares(1)... 27,390 15,439 13,231 12,175 11,957
Diluted net income (loss) per share(1).... $0.08 ($0.04) $0.15 ($3.62) ($2.66)
Diluted weighted average common shares(1). $27,776 $15,439 $13,380 $12,175 $11,957
<CAPTION>
Consolidated Balance Sheet Data:
At December 31,
-------------------------------------------------
1998 1997 1996 1995 1994
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Working capital (deficit)(2).............. $983 ($18,232) ($15,616) ($25,604) $599
Total assets.............................. 29,372 28,200 36,705 48,104 58,161
Long-term obligations..................... 53 856 12,188 11,744 1,939
Stockholders' equity (deficit)............ $7,273 ($9,954) ($16,923) ($24,057) $18,670
</TABLE>
___________
(1) See Note 2 of Notes to Consolidated Financial Statements in
Centura's most recent annual report incorporated in this prospectus
by reference for an explanation of shares used in computing net
income (loss) per basic and diluted common shares and equivalents.
(2) Working Capital (Deficit) includes deferred revenue of $13,274,000,
$14,618,000, $21,891,000, $28,800,000 and $21,879,000 at December
31, 1998, 1997, 1996, 1995, and 1994, respectively.
1999 First Quarter Results
Centura recorded net revenue of $12.4 million in the first quarter
of 1999, as compared with net revenue of $12.8 million in the first
quarter of 1998. International revenues were 54% of net revenue in the
first quarter of 1999 compared with 55% of net revenue in the first
quarter of 1998. Invoicing increased to $12.2 million for the first
quarter in 1999, as compared with $11.9 million in the first quarter of
1998. Invoicing for embedded database licenses grew 17% as compared with
the first quarter of 1998.
Operating income was $.4 million in the first quarter of 1999, as
compared with $1.3 million in the first quarter of 1998 and net income
was $.1 million, as compared with $.5 million in the first quarter of
1998. Operating cash flow (EBITDA) was $.5 million in the first quarter
of 1999, as compared with $1.2 million in the first quarter of 1998.
Earnings per basic and diluted shares outstanding was $.00 in the first
quarter of 1999, as compared with $.03 for the first quarter of 1998.
__________________________________________________________
Raima is providing the following information to aid you in your
analysis of the financial aspects of the merger. Raima derived this
information from its historical unaudited financial statements for the
fiscal years ended December 31, 1994 through December 31, 1996 and the
audited financial statements for the fiscal years ended December 31, 1997
and 1998. This information is only a summary and you should read it in
conjunction with Raima's consolidated financial statements (and related
notes) beginning on page F-1 and "Raima's Management's Discussion and
Analysis of Financial Condition and Results of Operations" beginning on
page 59.
Selected Historical Financial Data of Raima
(in thousands)
<TABLE>
<CAPTION>
Consolidated Statement of Operations Data:
Year Ended December 31,
---------------------------------------------------
1998 1997 1996 1995 1994
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Net revenues............................... $8,584 $8,613 $6,771 $6,148 $5,422
Operating income (loss).................... (220) 343 183 516 (1,926)
Net income (loss) from continuing
operations............................... (127)(1) 323 123 389 (1,977)
<CAPTION>
Consolidated Balance Sheet Data:
December 31,
---------------------------------------------------
1998 1997 1996 1995 1994
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Working capital (deficit).................. $86 ($712) $272 $294 ($247)
Total assets............................... 3,023 3,719 3,072 2,876 1,688
Long-term obligations...................... 36 31 1,740 1,876 1,770
Shareholders' equity (deficit)............. 564 (166) (881) (1,004) (1,360)
</TABLE>
(1) Excludes extraordinary gain on the forgiveness of debt of $451,000,
net of taxes. See note 1 to Raima's consolidated financial
statements (and related notes).
Summary Unaudited Pro Forma Condensed Combined Consolidated Financial Data
(in thousands, except per share data)
The following table sets forth unaudited pro forma condensed
combined consolidated financial data for Centura and Raima which gives
effect to the acquisition, accounted for as a purchase, as if it had been
consummated as of January 1, 1998 for the statement of operations data
and December 31, 1998 for the balance sheet data. The pro forma data is
not necessarily indicative of the results that would have been achieved
had the transaction been consummated on such dates and should not be
construed as representative of future operations. This presentation is
subject to the assumptions set forth in the notes to the Unaudited Pro
Forma Condensed Combined Consolidated Financial Information appearing
elsewhere in this prospectus. The information presented should be read in
conjunction with the pro forma financial information and the notes
thereto and the historical consolidated financial statements (and related
notes) of Centura and of Raima incorporated by reference or appearing
elsewhere in this prospectus.
Pro Forma Combined Consolidated Statement of Operations Data:
Year Ended
December 31, 1998
---------------
Net revenues.................................................. $62,081
Operating income.............................................. 2,502
Net income.................................................... 708
Basic net income per share.................................... $0.02
Basic weighted average common shares.......................... 33,190
Diluted net income per share.................................. $0.02
Diluted weighted average common shares........................ 33,576
Pro Forma Combined Consolidated Balance Sheet Data:
December 31, 1998
---------------
Working capital............................................... $234
Total assets.................................................. 38,709
Long-term obligations......................................... 53
Shareholders' equity.......................................... 13,437
(1) Excludes extraordinary gain on the forgiveness of debt of $451,000,
net of taxes. See note 1 to Raima's consolidated financial
statements (and related notes).
UNAUDITED COMPARATIVE PER SHARE INFORMATION
The following table sets forth certain earnings, dividend and book
value per share data for Centura and Raima on a historical basis and pro
forma combined basis.
The information is only a summary and you should read it in
conjunction with the "Unaudited Pro Forma Condensed Combined
Consolidated Financial Information" beginning on page 50 and the
respective audited consolidated financial statements (and related notes)
of Centura and Raima incorporated by reference or appearing elsewhere in
this prospectus.
The Raima pro forma equivalent per share amounts are calculated by
multiplying the Centura pro forma per share amounts by the assumed
exchange ratio of approximately 0.768. This ratio is calculated by
dividing the total number of shares of Centura common stock to be issued
in the merger (5,800,000) (assuming no adjustments in respect of
professional fees or Raima's balance sheet) by the number of shares of
Raima common stock outstanding on a fully diluted basis (7,550,519).
This information is not necessarily indicative of the results of
future operations of the combined company or the actual results that
would have occurred had the merger been consummated prior to the periods
indicated.
At or for
the
Year Ended
December 31,
1998
------------
Per share of Centura common stock:
Book value:
Historical............................ $0.25
Pro forma............................. $0.38
Net income from continuing operations:
Historical............................ $0.08
Pro forma(1).......................... $0.02
Per share of Raima common stock:
Book value:
Historical............................ $0.09
Pro forma............................. $0.29
Net income (loss) from continuing
operations:
Historical(1)......................... ($0.02)
Pro forma(1).......................... $0.02
(1) Excludes extraordinary gain on the forgiveness of debt of $451,000,
net of taxes. See note 1 to Raima's consolidated financial
statements (and related notes).
MARKET PRICE AND DIVIDEND INFORMATION
The shares of Centura common stock are listed and principally
traded on the Nasdaq SmallCap Market and quoted under the symbol
"CNTR." The following table sets forth, for the quarters indicated, the
high and low closing prices of Centura common stock as reported on the
Nasdaq SmallCap Market. For current price information, Raima stockholders
are urged to consult publicly available sources.
High Low
------------ ------------
1998
First Quarter........................... $2.125 $0.906
Second Quarter.......................... 2.875 1.563
Third Quarter........................... 1.813 1.000
Fourth Quarter.......................... 1.438 1.000
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
Recent Closing Prices
The following table sets forth the closing prices per share of
Centura common stock on the NASDAQ SmallCap Market on March 12, 1999, the
last trading day before announcement of the proposed merger, and on May
10, 1999, the latest practicable trading day before the printing of this
prospectus. The table also includes a Raima equivalent value which is
calculated by multiplying the closing price per share of Centura common
stock on the applicable date by an assumed exchange ratio of 0.768 shares
of Centura stock per share of Raima stock. The Raima equivalent per share
price can be used by the Raima stockholders to determine the approximate
value of one share of Raima capital stock based on the Centura common
stock trading price, without giving effect to the average Centura trading
price, Raima's professional fees and other adjustments or the escrow and
resale restrictions.
Centura stock Raima Equivalent
--------------- ------------------
March 12, 1999 .................. $1.063 $0.817
May 10, 1999 ................. $0.9375 $0.72
The market price of Centura common stock is subject to fluctuation.
Therefore, the market value of the shares of Centura common stock which
Raima stockholders will receive in the merger may increase or decrease
prior to the merger. Raima stockholders are urged to obtain current
market quotations.
In addition, if the average trading price of Centura common stock,
as defined in the section entitled "The Merger-Structure of the Merger
and Conversion of Raima Common Stock" on page 33, is $3.00 per share or
greater, the base number of shares Raima's stockholders would receive in
the merger (prior to any adjustments based on professional fees incurred
by Raima or Raima's balance sheet) would be determined by dividing
o $17,400,000 by
o the average trading price
so that the value of the shares issuable (using the 10-day average
calculation) is $17,400,000.
Dividend Information
Centura has not paid any cash dividends on its common stock during
the last five fiscal years. Centura currently intends to retain any
earnings for use in its business and does not anticipate paying any cash
dividends in the foreseeable future. In addition, Centura's short-term
borrowing facility restricts Centura's ability to pay cash dividends.
Raima has never paid any cash dividends on its common stock, and if
the merger is not consummated, it anticipates that it will continue to
retain any earnings for the foreseeable future for use in the operation
of its business.
RISK FACTORS
In addition to general investment risks and those factors set forth
elsewhere herein, the following risks should be considered by Raima
stockholders in deciding whether to adopt the merger agreement and
thereby become stockholders of Centura.
The value of the consideration that Raima stockholders receive will
depend in part on the price of Centura's common stock.
Under the terms of the merger agreement, the shares of Raima common
stock issued and outstanding at the time of the merger will be converted
into (1) a base number of Centura common shares, minus professional fees
incurred by Raima over a certain dollar amount and a possible negative
adjustment based on Raima's balance sheet and (2) a possible cash payment
from a positive adjustment based also on Raima's balance sheet. See the
section entitled "The Merger-Structure of the Merger and Conversion of
Raima Common Stock" on page 33 for a discussion of how the conversion of
the Raima shares will be calculated.
The value of the consideration will therefore depend largely on the
price of Centura's common stock at the time of the merger. On March 15,
the day the merger agreement was signed, the closing price of Centura's
common stock was $1.031. The market price of Centura's common stock on
and after the merger may be higher or lower than such price.
The merger agreement contains a condition that the average trading
price of Centura's common stock for 10 trading days prior to the merger
must be at least $1.00. However, this condition may be waived by both
parties. The merger agreement also provides a cap of $17,400,000 on the
value of the Centura shares the Raima stockholders receive in the merger.
Raima stockholders should consider recent trading prices of
Centura's common stock in determining whether or not to vote in favor of
the merger.
The price of Centura's common stock has been volatile.
The market for Centura's common stock is highly volatile. The
trading price of Centura's common stock fluctuated significantly in 1998,
1997, and 1996, and may continue to be subject to wide fluctuations in
response to quarterly variations in operating and financial results,
announcements of new products or customer contracts by Centura or its
competitors, litigation and other factors including sales of substantial
blocks of Centura's common stock. 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
Centura's common stock in any given period.
Additionally, Centura may not learn of, or be able to confirm,
revenue or earnings shortfalls until late in the fiscal quarter or
following the end of the quarter, which could result in an even more
immediate and adverse effect on the trading of Centura's common stock.
Finally, Centura participates in a highly dynamic industry, which
often results in significant volatility of its common stock price,
without necessarily any regard to whether Centura has experienced changes
in its business, operating results, or financial condition.
Centura may have difficulty restructuring its operations and
integrating Raima into its business.
The realization of the benefits sought from the merger depends on
the ability of the combined company to better utilize product development
capabilities, sales and marketing channels, administrative organization
and facilities than either company could do separately. These benefits
may not be achieved if the activities of Centura and Raima are not
integrated in a coordinated, timely and efficient manner.
The combination of the two organizations will also require the
dedication of management resources, which will temporarily detract
attention from the day-to-day business of the combined company.
The impact of Centura's recent strategic changes is uncertain.
Centura's recent restructuring efforts may not be successful.
Centura has restructured its operations and announced changes in
strategic direction several times during the past three years.
o The first of these changes, which began in December 1995,
encompassed a change in Centura's name from Gupta Corporation to
Centura Software Corporation and the identification of a
flagship product bearing the name Centura.
o In early 1997, Centura refocused its marketing and sales efforts
away from databases and development tools products to a
middleware connectivity product, and entered into an agreement
to merge with InfoSpinner, Inc., the developer of the underlying
product. That merger was not consummated, and Centura entered
into a distribution agreement with InfoSpinner.
o In the second half of 1997, however, Centura restructured and
refocused operations on its core competencies, products and
technologies and terminated its distribution arrangement with
InfoSpinner. Centura continued to pursue this strategic
direction throughout 1998.
It is uncertain whether these efforts will result in improved
operational performance. Centura may or may not undertake other major
restructuring efforts or changes in strategic direction in the future.
Centura's new management team might not be successful in executing
its objectives.
Recent changes in Centura's management make it difficult to predict
Centura's likelihood of success in achieving its business goals. In the
fourth quarter of 1997, Centura 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 Alliances, and the election of
Messrs. Jack King, Phillip Koen, Jr., and Earl Stahl to Centura's board
of directors, and the departure of Samuel M. Inman, III, Earl Stahl and
Richard Gelhaus from their positions as officers of Centura. In
February 1998 Centura 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. Mr. Nicholas
subsequently resigned from the board of directors in December 1998. In
April 1999, Mr. Inman resigned from the board of directors.
The key recent additions to the senior management team are Joe
Falcone, who joined Centura as Senior Vice President and Chief Technology
Officer in November, 1998, and Len Strickler, who joined Centura as Vice
President, Americas and Asia Pacific Sales and Marketing in January 1999.
In connection with the merger, Thomas D. Clark, presently on the
Raima board of directors, will be appointed to Centura's board of
directors. In addition, Stephen P. Smith, presently a director and
principal stockholder and the Chief Executive Officer of Raima, will be
employed as Vice President, Business Development of Centura, and Steven
T. Graves, who is presently President and Chief Operating Officer of
Raima, will be employed as Vice President, Worldwide Consulting of
Centura.
Centura's future performance is substantially dependent on the
performance of its executive officers and key product development,
technical, sales, marketing and management personnel.
The loss of the services of any executive officer or other key
technical or management personnel of Centura for any reason could have a
material adverse effect on the business, operating results and financial
condition of Centura. Centura presently does not have employment or non-
competition agreements with any of its employees. However, Centura will
have employment agreements with key Raima personnel after the merger. See
the section entitled "The Merger-Employment Agreements" on page 47.
The future success of Centura also depends on its continuing
ability to identify, hire, train, motivate and retain other highly
qualified technical and managerial personnel. Centura has experienced
difficulty in identifying and hiring qualified engineering and software
development personnel. Centura might not be able to attract, assimilate
or retain other highly qualified technical and managerial personnel in
the future.
Centura has experienced recent fluctuations in quarterly and annual
results.
Centura has experienced in the past and might continue to
experience in the future significant fluctuations in quarterly or annual
operating results. On an annual basis, Centura reported a profit of $2.1
million in 1998, a loss of $0.6 million for 1997, and a profit of
$2.0 million for 1996. Centura might not be able to sustain profitability
on a quarterly or annual basis.
Many of Centura's product licensing arrangements are subject to
revenue recognition on a per-unit deployed basis as Centura's deferred
obligation to such customers is gradually extinguished. Revenue
recognition in such cases is therefore dependent upon the business
activities of Centura's customers and the timely and accurate reporting
of such activities to Centura, which makes predictability of the related
revenue extremely uncertain.
In addition, quarterly operating results of Centura will depend on
a number of other factors that are difficult to forecast, including:
o general market demand for Centura's products;
o the size and timing of individual orders during a quarter;
o introduction, localization or enhancement of products by Centura;
o delays in the introduction and/or enhancement of products by
Centura and its competitors;
o market acceptance of new products;
o reviews in the industry press concerning the products of Centura
or its competitors;
o software "bugs" or other product quality problems;
o competition and pricing in the software industry;
o sales mix among distribution channels;
o customer order deferrals in anticipation of new products;
o reduction in demand for existing products and shortening of
product life cycles as a result of new product introductions;
o changes in operating expenses;
o changes in Centura's strategy;
o personnel changes;
o foreign currency exchange rates;
o mix of products sold;
o inventory obsolescence;
o product returns and rotations; and
o general economic conditions.
Sales of Centura's products also may be negatively affected by
delays in the introduction or availability of new hardware and software
products from third parties. Centura'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 Centura has operated historically with little or no
backlog of traditional boxed product shipments, it has experienced a
seasonal pattern of product revenue, contributing to variation in
quarterly worldwide product revenues and operating results. It has
generally realized lower European product revenues in the third quarter
as compared to the rest of the year. Centura has also experienced a
pattern of recording a substantial portion of its revenues in the third
month of a quarter. As a result, product revenues in any quarter are
dependent on orders booked in the last month. Centura's staffing and
other operating expenses are based in part on anticipated net revenues, a
substantial portion of which may not be generated until the end of each
quarter. Delays in the receipt or shipment of orders, including delays
that may be occasioned by failures of third party product fulfillment
firms to produce and ship products, or the actual loss of product orders
can cause significant variations in operating results from quarter to
quarter.
Centura may be unable to adjust spending in a timely manner to
compensate for any unexpected revenue shortfall. Accordingly, any
significant shortfall in sales of Centura's products in relation to
Centura's expectations could have an immediate adverse impact on
Centura's business, operating results and financial condition. Due to the
foregoing factors, Centura's operating results may, during any fiscal
period, fall below the expectations of securities analysts and investors.
In such event, the trading price of Centura's common stock could be
materially adversely affected.
Centura and Raima may not succeed in effectively developing new
products and keeping pace with rapid technological changes.
The markets for Centura's and Raima'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 combined company depends
substantially upon its ability to continue to enhance existing products,
to develop and introduce new products incorporating technological
advances and to meet increasing customer expectations, all on a timely
and cost-effective basis. To the extent one or more competitors introduce
products that better address customer needs, Centura's businesses could
be adversely affected.
Centura or Raima may fail to timely deliver or achieve market
acceptance with its products.
The combined company's success will depend on the ability of its
primary products, SQLBase, SQLBase SafeGarde, Raima Database Manager,
Velocis Database Server, 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 market acceptance
as a result of competition, technological change, failure 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
combined company.
In addition, commercial acceptance of Centura's and Raima's products
and services could be adversely affected by critical or negative
statements or reports by industry and financial analysts concerning
Centura and Raima and their products, or other factors such as the
combined company's financial performance. If Centura or Raima are 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, the combined company's business, operating results and
financial condition could be materially and adversely affected.
Centura may experience delays in the development of new products.
Centura depends substantially upon internal efforts for the development
of new products and product enhancements. Like many software companies,
Centura has in the past experienced delays in the development of new
products and product versions, which resulted in loss or delays of product
revenues, and there can be no assurance that Centura will not experience
further delays in connection with its current product development or
future development activities.
Some of Centura's and Raima's products may contain software errors.
Software products as complex as those offered by Centura and Raima may
contain undetected errors when first introduced or as new versions are
released. Centura has in the past discovered software errors in some of
its new products and enhancements after their introduction. Although
Centura has not experienced material adverse effects resulting from any
such errors to date, errors could 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.
New products may result in increased returns of previously sold products.
From time to time, Centura and Raima or their competitors may
announce new products, product versions, capabilities or technologies that
have the potential to replace or shorten the life cycles of Centura's and
Raima's existing products. Centura has historically experienced increased
returns of a particular product version following the announcement of a
planned release of a new version of that product. Centura 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.
The computer industry may shift away from Centura's PC client/server-based
products.
To date, substantially all of Centura'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 Centura'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 World Wide Web connectivity.
Accordingly, some companies may substantially reduce or abandon the use
of PC client/server systems, which could have a material adverse effect
on Centura's future success.
The market for internet software in general, and the segments of
such market addressed by Centura's products in particular, are relatively
new. The future financial performance of Centura will depend in part on
the continued expansion of this market and these market segments and the
growth in the demand for other products developed by Centura and Raima, as
well as increased acceptance of Centura's and Raima's products by MIS
professionals. We cannot assure you that the internet software market and
the relevant segments of the market will continue to grow, that Centura
and Raima will be able to respond effectively to the evolving requirements
of the market and market segments, or that MIS professionals will accept
Centura's and Raima's products. If Centura and Raima are not successful in
developing, marketing, localizing and selling applications that gain
commercial acceptance in these markets and market segments on a timely
basis, the combined company's business, operating results and financial
condition could be materially and adversely affected.
Year 2000 problems may have an adverse effect on Centura's and
Raima's operations and ability to offer products and services
without interruption.
Both Centura and Raima utilize a significant number of computer
software programs and operating systems across their entire
organizations. To the extent Centura's and Raima's software applications
use source codes that are unable to appropriately recognize the upcoming
calendar year 2000, some level of modification, or even replacement of
such applications may be necessary. Accordingly, Centura and Raima are
reviewing their internal computer programs and systems to prepare for
problems associated with the year 2000. Centura presently believes that
its and Raima's computer systems will be compliant with the year 2000 in
a timely manner and that the incremental costs to achieve such compliance
will not exceed $100,000 during the last three quarters of 1999. However,
Centura cannot assure you that its or Raima's computer systems will
function properly in the year 2000.
Centura has initiated communications with its customers and third
party suppliers, and Raima has initiated communications with third
parties with whom it has material relationships, to identify and, to the
extent possible, to resolve issues involving the year 2000. However,
Centura and Raima have limited or no control over the actions of its
customers and other third parties. These third parties might not resolve
any or all problems with their systems before the occurrence of a
material disruption to the business of Centura.
In particular, customers that may not be compliant with the year
2000 may experience cash flow difficulties and could negatively affect
Centura's and Raima's accounts receivables or bad debt reserves. Centura
has requested compliance letters from all of its large customers.
Moreover, Centura has created Centura Team2000, which is a service that
determines whether any application built in CTD or SQLWindows is year
2000 compliant. Centura charges for this service and does not mandate
that this service be purchased.
It is also possible that undetected year 2000 issues, or year 2000
issues of third parties with whom Centura or Raima has material
relationships, could have a material adverse effect on Centura's
operations or results of operations.
After the merger the combined company will face intense competition.
The market for embeddable databases and application development
tools system software is intensely competitive and rapidly changing.
Centura's products are specifically targeted at the emerging portion of
this market relating to embeddable PC and World Wide Web client/server
software, and Centura's current and prospective competitors offer a
variety of solutions to address this market segment. Competitor providers
of application development software include Oracle, Sybase's Powersoft
Division, Microsoft, and borland.com (Inprise), and connectivity software
competitors include IBM. Centura also faces potential competition from
vendors of applications development tools based on 4GLs 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 with:
o longer operating histories;
o significantly greater financial, technical, sales, marketing and
other resources;
o greater name recognition;
o larger installed base; and
o established relationships with customers of Centura.
Centura's competitors could in the future introduce products with
more features and lower prices than Centura's offerings. These companies
could also bundle existing or new products with more established products
to compete with Centura. Furthermore, as the PC and World Wide Web
client/server market expands, a number of companies, with significantly
greater resources than Centura, could attempt to increase their presence
in this market by acquiring or forming strategic alliances with
competitors of Centura, or by introducing products specifically designed
for the PC and Web client/server market.
Since database capacity is often indicative of differences in
customer application, segments within the PC client/server market in
which Centura competes can generally be distinguished and segregated by
the target capacity of the database utilized. Centura generally markets
its database products in environments utilizing capacity ranging from
very small environments of less than five hundred kilobytes to those in
excess of five gigabytes. Competitors of Centura, including Microsoft,
Oracle, CA, IBM, Sybase, borland.com (Inprise), Pervasive, Progress, and
Informix, generally have product offerings which compete with Centura'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 reconfigured to provide similar
functionality in Windows or Browser clients, or smaller capacity
environments, could materially and adversely impact Centura's revenues,
results of operations and financial condition.
Raima's products also compete in the embedded segment of the
database management system market. Within this segment, Raima's
competitors include vendors of embedded database management systems, such
as Pervasive, Faircom, Solid, Sybase, MDBS, and Inprise. To a lesser
extent, Raima's products also compete with providers of enterprise
database management systems, including Microsoft and Oracle. Raima also
competes with internally developed, custom database management software.
Many of these competitors have significantly greater financial,
technical, marketing and other resources than Raima. Such competitors may
be able to respond more quickly to new or emerging technologies and
changes in customer requirements or devote greater resources to the
development, promotion and sales of products than Raima. Raima might not
be able to compete successfully against current and future competitors.
Any termination or significant disruption of Centura's or Raima's
relationships with any of their resellers or distributors, or the
failure by such parties to renew agreements with Centura or Raima,
could materially and adversely affect the combined company's
business, operating results and financial condition.
Centura relies on relationships with value-added resellers and
independent third party distributors for a substantial portion of its
sales and revenues. Some of Centura's resellers and distributors also
offer competing products. Most of Centura's resellers and distributors
are not subject to any minimum purchase requirements, they can cease
marketing Centura'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 Centura's business, operating results and financial condition.
Centura also maintains strategic relationships with a number of vertical
software vendors and other technology companies for marketing or resale
of Centura's products.
The distribution channels through which client/server software
products are sold have been characterized by rapid change, including
consolidations and financial difficulties of distributors, resellers and
other marketing partners including certain of Centura's current
distributors. The bankruptcy, deterioration in financial condition or
other business difficulties of a distributor or retailer could render
Centura's accounts receivable from such entity uncollectible, and this
could result in a material adverse effect on Centura's business,
operating results and financial condition. We cannot assure you that
distributors will continue to purchase Centura's products or provide
Centura's products with adequate promotional support. Failure of
distributors to do so could have a material and adverse effect on
Centura's business, operating results and financial condition.
In a number of international markets Centura has entered into
multi-year agreements with independent companies that have also licensed
the use of Centura's name. These agreements are in place to increase
Centura's opportunities and penetration in such markets where the rapid
adoption of client/server technologies is anticipated. While Centura
believes that to date these agreements have increased Centura's
penetration in such markets, there can be no certainty that this
performance will continue nor that these relationships will remain in
place. Centura's future cost of maintaining its business in these markets
could increase substantially if these agreements are not renewed.
Approximately 16% of Raima's sales revenues come from international
distributors and resellers. Raima typically engages these firms to sell
in a country or group of countries and provides products at a discount of
30% or more. Distributors and resellers provide local marketing and sales
organizations, which are assisted by Raima.
In addition, approximately 17% of Raima's revenues are generated as
royalties by original equipment manufacturers or OEMs in the U.S. and
internationally. These OEMs are technology companies that embed Raima
databases into their own products. Raima is paid a royalty, which can be
structured on a license fee per-unit-sold, an annual license fee, or as a
royalty "buyout" covering a specified time period and platforms. The
list price for royalties on Velocis Database Server is 60% of the price
of Raima's development products, but discounts are often negotiated in
larger transactions.
The combined company's continued success in international markets
is uncertain.
International sales represented 54%, 58%, and 60% of Centura's net
revenues for the years ended December 31, 1998, 1997 and 1996,
respectively. A key component of Centura's strategy is continued
expansion into international markets, and Centura currently anticipates
that international sales, particularly in new and emerging markets, will
continue to account for a significant percentage of total revenues. As
stated above, approximately 16% of Raima's sales revenues come from
international distributors and resellers. The combined company will need
to retain effective distributors, and hire, retain and motivate qualified
personnel internationally to maintain and/or expand its international
presence. However, Centura cannot assure that it will be able to
successfully market, sell, localize and deliver its products in
international markets.
In addition to the uncertainty as to the combined company's ability
to sustain or expand its international presence, there are certain risks
inherent in doing business on an international level, such as unexpected
changes in regulatory requirements and government controls, problems and
delays in collecting accounts receivable, tariffs, export license
requirements and other trade barriers, difficulties in staffing and
managing foreign operations, longer payment cycles, political and
economic instability, fluctuations in currency exchange rates, seasonal
reductions in business activity during summer months in Europe and
certain other parts of the world, restrictions on the export of critical
technology, and potentially adverse tax consequences, which could
adversely impact the success of international operations. In addition,
effective copyright and trade secret protection may be limited or
unavailable under the laws of certain foreign jurisdictions.
Also, sales of the combined company's products will be denominated
either in the local currency of the respective geographic region or 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 those markets may
negatively impact the combined company's competitive position and
subsequently its revenues, results of operations and financial condition.
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.
The success and ability of the combined company to compete is
dependent in part upon its proprietary technology.
Centura has one patent with respect to its SQLWindows and Centura
Team Developer products. Raima has no patents. The source code for
Centura'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.
Centura and Raima generally enter into confidentiality or license
agreements with their 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 Centura's or
Raima'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 Centura or Raima will prevent
misappropriation of Centura's or Raima'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 litigation could result in substantial costs and
diversion of Centura's or Raima's resources.
Third parties may also claim infringement by Centura or Raima with
respect to current or future products. Centura 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, Centura has received notices alleging
that its products infringe trademarks of third parties. Centura has
historically dealt with and will in the future continue to deal with such
claims in the ordinary course of business, evaluating the merits of each
claim on an individual basis. There are currently no material pending
legal proceedings against Centura regarding trademark infringement.
Any third party infringement claims, whether or not they are
meritorious, could result in costly litigation or require Centura or
Raima to enter into royalty or licensing agreements. Such royalty or
license agreements, if required, may not be available on terms acceptable
to Centura, or at all. If Centura 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.
This prospectus and the documents incorporated by reference into
this prospectus contain forward-looking statements within the "safe
harbor" provisions of the Private Securities Litigation Reform Act of
1995 with respect to our financial condition, results of operations and
business and on the expected impact of the merger on Centura's
performance. Words such as "anticipates," "expects," "intends,"
"plans," "believes," "seeks," "estimates" and similar expressions
identify forward-looking statements. These forward-looking statements are
not guarantees of future performance and are subject to certain risks and
uncertainties that could cause actual results to differ materially from
the results contemplated by the forward-looking statements. In evaluating
the merger, you should carefully consider the above discussion of risks
and uncertainties.
SPECIAL MEETING OF RAIMA'S STOCKHOLDERS
The holders of two-thirds of the issued and outstanding shares
of Raima common stock must vote in favor of the merger for its approval.
Raima's board of directors has called a special meeting of the Raima
stockholders, to be held on June 4, 1999 at 5:30 p.m. local time, at the
Raima's offices located at 701 Fifth Avenue, Suite 4800, Seattle,
Washington, 98104. At the special meeting, the Raima stockholders of
record as of the close of business on May 12, 1999 will be asked to
consider and vote upon the merger and such other business as may properly
come before the meeting.
Record Date
The Raima board has fixed May 12, 1999 as the record date for
determination of Raima stockholders entitled to notice of, and to vote
at, its special meeting. Accordingly, only stockholders of record at the
close of business on May 12, 1999 are entitled to notice of, and to vote
at, Raima's special meeting. Each holder of record of shares of Raima
common stock on the record date is entitled to cast one vote per share,
exercisable in person or by a properly executed proxy at Raima's special
meeting. As of the record date, there were 6,557,528 shares of Raima
common stock outstanding and entitled to vote which were held by 70
holders of record.
Voting at the Raima Special Meeting
Raima stockholders representing a majority of the outstanding
shares of Raima common stock outstanding on the record date must be
present either in person or by proxy at Raima's special meeting in order
for a quorum to be present for purposes of voting on the merger. Pursuant
to applicable law, the affirmative vote of the holders of two-thirds of
the outstanding shares of Raima common stock is required to approve and
adopt the merger. An abstention from voting on the merger will have the
effect of a vote "against" the merger since it is one less vote in
favor. Stephen P. Smith, Wayne L. Warren and Randall R. Merilatt, who
collectively hold a total of 5,079,910 shares of Raima common stock,
representing approximately 81% of the currently outstanding shares of
Raima common stock, have agreed in the merger agreement to vote in favor
of the merger. Thus, the approval of the merger by the Raima stockholders
is assured.
Proxies
All shares represented by each properly executed, unrevoked proxy,
in the form accompanying this prospectus, which is received in time for
the special meeting will be voted in the manner specified therein. If the
manner of voting is not specified in an executed proxy received by Raima
the proxy will be voted for approval of the merger.
Any stockholder giving a proxy in the form accompanying this proxy
statement has the power to revoke the proxy prior to its exercise. A
proxy can be revoked by (1) delivering to the secretary of Raima an
instrument of revocation prior to the special meeting, (2) presenting a
duly executed proxy bearing a later date or time than the date or time of
the proxy being revoked at the special meeting, or (3) attending the
special meeting and electing to vote in person. Mere attendance at the
special meeting will not serve to revoke a proxy.
The expense of soliciting proxies will be borne by Raima. The
solicitation will be by mail. Further solicitation of proxies may be made
by telephone or oral communication with stockholders by directors,
officers and other employees of Raima who will not receive additional
compensation for the solicitation.
THE MERGER
This section of the prospectus describes material aspects of the
proposed merger, including the merger agreement. While we believe that
the description covers the material terms of the merger and the related
transactions, this summary may not contain all of the information that is
important to you. You should read this entire document and the other
documents we refer to carefully for a more complete understanding of the
merger. In addition, we incorporate important business and financial
information about Centura into this prospectus by reference. You may
obtain the information incorporated by reference into this prospectus
without charge by following the instructions in the section entitled
"Where You Can Find More Information" on page 77 of this prospectus.
Background Of The Merger
Centura, until late 1997, had been primarily focused on Fourth
Generation Language software development tools and databases embedded in
software applications for business. In late 1997, Centura expanded its
use of the term "embedded" software to include software embedded in
electronic devices, appliances and other computer hardware and embraced
this expanded definition within the framework of a formal strategic
direction. Raima has been selling its line of embeddable database
products for several years in computer hardware, electronic device and
appliances markets.
On or about December 15, 1998, Richard Lucien, Vice President,
Finance and Operations of Centura, contacted Stephen P. Smith, Chief
Executive Officer of Raima by telephone to discuss cross-licensing,
cross-selling and other potential joint strategic opportunities the two
companies might pursue. In the course of this discussion it was
determined that both Raima and Centura may have an interest in combining
their operations and the strategic merits of what such a combination
might be were also discussed.
From December 15, 1998 through December 31, 1998 discussions
concerning the potential merits of combined operations continued. Such
discussions included Scott Broomfield, Chairman and Chief Executive
Officer of Centura, John Bowman, Executive Vice President and Chief
Financial Officer of Centura, Mr. Smith and Mr. Lucien.
On January 4 and 5, 1999, representatives from both companies,
including Mr. Smith, Steven Graves, President and Chief Operating Officer
of Raima, Chris Schember, Raima's financial advisor, Larry Stefonic,
Managing Director of Raima's Australian subsidiary, and Mr. Broomfield,
Mr. Bowman, Joe Falcone, Chief Technical Officer of Centura, Kathy Lane,
Sr. Vice President of Alliances of Centura, Mr. Lucien, David Tollen,
Director of World Wide Transactions of Centura and Jay Botelho, Director
of Product Management of Centura, met to discuss in more depth the
benefits and issues related a merger and what the terms of such a merger
might be. During the course of these meetings it was decided to continue
to pursue discussions related to a merger of the companies, predicated
upon the ability to agree on terms and conditions and the results of
further due diligence to be performed by both parties.
Beginning January 11, 1999, Mr. Broomfield, Mr. Bowman, Mr. Lucien,
Mr. Tollen, Mr. Smith and Mr. Schember had numerous discussions relating
to the structure of a transaction and the terms and conditions thereto.
On January 20, 1999, at a regularly scheduled meeting of Centura's
board of directors, management of Centura discussed the recent
communications with Raima and the advantages of a business combination.
Centura's board of directors authorized the appropriate officers to
continue with formal merger negotiations.
On January 29, 1999 the companies completed a non-binding agreement
setting forth the terms and conditions for the proposed transaction which
included:
o approximate exchange ratio of Centura shares for Raima shares
and conditions thereto
o anticipated professional fees to be incurred
o the basic terms of employment agreements for certain Raima employees.
Beginning February 1, 1999 and continuing through March 15, 1999
the companies completed bi-directional due diligence reviews which
included investigation of technical fit, a financial and legal review,
exploration and comparison of the respective company cultures and
discussions with customers. Upon completion of a majority of their due
diligence work, the companies began detailed discussions concerning a
definitive agreement to merge and began drafting the underlying
agreement.
Extensive discussions between the parties, including Orrick
Herrington & Sutcliffe LLP, counsel for Centura, and Heller, Ehrman,
White and McAuliffe, counsel to Raima, concerning the terms of a
definitive agreement, began February 15, 1999 and continued through
execution of the definitive agreement.
On March 9, 1999, Centura's board of directors held a special
meeting to discuss the proposed transaction. Mr. Broomfield and other
members of management reviewed the status of the transaction, including
the following:
o the details related to the proposed merger that still required
resolution
o a financial review of the proposed transaction
o a review of Raima's business operations
o the results of Centura's due diligence review
On March 10, 1999 Centura engaged First Security, Van Kasper to
perform financial advisory services concerning a review of the financial
aspects of the proposed transaction, including an analysis of the
fairness of the transaction to the stockholders of Centura.
On the evening of March 11, 1999 Raima's board of directors met and
the senior management and legal and financial advisors of Raima reviewed
the following:
o the status of the negotiations of the proposed transaction
o the results of the due diligence evaluation of Centura
o the benefits and potential risks of the transaction with Centura
o the principal terms of the merger agreement and related documents
Raima's legal advisors discussed the board's fiduciary duties in
considering a strategic business combination and strategic alternatives
and further discussed the terms of the merger agreement and related
documents. Raima's financial advisor reviewed the strategic rationale
for, and financial analyses relating to, the proposed merger.
On the morning of March 15, 1999, Centura's board of directors held
a special meeting to discuss the proposed transaction. Representatives of
First Security, Van Kasper presented to Centura's board of directors a
summary of its analyses of the fairness of the transaction to the
stockholders of Centura from a financial point of view. Mr. Broomfield
and representatives of Orrick Herrington & Sutcliffe LLP, Centura's legal
advisors, outlined the terms of the proposed merger and the directors'
legal duties and responsibilities. At the conclusion of the meeting,
Centura's board of directors unanimously approved the principal terms of
the proposed business combination, approved the merger agreement in the
form presented and authorized management to finalize the details of the
merger agreement.
On the morning of March 15, 1999, Raima's board of directors met
again to discuss the merger. Scott Broomfield and John Bowman attended
part of this meeting to address Raima's board of directors regarding the
perceived benefits of the merger and to answer questions. Following
discussion and further consideration of the merger by all of the
directors, including a discussion of the interests of certain directors
in the merger which are different than the interests of the stockholders,
Raima's board of directors determined that the proposed merger was
advisable and unanimously approved the merger agreement and resolved to
recommend that Raima stockholders approve the merger agreement.
Centura and Raima entered into the definitive merger and
reorganization agreement as of March 15, 1999. On the afternoon of March
15, 1999, subsequent to execution of the agreements Raima and Centura
each issued a press release announcing that they had entered into
definitive agreements to merge.
Joint Reasons For The Merger
Centura's and Raima's boards of directors have determined that the
combined company following the merger would have the potential to realize
long-term improved operating and financial results. Centura's and Raima's
boards of directors have identified additional potential mutual benefits
of the merger that they believe will contribute to the success of the
combined company. These potential benefits include the following:
o The merger allows the combined entity to clearly define the
market for embedded and secure databases as a market which
encompasses database products embedded in software applications,
computer hardware, information appliances and other appliances,
and places it in a position of leadership in this market.
o The combined entity will be one of the largest participants in
the world-wide market for embedded micro and e-business
databases and data management tools, supporting a wide variety
of cross-platform solutions for secure embedded and e-business
solutions. Platforms the combined entity will support include
Unix, Linux, NT, Netware, Windows CE and a variety of real-time
operating systems, or RTOS, utilizing the three database options
of SQLBase 7.5/SafeGarde, RDM and Velocis. This will place the
combined entity a position of strategic advantage when compared
with competitors with less product depth.
o International Data Corporation, or IDC, has estimated the
Windows CE based information appliance market to be growing at a
rate of 70% a year. The combination provides products already
developed for this market by Raima to a broad distribution
channel and experienced sales force at Centura. The combination
also provides Centura the ability to reallocate scarce
development resources to other projects, resulting in a more
efficient use of resources by the combined entity.
o Centura believes an important direction of information
management is in connecting micro and e-business databases to
core business systems, allowing connectivity and browser based
access to information, to and from appliances, mobile users,
desktops and back-end servers in a secure fashion. The
combination allows the companies to leverage their combined
strength in business software application development tools,
embedded and secure databases, connectivity, and browser based
access to information.
o Many of the applications built using the combined companies'
product line tend to be found in relatively insecure
environments, outside of a firewall and possibly embedded in
portable devices. For such systems, security is becoming an
increasingly important "must-have" feature. Over time the
companies intend to add end-to-end security to the entire
combined product line, providing products which are both secure
and scalable.
o The combined entity will immediately be enabled with a combined
consulting services organization of approximately 20 individuals
capable of providing enhanced applications design and
development, which will further enable the combined entity to
more effectively offer "whole product" and complete solutions
for its customers.
Raima's Reasons for the Merger; Board Recommendation
In 1994, shortly after a resource intensive introduction of Raima's
new flagship product, Velocis Database Server, Raima's board of directors
and its new management team made the decision to focus Raima's limited
resources on enhancing product technology, while positioning the company
for sale. Through 1998, Raima completed new releases of three major
products, paid off all its debts, and considered obtaining equity
financing. In early 1998, Mr. Smith was specifically charged by the board
with the priority to finance or sell the company. In April 1998, Raima
negotiated a $2 million credit line to pay off debts and to finance
growth, then proceeded to contact brokers to sell the company.
Over a period of several months, Raima's management consulted with
Raima's board of directors regarding a potential business combination.
Beginning in January 1999, Raima's board of directors, along with Raima's
management, engaged in several meetings and negotiations discussing the
desirability and terms of such a business combination.
At a special meeting of Raima's board of directors held on March
11, 1999, Raima's board of directors received presentations concerning,
and reviewed the terms of, the merger agreement with members of Raima's
management and its legal counsel and also received a presentation from
its financial advisor.
On March 15, 1999, Raima's board of directors held another meeting
to discuss the merger, at which they received a presentation from Scott
Broomfield, Chairman and Chief Executive Office of Centura. Following the
meeting, Raima's board of directors determined that the proposed merger
was fair to, and in the best interests of, the stockholders of Raima.
Accordingly, Raima's board of directors has unanimously adopted the
merger agreement and resolved to proceed with the merger transaction and
unanimously recommends that Raima's stockholders approve the merger.
In reaching its conclusion to approve the merger, Raima's board of
directors considered the following factors:
o historical information concerning Centura's and Raima's
respective businesses, financial performance and condition,
operations, technology, management and competitive position,
including public reports concerning results of operations during
the most recent fiscal year and fiscal quarter for Centura filed
with the SEC;
o the financial condition, cash flows and results of operations of
Raima, both on a historical and prospective basis, including its
financial prospects as an independent company;
o the engineering, marketing and sales benefits of combining the
products of Centura and Raima;
o Centura's ability to sell Raima products into its existing
customer base and thereby achieve greater presence and
distribution of Raima's core products;
o the general business and competitive conditions in its industry
and the risks and uncertainties in remaining an independent
company, as well as Raima's management's view as to the
potential for other third parties to merge with or to acquire
Raima;
o comments made by Raima's financial advisor concerning a range of
values for Raima as well as a comparison of the percentage of
Centura common stock being issued in the merger to Raima's
relative contribution to the financial condition and operations
of the combined entity after the merger;
o the opportunity the merger provides for Raima stockholders to
trade shares of the combined entity in the public equity markets
after the merger;
o the terms and conditions of the merger agreement, including the
parties' representations, warranties and covenants and the
conditions to their respective obligations;
o the due diligence investigations of Centura conducted by Raima's
management and financial advisor; and
o current financial market conditions and historical market
prices, volatility and trading information with respect to
Centura common stock.
Raima's board of directors also identified and considered the
following potential negative factors in its deliberations concerning the
merger:
o possible disruption of Raima's business pending completion of
the merger;
o the possibility that the merger might not be consummated and the
negative effect of the public announcement of the merger on
Raima's sales and operating results and on Raima's ability to
retain key management, marketing and technical personnel;
o the possibility of management disruption associated with the
merger and the risk that, despite the efforts of Centura and
Raima, key technical and management personnel might not remain
employed by Raima;
o the substantial expense to be incurred in connection with the
merger, including the costs of integrating the businesses and
transaction expenses arising from the merger;
o the volatility and recent trading values of Centura's common
stock; and
o the risk factors of Centura identified in documents filed by
Centura with the SEC and available to the general public.
Raima's board of directors believed that these potential negative
factors were outweighed by the potential benefits of the merger.
The list of factors above represents many factors considered by the
board but is not exhaustive. Raima's board of directors did not quantify
or assign relative weights to the specific factors considered in reaching
its determination. In addition, individual members of Raima board of
directors may have given different weights to different factors. Based on
the factors outlined above, Raima's board of directors determined that
the merger is in the best interests of Raima and all of its stockholders.
Conflicts of Interests of Certain Persons in the Merger
In considering Raima's board of director's recommendation that
Raima's stockholders vote in favor of the merger, Raima's stockholders
should be aware that several major stockholders, executive officers and
directors of Raima have certain interests in the merger that are
different from, or in addition to, the interests of Raima's stockholders
generally.
Ownership of Raima Common stock. As of March 15, 1999, directors
and executive officers of Raima beneficially owned, directly or
indirectly, an aggregate of 5,830,775 shares of Raima common stock,
including shares issuable upon the exercise of outstanding stock options,
which would represent approximately 77% of the outstanding shares of
Raima common stock, if all outstanding options were actually exercised.
Acceleration of Options. As of March 15, 1999 directors and
executive officers of Raima hold options to purchase approximately
495,275 shares of Raima common stock, which would represent about 7% of
the Raima common stock outstanding if all options were exercised. In
connection with the merger, under the terms of the Raima Stock Option
Plan, these directors and officers and other holders of outstanding
options will have the right to exercise their options in full immediately
prior to the merger, and to thereby participate in the merger, regardless
of whether or not the vesting requirements of such options have been
satisfied.
Directorship. After the merger, one of Raima's directors, Thomas R.
Clark, will be appointed to the board of directors of Centura. In
addition, Centura agrees in the merger agreement to nominate either Mr.
Clark or another individual designated by Stephen P. Smith, Randall L.
Merilatt and Wayne L. Warren, directors and principal stockholders of
Raima, for election to its board of directors for the next two annual
meetings or until Messrs. Smith, Merilatt and Warren cease to own 50% of
the total shares of Centura common stock they were issued in the merger.
Centura provides each of its directors stock options to purchase
100,000 shares of common stock at an exercise price equal to the closing
fair market value on the date of the grant. Mr. Clark will be granted
these options shortly after his appointment to Centura's board.
Employment Agreements. As a condition to the merger, Centura will
enter into employment agreements with Stephen P. Smith, Randall L.
Merilatt and Wayne L. Warren, each of whom is a director and principal
stockholder of Raima, and Steven T. Graves, who is President and Chief
Operating Officer of Raima. Mr. Smith will be employed as Vice President,
Business Development of Centura; Mr. Graves will be employed as Vice
President, Worldwide Consulting of Centura; and Messrs. Warren and
Merilatt will be employed as Senior Database Architects of Centura.
Centura will pay these employees annual salaries as follows: Mr.
Smith, $175,000, Mr. Graves, $150,000, and Messrs. Warren and Merilatt,
$135,000. Their compensation package will also include quarterly bonuses
or commissions and options to purchase shares of Centura common stock.
See the section entitled "The Merger-Employment Agreements" on
page 47.
Raima's board of directors recognized the interests of these
stockholders, directors and officers and determined that such interests
neither supported nor detracted from the merger transaction being in the
best interests of all the stockholders of Raima.
Completion and Effectiveness of the Merger
The merger will be completed when all of the conditions to
completion of the merger are satisfied or waived, including adoption of
the merger agreement by the stockholders of Raima. The merger will become
effective upon the filing of a certificate of merger with the State of
Delaware and articles of merger with the State of Washington.
Centura and Raima are working towards completing the merger as
quickly as possible. They have agreed in the merger agreement to complete
the merger by June 7, 1999, unless they waive this requirement.
Structure of the Merger and Conversion of Raima Common Stock
In accordance with the merger agreement and Delaware and Washington
law, Centura Subsidiary Corporation, a newly formed and wholly owned
subsidiary of Centura, will be merged with and into Raima. As a result of
the merger, the separate corporate existence of Centura Subsidiary will
cease and Raima will survive the merger as a wholly owned subsidiary of
Centura.
Upon completion of the merger, each outstanding share of Raima
common stock will be converted into (1) fully paid and nonassessable
shares of Centura common stock and (2) cash, if there is a positive
adjustment to the purchase price based on Raima's balance sheet.
The total number of shares of Centura common stock issuable in the
merger will be equal to:
o the "Base Share Number" of
o 5,800,000 shares, if the "average Centura trading price,"
or the arithmetic mean of the closing sale price of Centura
common stock on the Nasdaq SmallCap Market for each of the 10
trading days before the merger, is equal to or greater than
$1.00 per share and less than or equal to $3.00 per share, or
o the number of shares obtained by dividing $17,400,000 by the
average Centura trading price, if the average Centura trading
price is greater than $3.00 per share
o minus any professional fee adjustment, which shall be made if
Raima incurs professional fees in connection with the completed
merger in excess of a total of $400,000, and which shall equal
the amount of fees in excess of $400,000 divided by the average
Centura trading price
o and minus any negative balance sheet adjustment, which shall be
made if
o Raima's "current net equity," or total assets divided by
total liabilities (subject to certain exclusions, such as
amounts attributable to Raima's sale of its internet
consulting business prior to the merger), at the end of the
month preceding the merger and ending at least 15 days prior
to the merger,
is less than
o Raima's "minimum net equity," which is equal to (a) Raima's
net equity as of December 31, 1998 minus (b) $700,000.
o A negative balance sheet adjustment will equal the excess of
Raima's current net equity over Raima's minimum net equity
divided by the average Centura trading price.
Each outstanding share of Raima common stock will be converted into
the number of shares of Centura common stock and the amount of cash
determined by dividing the total number of shares issuable and the total
amount of cash payable by the number of shares of Raima common stock
outstanding.
No fractional shares of Centura common stock will be issued in
connection with the merger. Instead you will receive cash, without
interest, in lieu of a fraction of a share of Centura common stock.
Raima stockholders may also receive cash equal to any positive
balance sheet adjustment, which will be equal to the excess, if any, of
Raima's current net equity over Raima's "maximum net equity," which is
equal to Raima's (a) net equity as of December 31, 1998 plus (b) $700,000.
Escrow Arrangement
According to the terms of the merger agreement and an escrow
agreement, Centura will pay to each holder of Raima stock at the time of
the merger 80% of the shares of Centura common stock and 80% of the cash
to which such stockholder is entitled to receive. The 20% balance of
stock and cash will be put in escrow to cover any indemnification claims
under the merger agreement. See the section entitled "The Merger-The
Merger Agreement-Indemnification Claims against the Raima Stockholders"
on page 46.
U.S. Bank Trust, National Association, is the designated escrow
agent. The escrow agent will deliver an irrevocable proxy to the former
Raima stockholders' representatives under which the former Raima
stockholders will be entitled to vote based on their proportionate
ownership of the Centura shares held in escrow. The escrow agent will
invest the cash held in escrow as directed in writing by the former Raima
stockholders' representatives. See the section entitled "The Merger-The
Merger Agreement-The Stockholders' Representatives on page 47. The
escrow agent may only invest in certain types of obligations, as
specified in the escrow agreement. All interest and income from the
investments will be added to the escrow account. The escrow agent will
not be liable for any losses from the investments.
Six months after the effective date of the merger, the escrow agent
will release to the former Raima stockholders the number of Centura
shares equal to half of:
o the Centura shares held in escrow
minus
o the number of shares which, when added to the cash held in
escrow, are needed to cover any indemnification claims then
pending (including reasonable legal fees and expenses).
One year after the effective date of the merger, the escrow agent
will release the balance of first the Centura shares held in escrow and
then the cash held in escrow, to the extent such shares and cash are not
needed to reasonably cover any indemnification claims then pending.
Centura will pay the fees and expenses of the escrow agent.
Exchange of Raima Stock Certificates for Centura Stock Certificates
and Cash
When the merger is completed, Centura will (1) deposit 20% of the
number of shares of Centura common stock and 20% of the total amount of
cash payable to Raima stockholders in the merger into the escrow account
and (2) mail to each Raima stockholder a letter of transmittal and
instructions for use in surrendering their Raima stock certificates in
exchange for Centura stock certificates and cash, if applicable. When you
deliver your Raima stock certificates to the transfer agent along with a
properly executed letter of transmittal and any other required documents,
your Raima stock certificates will be canceled and you will receive
Centura stock certificates and cash representing 80% of the number of
full shares of Centura common stock and total amount of cash to which you
are entitled under the merger agreement.
You will also receive payment in cash, without interest, in lieu of
any fractional shares of Centura common stock which would have been
otherwise issuable to you as a result of the merger.
YOU SHOULD NOT SUBMIT YOUR RAIMA STOCK CERTIFICATES FOR EXCHANGE
UNLESS AND UNTIL YOU RECEIVE THE TRANSMITTAL INSTRUCTIONS AND A FORM OF
LETTER OF TRANSMITTAL FROM THE TRANSFER AGENT.
You are not entitled to receive any dividends or other
distributions on Centura common stock until the merger is completed and
you have surrendered your Raima stock certificates in exchange for
Centura stock certificates.
If there is any dividend or other distribution on Centura common
stock with a record date after the merger and a payment date prior to the
date you surrender your Raima stock certificates in exchange for Centura
stock certificates, you will receive it with respect to the whole shares
of Centura common stock issued to you promptly after they are issued. If
there is any dividend or other distribution on Centura common stock with
a record date after the merger and a payment date after the date you
surrender your Raima stock certificates in exchange for Centura stock
certificates, you will receive it with respect to the whole shares of
Centura common stock issued to you promptly after the payment date.
Centura will only issue a Centura stock certificate or a check in
lieu of a fractional share in a name other than the name in which a
surrendered Raima stock certificate is registered if you present the
transfer agent with all documents required to show and effect the
unrecorded transfer of ownership and show that you paid any applicable
stock transfer taxes.
Material United States Federal Income Tax Consequences of the Merger
The following general discussion summarizes certain material United
States federal income tax consequences of the merger, assuming that you
hold your shares of Raima common stock as a capital asset. This
discussion is based on the Internal Revenue Code of 1986, or the Code,
its legislative history, applicable Treasury regulations, administrative
rulings and court decisions currently in effect, all of which are subject
to change at any time, possibly with retroactive effect. Neither a ruling
from the Internal Revenue Service, or the IRS, nor an opinion of tax
counsel will be received with regard to the United States federal income
tax treatment relating to merger and, therefore, there can be no
assurance that the IRS will agree with the conclusions set forth below.
This discussion does not address all aspects of United States federal
income taxation that may be important to you in light of your individual
circumstances, particularly if you are subject to special rules, such as
rules relating to (1) stockholders who are not citizens or residents of
the United States, (2) financial institutions, (3) tax-exempt
organizations, (4) insurance companies, (5) dealers in securities, (6)
stockholders who acquired their shares of Raima common stock by
exercising employee stock options or rights or otherwise as compensation
or (7) stockholders who hold their shares of Raima common stock as part
of a hedge, straddle or conversion transaction.
It is expected that the merger will be treated as a reorganization
within the meaning of Section 368(a) of the Code. In that case:
o No gain or loss will be recognized by Centura, Raima, or Centura
Subsidiary Corporation as a result of the merger.
o No gain or loss will be recognized by holders of Centura stock
as a result of the merger.
o No gain or loss will be recognized by you when you exchange all
of your Raima common stock solely for Centura common stock in
the merger (except with respect to cash you receive in the
merger).
o The aggregate tax basis of the Centura common stock you receive
in the merger will be the same as your aggregate tax basis in
the Raima common stock you surrender in the merger (reduced by
the tax basis allocable to any fractional share interest in
Centura common stock for which you receive cash and the amount
of any additional cash you receive in the merger, and increased
by the amount of any gain or dividend you recognize as a result
of receiving such additional cash).
o The tax holding period of the Centura common stock that you
receive in the merger (including any fractional share interest
for which you receive cash as described above) will include the
period during which you held the Raima common stock surrendered
in the merger.
Any cash you receive in the merger in addition to the cash you
receive in lieu of a fractional share of Centura common stock will result
in you recognizing gain to the extent of the additional cash received,
but not in excess of any gain you would have recognized on your Raima
common stock if the merger were fully taxable. Your gain recognized on
the receipt of the additional cash would be capital gain if the receipt
of the additional cash is considered "not essentially equivalent to a
dividend," determined as if you received additional shares of Centura
common stock in the merger instead of the additional cash, which
additional shares were then redeemed by Centura for the additional cash
payment. The receipt of such cash by you will not be considered
essentially equivalent to a dividend if based upon your individual facts
and circumstances such deemed redemption of Centura common stock results
in a "meaningful reduction" in your interest in Centura. The IRS has
indicated in published rulings that even a small reduction in the
proportionate interest of a small minority stockholder in a publicly held
corporation who exercises no control over corporate affairs may
constitute a "meaningful reduction." The IRS held in Revenue Ruling 76-
385, 1976-2 C.B. 92, that a reduction in the percentage ownership
interest of a stockholder in a publicly held corporation from .0001118%
to .0001081% (a reduction to 96.7% of the stockholder's prior percentage
ownership interest) would constitute a "meaningful reduction." Under
this ruling, it is likely that you would satisfy the "not essentially
equivalent to a dividend" test if you are a small minority stockholder
who exercises no control over Centura. In making this determination, you
must take into account not only shares you actually own, but also shares
you are deemed to own under Section 318 of the Code. In addition,
contemporaneous or related transactions in stock or stock options may be
taken into account. Any capital gain would be a long term capital gain if
the holding period for your shares of Raima common stock is more than one
year at the time the merger is consummated.
You will recognize gain or loss with respect to the cash you
receive in lieu of a fractional share interest in Centura common stock.
Your gain or loss will be measured by the difference between the amount
of cash that you receive in lieu of the fractional share and the portion
of the tax basis of your shares of Raima common stock allocable to such
fractional share interest (after adjustment to the basis to account for
the receipt of any additional cash received by you and the gain or
dividend resulting from the receipt of such cash). This gain or loss will
be capital gain or loss and will be long term capital gain or loss if
your shares of Raima common stock have been held for more than one year
at the time the merger is consummated.
In the event that the receipt of the additional cash by you does
not satisfy the "not essentially equivalent to a dividend" test then
your gain recognized on the receipt of the additional cash will be
treated as a dividend instead of a capital gain to the extent of your
ratable share of the accumulated earnings and profits of Raima.
Accordingly, you should consult with your own tax advisors if you are
expecting to rely on the "not essentially equivalent to a dividend"
test.
Pursuant to the merger agreement an escrow will be established to
hold a portion of the Centura common stock you receive in the merger. The
escrow agent will not elect to treat the escrow as an association taxable
as a corporation for United States federal income tax purposes.
Accordingly, you should be required to report on your federal income tax
return your allocable share of any income or loss of the escrow and
should be entitled to deduct your share of the fees and expenses of the
escrow subject to applicable limitations. It is not expected that the
escrow will have any material income.
The foregoing discussion assumes that the merger will be treated as
a reorganization within the meaning of Section 368(a) of the Code.
However, there may be a possibility that the merger as structured will
not be considered such a reorganization because, for example, the amount
of additional cash you may receive in the merger could exceed the amount
permitted under the Code for a reorganization. In that event, you would be
treated as selling your Raima common stock to Centura in a fully taxable
transaction, resulting in capital gain or loss measured by the difference
between the value of the Centura common stock and cash received by you in
the merger and your tax basis in the Raima common stock. Gain or loss
would be computed separately for each block of shares sold (shares
acquired separately at different times and prices). The gain or loss on
such sale would be long term capital gain or loss if your Raima common
stock had been held for more than one year. The deductibility of capital
losses is restricted and generally may only be used to reduce capital
gains to the extent thereof. However, individual taxpayers generally may
deduct annually $3,000 of capital losses in excess of their capital
gains.
This foregoing discussion is a general summary and is not intended
to be a complete analysis or description of all potential United States
federal income tax consequences of the merger. In addition, this
discussion does not address (1) tax consequences which may vary with, or
are contingent on, your particular circumstances and tax situation and
(2) any non-income tax or any foreign, state or local tax consequences of
the merger. You are strongly urged to consult with your tax advisor
regarding the tax consequences of the merger to you, including the
effects of United States federal, state, local, foreign and other tax
laws.
Accounting Treatment of the Merger
The merger will be accounted for by Centura as a purchase in
accordance with generally accepted accounting principles. Application of
the purchase method of accounting for the merger will reduce Centura's
pre-tax earnings for approximately 5 years. The reported results of
operations of Centura will include the results of Raima from and after
the closing date of the merger. The assets, including intangible assets,
and liabilities of Raima will be recorded at their fair values as of the
closing date of the merger. Any excess of the purchase consideration over
the fair values of the assets and liabilities of Raima will be recorded
as goodwill and amortized over a 5-year period.
Regulatory Filings and Approvals Required to Complete the Merger
Centura is not aware of any material governmental or regulatory
filings or approvals required for completion of the merger, other than
compliance with the applicable corporate laws of Delaware and Washington.
NASDAQ SmallCap Market Listing
One of Raima's conditions to the merger is that Centura be in
compliance with all of the requirements for continued listing on the
NASDAQ SmallCap Market as of the date of the merger. However, this
condition may be waived by Raima in its discretion.
Rights of Dissenting Stockholders
The following is a brief summary of your right to dissent from the
merger. The summary is not exhaustive and you are encouraged to read the
applicable provisions of Chapter 23B.13 of the Washington Business
Corporation Act, or the Dissenters' Rights Statute, a copy of which is
attached hereto as Annex B. Under the Dissenters' Rights Statute, you
will be entitled to dissenters' rights as a result of the merger.
You will have the right to dissent with respect to the merger and,
subject to certain conditions, will be entitled to receive a cash payment
equal to the fair value of your shares of Raima common stock under the
Dissenters' Rights Statute. If you choose to assert dissenters' rights
you must assert them with respect to all shares of Raima common stock
which you beneficially own or have the power to direct the vote. You may
assert dissenters' rights as to fewer than all the shares registered in
your name only if you dissent with respect to all shares beneficially
owned by any one person and notify Raima in writing of the name and
address of each person on whose behalf you are asserting dissenters'
rights.
To exercise dissenters' rights, (a) before the vote on the merger
is taken, you must deliver to Raima written notice of your intent to
demand payment for your shares if the merger is effectuated, and (b) you
must not vote in favor of the merger. A vote against the merger will not
in itself satisfy the notice requirement, and failure to vote against the
merger will not in itself constitute a waiver of dissenters' rights with
respect to such shares. You should deliver notice of your intent to
exercise dissenters' rights to Raima at its principal executive offices
at 701 Fifth Avenue, Suite 4800, Seattle, WA. If you do not satisfy both
of these requirements you will not be entitled to dissenters' rights.
If the merger is approved, Raima will send written notice not later
than 10 days after the effective time of the merger to each of its
dissenting stockholders (a) stating where such stockholder must send his
or her written payment demand, (b) stating where and when certificates
representing shares of Raima common stock must be deposited, (c)
containing a form for demanding payment which requires that the dissenter
certify whether or not he or she acquired beneficial ownership before the
first public announcement of the merger which occurred on March 15, 1999,
and (d) setting a date by which such written payment demand must be
received. A dissenting stockholder who does not demand payment must
certify that he or she acquired the shares on or before March 15, 1999
and deposit his or her shares within the time provided by such notice or
will not be entitled to dissenters' rights.
Raima will pay to each dissenting stockholder who (a) complies with
the procedures described above within 30 days after the later of the
effective time of the Merger and the date the payment demand is received
and (b) was a stockholder on March 15, 1999, the amount that Raima
estimates to be the fair value of his or her shares, plus accrued
interest. In addition, Raima will provide to these dissenting
stockholders, financial information of Raima, including Raima's balance
sheet, income statement and statement of changes in stockholders' equity
for its last fiscal year and Raima's latest available interim financial
statements, an explanation of how Raima estimated the fair value of the
shares, and, an explanation of how the accrued interest was calculated.
For dissenting stockholders who were not the beneficial owner of the
shares of Raima common stock before March 15, 1999, Raima may withhold
payment and instead send a statement setting forth its estimate of the
fair value of their shares and offering to pay such amount, with
interest, as a final settlement of such dissenting stockholder's demand
for payment. Any dissenting stockholder who is dissatisfied with his or
her payment or offer may, within 30 days of such payment or offer for
payment, notify Raima in writing of their estimate of fair value of his
or her shares and the amount of interest due and demand payment thereof.
If any dissenting stockholder's demand for payment is not settled
within 60 days after receipt by Raima of his or her payment demand, the
Dissenters' Rights Statute requires that Raima commence a proceeding in
King County Superior Court and petition the court to determine the fair
value of the shares and accrued interest, naming all the dissenting
stockholders whose demands remain unsettled as parties to the proceeding.
The court may appoint one or more persons as appraisers to receive
evidence and recommend the fair value of the shares. The dissenting
stockholders will be entitled to the same discovery rights as parties in
other civil actions. Each dissenting stockholder made a party to the
proceeding will be entitled to judgment for the amount, if any, by which
the court finds the fair value of his or her shares, plus interest,
exceeds the amount paid by Raima.
Stockholders should recognize that a court determination of fair
value could result in a price higher than, lower than or equal to the
price available to Raima's stockholders pursuant to the merger. Under the
Dissenters' Rights Statute, a court may consider a variety of factors in
determining fair value. The Dissenters' Rights Statute requires that the
court consider all relevant facts and circumstances in determining the
fair value and that it not give undue emphasis to any one factor.
Court costs and appraisal fees would be assessed against Raima,
except that the court may assess such costs against some or all of the
dissenting stockholders to the extent that the court finds that the
dissenting stockholders acted arbitrarily, vexatiously or not in good
faith in demanding payment. The court may also assess the fees and
expenses of counsel and experts of the respective parties in amounts that
the court finds equitable: (a) against Raima, if the court finds that it
did not substantially comply with the Dissenters' Rights Statute, and (b)
against the dissenting stockholder or against Raima, if the court finds
that the party against whom the fees and expenses are assessed acted
arbitrarily, vexatiously or not in good faith. If the court finds that
services of counsel for any dissenting stockholder were of substantial
benefit to other dissenting stockholders similarly situated, and that the
fees should not be assessed against Raima, the court may award to such
counsel reasonable fees to be paid out of the amounts awarded to
dissenting stockholders who benefited from the proceedings.
The Merger Agreement
Representations and Warranties. Centura and Raima each made a number of
representations and warranties in the merger agreement regarding aspects
of their respective businesses, financial condition, structure and other
facts pertinent to the merger. In addition, certain principal
stockholders of Raima made representations concerning title and ownership
of their Raima shares and certain other matters.
The representations given by Raima cover the following topics,
among others, as they relate to Raima and its subsidiaries:
o Raima's corporate organization and its qualification to do business
o Raima's capitalization
o identification of Raima's subsidiaries
o Year 2000 compliance of Raima's products
o Raima's financial statements
o Raima's accounts receivable
o Raima's taxes
o changes in Raima's business, properties or financial position
since December 31, 1998
o Raima's largest customers and Raima's notice that any intend to
cease doing business with Raima
o Raima's material contracts
o identification of Raima's key employees
o labor matters
o Raima's employee benefit plans
o Raima's authority to enter into the merger agreement
o governmental consents and approvals needed in connection with
the merger
o property leased by Raima
o Raima's personal property
o litigation involving Raima
o the possession and compliance with governmental licenses and
permits required to conduct Raima's business
o employee-related claims against Raima
o employees and proprietary information
o intellectual property used by Raima
o brokers engaged by Raima in connection with the merger
o the condition of Raima's equipment
o environmental matters concerning real property used by Raima
o Raima's corporate records
o information supplied by Raima in the merger agreement, this
prospectus and the related registration statement filed by
Centura
The representations given by Centura cover the following topics,
among others, as they relate to Centura and its subsidiaries:
o Centura's corporate organization and its qualification to do
business and the organization of Centura Subsidiary
o Centura's capitalization
o authorization of the merger agreement by Centura and Centura
Subsidiary
o governmental approvals required to complete the merger
o the validity of the shares to be issued in the merger
o Centura's filings and reports with the SEC
o Centura's financial statements
o Developments having an adverse effect on Centura's business
since December 31, 1998
o information supplied by Centura in the merger agreement, this
prospectus and the related registration statement filed by
Centura
o the effect of the merger on obligations of Centura and under
applicable laws
o litigation involving Centura
The representations, warranties and covenants in the merger
agreement are complicated and not easily summarized. You are urged to
carefully read the article II of the merger agreement entitled
"Representations and Warranties of the Company" and article IV of the
merger agreement entitled "Representations, Warranties and Covenants of
Centura."
Raima's Conduct Of Business Before Completion Of The Merger. Raima agreed
that until the completion of the merger, Raima and its subsidiaries will
operate its businesses in the ordinary course and use commercially
reasonable efforts to:
o preserve intact its current business organization;
o conserve the goodwill and relationships of its
o customers
o suppliers
o others having business relations with it; and
o keep available the services of its officers, employees, agents
and representatives.
Raima also agreed that until the completion of the merger, Raima
would conduct its business in compliance with specific restrictions
relating to the following:
o the maintenance of Raima's corporate existence and good standing
in the appropriate jurisdictions
o the amendment of Raima's articles of incorporation and bylaws
o the issuance of dividends or other distributions
o the increase in compensation of its employees or officers other
than normal increases or certain permitted bonuses
o the merger with or acquisition of assets of other entities
o the taking of any action which would be a breach or default
under its contracts
o allowing Centura access to Raima's corporate offices, properties
and records
o the taking of any action which would result in any
representation or warranty in the merger agreement being
materially inaccurate or incorrect
o the provision of financial statements to Centura
The agreements related to the conduct of Raima's business in the
merger agreement are complicated and not easily summarized. You are urged
to carefully read article V of the merger agreement entitled "Covenants
of the Company."
No Other Negotiations Involving Raima. Until the merger is completed or
the merger agreement is terminated, Raima has agreed not to submit,
solicit, initiate, encourage or discuss any proposal or enter into any
agreement or accept an offer relating to:
o a major restructuring of Raima, or any of its subsidiaries,
other than the sale of the internet consulting division of
Raima's subsidiary, Vista Development Corporation as described
more fully in the section entitled "Information Regarding
Raima-Results of Operations" on page 59
o additional borrowings or increased indebtedness outside of the
ordinary course of business
o a merger or consolidation of Raima or any subsidiary
o a purchase or sale of material assets or capital stock
o any similar transaction or business combination involving Raima
or its subsidiaries, or their assets
In addition, Raima has agreed not to furnish any information to any
third person relating to the matters mentioned above and to notify
Centura about any proposal, offer, inquiry or contact relating to the
matters mentioned above which it receives.
Centura's Covenants. The covenants given by Centura cover the following
topics, among others, as they relate to Centura and its subsidiaries:
o the appointment of Thomas R. Clark or another designated
individual to Centura's board of directors, as discussed in the
sections entitled "The Merger-Operations after the Merger" on
page 48 and "Conflicts of Interest of Certain Persons in the
Merger" on page 32 and
o access to information.
Treatment Of Raima Stock Options. Under the terms of Raima's Stock Option
Plan, each of Raima's outstanding stock options will become fully vested
and exercisable immediately prior to the merger. The shares of Raima
common stock issued upon exercise will then be converted into Centura
stock and cash on the same terms as all other outstanding shares of Raima
common stock are converted upon completion of the merger. Any stock
options not exercised prior to completion of the merger will expire and
be terminated.
Conditions To Completion Of The Merger. Centura's and Raima's obligations
to complete the merger and the other transactions contemplated by the
merger agreement are subject to the satisfaction of each of the following
conditions before completion of the merger, each of which may be waived
by both parties:
o Centura's registration statement on Form S-4, of which this
prospectus forms a part, must be effective and all necessary
state securities authorizations must have been obtained
o the merger agreement must be adopted by the holders of two-
thirds of the outstanding shares of Raima common stock
o no suit, action or other proceeding shall be pending or
threatened before any court or governmental agency seeking to
restrain, to prohibit or to obtain material damages in
connection with the merger
o all applicable approvals and consents required to complete the
merger must be received
o the ancillary agreements, including employment agreements with
key employees of Raima and an escrow agreement, must be executed
and delivered
o the "average trading price" of Centura's shares must not be
less than $1.00 per share
Centura's obligations to complete the merger and the other
transactions contemplated by the merger agreement are subject to the
satisfaction of each of the following additional conditions before
completion of the merger, each of which may be waived by Centura:
o Raima's and its principal stockholders' representations and
warranties must be true and correct in all material respects on
the date of closing of the merger
o Centura must receive a legal opinion of Heller Ehrman White and
McAuliffe, counsel to Raima
o Raima and its principal stockholders must perform or comply in
all material respects with all of their agreements and covenants
required by the merger agreement
o holders of no more than 6% of Raima's common stock will have
dissented from the merger under Washington law
o Centura must receive an officers' certificate from Raima and
certificates from Raima's principal stockholders
o Raima must have received Raima's audited financial statements
for fiscal years ended December 31, 1998 and 1997, together with
an unqualified opinion from PricewaterhouseCoopers LLP
Raima's obligations to complete the merger and the other
transactions contemplated by the merger agreement are subject to the
satisfaction of each of the following additional conditions before
completion of the merger, each of which may be waived by Raima:
o Centura must be in compliance with all the requirements for
continued listing on the Nasdaq SmallCap Market
o Centura's representations and warranties must be true and
correct in all material respects on the date of closing of the
merger
o Raima and its stockholders must receive a legal opinion of
Orrick, Herrington & Sutcliffe LLP, counsel to Centura
o Centura must perform or comply in all material respects with all
of its agreements and covenants required by the merger agreement
o Raima and its stockholders must receive an officer's certificate
from Centura
o within 5 days of the merger, Centura must not have issued a
press release containing news adverse to Centura
Termination Of The Merger Agreement. The merger agreement may be
terminated at any time prior to completion of the merger, whether before
or after adoption of the merger agreement by Raima stockholders:
o by mutual consent of Centura and Raima
o by Centura or Raima, if the merger is not completed before June
7, 1999 except that the right to terminate the merger agreement
is not available to any party whose failure to fulfill any
obligation under the merger agreement has been a cause of the
failure to complete the merger on or before June 7, 1999
Payment Of Merger Expenses upon Termination. If the merger agreement is
terminated because of:
o a breach by Centura, Centura will pay all of Raima's merger-
related fees and expenses;
o a breach by Raima, Raima will pay all of Centura's merger-
related fees and expenses;
o any reason other than a breach by Centura or Raima, Centura will
pay up to $100,000 of Raima's merger-related fees and expenses.
Indemnification Claims against the Raima Stockholders. Centura and Raima
and their successors, assigns, officers, directors, stockholders,
employees and agents will be indemnified and held harmless by the Raima
stockholders from and against all damages, claims, losses, liabilities
and expenses, including legal and accounting, which arise out of
o any breach of the merger agreement by Raima or its principal
stockholders who are parties to the merger agreement
o any breach of any of the representations, warranties or
covenants made in the merger agreement by Raima or its principal
stockholders who are parties to the merger agreement
o any inaccuracy or misrepresentation in the schedules or exhibits
or certificate or document delivered according to the merger
agreement by Raima or its principal stockholders who are parties
to the merger agreement
o any claim based on events occurring or circumstances existing
prior to the effective date of the merger.
Parties will only be entitled to indemnification if the aggregate
indemnification claims exceed $100,000. All rights to assert
indemnification claims expire one year after the effective date of the
merger, except for claims notified to the stockholders' representatives
prior to the one-year expiration date.
Indemnification claims will be satisfied solely by first the cash
and then the shares held in escrow. See the section entitled "The
Merger-Escrow Arrangement" on page 34. No former Raima stockholder will
have any personal liability for the indemnification claims.
Stockholders' Representatives. Under the merger agreement, Stephen P.
Smith, Wayne L. Warren and Randall L. Merilatt, principal stockholders
and directors of Raima, are appointed and authorized to act as the
representatives, exclusive agent and attorney-in-fact of the Raima
stockholders for all matters of the merger agreement and the escrow
agreement. The stockholders' representatives will act by vote or consent
by any one or more of them owning a majority of the Centura shares held
in escrow. Any action taken by the stockholders' representatives will be
binding on the Raima stockholders. The stockholders' representatives will
act at all times in the best interests of the Raima stockholders and will
provide written notice to them within 3 business days of any action taken
on their behalf.
Employment Agreements
As a condition to the merger, Centura will enter into employment
agreements with Stephen P. Smith, Randall L. Merilatt, Wayne L. Warren
and Steven T. Graves. Mr. Smith will be employed as Vice President,
Business Development of Centura; Mr. Graves will be employed as Vice
President, Worldwide Consulting of Centura; and Messrs. Warren and
Merilatt will be employed as Senior Database Architects of Centura.
Centura will pay these employees annual salaries as follows: Mr.
Smith, $175,000, Mr. Graves, $150,000, and Messrs. Warren and Merilatt,
$135,000. Their compensation package will also include bonuses and
commissions and options to purchase an aggregate of 1,200,000 shares of
Centura common stock.
The initial term of employment in each agreement is 3 years
following the merger, unless sooner terminated, as described below. These
employees agree not to compete with Centura or solicit any of Centura's
customers for a period ending on the earlier of
o 3 years after the effective date of the merger, or
o the date which is 1 year after termination of the employment
agreement.
However, the employees may own, manage or be employed by entities
which do not compete directly with Centura's database business.
If any of these employees is terminated by Centura other than for
"cause" or voluntarily resigns for "good reason," as defined in their
employment agreements, they will continue to be paid their annual salary
for a period after termination equal to the lesser of (a) 18 months or
(b) the end of the regular term of employment under their employment
agreement, but in no event less than 3 months. In addition, following
Centura's termination of any of these employees other than for "cause,"
or an employee's resignation for "good reason," that employee's options
will continue to vest and remain exercisable as they would have if the
employee remained an employee of Centura.
Raima Employee Stock Options
Provided the merger occurs, Centura has agreed to issue options,
effective the date of the merger, to purchase up to 800,000 shares of
Centura common stock to the former employees of Raima (excluding Messrs.
Smith, Graves, Warren and Merilatt). The exercise price, vesting schedule
and other terms and conditions of these options will be consistent with
options issued under Centura's existing stock option plan for its
employees.
Operations after the Merger
Stockholders. Following the merger, Raima will become a wholly owned
subsidiary of Centura, and be fully integrated with Centura's operations.
The membership of Centura's board of directors will remain unchanged as a
result of the merger, except Centura has agreed to appoint Thomas R.
Clark to its board of directors, and in connection with its next 2 annual
meetings thereafter, to nominate and recommend for election Mr. Clark, or
another designee of Raima's principal stockholders, to its board of
directors for a period of 2 years after the merger or until the principal
stockholders fail to collectively own 50% of the Centura shares issued to
them in the merger.
Some of the conditions of the merger include that:
o Stephen P. Smith, Raima's Chairman and Chief Executive Officer,
join Centura as Vice President of Business Development;
o Steven Graves, Raima's President and Chief Operating Officer,
join Centura as Vice President of Consulting; and
o Wayne Warren and Randall Merilatt, current employees and
significant stockholders of Raima, join Centura as Senior
Database Architects.
Messrs. Smith, Graves, Warren and Merilatt have separate employment
contracts.
The stockholders of Raima will become stockholders of Centura, and
their rights as Stockholders will be governed by the Centura bylaws and
the laws of the State of Delaware.
Management. Following the merger, the Seattle office of Raima will
continue to function indefinitely, but as an office of Centura. The
office will focus on developing and maintaining existing Raima products,
as well as other products Centura may decide to develop and offer to the
market. Centura's management team will remain in place following the
merger, supplemented by Mr. Smith as Vice President of Business
Development, and Mr. Graves as Vice President of Consulting.
Administration. To the extent possible, the administrative functions
currently performed at Raima will be consolidated with those at Centura.
Administration consists primarily of Finance, Accounting, Operations, and
Human Resources. Finance and Accounting will be consolidated generally
within one quarter following the completion of the merger, whereas Human
Resources will be consolidated immediately following the merger.
Engineering and Consulting. There will be two database code lines; one
each for Centura and Raima. The development of Centura products will
remain at Redwood Shores, whereas the development of Raima products
combined with certain Centura product development will remain in Seattle.
The consulting business will be managed out of the Seattle office.
However, Raima has entered into an agreement to sell the internet
consulting business conducted by Raima's wholly owned subsidiary, Vista
Development Corporation, which is expected to occur prior to the merger.
Sales and Marketing. The combined sales force will be structured similar
to the Centura sales organization; a North American, European and Asia
Pacific organizations with regional divisions, supplemented with Raima
staff. There will also remain an "inside" sales staff which will remain
in Seattle. Following the merger, all products will be cross-sold - there
will not be separate Centura or Raima sales forces.
Products. Following the merger, Centura will continue to offer all of its
current products, along with Raima Database Manager and Velocis products.
Centura will brand all products as Centura, and product pricing is
expected to remain unchanged.
UNAUDITED PRO FORMA CONDENSED COMBINED CONSOLIDATED FINANCIAL INFORMATION
The following unaudited pro forma condensed combined consolidated
financial information gives effect to the acquisition by Centura of Raima
in a transaction accounted for as a purchase. The unaudited pro forma
condensed combined consolidated financial information is based on the
individual historical consolidated financial statements (and related
notes) of Centura and Raima for the year ended December 31, 1998,
incorporated by reference or included elsewhere in this prospectus.
The following unaudited pro forma condensed combined consolidated
statement of operations is not necessarily indicative of the results of
operations of the combined company or the results of operations which
would have resulted had Centura and Raima been combined during the period
presented. In addition, the pro forma results are not intended to be a
projection of future operating results. The unaudited pro forma condensed
combined consolidated financial information should be read in conjunction
with the historical consolidated financial statements (and related notes)
of Centura and Raima incorporated by reference or appearing elsewhere in
this prospectus.
The unaudited pro forma condensed combined consolidated balance
sheet assumes that the acquisition took place on December 31, 1998. The
unaudited pro forma condensed combined consolidated statement of
operations assumes that the acquisition took place as of January 1, 1998.
The unaudited pro forma condensed combined consolidated financial
statements are based on the estimates and assumptions set forth in the
notes to such statements. The pro forma adjustments are based on a
preliminary valuation of Raima made in connection with the development of
the pro forma information for illustrative purposes to comply with the
disclosure requirements of the SEC.
Centura Software Corporation
Unaudited Pro Forma Condensed Combined Consolidated Balance Sheet
(in thousands)
<TABLE>
<CAPTION>
Centura Raima Pro Forma
December 31, December 31, --------------------------
1998 1998 Adjustments Combined
------------ ------------ ------------ -----------
<S> <C> <C> <C> <C>
Current Assets:
Cash and cash equivalents.................. $6,414 $406 $6,820
Accounts receivable, net................... 12,988 1,800 14,788
Other current assets....................... 3,627 303 ($85)(b) 3,845
------------ ------------ ------------ -----------
Total current assets.................... 23,029 2,509 (85) 25,453
Property and equipment, net.................. 2,888 437 3,325
Goodwill..................................... -- -- 6,399 (c) 6,399
Intangibles and other assets................. 3,455 77 3,532
------------ ------------ ------------ -----------
Total assets............................ $29,372 $3,023 $6,314 $38,709
============ ============ ============ ===========
Current Liabilities:
Accounts payable........................... $2,798 $462 $3,260
Accrued compensation and related expenses.. 1,567 408 1,975
Short-term borrowings...................... 2,663 364 3,027
Other accrued liabilities.................. 1,744 316 $750 (d) 2,810
Deferred revenue........................... 13,274 873 14,147
------------ ------------ ------------ -----------
Total current liabilities............... 22,046 2,423 750 25,219
Other long-term liabilities.................. 53 36 (36)(b) 53
Commitments and contingencies
Stockholders' equity:
Preferred stock............................ -- -- --
Common stock............................... 85,690 2,257 3,907 (a) 91,854
Accumulated other comprehensive loss....... (426) -- (426)
Deferred compensation...................... -- (640) 640 (a) --
Accumulated deficit........................ (77,991) (1,053) 1,053 (a) (77,991)
------------ ------------ ------------ -----------
Total stockholders' equity.............. 7,273 564 5,600 13,437
------------ ------------ ------------ -----------
Total liabilities and stockholders'
equity................................ $29,372 $3,023 $6,314 $38,709
============ ============ ============ ===========
</TABLE>
See accompanying notes to unaudited pro forma condensed combined
consolidated financial information.
Centura Software Corporation
Unaudited Pro Forma Condensed Combined Consolidated Statement of Operations
(in thousands, except per share data)
<TABLE>
<CAPTION>
For the Year Ended
December 31, Pro Forma
------------------------- --------------------------
Centura Raima Adjustments Combined
------------ ------------ ------------ -----------
<S> <C> <C> <C> <C>
Net revenues:
Product.................................... $33,453 $6,314 $39,767
Service.................................... 20,044 2,270 22,314
------------ ------------ ------------ -----------
Net revenues 53,497 8,584 62,081
------------ ------------ ------------ -----------
Cost of revenues:
Product.................................... 4,652 96 4,748
Service.................................... 4,382 1,170 5,552
------------ ------------ ------------ -----------
Cost of revenues........................ 9,034 1,266 10,300
------------ ------------ ------------ -----------
Gross profit............................ 44,463 7,318 51,781
------------ ------------ ------------ -----------
Operating expenses:
Sales and marketing........................ 25,776 3,054 28,830
Engineering and product development........ 7,938 1,648 9,586
General and administrative................. 6,854 2,729 9,583
Goodwill amortization...................... -- -- $1,280 (a) 1,280
------------ ------------ ------------ -----------
Total operating expenses................ 40,568 7,431 1,280 49,279
------------ ------------ ------------ -----------
Operating income (loss)................. 3,895 (113) (1,280) 2,502
Other income (expense), net.................. (1,507) (107) (1,614)
------------ ------------ ------------ -----------
Income (loss) before taxes................... 2,388 (220) (1,280) 888
Provision for income taxes................... (273) 93 (180)
------------ ------------ ------------ -----------
Net income (loss) from
continuing operations..................... $2,115 ($127) ($1,280) $708
============ ============ ============ ===========
Basic net income per share................... $0.08 $0.02
============ ===========
Basic weighted average common shares(b)...... 27,390 33,190
============ ===========
Diluted net income per share................. $0.08 $0.02
============ ===========
Diluted weighted average common shares(b).... 27,776 33,576
============ ===========
</TABLE>
See accompanying notes to unaudited pro forma condensed combined
consolidated financial information.
Notes to Unaudited Pro Forma Condensed Combined Consolidated Financial
Information
Note 1-Basis of Presentation
The unaudited pro forma condensed combined consolidated balance
sheet has been prepared to reflect the acquisition of Raima by Centura as
if the acquisition had occurred on December 31, 1998.
The unaudited pro forma condensed combined consolidated statement
of operations for the year ended December 31, 1998 has been prepared to
reflect the acquisition of Raima by Centura as if the acquisition had
occurred on January 1, 1998. The unaudited pro forma condensed combined
consolidated statement of operations presents information only through
income (loss) from continuing operations. Therefore, the extraordinary
gain on the forgiveness of debt of $451,000, net of taxes, for Raima
occurring in fiscal 1998 is excluded from this statement.
There were no material differences in the accounting policies of
Centura and Raima for the periods presented.
Note 2-Purchase Accounting and Pro Forma Adjustments
Purchase Price
In connection with the merger, Centura issued or will be obligated
to issue a total of 5,800,000 shares of Centura common stock. The market
value of a share of common stock used to value the purchase price was
$1.063. In addition, Centura anticipates incurring acquisition costs of
$750,000, resulting in a total purchase price of $6,914,000. The Raima
option grants contained provisions for accelerated vesting of all the
options in the event of a transaction resulting in a change in control of
Raima and are included in the total amount of shares issued by Centura.
Allocation of Purchase Price
The total purchase price of $6,914,000 was allocated to the fair
value of the assets acquired and liabilities assumed as follows:
Amortization
Life
---------------
Tangible assets........ $ 2,938,000 --
Goodwill .............. 6,399,000 5
Liabilities assumed.... (2,423,000) --
---------------
Total .......... $ 6,914,000
===============
Pro Forma Adjustments
The following adjustments were applied to the historical
consolidated statements of operations to arrive at the pro forma
condensed combined consolidated statement of operations:
(a) Reflects the amortization of anticipated goodwill for the
year ended December 31, 1998 on a straight-line basis over 5
years.
(b) Shares used in the pro forma per share calculations reflect
the 5,800,000 Centura common shares issued to Raima
stockholders as if they were outstanding from the beginning
of the period presented.
The following adjustments were applied to the historical
consolidated balance sheets to arrive at the pro forma condensed combined
consolidated balance sheet:
(a) The elimination of the common stockholders' equity accounts
of Raima.
(b) The anticipated net assets of Raima established at fair value
at the acquisition date.
(c) The anticipated excess of acquisition cost over the fair
value of the net assets acquired (goodwill).
(d) The anticipated acquisition costs to be incurred.
INFORMATION REGARDING RAIMA
Overview
Raima develops and markets database management systems that are
used for developing commercial, industrial and corporate in-house
software applications, as well as "embedded systems" applications that
are built into hardware products, such as office equipment and consumer
devices.
Raima's products include two database management systems or
database "engines" that provide the professional software developer
with a number of options for customization. These database engines are
provided on multiple operating systems, including Microsoft Windows
(95/98, CE, NT), many types of UNIX, including Linux and Solaris, and
real-time operating systems such as Wind River Systems' VxWorks and QNX
Software's QNX. Raima has also developed technology used in generating
reports from its database engines. In addition, Raima provides
consulting, training and product support services.
Raima has four wholly owned subsidiaries:
o Vista Development Corporation, a Washington corporation which
provides application development, database integration,
performance optimization, design review and training to clients
o Raima Deutschland GmbH, organized under the laws of Germany,
which is responsible for sales and marketing in Germany
o Raima ANZ, organized under the laws of Australia, which is
responsible for sales and marketing in Australia and New Zealand
o Raima International Sales Corporation, a foreign sales
corporation organized under the laws of the Virgin Islands
Raima has entered into an agreement to sell the internet consulting
services business unit of Vista Development Corporation. Revenues from
this business unit represented approximately 11% of Raima's consolidated
net revenues in 1998. Raima anticipates this sale will occur prior to the
merger becoming effective.
Raima is based in Seattle, Washington and has sales offices in 14
countries. As of April 13, 1999, Raima and its subsidiaries had
approximately 91 employees.
Products and Technology
Raima's principal products are embedded database management
systems, Velocis Database Server and Raima Database Manager. Velocis is a
client/server architecture database engine that supports the ODBC and SQL
standards. Velocis also has interfaces for the C, C++, Java, Delphi, Perl
and Visual Basic programming languages. Raima Database Manager is a file
server architecture database engine, delivered in the form of a shared
library of C language functions called by the application and offers a
relatively small "footprint" in terms of RAM, CPU and disk storage
demands.
Raima has also developed Raima Report Writer, which allows users to
generate reports from information stored in Raima Database Manager.
Software products as complex as those offered by Raima may contain
undetected errors. We cannot assure you that, despite testing by Raima
and by customers, errors will not be found in the products, or, if
discovered, successfully corrected in a timely manner.
Services
In addition to its product offerings, Raima provides consulting and
implementation services as well as technical support. Raima provides
consulting and implementation services through its wholly owned
subsidiary, Vista Development Corporation. Vista provides a range of
implementation and post-implementation services, including application
development, database integration, design review, performance
optimization, migration from Raima Database Manager to Velocis, and
product training. Raima provides technical support through a team of
engineers, who provide remote technical assistance for Raima's products,
including answers to technical questions, functionality issues, and
documentation clarification.
Engineering
Raima's product development efforts are currently directed toward
refining and enhancing Velocis Database Server, Raima Database Manager,
and Raima Report Writer. A key milestone for Raima will be the launch of
Velocis Database Server version 3.0. This product's beta release is
expected in the Second Quarter of 1999.
Raima's current development goals for Velocis Database Server
include developing and improving interfaces for development environments,
such as Java and OLE DB, and implementing architectural changes to
enhance performance. Raima is currently focusing its development efforts
for Raima Database Manager on architectural changes that deliver "re-
entrancy" or the ability to support multiple threads of execution
simultaneously.
Sales and Marketing
Raima's target customers are professional software developers,
development managers and executives. These include major hardware and
software companies, consultants and firms developing systems for specific
vertical markets, such as retail and manufacturing; and corporations
developing applications for internal use. With the exception of the Raima
Report Writer, Raima's products do not target application end-users.
Raima concentrates its marketing efforts on the horizontal market
of professional application development. By focusing on this group, Raima
believes it can clearly identify its prospective accounts and the
developers, managers and executives in these organizations, who are
primary sales targets. Within the market of professional application
development, Raima has identified several segments to focus its marketing
efforts. These include network and systems management,
telephony/telecommunications, and real-time and embedded systems.
Raima employs a direct selling model, in which direct sales
executives work with leads provided by the marketing department and with
Raima's base of existing customers. Raima's sales process incorporates a
"strategic/conceptual selling" methodology that addresses the issues
involved in a complex sale, in which the purchasing decision usually
involves multiple executives within the purchasing company. Raima sales
executives meet with the customers and prospects and provide them with
information, product descriptions and overviews, as well as a sales
presentation.
Distributors and OEM Relationships
Approximately 16% of Raima's sales revenues come from international
distributors and resellers. Raima typically engages these firms to sell
in a country or group of countries and provides products at a discount of
30% or more. Distributors and resellers provide local marketing and sales
organizations, which are assisted by Raima.
In addition, approximately 17% of Raima's revenues are generated as
royalties by original equipment manufacturers, or OEMs in the U.S. and
internationally. These OEMs are technology companies that embed Raima
databases into their own products. Raima is paid a royalty, which can be
structured on a license fee per-unit-sold, an annual license fee, or as a
royalty "buyout" covering a specified time period and platforms. The
list price for royalties on Velocis Database Server is 60% of the price
of Raima's development products, but discounts are often negotiated in
larger transactions.
Competition
Raima's products compete in the embedded segment of the database
management system market. Within this segment, competitors include
vendors of embedded database management systems, such as Pervasive,
Faircom, Solid, Sybase, MDBS, and Inprise. To a lesser extent, Raima's
products also compete with providers of enterprise database management
systems, including Microsoft and Oracle. Raima also competes with
internally developed, custom database management software.
Many of these competitors have significantly greater financial,
technical, marketing and other resources than Raima. Such competitors may
be able to respond more quickly to new or emerging technologies and
changes in customer requirements or devote greater resources to the
development, promotion and sales of products than Raima. We cannot be
certain that Raima will be able to compete successfully against current
and future competitors.
Proprietary Rights
Raima relies upon a combination of statutory and common law
copyright, trademark and trade secret laws, customer licensing
agreements, employee and third party non-disclosure agreements, and other
methods to establish and maintain its proprietary rights to its products.
Raima does not hold any patents. Raima generally enters into
confidentiality agreements with its employees, consultants and customers,
and limits access to, and distribution of, its proprietary information.
Use of Raima's software products is subject to terms and conditions
prohibiting unauthorized reproduction or transfer of such products.
The laws of some foreign countries do not protect Raima's
proprietary rights to as great an extent as do the laws of the United
States. In addition, we cannot assure you that the steps taken by Raima
to protect its proprietary rights will be adequate to prevent
misappropriation of its technology or that Raima's competitors will not
independently develop technologies or similar products that are
substantially equivalent or superior to Raima's technology and products.
Raima is not aware that any of its products infringes the
proprietary rights of third parties. However, we cannot assure you that
third parties will not claim infringement by Raima with respect to
current or future products.
Certain development tools and technology used in Raima's products
are licensed from third parties, including the Velocis JDBC driver. Raima
also licenses certain software products from third parties, including the
Raima Report Writer. These licenses may require Raima to pay royalties
and to fulfill confidentiality obligations. Raima believes that there are
alternative sources for each of the material components of technology
licensed by Raima from third parties. However, the termination of any of
such licenses, or the failure of the third party licensers to adequately
maintain or update their products, could result in delay in Raima's
ability to ship certain of its products while it seeks to implement
technology offered by alternative sources. Any required replacement
licenses could prove costly.
Management's Discussion and Analysis
Management's discussion and analysis should be read in conjunction
with the consolidated financial statements of Raima and related notes and
the information contained in "Selected Consolidated Financial Data of
Raima." The following discussion may contain predictions, estimates, and
other forward-looking statements that involve a number of risks and
uncertainties. See "Risk Factors" beginning on page 13 for a discussion
of certain factors that could cause actual results to differ from those
described in the following discussion.
Overview
Raima was founded in 1982 to provide consulting services and to
develop embedded database management systems. Raima sells its database
products primarily to professional application developers for use in
commercial and line-of-business database applications. Raima's products
are hardware independent and operate on a number of computing
environments, including Microsoft Windows 3.11, Windows 95, Windows NT,
QNX, VxWorks, Linux and many UNIX variants, including Solaris, HP-UX,
AIX, SCO, BSDI. Raima's products include Velocis Database Server, Raima
Database Manager and Raima Report Writer. Raima sells its products
through a direct sales force, international distributors, and Value Added
Resellers (VARs). Raima generates revenue from product sales, license
fees paid by VARs and distributors, and service fees paid by its
customers for technical support and database and internet consulting.
Prior to 1998, Raima recognized revenue in accordance with
Statement of Position 91-1, "Software Revenue Recognition" (SOP 91-1).
For the fiscal year beginning January 1, 1998, Raima has recognized
revenue in accordance with Statement of Position No. 97-2, "Software
Revenue Recognition" (SOP 97-2). In December, 1998, the American
Institute of Certified Public Accountants also issued Statement of
Position 98-9, "Modification of SOP 97-2, Software Recognition, with
Respect to Certain Transactions", which Raima will adopt for
transactions entered into during the fiscal year beginning January 1,
1999.
Results of Operations
The following table sets forth, for the periods indicated, selected
consolidated financial data of Raima and such data as a percentage of
Raima's total net revenue:
<TABLE>
<CAPTION>
Year Ended December 31,
---------------------------------------
1998 1997
------------------- -------------------
Per- Per-
centage centage
of total of total
net net
Amount Revenue Amount Revenue
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Net revenue:
Product........................... $6,314 74% $7,552 88%
Service........................... 2,270 26% 1,061 12%
--------- --------- --------- ---------
Net revenue.................... 8,584 100% 8,613 100%
--------- --------- --------- ---------
Cost of revenue:
Cost of product revenue........... 96 1% 167 2%
Cost of service revenue........... 1,170 14% 769 9%
--------- --------- --------- ---------
Gross profit................... 7,318 85% 7,677 89%
--------- --------- --------- ---------
Operating expenses:
Sales and marketing............... 3,054 36% 3,619 42%
Engineering and product
development..................... 1,648 19% 1,548 18%
General and administrative........ 2,729 31% 2,116 24%
--------- --------- --------- ---------
Total operating expenses....... 7,431 86% 7,283 84%
--------- --------- --------- ---------
Operating income............... (113) -1% 394 5%
Other income (expense), net......... (107) -1% (51) -1%
--------- --------- --------- ---------
Income (loss) before taxes and
extraordinary item................ (220) -2% 343 4%
Provision (benefit) for income
taxes............................. (93) -1% 20 --
--------- --------- --------- ---------
Net income (loss) before
extraordinary item................ (127) -1% 323 4%
Extraordinary item, net of
applicable income taxes........... 451 5% -- --
--------- --------- --------- ---------
Net income.......................... $324 4% $323 4%
========= ========= ========= =========
</TABLE>
Net Revenue. Raima's net revenue for 1998 was $8.6 million which
was consistent with net revenue in 1997. Net revenue remained static in
1998 primarily due to management's decision in 1998 to limit marketing
and sales expenditures, in order to pay approximately $1.2 million of
pre-bankruptcy petition obligations and to reduce borrowings under
Raima's line of credit. Management has increased its spending on sales
and marketing beginning in January 1999.
Raima has entered into an agreement to sell the internet consulting
division of its wholly owned subsidiary, Vista Development Corporation in
fiscal year 1999. This division generated $1.0 million of Raima's net
revenue in 1998 and $262,000 of Raima's net revenue in 1997. As of March
31, 1999, revenue from this division had exceeded $490,000 for the three
months then ended. This sale may cause 1999 revenue to decrease. However,
management believes that the cash provided by the sale will enable Raima
to invest more in its core competencies, database development and
services.
Net Product Revenue. Net product revenue consists of license fees
from certain resellers under product licensing arrangements. Net product
revenue for 1998 was $6.3 million, which represents a 17% decrease from
net product revenue of $7.6 million in 1997. This decrease was primarily
due to the loss of a customer. In addition, reduced investment in sales
and marketing in the second and third quarters of 1998 resulted in a
decrease in product sales in the fourth quarter of 1998.
Net Service Revenue. Net services revenue consists of consulting,
training and maintenance. Net service revenue for 1998 was $2.3 million,
which represents an increase of 109% over 1997 service revenue of $1.1
million. This increase was primarily due to Raima's dedication of a full-
time salesperson to database services sales in 1998 and the resulting
service fees paid under several significant long-term contracts awarded
in 1998.
Cost of Product Revenue. Cost of product revenue includes the cost
of media (CDs, tapes, etc.) freight, training and product manuals, and the
amortization of capitalized software. Cost of product revenue as a
percentage of product revenue was 2% in 1998, compared with 3% in 1997.
Cost of Service Revenue. Cost of service revenue consists primarily
of personnel costs related to database consulting and internet services
consulting. Cost of service revenue as a percentage of service revenue was
52% in 1998, compared with 73% in 1997. The decrease in cost of service
revenue as a percentage of service revenue in 1998 was primarily due to a
higher utilization of direct personnel resources, and an increase in
average billing rates.
Sales and Marketing Expenses. Sales and marketing expenses consist
principally of salaries, sales commissions and costs of advertising and
marketing campaigns. Sales and marketing expenses decreased 14% to
$3.1 million in 1998 from $3.6 million in 1997. Sales and marketing
expenses represented 36% of net revenue in 1998, compared with 42% of net
revenue in 1997. The decrease in sales and marketing expenses, both as
percentage of revenue and in total dollars spent in 1998, was primarily
due to management's decision to reduce spending on sales and marketing in
the second and third quarters of 1998 by consolidating the senior
marketing and senior sales positions, attending fewer trade shows than in
previous years, and using internet in place of print advertisements.
Engineering and Product Development. Engineering and product
development consists principally of salaries, quality assurance,
documentation and technical support personnel. Engineering and product
development expenses increased 6% to $1.6 million in 1998 from $1.5
million in 1997. As a percentage of total net revenue, engineering and
product development expenses also increased slightly to 19% of net revenue
in 1998 from 18% of net revenue in 1997. This increase is primarily due to
normal pay increases and merit raises.
General and Administrative Expenses. General and administrative
expenses consist primarily of staffing and related expenses in the
following functional areas: executive offices, finance, legal,
information systems, shipping and administration. They also include
expenses for rent and facilities, depreciation, and outside services.
General and administrative expenses increased 29% to $2.7 million in 1998
from $2.1 million in 1997. This increase was primarily due to the addition
of a senior executive, a senior consultant, a full-time contracts
administrator, and an assistant in accounts receivable, combined with
employee raises of 4% to 5% and employee merit increases.
Other Income (Expense). Other income (expense) primarily consists of
interest expense.
Extraordinary Item, Net of Applicable Income Taxes. Extraordinary
item, net of applicable income taxes was due to the forgiveness in May
1998, of approximately $451,000, net of tax, of debt and interest related
to obligations incurred prior to the filing of Raima's bankruptcy petition
in June 1994.
Provision (Benefit) for Income Taxes. Raima reported an income tax
benefit of $93,000 in 1998, compared with an income tax provision of
$20,000 in 1997. The income tax benefit in 1998 was primarily due to the
tax losses in 1998, which Raima believes will be available to offset
taxable income related to the extraordinary gain.
Liquidity and Capital Resources. At December 31, 1998, Raima had
working capital of approximately $86,000 and net stockholders equity of
approximately $564,000. Excluding the impact of deferred product and
support revenue of $873,000, Raima had working capital of approximately
$959,000 at December 31, 1998. The deferred product and support revenue of
$873,000 at December 31, 1998, reflects a delay in recognition of revenue
in accordance with contractual agreements and requires minimal resources
of Raima.
Net cash provided by operating activities was $1,007,000 in 1998,
compared to net cash provided by operating activities of $523,000 in 1997.
Net cash used in investment activities was $153,000 in 1998, and
cash used for investment activities was $187,000 in 1997. In each year
cash was used by investment activities to purchase property and equipment.
Net cash used by financing activities was $913,000 in 1998, compared
to net cash used by financing activities of $39,000 in 1997. The increase
in net cash used by financing activities in 1998 was principally due to
the repayment of long-term obligations to creditors in the amount of $1.2
million offset by proceeds from the line of credit in the amount of
$114,000. Also, in 1998, cash in the amount of $227,000 was received upon
payment of a note from Raima UK, a distributor. In 1997, repayments of
notes payable of $272,000 offset by net proceeds from the line of credit
of $250,000 and the issuance of common stock, accounted for the cash used
by financing activities.
As of December 31, 1998, Raima's principal sources of liquidity were
cash of $406,000 and its line of credit. Raima management believes that
expected cash flow from operations and existing cash balances, as well as
borrowings under its line of credit will be sufficient to meet Raima's
currently anticipated working capital and capital expenditure requirements
for at least the next 12 months.
In April 1998, Raima entered into a loan and security agreement
with Silicon Valley Bank, which provided Raima with $2.0 million line of
credit, secured by substantially all of Raima's assets. As of December
31, 1998, approximately $364,000 was outstanding under the loan and
security agreement. In April of 1999, Raima entered into a new $1.0
million loan revolving agreement with Silicon Valley Bank to replace the
$2.0 million loan agreement. This facility bears interest at 1.5% above
the prime rate and expires in one year. The loan is secured substantially
by all of Raima's assets. The loan agreement is subject to a number of
financial and non-financial covenants, including a covenant not to merge
with any other entity, which will need to be waived in connection with
the merger.
Year 2000 Issues
Raima utilizes a significant number of computer software programs
and operating systems across its entire organization. To the extent that
Raima's software applications use source codes that are unable to
appropriately recognize the upcoming calendar year 2000, some level of
modification, or even replacement of such applications, may be necessary.
Accordingly, Raima is reviewing its internal computer programs and
systems to prepare for problems associated with the year 2000. Raima is
also currently assessing the extent to which its non-information
technology systems are not Year 2000 compliant and the remediation
required to bring those systems into compliance.
Raima has taken steps to identify the extent to which the software
applications and computer equipment used in its internal operations will
need to be modified or replaced to accurately function after January 1,
2000, and has begun the required modification and replacement. Raima
believes it will complete the process of making its internal operations
Year 2000 compliant in a timely manner. Raima is also currently assessing
the extent to which its non-information technology systems are not Year
2000 compliant and the remediation required to bring these systems into
compliance.
Raima has also initiated discussions with third parties with whom
it has material relationships to identify and assess the risk posed to
Raima by their Year 2000 issues. At this time Raima is unable to estimate
the extent of the risk it faces from third parties' failure to
effectively address Year 2000 issues.
Raima presently believes that Year 2000 issues will not pose
significant operational problems. However, it is possible that undetected
Year 2000 issues, or Year 2000 issues of third parties with whom Raima
has material relationships, could have a material adverse effect on
Raima's operations or result of operations.
The discussion of the Raima's efforts, and management's
expectations, relating to Year 2000 compliance are forward-looking
statements. Raima's ability to achieve Year 2000 compliance and the costs
associated therewith, could be adversely impacted by, among other things,
the availability and cost of programming and testing resources, vendors'
ability to modify proprietary software, and unanticipated problems
identified in the ongoing compliance review.
Recent Accounting Pronouncements. In April 1998, the American
Institute of Certified Public Accountants issued Statement of Position
98-1, "Accounting for the Costs of Computer Software Developed or
Obtained for Internal Use" ("SOP 98-1"). SOP 98-1 provides guidance on
capitalization of the costs incurred for computer software developed or
obtained for internal use. It also provides guidance for determining
whether computer software is internal-use software, and on accounting for
the proceeds of computer software originally developed or obtained for
internal use and then subsequently sold to the public. Raima has not yet
determined the impact, if any, of adopting this statement. The
disclosures prescribed by SOP 98-1 will be effective for Raima's
consolidated financial statements for the fiscal year ending December 31,
1999.
In June 1998, the Financial Accounting Standards Board ("FASB")
issued Statement of Financial Accounting Standards No. 133, "Accounting
for Derivative Instruments and Hedging Activities" ("SFAS 133"). SFAS
133 establishes accounting and reporting standards for derivative
instruments, including certain derivative instruments embedded in other
contracts and for hedging activities. It requires that entities recognize
all derivatives as either assets or liabilities in the statement of
financial position and measures those instruments at fair value. The
accounting for changes in the fair value of a derivative depends on the
intended use of the derivative and the resulting designation. Raima will
adopt SFAS 133 in the first quarter of the fiscal year ending December
31, 2000 and has not yet evaluated the impact of adoption and its effects
on the Raima's results of operations, financial position, capital
resources or liquidity.
Ownership of Raima Capital Stock
The following table sets forth certain information regarding the
beneficial ownership of Raima common stock as of March 15, 1999, by (1)
each person who is known by Raima to own beneficially more than 5% of the
Raima Common stock, (2) each director of Raima, (3) each of the executive
officers of Raima and (4) by all of Raima's directors and executive
officers as a group.
Shares
Beneficially Owned(1)
-----------------------
Percent of
Outstanding
Number Capital
of Shares Stock(2)
----------- -----------
Stephen P. Smith(3)................... 2,788,000 44.7%
Randall L. Merilatt(4)................ 1,522,500 24.4%
Wayne L. Warren(5).................... 769,410 12.3%
Steven T. Graves(6)................... 131,400 2.0%
Wayne Dalgardno(7).................... 26,250 *
Thomas R. Clark(8).................... 23,000 *
Laird Foshay(9)....................... 75,000 1.1%
William C. Dunn(10)................... 35,000 *
All directors and executive
officers as a group (8 persons)(11).. 5,380,560 82.3%
----------------
* Less than 1% of the outstanding shares of Raima common stock.
(1) Beneficial ownership is determined in accordance with the rules of the
Commission. In computing the number of shares beneficially owned by a
person and the percentage of ownership of that person, shares subject
to options held by that person that are currently exercisable or
exercisable within 60 days of March 15, 1999 are deemed outstanding.
Such shares, however, are not deemed outstanding for the purpose of
computing the percentage ownership of each other person. Except
pursuant to applicable community property laws or as indicated in the
footnotes of this table, to Raima's knowledge, each stockholder
identified in the table possesses sole voting and investment power
with respect to all shares of Raima common stock shown as beneficially
owned by such stockholder.
(2) Applicable percentage of ownership for each stockholder is based on
6,199,953 shares of Raima common stock outstanding as of March 4, 1999.
(3) Includes 28,000 shares of Raima common stock issuable upon exercise of
options under the Raima Stock Option Plan.
(4) Includes 17,000 shares of Raima Common stock issuable upon exercise of
options under the Raima Stock Option Plan.
(5) Includes 16,660 shares of Raima common stock issuable upon exercise of
options under the Raima Stock Option Plan.
(6) Includes 117,950 shares of Raima common stock issuable upon exercise
of options under the Raima Stock Option Plan.
(7) Represents 26,250 shares issuable upon exercise of options under the
Raima Stock Option Plan.
(8) Includes 7,500 shares of Raima common stock issuable upon exercise of
options under the Raima Stock Option Plan.
(9) Represents 75,000 shares issuable upon exercise of options under the
Raima Stock Option Plan.
(10) Represents 35,000 shares issuable upon exercise of options under the
Raima Stock Option Plan.
(11) Includes 333,360 shares issuable upon exercise of options under the
Raima Stock Option Plan.
CERTAIN RELATIONSHIPS AND RELATED TRANSCTIONS
Thomas R. Clark, who will be appointed to the board of directors of
Centura after the merger, is presently on the board of directors of Raima
and has provided consulting services to Raima through Clark Ventures,
Inc., an S corporation wholly owned by him and his wife. Services
commenced April 5, 1999 and will conclude by the time of the merger,
unless extended by Centura.
PRO FORMA OWNERSHIP OF CENTURA COMMON STOCK
An aggregate of approximately 5,800,000 shares of Centura common
stock (subject to certain adjustments) will be issued to Raima
stockholders in the merger.
It is a condition to the obligation of all parties to close the
transaction that the "average Centura trading price," defined as the
arithmetic mean of the closing sale price of Centura's common stock on
the NASDAQ SmallCap Market for each of the 10 trading days ending on the
day immediately preceding the closing, be at least $1.00 per share.
In addition, if the average trading price is $3.00 per share or
greater, Raima's stockholders will receive the number of shares (assuming
no adjustments) determined by dividing
o $17,400,000 by
o the average trading price
so that the value of the shares they are issued (using the 10-day average
calculation) is no more than $17,400,000.
Approximately 20% of the consideration payable to the former Raima
stockholders will be subject to an escrow which will be available to
Centura to satisfy certain indemnification rights under the merger
agreement. Approximately one-half of the consideration held in escrow not
needed to satisfy pending claims will be released to the former Raima
stockholders six months after closing, and the balance not needed to
satisfy pending claims will be released one year after closing.
Based upon the number of shares of Centura common stock issued and
outstanding as of March 15, 1999, the Raima common stock outstanding
immediately prior to the merger would be converted into, and have voting
power with respect to, approximately 16.4% of the combined company's
total issue and outstanding shares.
The foregoing numbers of shares and percentages are subject to
change in the event that the capitalization of Centura changes subsequent
to March 15, 1999 and prior to the effective time of the merger. There
can be no assurance as to the actual capitalization of Centura at the
time of the merger or of Centura at any time following the merger.
COMPARISON OF RIGHTS OF HOLDERS OF RAIMA COMMON STOCK AND CENTURA COMMON
STOCK
This section of the prospectus describes certain differences
between the rights of holders of Raima common stock and Centura common
stock. While Centura and Raima believe that the description covers the
material differences between the two, this summary may not contain all of
the information that is important to you. You should carefully read this
entire document and the other documents we refer to for a more complete
understanding of the differences between being a stockholder of Raima and
being a stockholder of Centura.
As a stockholder of Raima, your rights are governed by the laws of
the State of Washington, Raima's restated articles of incorporation and
Raima's bylaws. After completion of the merger, you will become a
stockholder of Centura. As a Centura stockholder, your rights will be
governed by the Delaware General Corporate Law, Centura's certificate of
incorporation and Centura's bylaws.
Classes of Common Stock of Raima and Centura
Both Raima and Centura have only one class of common stock issued
and outstanding. Holders of Raima and Centura stock are entitled to one
vote for each share held.
Preferred Stock
Centura is authorized to issue preferred stock, while Raima is not.
Centura may issue its preferred stock periodically in one or more series.
Centura's board of directors may fix or alter the dividend rights,
dividend rate, conversion rights, voting rights, rights and terms of
redemption, redemption prices, and liquidation preferences of any
unissued series, and the number of shares constituting that series.
Centura's board of directors may also increase or decrease the
number of shares of any series subsequent to the issuance of such series;
however, the board may not decrease the number of shares below the number
of shares then outstanding within that series.
Cumulative Voting
At elections for directors, Raima stockholders may cumulate their
votes by giving one candidate as many votes as the number of such
directors multiplied by the number of their shares, or by distributing
such votes on the same principle among any number of candidates.
Centura does not allow its stockholders to cumulate votes at any
election of directors.
Number of Directors
Raima's restated articles of incorporation and bylaws provide that
the number of directors on the board shall be seven. This number may only
be changed by amendment of the restated articles of incorporation.
Centura's bylaws allow the stockholders or the board to set the
number of directors within a range from five to nine. The present number
of Centura directors is seven. The numbers of the range may be changed,
or a definite number may be fixed without allowing for a range, by an
amendment to the bylaws adopted by a majority of the stockholders, or by
an amendment to the certificate of incorporation.
Removal of Directors
Centura's stockholders may remove any director or the entire board
of directors only for cause by a majority of the stockholders then
entitled to vote at an election of directors.
Raima's stockholders may remove one or more directors, with or
without cause, by a majority vote at a stockholder meeting called
expressly for that purpose. However, no Raima director may be removed
from office (unless the entire board is removed) if the votes cast
against his or her removal would be sufficient to elect him or her under
cumulative voting.
Filling of Vacancies on the Board of Directors
Any vacancy created on Raima's board may be filled by a majority
vote of the remaining directors, even though less than a quorum. A
director of Raima elected to fill a vacancy is elected for the unexpired
term of his or predecessor. A vacancy may also be filled by a vote of
Raima's stockholders at either an annual meeting or a special meeting
called for that purpose.
A vacancy created on Centura's board may also be filled by a
majority vote 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 of the stockholders 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 where a quorum is present.
A director of Centura so elected holds office until the next annual
meeting of stockholders and until a successor is elected and qualified.
If Centura has no directors in office, then any officer or
stockholder or fiduciary of a stockholder may call a special meeting of
the stockholders or apply to the Delaware Court of Chancery for a decree
ordering an election.
If the number of directors on the board at the time of filling any
vacancy is less than a majority of the whole board, then any stockholder
holding at least ten percent of the total outstanding shares entitled to
vote may also apply to the Delaware court of Chancery for a decree
ordering an election.
Limits on Stockholder Action by Written Consent
Raima's stockholders may take any action which could be taken at a
meeting if all the stockholders entitled to vote sign one or more written
consents and deliver them to Raima.
Centura's stockholders may not take action by written consent in
lieu of a meeting. Any actions contemplated by the stockholders must be
taken at a duly called annual or special meeting.
Ability to Call Special Meetings
Raima's chairman of the board, president or board of directors may
call special meetings of the stockholders for any purpose. A special
meeting must be held if holders of at least 10% of all the votes eligible
to be cast on any issue proposed to be considered at the special meeting
have signed and delivered to Raima's secretary a written demand for a
meeting describing the meeting's purpose.
Centura's chairman of the board, president or board of directors
may call special meetings of the stockholders at any time.
Advance Notice Provisions for Stockholder Nominations and Proposals
Raima's bylaws provide that the board, chairman of the board, the
president, the secretary, or someone under their direction, must give
written notice of a meeting to each stockholder entitled to vote no less
than 10 nor more than 60 days prior to the meeting for most meetings.
However, notice must be given to stockholders no less than 20 days prior
to a meeting to act on:
o amendment to the articles of incorporation;
o a plan of merger or share exchange;
o the sale, lease, exchange or other disposition of all or
substantially all of Raima's assets other than in the regular
course of business; or
o the dissolution of Raima.
Any stockholder owning 30% or more of Raima's common stock must be
given notice at least 30 days before the meeting.
The notice must state the place, day and hour of the meeting, and
in the case of a special meeting, the purpose of the meeting.
For Centura, nominations for the election of a director or other
business brought before an annual meeting must be:
o specified in the notice of a meeting given by or at the
direction of the board of directors;
o otherwise properly brought before the meeting by or at the
direction of the board of directors, or
o otherwise properly brought before the meeting by a stockholder.
"Properly brought before the meeting by a stockholder" means
giving timely notice and using proper form.
To be timely, the notice must be delivered to or mailed and
received by the secretary of the corporation at least 90 days prior to
the meeting. If less than 100 days notice or prior public disclosure of
the meeting is given or made to stockholders, then the stockholder's
notice must be received by the secretary no later than 10 days after the
notice or disclosure of the meeting.
To be in proper form, the notice must include:
o relevant names and addresses;
o representation that the stockholder is a holder of record and
will appear in person or by proxy;
o if applicable, a description of all arrangements or
understandings between the stockholder and any nominee;
o other information required to be in a proxy statement by the SEC
had the nominee been nominated or the matter proposed by the
board of directors;
o if applicable, the consent of each nominee to serve as director
if elected.
Amendment of Certificate or Articles of Incorporation
Under Delaware law, a certificate of incorporation of a Delaware
corporation may be amended by approval of the board of directors of the
corporation and the affirmative vote of the holders of a majority of the
outstanding shares entitled to vote for the amendment, unless a higher
vote is required by the corporation's certificate of incorporation.
Centura's certificate of incorporation provides that the
affirmative vote of the holders of at least two-thirds (2/3) of the
combined voting power of all the then-outstanding shares of Centura
entitled to vote is required to alter, amend or repeal:
o Article 13 of the certificate of incorporation, which does not
allow Centura stockholders to take any action by written consent
in lieu of a meeting; or
o Article 14 of the certificate of incorporation, which creates
this two-thirds requirement for amending part of the certificate
of incorporation.
The Washington Business Corporation Act authorizes a corporation's
board of directors to make various changes of an administrative nature to
the corporation's articles of incorporation, including changes of
corporate name, changes to the number of outstanding shares in order to
effectuate a stock split or stock dividend in the corporation's own
shares, and changes to or elimination of provisions with respect to the
corporation's stock's par value. Other amendments to a corporation's
articles of incorporation must be recommended to the stockholders by the
board of directors, unless the board determines that because of a
conflict of interest or other special circumstances, it should make no
recommendation, and must be approved by two-thirds (if the corporation is
not a public company), or a majority (if the corporation is a public
company), of all votes entitled to be cast by each voting group that has
a right to vote on the amendment. The articles of incorporation of a
corporation other than a public company may provide for a lower
percentage of stockholder approval (but not less than a majority of the
votes entitled to be cast.
Raima's restated articles of incorporation provide that any
provision in the restated articles may only be repealed or amended by the
affirmative vote of at least two-thirds (2/3) of the outstanding common
stock of Raima. The board of directors of Raima may not amend the
restated articles of incorporation.
Amendment of Bylaws
Under Delaware law, stockholders entitled to vote have the power to
adopt, amend or repeal bylaws. In addition, a corporation may, in its
certificate of incorporation, confer such powers upon the board of
directors. The stockholders always have the power to adopt, amend or
repeal bylaws, even though the board may also be delegated such power.
Accordingly, Centura's certificate of incorporation expressly
authorizes the board of directors to make, alter, amend or repeal the
bylaws of Centura.
Under Washington law, stockholders entitled to vote have the power
to amend or repeal bylaws or adopt new bylaws. In addition, a
corporation's board of directors may also have such power unless (a) the
articles of incorporation or Washington law expressly reserve this power
to the stockholders or (b) in amending or repealing a particular bylaw,
the stockholders expressly provide the board of directors may not amend
or repeal that bylaw.
Raima's board of directors has the power to adopt, amend or repeal
the bylaws of Raima, subject to the power of the stockholders to amend or
repeal the bylaws. The stockholders of Raima also have the power to
adopt, amend or repeal the bylaws.
State Anti-Takeover Statutes
Centura is subject to Section 203 of the Delaware General
Corporation Law, which under certain circumstances may make it more
difficult for a person who would be an "Interested Stockholder," as
defined in Section 203, of Centura, to effect various business
combinations with Centura for a three-year period. Under Delaware law, a
corporation's certificate of incorporation or bylaws may exclude a
corporation from the restrictions imposed by Section 203. Centura's
certificate of incorporation and bylaws do not exclude it from the
restrictions imposed under Section 203.
Transactions With Officers or Directors.
The Washington Business Corporation Act sets forth a safe harbor
for transactions by a corporation, one of its subsidiaries or any other
entity in which it has a controlling interest, respecting which a
director has a conflicting interest. Under this provision, a director's
conflicting interest transaction may not be enjoined, set aside or give
rise to damages because a director has an interest in the transaction if:
(1) it is approved by a majority of qualified directors or a duly
empowered committee of qualified directors of the board after required
disclosure; (2) it is approved by the affirmative vote of a majority of
all qualified shares after required notice and disclosures; or (3) the
transaction, judged according to circumstances at the time of commitment,
is established to have been fair to the corporation. For purposes of this
provision, a "qualified director" is one who does not have (1) a
conflicting interest respecting the transaction or (2) a familial,
financial, professional or employment relationship with a second
director, which relationship would reasonably be expected to exert an
influence on the first director's judgment when voting on the
transactions. "Qualified shares" are defined generally as shares other
than those beneficially owned, or the voting of which is controlled, by a
director who has a conflicting interest respecting the transaction.
The Delaware General Corporation Law provides that contracts or
transactions between a corporation and one or more of its officers or
directors or an entity in which they have an interest is not void or
voidable solely because of such interest or the participation of the
director or officer in a meeting of the board or a committee that
authorizes the contract or transaction if : (1) the material facts as to
the relationship or interest and as to the contract or transaction are
disclosed or are known to the board or the committee, and the board or
the committee in good faith authorizes the contract or transaction by the
affirmative vote of a majority of disinterested directors; (2) the
material facts as to the relationship or interest and as to the contract
or transaction are disclosed or are known to the stockholders entitled to
vote thereon, and the contract or transaction is specifically approved in
good faith by a vote of the stockholders; or (3) the contract or
transaction is fair to the corporation as of the time it is authorized,
approved or ratified by the board of directors, a committee thereof or
the stockholders.
Limitation of Liability of Directors
The Delaware General Corporation Law permits a corporation to
include a provision in its certificate of incorporation eliminating or
limiting the personal liability of a director or officer to the
corporation or its stockholders for damages for a breach of the
director's fiduciary duty, subject to certain limitations. Centura's
certificate of incorporation includes such a provision to the maximum
extent permitted by law.
While this provision provides directors with protection from awards
for monetary damages for breaches of their duty of care, it does not
eliminate that duty. Accordingly, this provision will have no effect on
the availability of equitable remedies such as an injunction or
rescission based on a director's breach of his or her duty of care.
The Washington Business Corporation Act permits a corporation to
include a provision in its articles of incorporation not inconsistent
with law that eliminates or limits the personal liability of a director
to the corporation or its stockholders for monetary damages for conduct
as a director. However such provisions may not eliminate or limit the
liability of a director for (1) acts or omissions that involve
intentional misconduct or a knowing violation of law by a director, (2)
certain conduct involving a transaction in which the director has a
conflicting interest, or (3) any transaction from which the director will
personally receive a benefit in money, property, or services to which the
director is not legally entitled.
Raima's restated articles of incorporation also state that its
directors will not be liable to Raima or its stockholders for monetary
damages for conduct as a director, to the full extent that the Washington
Business Corporation Act, as amended, permits the limitation or
elimination of the liability of directors.
Indemnification of Directors and Officers
The Delaware General Corporation Law permits a corporation to
indemnify officers and directors for
o actions taken in good faith and
o in a manner they reasonably believed to be in, or not opposed
to, the best interests of the corporation and
o with respect to any criminal action which they had no reasonable
cause to believe was unlawful.
Centura's bylaws provide for the indemnification of its officers
and directors to the maximum extent and in the manner permitted by the
General Corporation Law of Delaware. Centura will indemnify each of its
directors and officers against:
o expenses (including attorneys' fees);
o judgments;
o fines;
o settlements; and
o other amounts actually and reasonably incurred in connection
with any proceeding arising by reason of the fact that such
person is or was an agent of Centura.
Raima's bylaws also provide indemnification for Raima's officers
and directors to the full extent permitted by the Washington Business
Corporation Act. The Washington Business Corporation Act provides that a
corporation may (if authorized in each specific instance) indemnify an
individual made a party to a proceeding (for reasonable expenses
incurred) because they are or were a director, officer, employee or agent
if
o they acted in good faith,
o reasonably believed their conduct was in the best interest of
the corporation (if made in their official capacity) or not
opposed to the corporation's best interest (in all other cases),
and
o in criminal cases, had no reasonable cause to believe their
conduct was unlawful, and provided they are not adjudged liable
to the corporation or on the basis that they received any
personal benefit improperly.
However, if authorized by the articles of incorporation, a bylaw
adopted or ratified by stockholders, or a resolution adopted or ratified,
before or after the event, by the stockholders, a corporation has the
power to indemnify a director or officer made a party to a proceeding, or
advance or reimburse expenses incurred in a proceeding, without regard to
the foregoing limitations, expect that no such indemnification shall be
allowed on account of
o acts or omissions of a director or officer finally adjudged to
be intentional misconduct or a knowing violation of the law,
o conduct of a director or officer finally adjudged to be an
unlawful distribution, or
o any transaction with respect to which it was finally adjudged
that such director or officer personally received a benefit in
money, property or services to which the director or officer was
not legally entitled.
Unless limited by the corporation's articles of incorporation,
Washington law requires indemnification if the director or officer is
wholly successful on the merits of the action or otherwise. Any
indemnification of a director in a derivative action must be reported to
the stockholders in writing.
Raima will indemnify any person who was or is a party or is
threatened to be made a party to any civil, criminal, administrative or
investigative action, suit or proceeding because he or she is a director
or officer of Raima. Raima will indemnify against expenses and fees
similar to those against which Centura will indemnify. Raima's
indemnification is not exclusive of any other rights to which a person
might be entitled as a matter of law or contract.
Certain Anti-Takeover Provisions
Under Delaware law, every corporation may create and issue rights
entitling the holders of such rights to purchase from the corporation
shares of its capital stock of any class or classes, subject to any
provisions in its certificate of incorporation. The price and terms of
such shares must be in the certificate of incorporation or in a
resolution adopted by the board of directors for the creation or issuance
of such rights.
Centura has created a stockholder rights plan, which provides
that each share of common stock outstanding will have the right to
purchase a fraction of a share of preferred stock at an exercise
price of $60.00. This right will become exercisable if a person
o acquires 15% or more of Centura's common stock or
o announces a tender offer that would result in the person owning
15% or more of Centura's common stock.
If the right to purchase the preferred stock becomes exercisable,
the holder of each right (other than the person whose acquisition
triggered the exercisability of the rights) will be entitled to purchase,
at the right's then current exercise price, a number of shares of
Centura's common stock having a market value of twice the exercise price.
In addition, if Centura were to be acquired in a merger, or Centura
sells more than 50% of its assets or earning power, each right will
entitle its holder to purchase, at the right's then current price, common
stock of the acquiring company having a market value of twice the
exercise price.
The rights are redeemable by Centura at a price of $.01 per share
at any time within 10 days after a person has acquired 15% or more of
Centura's common stock. The rights expire on August 3, 2004, unless
earlier redeemed by Centura.
LEGAL OPINION
The validity of the shares of Centura common stock offered by this
prospectus will be passed upon for Centura by Orrick, Herrington &
Sutcliffe LLP.
EXPERTS
The consolidated financial statements incorporated in this
Prospectus by reference to the Annual Report on Form 10-K of Centura
Software Corporation for the year ended December 31, 1998 have been so
included in reliance on the report of PricewaterhouseCoopers LLP,
independent accountants, given on the authority of said firm as experts
in auditing and accounting.
The consolidated financial statements of Raima Corporation as of
December 31, 1998 and 1997 and for each of the two years in the period
ended December 31, 1998 included in this Prospectus have been so included
in reliance on the report of PricewaterhouseCoopers LLP, independent
accountants, given on the authority of said firm as experts in auditing
and accounting.
INCORPORATION BY REFERENCE
Centura's Annual Report on Form 10-K for the fiscal year ended
December 31, 1998 filed with the Securities and Exchange Commission by
Centura pursuant to the Securities Exchange Act of 1934, as amended, is
incorporated by reference in this prospectus. A copy of Centura's
aforementioned Annual Report on Form 10-K accompanies this
prospectus.
WHERE YOU CAN FIND MORE INFORMATION
Centura files reports, proxy statements and other information
with the SEC. Copies of Centura's reports, proxy statements and other
information may be inspected and copied at the public reference
facilities maintained by the SEC at:
Judiciary Plaza
Room 1024
450 Fifth Street, N.W.
Washington, D.C. 20549
Citicorp Center
500 West Madison Street
Suite 1400
Chicago, Illinois 60661
Seven World Trade Center
13th Floor
New York, New York 10048
Reports, proxy statements and other information concerning Centura may be
inspected at:
The National Association of
Securities Dealers
1735 K Street, N.W.
Washington, D.C. 20006
Copies of these materials can also be obtained by mail at
prescribed rates from the Public Reference Section of the SEC, 450 Fifth
Street, N.W., Washington, D.C. 20549 or by calling the SEC at l-800-SEC-
0330. The SEC maintains a Website that contains reports, proxy statements
and other information regarding each of us. The address of the SEC
Website is http://www.sec.gov.
Centura has filed a registration statement on Form S-4 under the
Securities Act with the SEC with respect to Centura's common stock to be
issued to Raima stockholders in the merger. This prospectus constitutes
the prospectus of Centura filed as part of the registration statement.
This prospectus does not contain all of the information set forth in the
registration statement because certain parts of the registration
statement are omitted in accordance with the rules and regulations of the
SEC. The registration statement and its exhibits are available for
inspection and copying as set forth above.
If you have any questions about the merger, please call Centura at
(650) 596-3400. You may also call Raima at (206) 515-9477.
This prospectus does not constitute an offer to sell, or a
solicitation of an offer to purchase, the securities offered by this
prospectus, or the solicitation of a proxy, in any jurisdiction to or
from any person to whom or from whom it is unlawful to make such offer,
solicitation of an offer or proxy solicitation in such jurisdiction.
Neither the delivery of this prospectus nor any distribution of
securities pursuant to this prospectus shall, under any circumstances,
create any implication that there has been no change in the information
set forth or incorporated into this prospectus by reference or in our
affairs since the date of this prospectus. The information contained in
this prospectus with respect to Centura and its subsidiaries was provided
by Centura and the information contained in this prospectus with respect
to Raima was provided by Raima.
STATEMENTS REGARDING FORWARD-LOOKING INFORMATION
This prospectus contains forward-looking statements within the
"safe harbor" provisions of the Private Securities Litigation Reform
Act of 1995 with respect to our financial condition, results of
operations and business, and on the expected impact of the merger on
Centura's financial performance. Words such as "anticipates,"
"expects," "intends," "plans," "believes," "seeks," "estimates"
and similar expressions identify forward-looking statements. These
forward-looking statements are not guarantees of future performance and
are subject to risks and uncertainties that could cause actual results to
differ materially from the results contemplated by the forward-looking
statements.
In evaluating the merger, you should carefully consider the
discussion of risks and uncertainties in the section entitled "Risk
Factors" on page 13 of this prospectus.
<PAGE>
RAIMA CORPORATION
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Page
-------
Report of Independent Accountants................................. F-2
Consolidated Balance Sheets....................................... F-3
Consolidated Statements of Operations............................. F-4
Consolidated Statements of Stockholders' Equity (Deficit)......... F-5
Consolidated Statements of Cash Flows............................. F-6
Notes to Consolidated Financial Statements........................ F-7
<PAGE>
Report of Independent Accountants
To the Board of Directors and Stockholders
of Raima Corporation
In our opinion, the accompanying consolidated balance sheets and the
related consolidated statements of operations, of stockholders' equity
(deficit) and of cash flows present fairly, in all material respects, the
financial position of Raima Corporation and its subsidiaries (the
"Company") at December 31, 1998 and 1997 and the results of their
operations and their cash flows for each of the two years in the period
ended December 31, 1998 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.
PricewaterhouseCoopers LLP
San Jose, California
April 7, 1999, except for Note 10
which is dated as of April 22, 1999
<PAGE>
RAIMA CORPORATION
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31,
-----------------------
1998 1997
----------- -----------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents........................ $406,000 $465,000
Accounts receivable, net......................... 1,800,000 1,969,000
Notes receivable................................. 3,000 230,000
0ther current assets............................. 300,000 478,000
----------- -----------
Total current assets........................... 2,509,000 3,142,000
Property and equipment, net........................ 437,000 450,000
0ther assets ...................................... 77,000 127,000
----------- -----------
Total assets................................... $3,023,000 $3,719,000
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Line of credit................................... $364,000 $250,000
Debt under reorganization plan................... -- 2,038,000
Accounts payable................................. 462,000 298,000
Accrued liabilities.............................. 536,000 433,000
Deferred revenue................................. 873,000 830,000
Income taxes payable............................. 188,000 5,000
----------- -----------
Total current liabilities...................... 2,423,000 3,854,000
Deferred income taxes.............................. 36,000 31,000
Commitments (Note 5)
Stockholders' equity (deficit):
Preferred Stock, $.01 par value; 2,000,000
shares authorized; none issued and
outstanding..................................... -- --
Common Stock, no par value; 10,000,000 shares
authorized; 6,157,838 and 6,106,713
issued and outstanding.......................... 2,257,000 2,036,000
Unearned compensation............................ (640,000) (825,000)
Accumulated deficit.............................. (1,053,000) (1,377,000)
----------- -----------
Total stockholders' equity (deficit)........... 564,000 (166,000)
----------- -----------
Total liabilities and stockholders'
equity (deficit).............................. $3,023,000 $3,719,000
=========== ===========
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
<PAGE>
RAIMA CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------------------
1998 1997 1996
----------- ----------- -----------
(unaudited)
<S> <C> <C> <C>
Net revenues:
License fees.......................... $6,314,000 $7,552,000 $5,892,000
Service and other..................... 2,270,000 1,061,000 879,000
----------- ----------- -----------
Net revenues........................ 8,584,000 8,613,000 6,771,000
----------- ----------- -----------
Cost of revenues:
License fees.......................... 96,000 167,000 128,000
Service and other..................... 1,170,000 769,000 611,000
----------- ----------- -----------
Cost of revenues.................... 1,266,000 936,000 739,000
----------- ----------- -----------
Gross profit............................ 7,318,000 7,677,000 6,032,000
----------- ----------- -----------
Operating expenses:
Research and development.............. 1,648,000 1,548,000 1,346,000
Sales and marketing................... 3,054,000 3,619,000 2,637,000
General and administrative............ 2,729,000 2,116,000 2,112,000
----------- ----------- -----------
Total operating expenses............ 7,431,000 7,283,000 6,095,000
----------- ----------- -----------
Operating income (loss)................. (113,000) 394,000 (63,000)
Interest income......................... 7,000 34,000 37,000
Interest expense ....................... (123,000) (65,000) (97,000)
Other income (expense), net............. 9,000 (20,000) (28,000)
----------- ----------- -----------
Income (loss) before income taxes
and extraordinary item................ (220,000) 343,000 (151,000)
Provision (benefit) for income taxes.... (93,000) 20,000 7,000
----------- ----------- -----------
Income (loss) before extraordinary item. (127,000) 323,000 (158,000)
Extraordinary item, net of applicable
income taxes........................... 451,000 -- --
----------- ----------- -----------
Net income (loss)....................... $324,000 $323,000 ($158,000)
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
<PAGE>
RAIMA CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Total
Common Stock Accumu- Stockholders'
----------------------- Unearned lated Equity
Shares Amount Compensation Deficit (Deficit)
---------- ------------ ------------- ------------ --------------
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1995
(unaudited)......................... 5,893,831 $1,326,000 ($788,000) ($1,542,000) ($1,004,000)
Exercise of Common Stock options
(unaudited)......................... 14,869 -- -- -- --
Unearned compensation (unaudited)..... -- 185,000 (185,000) -- --
Amortization of unearned compensation
(unaudited)......................... -- -- 281,000 -- 281,000
Net loss (unaudited).................. -- -- -- (158,000) (158,000)
---------- ------------ ------------- ------------ --------------
Balance at December 31, 1996.......... 5,908,700 1,511,000 (692,000) (1,700,000) (881,000)
Exercise of Common Stock options...... 198,013 2,000 -- -- 2,000
Unearned compensation................. -- 523,000 (523,000) -- --
Amortization of unearned compensation. -- -- 390,000 -- 390,000
Net income............................ -- -- -- 323,000 323,000
---------- ------------ ------------- ------------ --------------
Balance at December 31, 1997.......... 6,106,713 2,036,000 (825,000) (1,377,000) (166,000)
Exercise of Common Stock options...... 51,125 1,000 -- -- 1,000
Unearned compensation................. -- 220,000 (220,000) -- --
Amortization of unearned compensation. -- -- 405,000 -- 405,000
Net income............................ -- -- -- 324,000 324,000
---------- ------------ ------------- ------------ --------------
Balance at December 31, 1998.......... 6,157,838 $2,257,000 ($640,000) ($1,053,000) $564,000
========== ============ ============= ============ ==============
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
<PAGE>
RAIMA CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Year Ended December 31,
---------------------------------
1998 1997 1996
----------- ---------- ----------
(unaudited)
<S> <C> <C> <C>
Cash flows from operating activities:
Income (loss) before extraordinary item..... ($127,000) $323,000 ($158,000)
Adjustments to reconcile net income (loss)
before extraordinary item to net cash
provided by (used in) operating activities:
Depreciation and amortization............. 166,000 226,000 183,000
Provision for doubtful accounts........... 267,000 73,000 67,000
Amortization of unearned compensation..... 405,000 390,000 281,000
Deferred federal income taxes............. 31,000 (115,000) (38,000)
Litigation settlement and other........... -- -- 96,000
Changes in current assets and
liabilities:
Accounts receivable..................... (98,000) (231,000) (570,000)
Other current assets.................... 152,000 (99,000) (39,000)
Other assets............................ 50,000 (30,000) 17,000
Accounts payable and accrued
liabilities............................ 267,000 (198,000) (102,000)
Income tax payable...................... (149,000) (25,000) 18,000
Deferred revenue........................ 43,000 209,000 149,000
----------- ---------- ----------
Net cash provided by (used in)
operating activities................ 1,007,000 523,000 (96,000)
----------- ---------- ----------
Cash flows from investing activities:
Purchase of property and equipment.......... (153,000) (187,000) (307,000)
----------- ---------- ----------
Net cash used in investing activities. (153,000) (187,000) (307,000)
----------- ---------- ----------
Cash flows from financing activities:
Notes receivable, net....................... 227,000 -- (30,000)
Net proceeds from (repayment of) line
of credit.................................. 114,000 250,000 --
Proceeds from issuance of common stock...... 1,000 2,000 --
Net borrowing (repayment) of notes payable.. -- (272,000) (50,000)
Repayment of pre-petition debt.............. (1,255,000) (19,000) (82,000)
----------- ---------- ----------
Net cash used in financing activities. (913,000) (39,000) (162,000)
----------- ---------- ----------
Net increase (decrease) in cash and cash
equivalents.................................. (59,000) 297,000 (565,000)
Cash and cash equivalents at beginning
of year...................................... 465,000 168,000 733,000
----------- ---------- ----------
Cash and cash equivalents at end of year...... $406,000 $465,000 $168,000
=========== ========== ==========
Supplemental cash flow information:
Cash paid for income taxes.................. $18,000 $10,000 $27,000
=========== ========== ==========
Cash paid for interest...................... $72,000 $3,000 $8,000
=========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
<PAGE>
RAIMA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - THE COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
The Company
Raima Corporation and subsidiaries (the "Company") was incorporated
on November 12, 1982 in the State of Washington. The Company designs,
markets, and supports database management software products. The Company
also provides customers with training, telephone support and consulting
services.
The Company's customers are involved in information management
technology in a wide variety of industries and are located in the United
States and abroad.
Principles of consolidation
The consolidated financial statements include the accounts of the
Company and its wholly owned subsidiaries, Vista Development Corporation,
Raima Deutschland GmbH, Raima ANZ and Raima International Sales
Corporation. All significant intercompany balances and transactions have
been eliminated in consolidation.
Reorganization presentation
The accompanying consolidated financial statements are presented in
accordance with Statement of Position No. 90-7, Financial Reporting by
Entities in Reorganization under the Bankruptcy Code, which provides
guidance for financial reporting for companies in reorganization. On
November 12, 1996, the Bankruptcy Court confirmed the Company's
Chapter 11 Plan of Reorganization and the Company emerged as a
reorganized debtor. Pre-petition liabilities subject to compromise have
been classified according to the repayment schedule as stated in the
Company's reorganization plan. In 1998, the settlement of the pre-
petition liabilities resulted in an extraordinary gain of $451,000, net
of applicable income taxes of $332,000.
Use of estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities at the date of the
financial statements and reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates.
Revenue recognition
The Company receives licensing fees from certain resellers
(including original equipment manufactures) under product licensing
arrangements. Revenues from these resellers are recognized upon shipment
of product, if collection of the resulting receivable is probable and no
ongoing vendor obligation exists. If an ongoing vendor obligation
exists, revenue is deferred based on vendor-specific objective evidence
of the undelivered element. If vendor-specific objective evidences does
not exist for all undelivered elements, all revenue is deferred until
sufficient evidence exists or all elements have been delivered.
Provisions for sales returns are provided at the time of revenue
recognition based upon estimated returns. 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. Revenue from other services,
including consulting and training, are recognized as performed.
During 1998, the Company has recognized revenues in accordance with
Statement of Position No. 97-2 ("SOP 97-2"), "Software Revenue
Recognition." Prior to 1998, the Company recognized revenues in
accordance with Statement of Position No. 91-1, "Software Revenue
Recognition." In December 1998, the American Institute of Certified
Public Accountants ("AICPA") issued Statement of Position No. 98-9
("SOP 98-9"), "Modification of SOP 97-2, Software Revenue Recognition,
with Respect to Certain Transactions." The provisions of SOP 98-9 will
be adopted for transactions entered into during the fiscal year beginning
January 1, 1999.
Cash equivalents
The Company considers all highly liquid investments purchased with
an original maturity of three months or less to be cash equivalents.
Management believes the Company deposits cash and cash equivalents with
high credit quality financial institutions.
At December 31, 1997, restricted cash of $250,000 is invested in a
certificate of deposit, classified as a current asset, and represents
collateral for the line of credit.
Concentration of credit risk
Financial instruments that potentially subject the Company to a
concentration of credit risk consist of cash, cash equivalents,
short-term investments and accounts receivable. The Company's accounts
receivable are derived from revenue earned from customers located in the
United States and abroad. The Company generally requires no collateral
from its customers. The Company maintains an allowance for doubtful
accounts receivable based upon the expected collectibility of accounts
receivable.
At December 31, 1998, one customer accounted for 15% of total
accounts receivable.
Capitalized software development costs
All costs incurred to establish the technological feasibility of
software to be sold, leased or otherwise marketed are expensed as
research and development costs. Costs incurred subsequent to the
establishment of technological feasibility, and prior to the general
availability of the product to the public are capitalized. The Company
defines technological feasibility as the establishment of a working model
which typically occurs when the beta testing commences. The Company's
policy is to amortize the capitalized software costs on a product by
product basis using the greater of (a) the ratio that current period
gross revenues for the product bear to the total of current period and
estimated future gross revenues for that product or (b) the straight-line
method over the remaining estimated economic life of the product at the
beginning of the period, which is generally four years.
Amortization of capitalized computer software development costs is
provided over an estimated useful life of 48 months. At December 31,
1998 and 1997, all capitalized software was fully amortized.
Property and equipment
Property and equipment are stated at cost. Depreciation is computed
using the straight-line method over the estimated useful lives of the
assets, generally three to five years, or the lease term of the
respective assets.
Long-lived assets
The Company evaluates the recoverability of its long-lived assets in
accordance with Statement of Financial Accounting Standards No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed of ("SFAS 121"). SFAS 121 requires recognition
of impairment of long-lived assets in the event the net book value of
such assets exceeds the future undiscounted cash flows attributable to
such assets.
Fair value of financial instruments
The Company's financial instruments, including cash, cash
equivalents, accounts receivable and accounts payable are carried at
cost, which approximates their fair value because of the short-term
maturity of these instruments.
Comprehensive income
Effective January 1, 1998, the Company adopted the provisions of
SFAS No. 130, "Reporting Comprehensive Income." SFAS No. 130
established standards for reporting comprehensive income and its
components in financial statements. Comprehensive income, as defined,
includes all changes in equity (net assets) during a period from non-
owner sources. To date, the Company has not had any significant
transactions that are required to be reported in comprehensive income.
Foreign currency
The functional currency of the Company's subsidiaries is the local
currency. The balance sheet accounts are translated into United States
dollars at the exchange rates prevailing at the balance sheet dates.
Revenues, costs and expenses are translated into United States dollars at
average rates for the periods. Gains and losses resulting from
translation are accumulated as a component of stockholder's equity
(deficit) and were not significant during any of the periods presented.
Net gains and losses resulting from foreign exchange transactions are
included in the consolidated statements of operations and were not
significant during any of the period presented.
Stock-based compensation
The Company accounts for stock-based employee compensation using the
intrinsic value method prescribed in Accounting Principles Board Opinion
No. 25, "Accounting for Stock Issued to Employees" and related
interpretations. The Company provides footnote disclosure of the pro
forma net income and related disclosures based on the fair value method
of Statement of Financial Accounting Standards No. 123, "Accounting for
Stock-Based Compensation," ("SFAS 123"). Had compensation cost for
the Company's option plans been determined based on the fair value at the
grant date as prescribed in SFAS 123, the Company's pro forma net losses
would not be materially different from that reported in 1998, 1997 and
1996 (unaudited).
Recent accounting pronouncements
In March 1998, the American Institute of Certified Public
Accountants issued SOP No. 98-1, "Software for Internal Use," which
provides guidance on accounting for the cost of computer software
developed or obtained for internal use. SOP No. 98-1 is effective for
financial statements for fiscal years beginning after December 15, 1998.
The Company does not expect that the adoption of SOP No. 98-1 will have a
material impact on its consolidated financial statements.
In June 1998, the Financial Accounting Standards Board (FASB) issued
SFAS No. 133, "Accounting for Derivative Instruments and Hedging
Activities". SFAS No. 133 establishes accounting and reporting
standards for derivative instruments, including certain derivative
instruments, embedded in other contracts, and for hedging activities. It
requires that an entity recognize all derivatives as either assets or
liabilities in the statement of financial position and measure those
instruments at fair value. The company must adopt this standard no later
than the first quarter of fiscal year 2000. To date, the company has not
engaged in hedging activities.
NOTE 2 - BALANCE SHEET COMPONENTS:
<TABLE>
<CAPTION>
December 31,
-----------------------
1998 1997
----------- -----------
<S> <C> <C>
Allowance for doubtful accounts:
Balance at beginning of period........ $146,000 $100,000
Charged to costs and expenses......... 267,000 73,000
Deductions............................ (272,000) (27,000)
----------- -----------
$141,000 $146,000
=========== ===========
Property and equipment, net:
Computer equipment, furniture and
fixtures............................ $912,000 $759,000
Leasehold improvements................ 37,000 37,000
----------- -----------
949,000 796,000
Less: Accumulated depreciation and
amortization........................ (512,000) (346,000)
----------- -----------
$437,000 $450,000
=========== ===========
Accrued liabilities:
Payroll and related................... $408,000 $400,000
Other................................. 128,000 33,000
----------- -----------
$536,000 $433,000
=========== ===========
</TABLE>
NOTE 3 - INCOME TAXES:
The Company uses the asset and liability method of accounting for
income taxes. Under this method, deferred tax assets and liabilities are
recognized for the future tax consequences attributable to differences
between the financial statement carrying amounts of existing assets and
liabilities and their respective tax bases and to operating loss and tax
credit carryforwards. Deferred tax assets or liabilities are measured
using enacted tax rates expected to apply to taxable income in the years
in which those temporary differences are expected to be recovered or
settled. The effect on deferred tax assets and liabilities of a change
in tax rates is recognized in results of operations in the period that
includes the enactment date.
Operating income before income taxes are attributable to the
following jurisdictions:
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------------------
1998 1997 1996
----------- ----------- -----------
(unaudited)
<S> <C> <C> <C>
United States........................... ($123,000) $394,000 ($63,000)
Foreign................................. 10,000 -- --
----------- ----------- -----------
($113,000) $394,000 ($63,000)
=========== =========== ===========
<CAPTION>
The provision (benefit) for income taxes consists of the following:
Year Ended December 31,
-----------------------------------
1998 1997 1996
----------- ----------- -----------
(unaudited)
<S> <C> <C> <C>
Current................................. ($124,000) $135,000 $36,000
Deferred................................ 31,000 (115,000) (29,000)
----------- ----------- -----------
($93,000) $20,000 $7,000
=========== =========== ===========
</TABLE>
Deferred tax assets and liabilities consist of the following:
<TABLE>
<CAPTION>
December 31,
-----------------------
1998 1997
----------- -----------
<S> <C> <C>
Deferred tax assets:
Operating lease claim................ $ -- $111,000
Accruals and reserves................ 85,000 112,000
----------- -----------
85,000 223,000
Deferred tax liabilities:
Depreciation......................... $36,000 $31,000
----------- -----------
Net deferred tax assets................ 49,000 192,000
Valuation allowance.................... -- (112,000)
----------- -----------
$49,000 $80,000
=========== ===========
</TABLE>
The Company provides a valuation allowance for deferred tax assets
when it is more likely then not, based on available evidence, that some
portion or all of the deferred assets will not be realized. In 1997, the
deferred income tax benefit reflects a reduction of the valuation
allowance applied against the operating lease claim based upon a proposed
settlement and resulting deductibility of a significant portion of this
liability. 1997 reflects a valuation allowance against the accruals and
reserves due to uncertainty as to the future realization.
Statutory rate reconciliation:
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------------------
1998 1997 1996
----------- ----------- -----------
(unaudited)
<S> <C> <C> <C>
Pretax book income (loss) including
extraordinary gain.................... $563,000 $343,000 ($151,000)
=========== =========== ===========
Statutory rate at 34%................... 191,000 114,000 (51,000)
Change in valuation allowance........... (112,000) (247,000) (61,000)
Permanent differences................... 19,000 18,000 24,000
Stock compensation...................... 138,000 135,000 95,000
Other................................... 3,000 -- --
----------- ----------- -----------
$239,000 $20,000 $7,000
=========== =========== ===========
</TABLE>
NOTE 4 - BORROWINGS:
Line of credit
At December 31, 1998, the Company had a $2,000,000 revolving line of
credit with Silicon Valley Bank. The line of credit is supported by a
loan agreement, including certain financial covenants. Compliance shall
be determined on a monthly basis. The company was in compliance with
these debt covenants at December 31, 1998. Borrowings under the terms of
the line of credit are secured by substantially all of the Company's
assets. Interest is computed based on the bank's prime rate (7.75% at
December 31, 1998) plus 2.5% per annum. The line of credit expires in
April 2000. Total borrowings at December 31, 1998 were $364,000.
At December 31, 1997, the Company had a $300,000 revolving line of
credit with Silicon Valley Bank. The line of credit is supported by a
loan agreement which provides, among other matters, certain restrictive
covenants, including limitations on additional borrowings, restrictions
as to dividend payments, and the maintenance of certain ratios.
Borrowings under the terms of the line of credit are secured by
substantially all of the Company's assets, including a certificate of
deposit equal to the amount advanced. Interest is computed based upon
the bank's prime rate (8.5% at December 31, 1997) and is payable monthly.
The line of credit expired on August 27, 1998.
The Company's compliance with the loan agreement's financial
covenant structure determines the applicable interest rate and maximum
borrowing under the terms of the agreement. At December 31, 1997, the
Company was not in compliance with the financial covenants provided in
the loan agreement.
Debt under reorganization plan
<TABLE>
<CAPTION>
December 31,
-----------------------
1998 1997
----------- -----------
<S> <C> <C>
Notes payable - shareholders, including accrued
interest at 9% per annum. These notes are payable
according to the Company's reorganization plan..... $ -- $29,000
Pre-petition liabilities, including accrued
interest at 7% per annum. Unpaid liabilities
and accrued interest are payable according to
the Company's reorganization plan.................. -- 2,009,000
----------- -----------
$ -- $2,038,000
=========== ===========
</TABLE>
NOTE 5 - COMMITMENTS:
Leases
The Company leases office space under a 36 month noncancelable
operating lease. Rent expense for the year ended December 31, 1998,
1997, and 1996 (unaudited) was $365,000, $356,000 and $339,000,
respectively. The terms of the facility lease provided for free rent
periods during the lease term. The Company recognizes rent expense on a
straight-line basis over the lease period, and has accrued for rent
expense incurred but not paid.
Future minimum lease payments under the facility lease are as
follows:
<TABLE>
<S> <C> <C>
Year Ending December 31,
1999............................................... $383,000
2000............................................... 64,000
-----------
$447,000
===========
</TABLE>
NOTE 6 - SEGMENT INFORMATION:
Effective January 1, 1998, the Company adopted the provisions of
SFAS No. 131, "Disclosures about Segments of an Enterprise and Related
Information." The Company identifies its operating segments based on
business activities, management responsibility and geographical location.
Through December 31, 1998, foreign operations have not been significant.
The Company has determined that its reportable segments are licensed
software and related maintenance distributed under Raima Corporation and
consulting services performed under its wholly owned subsidiary, Vista
Development Corporation. The following summarizes information about each
reporting segment.
<TABLE>
<CAPTION>
Raima Vista Elimination Total
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
1998:
Revenues................ $6,272,000 $2,408,000 ($96,000) $8,584,000
Operating income (loss). (17,000) -- (96,000) (113,000)
Assets................... 2,589,000 434,000 -- 3,023,000
1997:
Revenues................ $7,551,000 $1,431,000 ($369,000) $8,613,000
Operating income (loss). 815,000 (52,000) (369,000) 394,000
Assets................... 3,408,000 311,000 -- 3,719,000
1998:
Revenues................ $5,891,000 $1,317,000 ($437,000) $6,771,000
Operating income (loss). 112,000 262,000 (437,000) (63,000)
Assets................... 2,761,000 311,000 -- 3,072,000
</TABLE>
Total export sales were 20%, 20% and 15% (unaudited) of total
revenues during the years ended December 31, 1998, 1997 and 1996,
respectively.
NOTE 7 - STOCK OPTION PLANS:
In November 1991, the Company adopted the 1991 Stock Option Plan
(the "Plan"). The Plan provides for the granting of stock options to
employees and consultants of the Company. Options granted under the Plan
may be either incentive stock options or nonqualified stock options.
Incentive stock options ("ISO") may be granted only to Company
employees (including officers and directors who are also employees).
Nonqualified stock options ("NSO") may be granted to Company employees
and consultants. The Company has reserved 3,500,000 shares of Common
Stock for issuance under the Plan.
Options under the Plan may be granted for periods of up to ten years
and at prices no less than 85% of the estimated fair value of the shares
on the date of grant as determined by the Board of Directors, provided,
however, that (i) the exercise price of an ISO and NSO shall not be less
than 100% and 85% of the estimated fair value of the shares on the date
of grant, respectively, and (ii) the exercise price of an ISO and NSO
granted to a 10% shareholder shall not be less than 110% of the estimated
fair value of the shares on the date of grant, respectively. Options are
exercisable immediately subject to repurchase options held by the Company
which lapse over a maximum period of ten years at such times and under
such conditions as determined by the Board of Directors. Options granted
under the Plan accelerate upon a change in control of the Company, as
defined. To date, options granted generally vest over four years.
<TABLE>
<CAPTION>
1998 1997 1996
--------------------- -------------------- --------------------
Weighted Weighted Weighted
Average Average Average
Exercise Exercise Exercise
Shares Price Shares Price Shares Price
----------- --------- ---------- --------- ---------- ---------
(unaudited)
<S> <C> <C> <C> <C> <C> <C>
Options outstanding at January 1.... 1,644,756 $0.02 1,618,644 $0.03 1,637,322 $0.03
Options granted below fair value.. 220,875 0.01 377,000 0.01 268,500 0.01
Options exercised................. (51,125) 0.01 (198,013) 0.01 (14,869) 0.01
Options canceled.................. (421,825) 0.05 (152,875) 0.02 (272,309) 0.03
----------- ---------- ----------
Outstanding at December 31.......... 1,392,681 0.01 1,644,756 0.02 1,618,644 0.03
=========== ========== ==========
</TABLE>
<TABLE>
<CAPTION>
Options Outstanding at Options Exercisable at
December 31, 1998 December 31, 1998
---------------------------------- ----------------------
Weighted
Average Weighted Weighted
Range of Remaining Average Average
Exercise Number Contractual Exercise Number Exercise
Price Outstanding Life Price Exercisable Price
- --------- ----------- ----------- ---------- ----------- ----------
<S> <C> <C> <C> <C> <C>
$0.01 1,356,806 7.20 $0.01 727,526 $0.01
0.20 35,875 3.98 0.20 35,875 0.20
----------- -----------
1,392,681 7.12 0.01 763,401 0.02
=========== ===========
</TABLE>
The Company calculated the fair value of each option grant on the
date of grant using the method with the following assumptions: dividend
yield at 0%; weighted average expected option term of four years; risk
free interest rate of 4.98% to 5.62% and 5.70% to 6.66% for the year
ended December 31, 1998 and 1997, respectively. The weighted average
fair value of options granted during 1998 and 1997 was less than $0.01,
respectively.
NOTE 8 - UNEARNED COMPENSATION:
In connection with certain stock option grants during the years
ended December 31, 1998, 1997 and 1996 (unaudited) the Company recorded
$220,000, $523,000 and $185,000, respectively, of unearned compensation
representing the difference between the deemed fair value by the Company
of the common stock on the date of grant and the option exercise price on
the date of grant. Unearned compensation will be amortized over the four
year vesting period of the options. During the years ended December 31,
1998, 1997 and 1996 (unaudited), $405,000, $390,000 and $281,000,
respectively, of unearned compensation was recognized as expense. The
fair market value of the options is determined by the Company on the date
of grant. In determining the fair market value on each grant date, the
Company considered, among other things, the Company's absolute and
relative level of revenues and other operating results, the absence of a
public trading market for the Company's securities, the intensely
competitive nature of the Company's market and the appreciation of stock
values of a number of generally comparable companies.
NOTE 9 - EMPLOYEE BENEFIT PLANS:
The Company sponsors a 401(k) defined contribution plan covering all
employees. Contributions made by the Company are determined annually by
the Board of Directors. Employer contributions under this plan amounted
to $36,000, $27,000 and $0 for the years ended December 31, 1998, 1997,
and 1996 (unaudited), respectively.
NOTE 10 - SUBSEQUENT EVENTS:
On March 15, 1999, the Company entered into an agreement, subject to
shareholder approval, with Centura Software Corporation ("Centura") to
be acquired for 5.8 million shares of Centura's common stock. The
transaction is expected to close on or before June 7, 1999 and will be
accounted for under the purchase method of accounting.
On April 22, 1999, the Company entered into an agreement with
Meridian Partners, Ltd. to sell certain assets of Vista Development
Corporation for approximately $1.4 million. The assets sold primarily
consist of existing consulting contracts with a historical value of zero
at December 31, 1998. Revenue from the contracts included in services
and other in the statement of operations were $1,000,000, $262,000 and
$100,000 for the years ended December 31, 1998, 1997 and 1996
(unaudited), respectively.
<PAGE>
Annex B
TITLE 23B. WASHINGTON BUSINESS CORPORATION ACT
CHAPTER 23B.13. DISSENTERS' RIGHTS
23B.13.010. Definitions
As used in this chapter:
(1) "Corporation" means the issuer of the shares held by a
dissenter before the corporate action, or the surviving or acquiring
corporation by merger or share exchange of that issuer.
(2) "Dissenter" means a shareholder who is entitled to dissent
from corporate action under the Revised Code of Washington, or RCW,
23B.13.020 and who exercises that right when and in the manner required
by RCW 23B.13.200 through 23B.13.280.
(3) "Fair value," with respect to a dissenter's shares, means the
value of the shares immediately before the effective date of the
corporate action to which the dissenter objects, excluding any
appreciation or depreciation in anticipation of the corporate action
unless exclusion would be inequitable.
(4) "Interest" means interest from the effective date of the
corporate action until the date of payment, at the average rate currently
paid by the corporation on its principal bank loans or, if none, at a
rate that is fair and equitable under all the circumstances.
(5) "Record shareholder" means the person in whose name shares
are registered in the records of a corporation or the beneficial owner of
shares to the extent of the rights granted by a nominee certificate on
file with a corporation.
(6) "Beneficial shareholder" means the person who is a beneficial
owner of shares held in a voting trust or by a nominee as the record
shareholder.
(7) "Shareholder" means the record shareholder or the beneficial
shareholder.
23B.13.020. Right to dissent
(1) A shareholder is entitled to dissent from, and obtain payment
of the fair value of the shareholder's shares in the event of, any of the
following corporate actions:
(a) Consummation of a plan of merger to which the corporation is
a party (i) if shareholder approval is required for the merger by RCW
23B.11.030, 23B.11.080, or the articles of incorporation and the
shareholder is entitled to vote on the merger, or (ii) if the corporation
is a subsidiary that is merged with its parent under RCW 23B.11.040;
(b) Consummation of a plan of share exchange to which the
corporation is a party as the corporation whose shares will be acquired,
if the shareholder is entitled to vote on the plan;
(c) Consummation of a sale or exchange of all, or substantially
all, of the property of the corporation other than in the usual and
regular course of business, if the shareholder is entitled to vote on the
sale or exchange, including a sale in dissolution, but not including a
sale pursuant to court order or a sale for cash pursuant to a plan by
which all or substantially all of the net proceeds of the sale will be
distributed to the shareholders within one year after the date of sale;
(d) An amendment of the articles of incorporation that
materially reduces the number of shares owned by the shareholder to a
fraction of a share if the fractional share so created is to be acquired
for cash under RCW 23B.06.040; or
(e) Any corporate action taken pursuant to a shareholder vote to
the extent the articles of incorporation, bylaws, or a resolution of the
board of directors provides that voting or nonvoting shareholders are
entitled to dissent and obtain payment for their shares.
(2) A shareholder entitled to dissent and obtain payment for the
shareholder's shares under this chapter may not challenge the corporate
action creating the shareholder's entitlement unless the action fails to
comply with the procedural requirements imposed by this title, RCW
25.10.900 through 25.10.955, the articles of incorporation, or the
bylaws, or is fraudulent with respect to the shareholder or the
corporation.
(3) The right of a dissenting shareholder to obtain payment of the
fair value of the shareholder's shares shall terminate upon the
occurrence of any one of the following events:
(a) The proposed corporate action is abandoned or rescinded;
(b) A court having jurisdiction permanently enjoins or sets
aside the corporate action; or
(c) The shareholder's demand for payment is withdrawn with the
written consent of the corporation.
23B.13.030. Dissent by nominees and beneficial owners
(1) A record shareholder may assert dissenters' rights as to fewer
than all the shares registered in the shareholder's name only if the
shareholder dissents with respect to all shares beneficially owned by any
one person and notifies the corporation in writing of the name and
address of each person on whose behalf the shareholder asserts
dissenters' rights. The rights of a partial dissenter under this
subsection are determined as if the shares as to which the dissenter
dissents and the dissenter's other shares were registered in the names of
different shareholders.
(2) A beneficial shareholder may assert dissenters' rights as to
shares held on the beneficial shareholder's behalf only if:
(a) The beneficial shareholder submits to the corporation the
record shareholder's written consent to the dissent not later than the
time the beneficial shareholder asserts dissenters' rights; and
(b) The beneficial shareholder does so with respect to all
shares of which such shareholder is the beneficial shareholder or over
which such shareholder has power to direct the vote.
23B.13.200. Notice of dissenters' rights
(1) If proposed corporate action creating dissenters' rights under
RCW 23B.13.020 is submitted to a vote at a shareholders' meeting, the
meeting notice must state that shareholders are or may be entitled to
assert dissenters' rights under this chapter and be accompanied by a copy
of this chapter.
(2) If corporate action creating dissenters' rights under RCW
23B.13.020 is taken without a vote of shareholders, the corporation,
within ten days after [the] effective date of such corporate action,
shall notify in writing all shareholders entitled to assert dissenters'
rights that the action was taken and send them the dissenters' notice
described in RCW 23B.13.220.
23B.13.210. Notice of intent to demand payment
(1) If proposed corporate action creating dissenters' rights under
RCW 23B.13.020 is submitted to a vote at a shareholders' meeting, a
shareholder who wishes to assert dissenters' rights must (a) deliver to
the corporation before the vote is taken written notice of the
shareholder's intent to demand payment for the shareholder's shares if
the proposed action is effected, and (b) not vote such shares in favor of
the proposed action.
(2) A shareholder who does not satisfy the requirements of
subsection (1) of this section is not entitled to payment for the
shareholder's shares under this chapter.
23B.13.220. Dissenters' notice
(1) If proposed corporate action creating dissenters' rights under
RCW 23B.13.020 is authorized at a shareholders' meeting, the corporation
shall deliver a written dissenters' notice to all shareholders who
satisfied the requirements of RCW 23B.13.210.
(2) The dissenters' notice must be sent within ten days after the
effective date of the corporate action, and must:
(a) State where the payment demand must be sent and where and
when certificates for certificated shares must be deposited;
(b) Inform holders of uncertificated shares to what extent
transfer of the shares will be restricted after the payment demand is
received;
(c) Supply a form for demanding payment that includes the date
of the first announcement to news media or to shareholders of the terms
of the proposed corporate action and requires that the person asserting
dissenters' rights certify whether or not the person acquired beneficial
ownership of the shares before that date;
(d) Set a date by which the corporation must receive the payment
demand, which date may not be fewer than thirty nor more than sixty days
after the date the notice in subsection (1) of this section is delivered;
and
(e) Be accompanied by a copy of this chapter.
23B.13.230. Duty to demand payment
(1) A shareholder sent a dissenters' notice described in RCW
23B.13.220 must demand payment, certify whether the shareholder acquired
beneficial ownership of the shares before the date required to be set
forth in the dissenters' notice pursuant to RCW 23B.13.220(2)(c), and
deposit the shareholder's certificates in accordance with the terms of
the notice.
(2) The shareholder who demands payment and deposits the
shareholder's share certificates under subsection (1) of this section
retains all other rights of a shareholder until the proposed corporate
action is effected.
(3) A shareholder who does not demand payment or deposit the
shareholder's share certificates where required, each by the date set in
the dissenters' notice, is not entitled to payment for the shareholder's
shares under this chapter.
23B.13.240. Share restrictions
(1) The corporation may restrict the transfer of uncertificated
shares from the date the demand for their payment is received until the
proposed corporate action is effected or the restriction is released
under RCW 23B.13.260.
(2) The person for whom dissenters' rights are asserted as to
uncertificated shares retains all other rights of a shareholder until the
effective date of the proposed corporate action.
23B.13.250. Payment
(1) Except as provided in RCW 23B.13.270, within thirty days of the
later of the effective date of the proposed corporate action, or the date
the payment demand is received, the corporation shall pay each dissenter
who complied with RCW 23B.13.230 the amount the corporation estimates to
be the fair value of the shareholder's shares, plus accrued interest.
(2) The payment must be accompanied by:
(a) The corporation's balance sheet as of the end of a fiscal
year ending not more than sixteen months before the date of payment, an
income statement for that year, a statement of changes in shareholders'
equity for that year, and the latest available interim financial
statements, if any;
(b) An explanation of how the corporation estimated the fair
value of the shares;
(c) An explanation of how the interest was calculated;
(d) A statement of the dissenter's right to demand payment under
RCW 23B.13.280; and
(e) A copy of this chapter.
23B.13.260. Failure to take action
(1) If the corporation does not effect the proposed action within
sixty days after the date set for demanding payment and depositing share
certificates, the corporation shall return the deposited certificates and
release any transfer restrictions imposed on uncertificated shares.
(2) If after returning deposited certificates and releasing
transfer restrictions, the corporation wishes to undertake the proposed
action, it must send a new dissenters' notice under RCW 23B.13.220 and
repeat the payment demand procedure.
23B.13.270. After-acquired shares
(1) A corporation may elect to withhold payment required by RCW
23B.13.250 from a dissenter unless the dissenter was the beneficial owner
of the shares before the date set forth in the dissenters' notice as the
date of the first announcement to news media or to shareholders of the
terms of the proposed corporate action.
(2) To the extent the corporation elects to withhold payment under
subsection (1) of this section, after taking the proposed corporate
action, it shall estimate the fair value of the shares, plus accrued
interest, and shall pay this amount to each dissenter who agrees to
accept it in full satisfaction of the dissenter's demand. The corporation
shall send with its offer an explanation of how it estimated the fair
value of the shares, an explanation of how the interest was calculated,
and a statement of the dissenter's right to demand payment under RCW
23B.13.280.
23B.13.280. Procedure if shareholder dissatisfied with payment or offer
(1) A dissenter may notify the corporation in writing of the
dissenter's own estimate of the fair value of the dissenter's shares and
amount of interest due, and demand payment of the dissenter's estimate,
less any payment under RCW 23B.13.250, or reject the corporation's offer
under RCW 23B.13.270 and demand payment of the dissenter's estimate of
the fair value of the dissenter's shares and interest due, if:
(a) The dissenter believes that the amount paid under RCW
23B.13.250 or offered under RCW 23B.13.270 is less than the fair value of
the dissenter's shares or that the interest due is incorrectly
calculated;
(b) The corporation fails to make payment under RCW 23B.13.250
within sixty days after the date set for demanding payment; or
(c) The corporation does not effect the proposed action and does
not return the deposited certificates or release the transfer
restrictions imposed on uncertificated shares within sixty days after the
date set for demanding payment.
(2) A dissenter waives the right to demand payment under this
section unless the dissenter notifies the corporation of the dissenter's
demand in writing under subsection (1) of this section within thirty days
after the corporation made or offered payment for the dissenter's shares.
23B.13.300. Court action
(1) If a demand for payment under RCW 23B.13.280 remains unsettled,
the corporation shall commence a proceeding within sixty days after
receiving the payment demand and petition the court to determine the fair
value of the shares and accrued interest. If the corporation does not
commence the proceeding within the sixty-day period, it shall pay each
dissenter whose demand remains unsettled the amount demanded.
(2) The corporation shall commence the proceeding in the superior
court of the county where a corporation's principal office, or, if none
in this state, its registered office, is located. If the corporation is a
foreign corporation without a registered office in this state, it shall
commence the proceeding in the county in this state where the registered
office of the domestic corporation merged with or whose shares were
acquired by the foreign corporation was located.
(3) The corporation shall make all dissenters, whether or not
residents of this state, whose demands remain unsettled, parties to the
proceeding as in an action against their shares and all parties must be
served with a copy of the petition. Nonresidents may be served by
registered or certified mail or by publication as provided by law.
(4) The corporation may join as a party to the proceeding any
shareholder who claims to be a dissenter but who has not, in the opinion
of the corporation, complied with the provisions of this chapter. If the
court determines that such shareholder has not complied with the
provisions of this chapter, the shareholder shall be dismissed as a
party.
(5) The jurisdiction of the court in which the proceeding is
commenced under subsection (2) of this section is plenary and exclusive.
The court may appoint one or more persons as appraisers to receive
evidence and recommend decision on the question of fair value. The
appraisers have the powers described in the order appointing them, or in
any amendment to it. The dissenters are entitled to the same discovery
rights as parties in other civil proceedings.
(6) Each dissenter made a party to the proceeding is entitled to
judgment (a) for the amount, if any, by which the court finds the fair
value of the dissenter's shares, plus interest, exceeds the amount paid
by the corporation, or (b) for the fair value, plus accrued interest, of
the dissenter's after-acquired shares for which the corporation elected
to withhold payment under RCW 23B.13.270.
23B.13.310. Court costs and counsel fees
(1) The court in a proceeding commenced under RCW 23B.13.300 shall
determine all costs of the proceeding, including the reasonable
compensation and expenses of appraisers appointed by the court. The court
shall assess the costs against the corporation, except that the court may
assess the costs against all or some of the dissenters, in amounts the
court finds equitable, to the extent the court finds the dissenters acted
arbitrarily, vexatiously, or not in good faith in demanding payment under
RCW 23B.13.280.
(2) The court may also assess the fees and expenses of counsel and
experts for the respective parties, in amounts the court finds equitable:
(a) Against the corporation and in favor of any or all
dissenters if the court finds the corporation did not substantially
comply with the requirements of RCW 23B.13.200 through 23B.13.280; or
(b) Against either the corporation or a dissenter, in favor of
any other party, if the court finds that the party against whom the fees
and expenses are assessed acted arbitrarily, vexatiously, or not in good
faith with respect to the rights provided by chapter 23B.13 RCW.
(3) If the court finds that the services of counsel for any
dissenter were of substantial benefit to other dissenters similarly
situated, and that the fees for those services should not be assessed
against the corporation, the court may award to these counsel reasonable
fees to be paid out of the amounts awarded the dissenters who were
benefited.
B-7
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 20. Indemnification of Directors and Officers.
Section 145(a) of the General Corporation Law of the State of
Delaware ("Delaware Corporation Law") provides, in general, that a
corporation shall have the power to indemnify any person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal,
administrative or investigative (other than an action by or in the right
of the corporation), because the person is or was a director or officer
of the corporation. Such indemnity may be against expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by the person in connection with such
action, suit or proceeding, if the person acted in good faith and in a
manner the person reasonably believed to be in or not opposed to the best
interests of the corporation and if, with respect to any criminal action
or proceeding, the person did not have reasonable cause to believe the
person's conduct was unlawful.
Section 145(b) of the Delaware Corporation Law provides, in
general, that a corporation shall have the power to indemnify any person
who was or is a party or is threatened to be made a party to any
threatened, pending or completed action or suit by or in the right of the
corporation to procure a judgment in its favor because the person is or
was a director or officer of the corporation, against any expenses
(including attorneys' fees) actually and reasonably incurred by the
person in connection with the defense or settlement of such action or
suit if the person acted in good faith and in a manner the person
reasonably believed to be in or not opposed to the best interests of the
corporation.
Section 145(g) of the Delaware Corporation Law provides, in
general, that a corporation shall have the power to purchase and maintain
insurance on behalf of any person who is or was a director or officer of
the corporation against any liability asserted against the person in any
such capacity, or arising out of the person's status as such, whether or
not the corporation would have the power to indemnify the person against
such liability under the provisions of the law.
Article Tenth of the Registrant's Certificate of Incorporation
(incorporated by reference herein) provides for indemnification of
directors, officers and other persons as follows:
"To the fullest extent permitted by the Delaware General
Corporation Law as the same exists or as may hereafter be
amended, no director of the Corporation shall be personally
liable to the Corporation or its stockholders for monetary
damages for breach of fiduciary duty as a director. Neither
any amendment nor repeal of this Article, nor the adoption of
any provision of this Certificate of Incorporation
inconsistent with this Article, shall eliminate or reduce the
effect of this Article in respect of any matter occurring, or
any cause of action, suit or claim that, but for this
Article, would accrue or arise, prior to such amendment,
repeal or adoption of an inconsistent provision."
Article VI of the Registrant's Bylaws (incorporated by reference
herein) provides that:
"Indemnification of Directors and Officers. The corporation
shall, to the maximum extent and in the manner permitted by
the General Corporation Law of Delaware, indemnify each of
its directors and officers against expenses (including
attorneys' fees), judgments, fines, settlements and other
amounts actually and reasonably incurred in connection with
any proceeding 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 or officer of a
corporation which was a predecessor corporation of the
corporation or of another enterprise at the request of such
predecessor corporation."
"Indemnification of Others. The corporation shall have the power,
to the maximum extent and in the manner permitted by the General
Corporation Law of Delaware, to indemnify each of its employees and
agents (other than directors and officers) against expenses (including
attorneys' Fees), judgments, fines, settlements and other amounts
actually and reasonably incurred in connection with any proceeding
arising by reason of the fact that such person is or was an agent of the
corporation. For purposes of this Section 6.9, an "employee" or
"agent" of the corporation (other than a director or officer) includes
any person (i) who is or was an employee or agent of the corporation,
(ii) who is or was serving at the request of the corporation as an
employee or agent of another corporation, partnership, joint venture,
trust or other enterprise, or (iii) who was an employee or agent of a
corporation which was a predecessor corporation of the corporation or of
another enterprise at the request of such predecessor corporation."
"Insurance. The corporation may purchase and maintain insurance
on behalf of any person who is or was a director, officer, employee or
agent of the corporation, or is or was serving at the request of the
corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise
against any liability asserted against him or her and incurred by him or
her in any such capacity, or arising out of his or her status as such,
whether or not the corporation would have the power to indemnify him or
her against such liability under the provisions of the General
Corporation Law of Delaware."
Centura has obtained directors' and officers' liability insurance
covering, subject to certain exceptions, actions taken by Centura's
directors and officers in their capacities as such.
Item 21. Exhibits and Financial Statement Schedules.
(a) The following exhibits are filled herewith or incorporated
herein by reference:
<TABLE>
<CAPTION>
Exhibit
No. Description
- ----------- -----------------------------------------------------------
<C> <S>
2.1(1) Agreement and Plan of Reorganization, dated as of March 15, 1999,
by and among the Registrant, Centura Subsidiary Corporation and
Raima Corporation (included as Annex A to the Prospectus included
as part of this Registration Statement).
3.1(1) Certificate of Incorporation of the Registrant.
3.2(1) Bylaws of the Registrant
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 Exhibit A, B and C, respectively.
4.2(17) Amendment to Preferred Shares Rights Agreement effective February
27, 1998.
5.1 Opinion of Orrick, Herrington & Sutcliffe LLP regarding legality
of securities being registered.
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 agreements thereunder.
10.4(3) 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 agreements 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 agreements
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.
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(17)* 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(17)* Settlement Agreements and Mutual Releases between the Registrant
and Sam M. Inman, III and between the Registrant and Earl Stahl.
10.29(17) Loan and Security Agreement dated January 19, 1998 between the
Registrant and Coast Business Credit, a division of Southern
Pacific Bank.
10.30(17) Common Stock and Warrant Purchase Agreement dated February 27,
1998 between the Registrant and certain Purchasers of the
Registrant's Common Stock.
10.31(17) Note Conversion Agreement dated February 27, 1998 between the
Registrant and Newport Acquisition Company No. 2, LLC.
10.32(17) Warrant Purchase Agreement dated February 27, 1998 between the
Registrant and Computer Associates International, Inc.
10.33(17) Investor Rights Agreement dated February 27, 1998 between the
Registrant and Newport Acquisition Company No. 2, LLC.
10.34(17) Common Stock Purchase Warrants issued to Rochon Capital Group,
Ltd. On February 27, 1998.
10.35(17)* 1998 Employee Stock Option Plan and form of Nonstatutory Option
Agreements thereunder.
10.36(18) Amendment to Investor Rights Agreement dated February 27, 1998
between the Registrant and Newport Acquisition Company No. 2, LLC.
11.1(14) Statement regarding computation of per share earnings.
23.1 Consent of Orrick, Herrington & Sutcliffe LLP (included in Exhibit
5.1).
23.2(1) Consent of PricewaterhouseCoopers LLP, with respect to financial
statements of the Registrant.
23.3(1) Consent of PricewaterhouseCoopers LLP, with respect to financial
statements of Raima Corporation.
24.1(1) Power of Attorney (included on the signature page of this Form
S-4).
</TABLE>
_______________________________
* Management Compensatory Plan or Arrangement.
(1) Previously filed.
(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-Q 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.
(17) Incorporated by reference from the Company's Annual Report on Form
10-K for the year ended December 31, 1997.
(18) Incorporated by reference from the Company's Quarterly Report on
Form 10-Q for the quarter ended June 30, 1998.
Item 22. Undertakings
The undersigned Registrant hereby undertakes:
(1) that, for purposes of determining any liability under the
Securities Act of 1933, each filing of the registrant's annual
report pursuant to Section 13(a) or Section 15(d) of the Securities
Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of
the Securities Exchange Act of 1934) that is incorporated by
reference in this registration statement shall be deemed to be a
new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof;
(2) that prior to any public reoffering of the securities registered
hereunder through use of a prospectus which is a part of this
registration statement, by any person or party who is deemed to be
an underwriter within the meaning of Rule 145(c), the issuer
undertakes that such reoffering prospectus will contain the
information called for by the applicable registration form with
respect to reofferings by persons who may be deemed underwriters,
in addition to the information called for by the other items of the
applicable form;
(3) that every prospectus (i) that is filed pursuant to paragraph (2)
immediately preceding, or (ii) that purports to meet the
requirements of Section 10(a)(3) of the Act and is used in
connection with an offering of securities subject to Rule 415, will
be filed as a part of an amendment to the registration statement
and will not be used until such amendment is effective, and that,
for purposes of determining any liability under the Securities Act
of 1933, each such post-effective amendment shall be deemed to be a
new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof;
(4) to respond to requests for information that is incorporated by
reference into the prospectus pursuant to Items 4, 10(b), 11, or 13
of this Form, within one business day of receipt of any such
request, and to send the incorporated documents by first class mail
or other equally prompt means, including information contained in
documents filed after the effective date of this registration
statement through the date of responding to such request; and
(5) to supply by means of a post-effective amendment all information
concerning a transaction, and the company being acquired involved
therein, that was not the subject of and included in this
registration statement when it became effective.
Insofar as indemnification for liabilities under the Securities Act of
1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the provisions described in Item 20 above, or
otherwise, the registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Securities Act and is therefore unenforceable.
If a claim of indemnification against such liabilities (other than the
payment by the registrant of expenses incurred or paid by a director,
officer or controlling person of the registrant in a successful defense
of any action, suit or proceeding) is asserted by such director, officer,
or controlling person in connection with the securities being registered,
the registrant will, unless in the opinion of its counsel the matter has
been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against
public policy as expressed in the Securities Act and will be governed by
the final adjudication of such issue.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the registrant has
duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Redwood Shores,
State of California, on May 12, 1999.
CENTURA SOFTWARE CORPORATION
By: /s/ Scott R. Broomfield
--------------------------
Scott R. Broomfield
President, Chief Executive Officer
and Chairman of the Board of
Directors
(Principal Executive Officer)
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on May 12, 1999.
Signature Title Date
- ------------------------ ---------------------------------- -----------------
/s/ Scott R. Broomfield* President, Chief Executive Officer
- ------------------------ and Chairman of the Board of
Scott R. Broomfield Directors (Principal Executive
Officer)
/s/ John W. Bowman* Executive Vice President, Finance
- ------------------------ and Operations and Chief Financial
John W. Bowman Officer (Principal Financial
Officer)
/s/ Richard Lucien Vice President, Finance and
- ------------------------ Operations (Principal Accounting
Richard Lucien Officer)
/s/ Peter Micchiche* Director
- ------------------------
Peter Micchiche
/s/ Earl M. Stahl* Director
- ------------------------
Earl M. Stahl
/s/ Philip Koen, Jr.* Director
- ------------------------
Philip Koen, Jr.
/s/ Jack King* Director
- ------------------------
Jack King
<PAGE>
*By: /s/ Richard Lucien
------------------------
Richard Lucien
Attorney-in-fact
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
No. Description
- ---------- -----------------------------------------------------------------
<C> <S>
2.1(1) Agreement and Plan of Reorganization, dated as of March 15, 1999,
by and among the Registrant, Centura Subsidiary Corporation and
Raima Corporation (included as Annex A to the Prospectus included
as part of this Registration Statement).
3.1(1) Certificate of Incorporation of the Registrant.
3.2(1) Bylaws of the Registrant
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 Exhibit A, B and C, respectively.
4.2(17) Amendment to Preferred Shares Rights Agreement effective February
27, 1998.
5.1 Opinion of Orrick, Herrington & Sutcliffe LLP regarding legality
of securities being registered.
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 agreements thereunder.
10.4(3) 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 agreements 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 agreements
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.
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(17)* 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(17)* Settlement Agreements and Mutual Releases between the Registrant
and Sam M. Inman, III and between the Registrant and Earl Stahl.
10.29(17) Loan and Security Agreement dated January 19, 1998 between the
Registrant and Coast Business Credit, a division of Southern
Pacific Bank.
10.30(17) Common Stock and Warrant Purchase Agreement dated February 27,
1998 between the Registrant and certain Purchasers of the
Registrant's Common Stock.
10.31(17) Note Conversion Agreement dated February 27, 1998 between the
Registrant and Newport Acquisition Company No. 2, LLC.
10.32(17) Warrant Purchase Agreement dated February 27, 1998 between the
Registrant and Computer Associates International, Inc.
10.33(17) Investor Rights Agreement dated February 27, 1998 between the
Registrant and Newport Acquisition Company No. 2, LLC.
10.34(17) Common Stock Purchase Warrants issued to Rochon Capital Group,
Ltd. On February 27, 1998.
10.35(17)* 1998 Employee Stock Option Plan and form of Nonstatutory Option
Agreements thereunder.
10.36(18) Amendment to Investor Rights Agreement dated February 27, 1998
between the Registrant and Newport Acquisition Company No. 2, LLC.
11.1(14) Statement regarding computation of per share earnings.
23.1 Consent of Orrick, Herrington & Sutcliffe LLP (included in Exhibit
5.1).
23.2(1) Consent of PricewaterhouseCoopers LLP, with respect to financial
statements of the Registrant.
23.3(1) Consent of PricewaterhouseCoopers LLP, with respect to financial
statements of Raima Corporation.
24.1(1) Power of Attorney (included on the signature page of this Form
S-4).
</TABLE>
______________________________
* Management Compensatory Plan or Arrangement.
(1) Previously filed.
(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-Q 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.
(17) Incorporated by reference from the Company's Annual Report on Form
10-K for the year ended December 31, 1997.
(18) Incorporated by reference from the Company's Quarterly Report on
Form 10-Q for the quarter ended June 30, 1998.
<PAGE>
Exhibit 5.1
[ORRICK, HERRINGTON & SUTCLIFFE LLP LETTERHEAD]
May 12, 1999
Centura Software Corporation
1060 Marsh Road
Menlo Park, CA 94025
Registration Statement on Form S-4 (File No. 333-77643)
Ladies and Gentlemen:
We have examined the Registration Statement on Form S-4 (No. 333-
77643) filed by you with the Securities and Exchange Commission (the
"Commission") on May 4, 1999 (the "Registration Statement"), in
connection with the registration under the Securities Act of 1933, as
amended, of 5,800,000 shares of your Common Stock (the "Shares"). As
your counsel in connection with this transaction, we have examined the
proceedings taken and are familiar with the proceedings proposed to be
taken by you in connection with the issuance of the Shares.
We have also examined instruments, documents, and records which we
deemed relevant and necessary for the basis of our opinion hereinafter
expressed. In such examination, we have assumed the following: (a) the
authenticity of original documents and the genuineness of all signatures;
(b) the conformity to the originals of all documents submitted to us as
copies; and (c) the truth, accuracy, and completeness of the information,
representations, and warranties contained in the records, documents, and
certificates we have reviewed.
Based on such examination, it is our opinion that the Shares when
issued in the manner described in the Registration Statement and the
Agreement and Plan of Reorganization dated as of March 15, 1999 by and
between you and Raima Corporation will be legally and validly issued,
fully paid and non-assessable.
We are admitted to practice law only in the State of California, and
we express no opinion concerning any laws other than the laws of the State
of California and the federal laws of the United States.
We hereby consent to the use of this opinion as an exhibit to said
Registration Statement, and further consent to the use of our name
wherever appearing in said Registration Statement, including the
Prospectus constituting a part thereof, and in any amendment thereto. In
giving such consent, we do not consider that we are "experts" within the
meaning of such term as used in the Securities Act of 1933, as amended, or
the rules and regulations of the Securities and Exchange Commission issued
thereunder, with respect to any part of the Registration Statement,
including this opinion as an exhibit or otherwise.
Very truly yours,
/s/ Orrick, Herrington & Sutcliffe LLP
ORRICK, HERRINGTON & SUTCLIFFE LLP
