CENTURA SOFTWARE CORPORATION
NOTE CONVERSION AGREEMENT
FEBRUARY 27, 1998
TABLE OF CONTENTS
Page
----
1. Conversion of Principal and Interest Indebtedness . . . . . . . . . . . . . 1
1.1 Issuance of Common Stock. . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Delivery into Escrow. . . . . . . . . . . . . . . . . . . . . . . . . 2
1.3 Purchase and Sale Irrevocable . . . . . . . . . . . . . . . . . . . . 2
1.4 Closing; Delivery . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2. Representations and Warranties of the Company . . . . . . . . . . . . . . . 3
2.1 Organization, Good Standing and Qualification . . . . . . . . . . . . 3
2.2 Capital Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.3 Authorization . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.4 Intentionally Omitted . . . . . . . . . . . . . . . . . . . . . . . . 4
2.5 Compliance with Other Instruments . . . . . . . . . . . . . . . . . . 4
2.6 SEC Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.7 Compliance with SmallCap Continued Listing Requirements . . . . . . . 5
2.8 Absence of Certain Changes. . . . . . . . . . . . . . . . . . . . . . 5
2.9 Absence of Litigation . . . . . . . . . . . . . . . . . . . . . . . . 6
2.10 No Undisclosed Events, Liabilities, Developments or Circumstances. . 6
2.11 No General Solicitation. . . . . . . . . . . . . . . . . . . . . . . 6
2.12 Employee Relations . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.13 Intellectual Property Rights . . . . . . . . . . . . . . . . . . . . 6
2.14 Title. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.15 Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.16 Regulatory Permits . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.17 Internal Accounting Controls . . . . . . . . . . . . . . . . . . . . 7
2.18 No Materially Adverse Contracts, Etc . . . . . . . . . . . . . . . . 7
2.19 Tax Status . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.20 Transactions With Affiliates . . . . . . . . . . . . . . . . . . . . 8
2.21 Consent. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
3. Representations and Warranties of Purchaser . . . . . . . . . . . . . . . . 8
3.1 Authorization . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
3.2 Purchase Entirely for Own Account . . . . . . . . . . . . . . . . . . 9
3.3 Accredited Investor . . . . . . . . . . . . . . . . . . . . . . . . . 9
3.4 Restricted Securities . . . . . . . . . . . . . . . . . . . . . . . . 9
3.5 Further Limitations on Disposition. . . . . . . . . . . . . . . . . . 9
3.6 Legends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10
3.7 Disclosure of Information . . . . . . . . . . . . . . . . . . . . . .10
3.8 Membership of the Purchaser . . . . . . . . . . . . . . . . . . . . .11
4. Registration of Securities. . . . . . . . . . . . . . . . . . . . . . . . .11
4.1 Rights Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . .11
TABLE OF CONTENTS
(continued)
Page
----
4.2 Prohibition on Hedging. . . . . . . . . . . . . . . . . . . . . . . .11
5. Covenants of the Company. . . . . . . . . . . . . . . . . . . . . . . . . .11
5.1 Nomination of Directors . . . . . . . . . . . . . . . . . . . . . . .11
5.2 Bylaws Amendments . . . . . . . . . . . . . . . . . . . . . . . . . .12
5.3 Amendment to Preferred Shares Rights Agreement. . . . . . . . . . . .12
5.4 Form D and Blue Sky . . . . . . . . . . . . . . . . . . . . . . . . .12
5.5 Reporting Status. . . . . . . . . . . . . . . . . . . . . . . . . . .13
5.6 Financial Information . . . . . . . . . . . . . . . . . . . . . . . .13
5.7 Listing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .13
5.8 Filing of Form 8-K. . . . . . . . . . . . . . . . . . . . . . . . . .13
5.9 Private Placement . . . . . . . . . . . . . . . . . . . . . . . . . .14
5.10 Coast Consent. . . . . . . . . . . . . . . . . . . . . . . . . . . .14
5.10 Coast Consent. . . . . . . . . . . . . . . . . . . . . . . . . . . .14
6. Covenants of the Purchaser. . . . . . . . . . . . . . . . . . . . . . . . .14
7. Conditions of the Purchaser's Obligations at the Closing. . . . . . . . . .14
7.1 Representations and Warranties. . . . . . . . . . . . . . . . . . . .14
7.2 Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14
7.3 Compliance Certificate. . . . . . . . . . . . . . . . . . . . . . . .14
7.4 Qualifications. . . . . . . . . . . . . . . . . . . . . . . . . . . .15
7.5 Opinion of Company Counsel. . . . . . . . . . . . . . . . . . . . . .15
7.6 NASD Confirmation . . . . . . . . . . . . . . . . . . . . . . . . . .15
7.7 Release . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .15
7.8 Schedule of Exceptions. . . . . . . . . . . . . . . . . . . . . . . .15
8. Conditions of the Company's Obligations at Closing. . . . . . . . . . . . .15
8.1 Representations and Warranties. . . . . . . . . . . . . . . . . . . .15
8.2 Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . .15
8.3 Qualifications. . . . . . . . . . . . . . . . . . . . . . . . . . . .15
8.4 Note and Other Evidence of Principal Indebtedness . . . . . . . . . .16
8.5 NASD Confirmation . . . . . . . . . . . . . . . . . . . . . . . . . .16
9. Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .16
9.1 Survival of Warranties. . . . . . . . . . . . . . . . . . . . . . . .16
9.2 Transfer; Successors and Assigns. . . . . . . . . . . . . . . . . . .16
9.3 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . .16
9.4 Counterparts. . . . . . . . . . . . . . . . . . . . . . . . . . . . .16
9.5 Titles and Subtitles. . . . . . . . . . . . . . . . . . . . . . . . .16
9.6 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .16
8.7 Company Advisor / Payment of Fees . . . . . . . . . . . . . . . . . .17
9.8 Fees and Expenses . . . . . . . . . . . . . . . . . . . . . . . . . .17
-ii-
TABLE OF CONTENTS
(continued)
Page
----
9.9 Attorney's Fees . . . . . . . . . . . . . . . . . . . . . . . . . . .17
9.10 Amendments and Waivers . . . . . . . . . . . . . . . . . . . . . . .17
9.11 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . .18
9.12 Delays or Omissions. . . . . . . . . . . . . . . . . . . . . . . . .18
9.13 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . .18
9.14 Corporate Securities Law . . . . . . . . . . . . . . . . . . . . . .18
9.15 Confidentiality. . . . . . . . . . . . . . . . . . . . . . . . . . .18
-iii-
CENTURA SOFTWARE CORPORATION
NOTE CONVERSION AGREEMENT
This Note Conversion Agreement (the "AGREEMENT") is made as of the 27th
day of February 1998 by and between Centura Software Corporation, a
California corporation (the "COMPANY"), and Newport Acquisition Company No. 2
LLC, a Delaware limited liability company (the "PURCHASER").
Recitals
Whereas, the Company and Computer Associates International, Inc. a
Delaware corporation (the "SELLER" or "CA"), entered into that certain Note
Purchase Agreement dated March 31, 1995 (the "PRIOR AGREEMENT") and that
certain Floating Rate Convertible Subordinated Note Due 1998 in the principal
amount of $10,000,000 (the "PRINCIPAL INDEBTEDNESS") dated as of April 3,
1995 in the form attached hereto as EXHIBIT A (the "NOTE");
Whereas, the Company, the Purchaser and the Seller have entered into a
Note Purchase and Sale Agreement (the "PURCHASE AGREEMENT") of even date
herewith pursuant to which the Purchaser has agreed to purchase the Note and
all accrued interest thereunder (the "INTEREST INDEBTEDNESS") and all of
Seller's rights and obligations pursuant to the Prior Agreement;
and the Seller has agreed to sell the Note and the Interest Indebtedness to
the Purchaser and to assign to Purchaser all of its rights and obligations
under the Note and the Prior Agreement and the Company has agreed, in
consideration of CA's release of the Company with respect to the Note as set
forth in a Warrant Purchase Agreement of even date herewith between Seller
and the Company in the form attached hereto as EXHIBIT B ("WARRANT PURCHASE
AGREEMENT"), to deliver and sell to the Seller concurrently at a price of
$0.001 per share a warrant in the form attached hereto as EXHIBIT B (the
"WARRANT") to purchase up to 500,000 shares of the Company's Common Stock at
an exercise price of $1.906 per share; and
Whereas, the Company and the Purchaser desire to convert the Principal
Indebtedness and Interest Indebtedness under the Note to equity securities of
the Company simultaneously with the Closing of the Purchase Agreement.
Now, therefore, for good and valuable consideration, the parties hereby
agree as follows:
1. CONVERSION OF PRINCIPAL AND INTEREST INDEBTEDNESS.
1.1 ISSUANCE OF COMMON STOCK. Subject to the terms and conditions
of this Agreement, at the Closing, in consideration for the cancellation of
all Principal Indebtedness and Interest Indebtedness under the Note and any
other instrument evidencing such indebtedness, the Company shall issue and
sell to the Purchaser and the Purchaser shall purchase a total of 11,415,094
shares of the Company's Common Stock. The shares of Common Stock issuable
upon the conversion hereunder (the "CONVERSION STOCK") shall also be
hereinafter referred to as the "STOCK" or the "SECURITIES."
1.2 DELIVERY INTO ESCROW. On the basis of the representations,
warranties, terms and conditions contained herein, on the date hereof each
party shall deliver to the financial entity or other entity mutually agreed
to by the Parties (the "ESCROW AGENT"), pursuant to an agreement in the form
attached hereto as EXHIBIT C (the "ESCROW AGREEMENT"), the following:
(a) Seller shall deliver the original signature Note;
(b) Purchaser shall deliver $6 million in cash or by wire
transfer;
(c) The Company shall deliver an affidavit executed by an
officer of the Company setting forth the Interest Indebtedness on the Note
calculated through February 27, 1998 and certified as correct by an officer
of the Seller (the "INTEREST AFFIDAVIT"); and
(d) Seller, Purchaser and the Company shall deliver each of
the other items required to be delivered by each of them pursuant to the
terms of the Escrow Agreement.
1.3 PURCHASE AND SALE IRREVOCABLE. The Company and Purchaser each
acknowledge and agree that by its delivery of the respective consideration
set forth above in Section 1.1 to the Escrow Agent, it shall have made an
irrevocable commitment to close the purchase, sale and assignment
transactions contemplated hereunder subject to the fulfillment of the terms
and conditions of this Agreement, the Purchase Agreement, and the Escrow
Agreement.
1.4 CLOSING; DELIVERY.
(a) The issuance and sale of the Conversion Stock hereunder
shall take place at the offices of Venture Law Group, ▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇,
▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, at 2:00 p.m., on February __, 1998, or at such other
time and place as the Company and the Purchaser mutually agree upon, orally
or in writing (which time and place are designated as the "CLOSING"),
provided that such Closing occurs simultaneously with the closing of the
Purchase Agreement pursuant to the terms and conditions thereof (without
waiver of any term or condition thereof).
(b) At the Closing, in consideration for the conversion of the
Principal and Interest Indebtedness by the Purchaser, the Company shall
instruct the Escrow Agent to deliver to the Purchaser a stock certificate
representing the Conversion Stock being issued.
(c) At the Closing, in consideration for the issuance of the
Conversion Stock by the Company, the Purchaser shall instruct the Escrow
Agent to deliver to the Company for cancellation the Note and the Interest
Affidavit as defined in Section 1.2.(a) of the Purchase Agreement, setting
forth the Interest Indebtedness under the Note.
2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company hereby
represents and warrants to the Purchaser that, except as set forth on a
Schedule of Exceptions attached hereto as EXHIBIT D, which exceptions shall
be deemed to be representations and warranties as if made hereunder:
-2-
2.1 ORGANIZATION, GOOD STANDING AND QUALIFICATION. The Company is
a corporation duly organized, validly existing and in good standing under the
laws of the State of California and has all requisite corporate power and
authority to carry on its business.
2.2 CAPITAL STOCK. The authorized capital of the Company consists,
or will consist, immediately prior to the Closing, of 60,000,000 shares of
Common Stock, $0.01 par value per share, of which 15,780,886 shares were
issued and outstanding as of February 9, 1998, and 2,000,000 shares of
Preferred Stock, $0.01 par value per share, none of which are issued or
outstanding. All such shares have been duly authorized, and all such issued
and outstanding shares have been validly issued, are fully paid and
nonassessable, are not subject to any preemptive rights or rights of first
refusal (other than rights of first refusal held by the Company and
specifically described in the Schedule of Exceptions) under applicable law,
the Articles of Incorporation or Bylaws of the Company, or any agreement to
which the Company is a party or by which it is bound and are free of any
liens or encumbrances other than any liens or encumbrances created by or
imposed upon the holders thereof. The Company has also reserved (i) an
aggregate of 2,000,000 shares of Common Stock issuable to employees and
consultants pursuant to the Company's 1995 Stock Option Plan, of which
1,164,947 shares are issuable upon exercise of outstanding options under such
plan, (ii) an aggregate of 2,657,399 shares of Common Stock issuable to
employees and consultants pursuant to the Company's 1986 Stock Option Plan,
of which 2,657,399 shares are issuable upon exercise of outstanding options
under such plan, (iii) an aggregate of 400,000 shares of Common Stock
issuable to employees pursuant to the Company's 1992 Employee Stock Purchase
Plan, of which no shares are available for future issuance under such plan,
(iv) 500,000 shares of Common Stock issuable to non-employee directors
pursuant to Company's 1996 Directors' Stock Option Plan, of which 300,000
shares are issuable upon exercise of outstanding options under such plan, (v)
non-plan options issued to the Company's Chief Executive Officer, Chief
Financial Officer and Vice President of Marketing to purchase up to an
aggregate of 1,500,000 shares of Common Stock, (vi) up to 450,000 shares of
Common Stock issuable upon exercise of warrants granted or to be granted to
certain third parties, including vendors, suppliers and financial and
investment advisors of the Company, prior to inclusion of the Warrant for
500,000 shares of Common Stock to be issued to the Seller. The shares of
Conversion Stock have been duly authorized and, when issued and paid for in
accordance with this Agreement, will be validly issued, fully paid, and
nonassessable, and not subject to any preemptive rights or rights of first
refusal under applicable law, the Articles of Incorporation or Bylaws of the
Company, or any agreement to which the Company is a party or by which the
Company is bound, and are free of any taxes, claims, liens, charges or
encumbrances other than taxes, claims, liens, charges or encumbrances created
by or imposed upon the holders thereof; provided, however, that the
Conversion Stock may be subject to restrictions on transfer as set forth in
this Agreement. There are no agreements or arrangements under which the
Company is obligated to register the sale of any of its securities under the
Securities Act of 1933, as amended (the "1933 ACT"). There are no
outstanding securities of the Company which contain any
-3-
redemption or similar provisions, and there are no contracts, commitments,
understandings or arrangements by which the Company is or may become bound to
redeem a security of the Company. There are no securities or instruments
containing anti-dilution or similar provisions that will be triggered by the
issuance of the Conversion Stock. There are no outstanding securities or
instruments of the Company which contain any redemption or similar
provisions, and there are on contracts, commitments, understandings or
arrangements by which the Company is or may become bound to redeem a security
of the Company. The Company does not have any stock appreciation rights or
"phantom stock" plans or agreements or any similar plan or agreement. Other
than as set forth in the Reports, the Company has no subsidiaries or equity
interest in any other entity. The Company has furnished to the Purchaser true
and correct copies of the Company's Articles of Incorporation, as amended and
as in effect on the date hereof (the "ARTICLES OF INCORPORATION"), and the
Company's Bylaws, as amended and as in effect on the date hereof (the
"BYLAWS"), and the terms of all securities convertible into or exercisable
for Common Stock and the material rights of the holders thereof in respect
thereto. The execution, delivery and performance by the Company of the
Transaction Agreements will not cause the conversion rights or exercise
rights of any securities convertible into or exercisable for Common Stock to
be accelerated.
2.3 AUTHORIZATION. The execution, delivery and performance by the
Company of this Agreement and the Investor Rights Agreement attached hereto
as EXHIBIT E (the "RIGHTS AGREEMENT" and together with the Agreement and the
Purchase Agreement, the "TRANSACTION AGREEMENTS") are within the Company's
corporate power and have been duly authorized by all requisite action by the
Company. The Transaction Agreements have been duly executed and delivered by
the Company and this Agreement constitutes, and the Rights Agreement when
executed and delivered in accordance with this Agreement will constitute, the
valid and binding obligation of the Company, enforceable in accordance with
their respective terms, except as such enforceability may be limited by
principles of public policy and subject to the laws of general application
relating to bankruptcy, insolvency and the relief of debtors and rules of law
governing specific performance, injunctive relief or other equitable remedies.
2.4 INTENTIONALLY OMITTED.
2.5 COMPLIANCE WITH OTHER INSTRUMENTS. The execution, delivery and
performance of the Transaction Agreements and the consummation of the
transactions contemplated thereby will not result in any violation or default
of any provisions of the Articles of Incorporation or Bylaws of the Company
or of any instrument, judgment, order, writ, decree or contract to which the
Company is a party or by which the Company is bound or, to the Company's
knowledge, of any provision of federal or state statute, rule or regulation
applicable to the Company, or be in conflict with or constitute, with or
without the passage of time and giving of notice, either a default under any
such provision, instrument, judgment, order, writ, decree or contract or an
event which results in the creation of any lien, charge or encumbrance upon
any assets of the Company.
2.6 SEC REPORTS. The Company has filed with the Securities and
Exchange Commission (the "COMMISSION") via ▇▇▇▇▇ its Annual Report on Form
10-K for the year ended December 31, 1996 and its Quarterly Reports on Form
10-Q for the first three quarters of the year ended December 31, 1997 (the
"REPORTS"), and such Reports are available to Purchaser through ▇▇▇▇▇ in
electronic format. As of their respective filing dates, the Reports complied
in all material respects with the requirements of the Securities Exchange Act
of 1934, as amended, and none of the Reports contained any untrue statement
of a material fact or omitted to state a
-4-
material fact required to be stated therein or necessary to make the
statements made therein, in light of the circumstances in which they were
made, not misleading, except to the extent corrected by a document
subsequently filed with the Commission and provided to Purchaser prior to the
date hereof. No other information provided by or on behalf of the Company to
the Purchaser which is not included in the Reports, including, but not
limited to, information referred to in Section 2.2 of this Agreement,
contains any untrue statement of a material fact or omits to state any
material fact necessary in order to make the statements therein, in light of
the circumstance under which they are or were made, not misleading. Neither
the Company nor any of its officers, directors, employees or agents have
provided the Purchaser with any material, nonpublic information.
2.7 COMPLIANCE WITH SMALLCAP CONTINUED LISTING REQUIREMENTS. After
giving effect to the transactions contemplated hereunder and a private
placement of the Company's equity securities scheduled to close concurrently
with the Closing, on the Closing Date the Company will have (a) net tangible
assets in excess of $2,000,000, (b) a public float of in excess of 500,000
shares, (c) a market value for the public float in excess of $1,000,000, (d)
in excess of 300 shareholders, (e) at least two market makers for its
registered securities and (f) corporate governance standards duly adopted by
its Board of Directors which the Company reasonably believes satisfy
published requirements for The Nasdaq SmallCap Market. After giving effect
to the transactions contemplated hereunder and the private placement
referenced above, the Company reasonably believes that (A) on the Closing
Date the Company will be in compliance with all other requirements, other
than the $1.00 per share bid price maintenance requirement, imposed by Nasdaq
upon the Company with respect to the continued listing of the Common Stock
for quotation on The Nasdaq SmallCap Market, and (B) the Common Stock of the
Company will continue to be listed for quotation on The Nasdaq SmallCap
Market.
2.8 ABSENCE OF CERTAIN CHANGES. Since September 30, 1997, there
has been no material adverse change and no material adverse development in
the business, properties, operations, financial condition, results of
operations or prospects of the Company. The Company has not taken any steps,
and does not currently expect to take any steps, to seek protection pursuant
to any bankruptcy law nor does the Company have any knowledge or reason to
believe that its creditors intend to initiate involuntary bankruptcy
proceedings. Since September 30, 1997 the Company has not declared or paid
any dividends, sold any assets outside of the ordinary course of business or
had material capital expenditures.
2.9 ABSENCE OF LITIGATION. There is no action, suit, proceeding,
inquiry or investigation before or by any court, public board, government
agency, self-regulatory organization or body pending or, to the knowledge of
the Company, threatened against or affecting the Company, its Common Stock or
any of the Company's officers or directors in their capacities as such or
that questions the validity of the Transaction Agreements or the right of the
Company to enter into them, or to consummate the transactions contemplated
thereby.
2.10 NO UNDISCLOSED EVENTS, LIABILITIES, DEVELOPMENTS OR
CIRCUMSTANCES. No event, liability, development or circumstance has occurred
or exists, or to the Company's knowledge is contemplated to occur, with
respect to the Company or its business, properties,
-5-
prospects, operations or financial condition, that would be required to be
disclosed by the Company under applicable securities laws on a registration
statement filed with the SEC relating to an issuance and sale by the Company
of its Common Stock and which has not been publicly announced.
2.11 NO GENERAL SOLICITATION. Neither the Company, nor any of its
affiliates, nor any person acting on its or their behalf, has engaged in any
form of general solicitation or general advertising (within the meaning of
Regulation D under the ▇▇▇▇ ▇▇▇) in connection with the offer or sale of the
Conversion Stock.
2.12 EMPLOYEE RELATIONS. The Company is not involved in any union
labor dispute nor, to the knowledge of the Company, is any such dispute
threatened. None of the Company's employees is a member of a union, the
Company is not a party to a collective bargaining agreement, and the Company
believes that its relations with is employees are good. No executive officer
(as defined in Rule 501(f) of the ▇▇▇▇ ▇▇▇) has notified the Company that
such officer intends to leave the Company or otherwise terminate such
officer's employment with the Company.
2.13 INTELLECTUAL PROPERTY RIGHTS. The Company owns or possesses
adequate rights or licenses to use all trademarks, trade names, service
marks, service ▇▇▇▇ registrations, service names, patents, patent rights,
copyrights, inventions, licenses, approvals, governmental authorizations,
trade secrets and rights necessary to conduct its business as now conducted.
None of the Company's trademarks, trade names, service marks, service ▇▇▇▇
registrations, service names, patents, patent rights, copyrights, inventions,
licenses, approvals, government authorizations, trade secrets or other
intellectual property rights have expired or terminated. The Company does
not have any knowledge of any infringement by the Company of trademarks,
trade name rights, patents, patent rights, copyrights, inventions, licenses,
service names, service marks, service ▇▇▇▇ registrations, trade secret or
other similar rights of others, or of any such development of similar or
identical trade secrets or technical information by others, other than
technology underlying competitive products in the market, and there is no
claim, action or proceeding being made or brought against, or to the
Company's knowledge, being threatened against the Company regarding
trademarks, trade names, patents, patent rights, invention, copyright,
license, service names, service marks, service ▇▇▇▇ registrations, trade
secrets or other infringements; and the Company is unaware of any facts or
circumstances which might give rise to any of the foregoing. The Company has
taken reasonable security measures to protect the secrecy, confidentiality
and value of all of its intellectual properties.
2.14 TITLE. The Company has good and marketable title to all real
property and good and marketable title to all personal property owned by it
which is material to the business of the Company free and clear of all liens,
claims, charges, encumbrances and defects such as do not materially affect
the value of such property and do not interfere with the use made and
proposed to made of such property by the Company. Any real property and
facilities held under lease by the Company is held by it under valid,
subsisting and enforceable leases with such exceptions as are not material
and do not interfere with the use made and proposed to be made of such
property and buildings by the Company.
-6-
2.15 INSURANCE. The Company is insured by insurers of recognized
financial responsibility against such losses and risks and in such amounts as
management of the Company believes to be prudent and customary in the
businesses in which the Company is engaged. The Company has not been refused
any insurance coverage sought or applied for and the Company has no reason to
believe that it will not be able to renew its existing insurance coverage as
and when such coverage expires or to obtain similar coverage from similar
insurers as may be necessary to continue its business at a cost that would
not materially and adversely affect the condition, financial or otherwise, or
the earnings, business or operations of the Company.
2.16 REGULATORY PERMITS. The Company possesses, to its knowledge,
all certificates, authorizations and permits issued by the appropriate
federal, state or foreign regulatory authorities necessary to conduct its
business, and the Company has not received any notice of proceedings relating
to the revocation or modification of any such certificate, authorization or
permit.
2.17 INTERNAL ACCOUNTING CONTROLS. The Company maintains a system
of internal accounting controls sufficient to provide reasonable assurance
that (i) transactions are executed in accordance with management's general or
specific authorizations, (ii) transactions are recorded as necessary to
permit preparation of financial statements in conformity with generally
accepted accounting principles and to maintain asset accountability, (iii)
access to assets is permitted only in accordance with management's general or
specific authorization and (iv) the recorded accountability for assets is
compared with the existing assets at reasonable intervals and appropriate
action is taken with respect to any differences.
2.18 NO MATERIALLY ADVERSE CONTRACTS, ETC. The Company is not
subject to any charter, corporate or other legal restriction, or any
judgment, decree, order, rule or regulation which in the reasonable business
judgment of the Company's officers, who were appointed as officers of the
Company on December 5, 1997, has or could reasonably be expected in the
future to have a material adverse effect on the Company. The Company is not
a party to any contract, agreement or arrangement which in the reasonable
business judgment of the Company's officers, who were appointed as officers
of the Company on December 5, 1997, has or could reasonably be expected to
have a material adverse effect on the Company.
2.19 TAX STATUS. The Company has made or filed all tax returns,
reports and declarations required by any jurisdiction to which it is subject
(unless and only to the extent that the Company has set aside on its books
provisions reasonably adequate for the payment of all unpaid and unreported
taxes) and has paid all taxes and other governmental assessments and charges
that are material in amount, and has set aside on its books provisions
reasonably adequate for the payment of all taxes for periods subsequent to
the periods to which such returns, reports or declarations apply. There are
no unpaid taxes in any material amount claimed to be due by the taxing
authority of any jurisdiction, and the officers of the Company know of no
basis for any such claim.
2.20 TRANSACTIONS WITH AFFILIATES. None of the officers, directors,
or employees of the Company is presently a party to any transaction with the
Company (other than
-7-
for services as employees, officers and directors), including any contract,
agreement or arrangement providing for the furnishing of services to or by,
providing for rental of real or personal property to or from, or otherwise
requiring payments to or from any officer, director or such employee or, to
the knowledge of the Company, any corporation, partnership, trust or other
entity in which any officer, director, or any such employee has a substantial
interest or is an officer, director, trustee or partner.
2.21 CONSENT. Coast Business Credit is the sole holder of Senior
Indebtedness under the Note. The Company has obtained the oral consent of
such holders of Senior Indebtedness under the Note to the transactions
contemplated hereunder and under the Transaction Agreements and will use best
efforts to obtain the written consent of such holder prior to the Closing.
2.22 ENVIRONMENT LAWS. To its knowledge, the Company (i) is in
compliance with any and all applicable foreign, federal, state and local laws
and regulations relating to the protection of human health and safety, the
environment or hazardous or toxic substances or wastes, pollutants or
contaminants ("ENVIRONMENTAL LAWS"), (ii) has received all permits, licenses
and other approvals required of it under applicable Environmental Laws to
conduct its respective businesses and (iii) is in compliance with all terms
and conditions of any such permit, license or approval where, in each of the
three foregoing cases, the failure to so comply would have individually or in
the aggregate, a material adverse effect on the Company.
3. REPRESENTATIONS AND WARRANTIES OF PURCHASER. The Purchaser hereby
represents and warrants to the Company that:
3.1 AUTHORIZATION. The execution, delivery and performance by the
Purchaser of the Transaction Agreements are within the Purchaser's limited
liability company power and have been duly authorized by all requisite action
by the Purchaser. The Transaction Agreements have been duly executed and
delivered by the Purchaser and this Agreement constitutes, and the Rights
Agreement when executed and delivered in accordance with this Agreement will
constitute, the valid and binding obligation of the Purchaser, enforceable in
accordance with their respective terms, except as such enforceability may be
limited by principles of public policy and subject to the laws of general
application relating to bankruptcy, insolvency and the relief of debtors and
rules of law governing specific performance, injunctive relief or other
equitable remedies.
3.2 PURCHASE ENTIRELY FOR OWN ACCOUNT. The Purchaser is acquiring
the shares of Conversion Stock hereunder for investment for the Purchaser's
own account, and not as a nominee or agent, and not with a view to the resale
or distribution of any part thereof. Purchaser has no present intention of
selling, granting any participation in, or otherwise distributing the
Securities other than to members of the Purchaser as of the date hereof.
3.3 ACCREDITED INVESTOR. The Purchaser is an accredited investor
as defined in Rule 501(a) of Regulation D promulgated under the 1933 Act.
-8-
3.4 RESTRICTED SECURITIES. Purchaser understands that the Securities
are characterized as "restricted securities" under the federal securities laws
inasmuch as they are being acquired from the Company in a transaction not
involving a public offering and that under such laws and applicable regulations
such Securities may be resold without registration under the 1933 Act, only in
certain limited circumstances. In this connection, Purchaser represents that it
is familiar with SEC Rule 144, as presently in effect, and understands the
resale limitations imposed thereby and by the Act.
3.5 FURTHER LIMITATIONS ON DISPOSITION. Notwithstanding anything to
the contrary contained in Section 3.5 of the Purchase Agreement, without in any
way limiting the representations set forth in this Agreement, Purchaser further
agrees not to make any disposition of all or any portion of the Securities
unless and until:
(a) There is then in effect a Registration Statement under the
1933 Act covering such proposed disposition and such disposition is made in
accordance with such Registration Statement; or
(b) (i) Purchaser shall have notified the Company of the
proposed disposition and shall have furnished the Company with such
information as is necessary to effect the proposed disposition, (ii) the
transferee has agreed in writing for the benefit of the Company to be bound
by this Section 3, and (iii) if reasonably requested by the Company,
Purchaser shall have furnished the Company with an opinion of counsel,
reasonably satisfactory to the Company, that such disposition will not
require registration under the ▇▇▇▇ ▇▇▇.
3.6 LEGENDS. Purchaser understands that the Securities, and any
securities issued in respect thereof or exchange therefor, may bear one or
all of the following legends, if applicable:
(a) "THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR
HYPOTHECATED IN THE ABSENCE OF A REGISTRATION STATEMENT IN EFFECT WITH
RESPECT TO THE SECURITIES UNDER SUCH ACT OR AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED OR UNLESS
SOLD PURSUANT TO RULE 144 OF SUCH ACT."
(b) Any legend required by the laws of the State of
California, including any legend required by the California Department of
Corporations.
(c) Any legend required by the Blue Sky laws of any other
state to the extent such laws are applicable to the shares represented by the
certificate so legended.
(d) Any legend required by the Company's Shareholder Rights
Plan.
The legends set forth in subparagraphs (a), (b) and (c) above shall be
removed upon application to the Company after the one year anniversary date
of this Agreement and the Company shall
-9-
promptly issue a certificate without such legends to the holder of Securities
upon which it is stamped and shall remove all stop transfer orders and other
transfer restrictions communicated to the Company's transfer agent, if (i)
such Securities are registered for sale under the 1933 Act, (ii) in
connection with a sale transaction, such holder provides the Company with an
opinion of counsel, in a generally acceptable form, to the effect that a
public sale, assignment or transfer of the Securities may be made without
registration under the 1933 Act or (iii) such holder provides the Company
with reasonable assurances that the Securities can be sold pursuant to Rule
144 and the Company's counsel has reasonably determined that the legends set
forth in subparagraphs (a), (b) and (c) above may be removed under Rule 144;
provided however, that in the event Purchaser is granted piggy-back
registration rights in connection with an equity offering by the Company
prior to the one year anniversary date of this Agreement, the legends set
forth in subparagraphs (a), (b) and (c) above shall be removed upon
application to the Company and the Company shall issue a certificate without
such legends to the holder of Securities upon which it is stamped.
3.7 DISCLOSURE OF INFORMATION. Purchaser has had an opportunity to
discuss the Company's business, management, financial affairs and the terms
and conditions of the offering of the Securities with the Company's
management and has had an opportunity to review the Company's Reports.
Purchaser understands that such discussions, as well as the written
information issued by the Company, were intended to describe the aspects of
the Company's business which it believes to be material.
3.8 MEMBERSHIP OF THE PURCHASER. EXHIBIT F attached hereto
contains a true and complete list of all of the members of the Purchaser.
4. REGISTRATION OF SECURITIES.
4.1 RIGHTS AGREEMENT. The Company and the Purchaser will enter
into an Investor Rights Agreement in the form attached hereto as EXHIBIT E,
setting forth the obligations and the rights of the parties, respectively,
with respect to registration of the Securities.
4.2 PROHIBITION ON HEDGING. During the period commencing with the
date that is two (2) weeks prior to the Closing and continuing through the
date on which the Purchaser holds 5% or less of the Conversion Stock acquired
hereunder, the Purchaser hereby agrees that it shall not directly or
indirectly engage in short sales, derivative transactions or any similar
hedging techniques or strategies involving any Common Stock of the Company.
5. COVENANTS OF THE COMPANY. The Company agrees that:
5.1 NOMINATION OF DIRECTORS. On or before the Closing date,
effective upon the consummation of the transaction contemplated hereunder,
the Company shall have (i) adopted an amendment to its Bylaws setting the
number of directors on its Board of Directors at seven (7) and (ii) appointed
two (2) new directors to its Board of Directors, each of whom shall have been
nominated by the Purchaser at least three (3) business days prior to the
Closing Date, provided that such individuals are reasonably acceptable to the
Company. Provided that the Purchaser and/or one or more of the persons listed
on EXHIBIT F continues to hold greater than 25% of the issued and outstanding
stock of the Company as of the record date for the mailing of
-10-
proxy materials to shareholders in connection with the Company's annual
meeting of shareholders, the Company shall recommend in such proxy materials
that shareholders at each such meeting elect two (2) individuals to its Board
of Directors who were nominated by the Purchaser (or the holders of a
majority of the Conversion Stock if the Purchaser has been dissolved) and the
Company shall at each such meeting cause its designated proxyholder to vote
proxies received from shareholders in favor of such nominees, provided that
such nominees are reasonably acceptable to the Company. Provided that the
Purchaser and/or one or more of the persons listed on EXHIBIT F continues to
hold greater than 15% but less than or equal to 25% of the issued and
outstanding stock of the Company as of the record date for the mailing of
proxy materials to shareholders in connection with the Company's annual
meeting of shareholders, the Company shall recommend in such proxy materials
that shareholders at each such meeting elect one (1) individual to its Board
of Directors who was nominated by the Purchaser (or the holders of a majority
of the Conversion Stock if the Purchaser has been dissolved) and the Company
shall at each such meeting cause its designated proxyholder to vote proxies
received from shareholders in favor of such nominee, provided that such
nominee is reasonably acceptable to the Company. In the event the Company
increases its Board size above seven (7) directors prior to the next annual
meeting of shareholders, the Company shall not be required to nominate or
recommend election of additional Purchaser candidates to the Company's Board
of Directors other than as set forth above in this Section 5.1, provided that
the number of directors who are officers, employees, or paid full-time
consultants of the Company is not greater than two (2). The Compensation
Committee of the Board of Directors shall be comprised of three (3) directors
and shall include one (1) director who was nominated to the Board by the
Purchaser.
5.2 BYLAWS AMENDMENTS. On or before the Closing date, effective
upon the consummation of the transaction contemplated hereunder, the Company
shall have adopted an amendment to its Bylaws providing that a two-thirds
super majority vote of directors be required to approve any of the following
actions:
(i) consolidation or merger of the Company with or into any
other corporation in which securities possessing more than fifty percent
(50%) of the total combined voting power of the Company's outstanding
securities are transferred to a person or persons different from the persons
holding those securities immediately prior to such transaction (other than a
consolidation or merger in which the surviving entity is the Company or one
of its wholly-owned subsidiaries) or transfer or sale of all or substantially
all of the assets of the Company; or
(ii) an increase in the Company's secured indebtedness to an
aggregate amount in excess of $15 million.
The Company agrees that it will not amend the foregoing super majority bylaws
amendment without obtaining the prior written consent of the Purchaser (or
the holders of a majority of the Conversion Stock if the Purchaser has been
dissolved) so long as the Purchaser and/or one or more of the persons listed
on EXHIBIT F continues to hold at least 7.5% of the issued and outstanding
capital stock of the Company.
-11-
5.3 AMENDMENT TO PREFERRED SHARES RIGHTS AGREEMENT. On or before
the Closing Date, the Company shall have taken all appropriate action to
ensure that (a) the sale of the Conversion Stock to Purchaser hereunder is
not deemed to be a Triggering Event as that term is defined in Section 1(y)
of the Preferred Shares Rights Agreement dated August 3, 1994 between the
Company and Chemical Trust Company of California (the "RIGHTS PLAN"), (b)
neither the Purchaser nor any of its members, Affiliates, Associates,
representatives or control persons shall be deemed an "Acquiring Person"
under the Rights Plan and (c) the Purchaser nominees to the Board of
Directors shall be deemed "Continuing Directors" under the Rights Plan.
5.4 FORM D AND BLUE SKY. The Company agrees to file a Form D with
respect to the Conversion Stock as required under Regulation D and to provide
a copy thereof to the Purchaser promptly after such filing. The Company
shall, on or before the Closing Date, take such action as the Company shall
reasonably determine is necessary to qualify the Conversion Stock for, or
obtain exemption for the Conversion Stock for, sale to the Purchaser at the
Closing pursuant to this Agreement under applicable securities or "Blue Sky"
laws of the states of the United States, and shall provide evidence of any
such action so taken to the Purchaser on or prior to the Closing Date. The
Company shall make all filings and reports relating to the offer and sale of
the Conversion Stock required under applicable securities or "Blue Sky" laws
of applicable states of the United States following the Closing Date.
5.5 REPORTING STATUS. Until the date as of which the Holders (as
that term is defined in the Rights Agreement) may sell all of the Conversion
Shares without restriction pursuant to Rule 144(k) promulgated under 1933 Act
(or successor thereto), the Company shall file all reports required to be
filed with the SEC pursuant to the Securities Exchange Act of 1934, as
amended (the "1934 ACT"), and until that date, the Company shall not
terminate its status as an issuer required to file reports under the 1934 Act
even if the 1934 Act, or the rules and regulations thereunder would otherwise
permit such termination, unless the reporting requirements of Rule 144(k)
have also been amended to permit the Holders to sell the Conversion Shares
without restriction.
5.6 FINANCIAL INFORMATION. The Company shall file with the SEC via
▇▇▇▇▇ all registration statements and all reports required pursuant to the
1933 Act and the 1934 Act, including without limitation, its Annual Reports
on Form 10-K, its Quarterly Reports on Form 10-Q, Current Reports on Form 8-K
and any registration statements (including those on Form S-8) or amendments
and such reports will be available to the Purchaser via ▇▇▇▇▇. The Company
shall deliver to the Purchaser copies of any notices and other information
made available or given to the shareholders of the Company generally,
contemporaneously with the making available or giving thereof to the
shareholders.
5.7 LISTING. The Company shall use its best efforts to maintain
the inclusion for quotation on The Nasdaq SmallCap Market of its Common
Stock, and without limiting the generality of the foregoing, the Company
shall use its best efforts to arrange for at least two market makers to
register with the NASD or any other comparable exchange as such with respect
to the Common Stock. The Company shall not knowingly take any action which
would be
-12-
reasonably expected to result in the removal of the Common Stock from
quotation on The Nasdaq SmallCap Market. At such time as the Company is able
to satisfy the listing requirements on the Nasdaq National Market System
("NNM") and the Company's management reasonably believes that the Company
will be able to continue to comply with the continued listing requirements of
the NNM thereafter, the Company shall use its reasonable efforts to secure
designation and quotation of its outstanding Common Stock on the NNM. The
Company shall promptly report to its Board of Directors information or
notices it receives regarding the continued eligibility of its Common Stock
for quotation on any automated quotation system or securities exchange.
5.8 FILING OF FORM 8-K. Within five (5) business days following
the Closing Date, the Company shall file a Form 8-K with the SEC describing
the terms of the transactions contemplated by the Transaction Agreements and
the Note Purchase Agreement in the form specified by the 1934 Act.
5.9 PRIVATE PLACEMENT. Concurrently with the Closing of the
transactions contemplated hereunder, the Company will consummate a private
placement of Common Stock of the Company, at not less than $1.06 per share
(with up to 25% warrant coverage at an exercise price of at least $1.25 per
share), resulting in gross proceeds to the Company of at least $1,000,000.
5.10 COAST CONSENT. The Company shall have obtained from Coast, as
a condition to the Closing, a written consent by Coast to the Company's
execution, delivery and performance of the Transaction Agreements and a
waiver, effective upon the Closing, of any defaults by the Company under its
debt facility with Coast occurring prior to the Closing Date.
6. COVENANTS OF THE PURCHASER. In the event that a shareholder vote is
solicited by the Company to amend and restate its Articles of Incorporation,
the Purchaser agrees to vote in favor of proposed amendments to effect any of
the following measures:
(a) a reverse stock split of the Company's capital stock in a ratio
reasonably recommended by the Company's executive management;
(b) reincorporation of the Company into Delaware; and
(c) an increase in the total number of authorized shares of the
Company's Common Stock, provided however that the Purchaser shall not be
obligated to vote in favor of such an amendment unless the authorized number
of the Company's Common Stock has been reduced to a number that is less than
60 million as the result of a reverse stock split pursuant to subsection 6(a)
above.
7. CONDITIONS OF THE PURCHASER'S OBLIGATIONS AT THE CLOSING. The
obligations of the Purchaser under this Agreement are subject to the
fulfillment, on or before the Closing, of each of the following conditions,
unless otherwise waived:
-13-
7.1 REPRESENTATIONS AND WARRANTIES. The representations and
warranties of the Company contained in Section 2 shall be true and correct on
and as of the Closing with the same effect as though such representations and
warranties had been made on and as of the date of the Closing.
7.2 PERFORMANCE. The Company shall have performed and complied
with all covenants, agreements, obligations and conditions contained in this
Agreement that are required to be performed or complied with by it on or
before the Closing.
7.3 COMPLIANCE CERTIFICATE. The President of the Company shall
deliver to the Purchaser at the Closing a certificate ("OFFICER'S COMPLIANCE
CERTIFICATE") certifying that (a) the conditions specified in Sections 5.1,
5.2, 5.3, 7.1 and 7.2 have been fulfilled and (b) all conditions of the
Company's obligations under the Purchase Agreement and the Warrant Purchase
Agreement have been fulfilled or waived.
7.4 QUALIFICATIONS. All authorizations, approvals or permits, if
any, of any governmental authority or regulatory body of the United States or
of any state that are required in connection with the lawful issuance and
sale of the Securities pursuant to this Agreement shall be obtained and
effective as of the Closing.
7.5 OPINION OF COMPANY COUNSEL. The Purchaser shall have received
from Venture Law Group, counsel for the Company, an opinion, dated as of the
Closing, in substantially the form of EXHIBIT G.
7.6 NASD CONFIRMATION. The Company shall have received
confirmation from the National Association of Securities Dealers, Inc. (the
"NASD") that approval by the Company's shareholders is not required prior to
the consummation of the actions (including without limitation, the issuance
of the Securities to Purchaser) contemplated hereunder.
7.7 RELEASE. CA shall have executed and delivered the Warrant
Purchase Agreement.
7.8 SCHEDULE OF EXCEPTIONS. The Company shall have delivered the
final Schedule of Exceptions, reasonably approved by Purchaser, in the form
attached as EXHIBIT D.
8. CONDITIONS OF THE COMPANY'S OBLIGATIONS AT CLOSING. The obligations
of the Company under this Agreement are subject to the fulfillment, on or
before the Closing, of each of the following conditions, unless otherwise
waived:
8.1 REPRESENTATIONS AND WARRANTIES. The representations and
warranties of the Purchaser contained in Section 3 shall be true and correct
in all material respects on and as of the Closing with the same effect as
though such representations and warranties had been made on and as of the
Closing.
-14-
8.2 PERFORMANCE. All covenants, agreements and conditions
contained in this Agreement to be performed by the Purchaser on or prior to
the Closing shall have been performed or complied with in all material
respects.
8.3 QUALIFICATIONS. All authorizations, approvals or permits, if
any, of any governmental authority or regulatory body of the United States or
of any state that are required in connection with the lawful issuance and
sale of the Securities pursuant to this Agreement shall be obtained and
effective as of the Closing.
8.4 NOTE AND OTHER EVIDENCE OF PRINCIPAL INDEBTEDNESS. The
Purchaser shall have delivered to the Company for cancellation the originally
executed Note and any other related documents or instruments, including the
Interest Affidavit, evidencing indebtedness under the Note.
8.5 NASD CONFIRMATION. The Company shall have received
confirmation from the NASD that approval by the Company's shareholder is not
required prior to the consummation of the actions (including without
limitation, the issuance of the Securities to Purchaser) contemplated
hereunder.
9. MISCELLANEOUS.
9.1 SURVIVAL OF WARRANTIES. Unless otherwise set forth in this
Agreement, the warranties, representations and covenants of the Company and
the Purchaser contained in or made pursuant to this Agreement shall survive
the execution and delivery of this Agreement and the Closing for a period of
two (2) years following the Closing.
9.2 TRANSFER; SUCCESSORS AND ASSIGNS. The terms and conditions of
this Agreement shall inure to the benefit of and be binding upon the
respective successors and assigns of the parties and successive holders of
all or any portion of the Conversion Stock and their respective successors
and assigns. Nothing in this Agreement, express or implied, is intended to
confer upon any party other than the parties hereto, holders of Conversion
Stock, or their respective successors and assigns any rights, remedies,
obligations, or liabilities under or by reason of this Agreement, except as
expressly provided in this Agreement.
9.3 GOVERNING LAW. This Agreement and all acts and transactions
pursuant hereto and the rights and obligations of the parties hereto shall be
governed, construed and interpreted in accordance with the laws of the State
of California, without giving effect to principles of conflicts of law.
9.4 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original and all of which
together shall constitute one instrument.
9.5 TITLES AND SUBTITLES. The titles and subtitles used in this
Agreement are used for convenience of reference only and are not to be
considered in construing or interpreting this Agreement.
-15-
9.6 NOTICES. Any notice required or permitted by this Agreement
shall be in writing and shall be deemed sufficient upon delivery, when
delivered personally or by overnight courier or sent by telegram or fax
(provided that electronic confirmation of transmission has been received), or
forty-eight (48) hours after being deposited in the US mail, as certified or
registered mail, with postage prepaid, addressed to the party to be notified
at such party's address as set forth on the signature page hereto, or as
subsequently modified by written notice, and (a) if to the Company, with a
copy to ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Venture Law Group, ▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇,
▇▇ ▇▇▇▇▇ or (b) if to the Purchaser, with a copy to ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇ Madison & Sutro LLP, ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇.
9.7 COMPANY ADVISOR / PAYMENT OF FEES. Purchaser represents that it
neither is nor will be obligated for any finder's fee or commissions to any
third party in connection with this transaction. The Company represents that
it has retained ▇▇▇▇▇▇ Capital Group, Ltd. ("▇▇▇▇▇▇") as its advisor in
connection with the transactions contemplated by this Agreement and the Note
Purchase and Sale Agreement. Purchaser acknowledges that ▇▇▇▇▇▇ has acted
solely as an advisor to the Company, and has in no way acted for or on behalf
of Purchaser in connection herewith. The information provided to Purchaser
by the Company (or by Purchaser) has not been subjected to independent
verification by ▇▇▇▇▇▇, and no representation or warranty is made by ▇▇▇▇▇▇
as to the accuracy or completeness of such information or the advisability of
Purchaser entering into this Agreement and consummating the transactions
contemplated hereby. Purchaser acknowledges that it has not relied on any
statements made by ▇▇▇▇▇▇ in connection with its decision to enter into and
perform this Agreement and the transactions contemplated hereby. The Company
agrees to indemnify and to hold harmless Purchaser from any liability for any
compensation payable to ▇▇▇▇▇▇ (and the costs and expenses of defending
against such liability or asserted liability) in connection with the
transactions contemplated hereby. Each Party agrees to hold ▇▇▇▇▇▇ harmless
and the Company agrees to indemnify ▇▇▇▇▇▇ and its officers, directors,
principals, employees and agents (and their respective heirs, successors and
assigns) from and against any liability arising from this Agreement,
including the consummation of or the failure to consummate any or all of the
transactions contemplated hereby, except to the extent such liability results
from the gross negligence or willful misconduct of ▇▇▇▇▇▇.
9.8 FEES AND EXPENSES. The Company shall pay the reasonable fees
and expenses of legal, accounting and financial advisors for the Purchaser
incurred with respect to this Agreement and the transactions contemplated
hereby, provided such fees and expenses do not exceed $45,000 in the
aggregate, of which reimbursement for legal fees shall not exceed $30,000,
reimbursement for fees incurred as a result of due diligence conducted by
individuals or entitles not affiliated with prospective purchasers of the
Company's capital stock shall not exceed $10,000 and reimbursement of travel
expenses shall not exceed $5,000.
9.9 ATTORNEY'S FEES. If any action at law or in equity (including
arbitration) is necessary to enforce or interpret the terms of any of the
Agreements, the prevailing party shall be entitled to reasonable attorney's
fees, costs and necessary disbursements in addition to any other relief to
which such party may be entitled.
-16-
9.10 AMENDMENTS AND WAIVERS. Any term of this Agreement may be
amended or waived only with the written consent of the Company and the
holders of at least two thirds (2/3) of the Conversion Stock. Any amendment
or waiver effected in accordance with this Section 9.10 shall be binding upon
the Purchaser and each transferee of the Conversion Stock and the Company.
9.11 SEVERABILITY. If one or more provisions of this Agreement are
held to be unenforceable under applicable law, the parties agree to
renegotiate such provision in good faith. In the event that the parties
cannot reach a mutually agreeable and enforceable replacement for such
provision, then (a) such provision shall be excluded from this Agreement, (b)
the balance of the Agreement shall be interpreted as if such provision were
so excluded and (c) the balance of the Agreement shall be enforceable in
accordance with its terms.
9.12 DELAYS OR OMISSIONS. No delay or omission to exercise any
right, power or remedy accruing to any party under this Agreement, upon any
breach or default of any other party under this Agreement, shall impair any
such right, power or remedy of such non-breaching or non-defaulting party nor
shall it be construed to be a waiver of any such breach or default, or an
acquiescence therein, or of or in any similar breach or default thereafter
occurring; nor shall any waiver of any single breach or default be deemed a
waiver of any other breach or default theretofore or thereafter occurring.
Any waiver, permit, consent or approval of any kind or character on the part
of any party of any breach or default under this Agreement, or any waiver on
the part of any party of any provisions or conditions of this Agreement, must
be in writing and shall be effective only to the extent specifically set
forth in such writing. All remedies, either under this Agreement or by law
or otherwise afforded to any party, shall be cumulative and not alternative.
9.13 ENTIRE AGREEMENT. This Agreement, and any transaction
documents referred to herein constitute the entire agreement between the
parties hereto pertaining to the subject matter hereof, and any and all other
written or oral agreements or commitments relating to the subject matter
hereof existing between the parties hereto (except for any confidentiality
provisions or terms contained therein) are expressly superseded hereby and
canceled.
9.14 CORPORATE SECURITIES LAW. THE SALE OF THE SECURITIES WHICH ARE
THE SUBJECT OF THIS AGREEMENT HAS NOT BEEN QUALIFIED WITH THE COMMISSIONER OF
CORPORATIONS OF THE STATE OF CALIFORNIA AND THE ISSUANCE OF THE SECURITIES OR
THE PAYMENT OR RECEIPT OF ANY PART OF THE CONSIDERATION THEREFOR PRIOR TO THE
QUALIFICATION IS UNLAWFUL, UNLESS THE SALE OF SECURITIES IS EXEMPT FROM THE
QUALIFICATION BY SECTION 25100, 25102 OR 25105 OF THE CALIFORNIA CORPORATIONS
CODE. THE RIGHTS OF ALL PARTIES TO THIS AGREEMENT ARE EXPRESSLY CONDITIONED
UPON THE QUALIFICATION BEING OBTAINED UNLESS THE SALE IS SO EXEMPT.
9.15 CONFIDENTIALITY. Each party hereto agrees that, except with
the prior written permission of the other parties, it shall at all times keep
confidential and not divulge, furnish or make accessible to anyone, including
without limitation CA, any confidential
-17-
information, knowledge or data concerning or relating to the business or
financial affairs of the other parties to which such party has been or shall
become privy by reason of the Transaction Agreements, discussions or
negotiations relating to the terms of the Transaction Agreements, the
performance of its obligations hereunder or the ownership of Securities
purchased hereunder, except for such disclosure as is required by law. The
parties acknowledge and agree that the Company will file reports with the
Securities and Exchange Commission from time to time following the
consummation of the transactions hereunder and that press releases may also
be required or desirable, provided that such press releases will contain only
such information as may be required for proper disclosure in the opinion of
legal counsel to the Company. This Section 9.15 shall not prohibit the
disclosure by Purchaser to its members and permitted assignees of the
Conversion Stock of such information, knowledge or data, provided each
recipient thereof agrees to be bound by the confidentiality covenants
hereunder.
[Signature Pages Follow]
-18-
The parties have executed this Note Conversion Agreement as of the date
first written above.
COMPANY:
CENTURA SOFTWARE CORPORATION
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
-----------------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
(print)
Title: CEO
Address: ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
PURCHASER:
NEWPORT ACQUISITION
COMPANY NO. 2 LLC
By: Crossroads Capital Partners LLC,
as Managing Member
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-----------------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
(print)
Title: Principal
Address: ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
SIGNATURE PAGE TO CONVERSION AGREEMENT
EXHIBITS
Exhibit A Note
Exhibit B Form of Warrant Purchase Agreement and Warrant
Exhibit C Form of Escrow Agreement
Exhibit D Schedule of Exceptions to Representations and Warranties
Exhibit E Form of Investor Rights Agreement
Exhibit F Purchaser Members
Exhibit G Form of Legal Opinion of Venture Law Group
