================================================================================UNITED STATES
SECURITIES AND EXCHANGE COMMISSIONWASHINGTON,
Washington, D.C. 20549------------------------FORM
10-K (MARK10-K/A(MARK ONE)
[X][X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
[FEE REQUIRED] FOR THE FISCAL YEAR ENDED DECEMBERFor the fiscal year ended December 31,
19982000OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
[NO FEE REQUIRED]FOR THE TRANSITION PERIOD FROM ___________ TO
COMMISSION FILE NUMBER:_____________Commission file number 0-21010
CENTURA SOFTWARE CORPORATION
(FORMERLY GUPTA CORPORATION) (Exact
(Exact name ofregistrantRegistrant asspecifiedSpecified in itscharter)Charter)
975 Island Drive
Redwood Shores, California 94065
(Address of Principal Executive Offices including area code: Zip Code)
(650) 596-3400
(Registrant's Telephone Number, Including Area Code)
Securities registered pursuant to Section 12(b) of the Act: NONE
None
Securities registered pursuant to sectionSection 12(g) of the Act:
COMMON STOCK, $.01$0.01 PAR VALUE PER SHARE
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment of this Form 10-K. [ ]
The aggregate market value of the voting stock held by non-affiliates of the Registrant was approximately $22,156,181$60,181,098 as of February 28, 1999,2001, based upon the closing sale price on the NASDAQ NationalSmallCap Market reported for such date. Shares of Common Stock held by each officer and director and by each person who owns 5% or more of the outstanding Common Stock have been excluded in that such persons may be deemed to be affiliates. This determination of affiliate status is not necessarily a conclusive determination for other purposes.
As of February 28, This Amendment No. 1 to Form 10-K on Form 10-K/A amends the Certain information regarding our executive officers and directors required by this item is contained in "Part I, Item 1 - Directors and Executive Officers of Registrant" of Form 10-K. Section 16(a) of the Exchange Act requires the Company's directors and executive officers, and persons who own more than ten percent of a To the best of the Company's The following table shows the compensation received by (a) the individuals who served as the Company's Summary Compensation Table Year Salary Bonus Other Annual Long-Term All Other Scott R. Broomfield 2000 199,247 112,500 - 250,000 - President and Chief Executive 1999 204,167 112,500 - 200,000 - Officer (Principal Executive Officer) 1998 166,667 - - - - John Bowman 2000 183,435 87,500 - 250,000 - Executive Vice President, 1999 202,500 87,500 - 150,000 - Chief Operating Officer 1998 166,667 - - 125,000 - Joe Falcone 2000 135,269 - - 100,000 8,657 Senior Vice President, Engineering 1999 198,462 - - 50,000 - And Support, Chief Technology Officer 1998 19,616 - - 160,000 - Richard Lucien 2000 198,125 25,000 - 120,000 625 Senior Vice President, Finance and 1999 168,177 25,000 - 80,000 - Chief Financial Officer 1998 147,840 15,000 - 50,000 - 1999,2001, there were 29,598,18242,988,906 shares of the Registrant's Common Stock outstanding.
================================================================================
PART I
Item 1. Business
Except forEXPLANATORY NOTE
historical information contained herein, the matters
discussed in this document are forward-looking statements that involve
certain risks and uncertainties, including the risks and uncertainties
under "Risk Factors".
Company OverviewForm 10-K of Centura Software Corporation for the year ended December 31, 2000 (the "Company" or "Centura""Form 10-K"). Item 10 of the Form 10-K is amended by adding Section 16(a) Beneficial Ownership Reporting Compliance pursuant to Item 405 of Regulation S-K. Items 11 - - 13 of the Form 10-K are replaced in their entirety.PART III
Item 10. Directors and Executive Officers of the Registrant
Section 16(a) Beneficial Ownership Reporting Compliance
leading providerregistered class of Secure, Embeddable, E-businessthe Company's equity securities to file with the SEC initial reports of ownership and Micro database
solutionsreports of changes in ownership of Common Stock and other equity securities of the Connectivity products necessaryCompany. Officers, directors, and holders of more than ten percent of the Company's Common Stock are required by SEC regulations to integrate these
solutions into business systems. Thefurnish the Company with copies of all Section 16(a) forms they file.products and services
provide a suiteknowledge, based solely upon review of development solutions for both corporate developers
and independent software vendors who require cross platform
Client/Server, Internet or Information Appliance (mobile and handheld)
business applications. (See Recent Developments)
The Company's principal product offerings include a familythe copies of embedded databases that are most often built-in to applications that
require a very small footprint, low cost, zero database administration,
and security; such as ADP's desktop payroll system or UPS's tracking
system. Centura's SQLBase SafeGarde product is the only database on the
market that has a full "end-to-end" security solution. Centura has a
well known, component-based Client/Server and Web development environment
that enables rapid development and deployment of complex business
applications. Further, Centura has a comprehensive cross platform
Internet publishing and E-business solution that radically simplifies
bringing "back office" business systemsreports furnished to the Internet. The Company also has productsand written representations that enable connectivity to, and replication with not
only Centura's products, butno other database environments as well, without
compromising performance, control, or security. The Company's current
product offerings are fully compliant with, and accommodate data
structures for years beginning afterreports were required, during the fiscal year ended December 31, 1999.
2000, all Section 16(a) filing requirements applicable to the Company's officers, directors, and holders of more than ten percent of the Company's Common Stock were complied with, except that Mr. Lucien, as of completion of this proxy, had not yet filed Form 5 for fiscal year 2000, which was due on February 15, 2000Item 11. Executive Compensation
Credo is to add valueChief Executive Officer ("CEO") during 2000; (b) the four most highly compensated executive officers other than the CEO who were serving as executive officers of the Company at December 31, 2000 and whose total compensation for customers by understanding
the complicated problems they face and how we help them solve these
problems with our products and consulting services. The Company also
recognizes that its customers face time-to-market, cost and investment
pressures. As such, Centura offers its customers a competitive advantage
with fast development and low cost deployment, which can result in a
significant return on investment for its customers.
Industry Overview
Industry experts believe that by the year 2010, information will beexceeded $100,000, (c) the two most important assethighly compensated individuals who would have been included under item (b) above but for the fact that they were no longer serving as executive officers of the corporation. Company at December 31, 2000, and (d) the compensation received by each such individual for the Company's two preceding fiscal years.Name and Principal Position
($)(1) (2)
($)(3)
Compensation
($)
Compensation
Awards
Securities
Underlying
Options
Compensation
_________________________
(1) Includes amounts deferred under the Company's 401(k) plan.
(2) Includes commissions paid in the indicated year.
Stock Option Grants in 2000
The following table sets forth information for the executive officers named in the Summary Compensation Table with respect to grants of options to purchase common stock of the Company agrees that
information is becoming more valuable,made in 2000 and the value of information is in
direct proportionall options held by such executive officers on December 31, 2000.
|
| Individual Grants | ||||||||||
|
| Number of |
| % of Total |
| Exercise Price | Expiration | Potential Realizable Value at Assumed Annual Rates of Stock Price Appreciation for Option Term (2) | ||||
Name |
| Granted(#) |
| Year(1) |
| ($/Share) | Date | 5% ($) | 10% ($) | |||
|
|
|
|
|
|
|
|
|
|
|
|
|
Scott Broomfield |
| 250,000 |
| 4.72 |
| $0.78 |
| 12/13/10 |
| $123,123 |
| $311,558 |
John Bowman |
| 250,000 |
| 4.72 |
| $0.78 |
| 12/13/10 |
| $123,123 |
| $311,558 |
Joe Falcone |
| 100,000 |
| 1.89 |
| $1.75 |
| 2/1/10 |
| $ 0 |
| $ 27,623 |
Richard Lucien |
| 50,000 |
| 0.94 |
| $7.75 |
| 2/1/10 |
| $ 0 |
| $ 0 |
Richard Lucien |
| 70,000 |
| 1.32 |
| $4.00 |
| 9/12/10 |
| $ 0 |
| $0 |
________________________
(1) Options to its accessibility and security. The immutable
Moore's law (microprocessor power) and Metcalf's laws (bandwidth and the
network) currently drive the entire software industry. These laws have
led to two relatively new phenomena: distributed or mobile computing and
the Internet. As these two laws continue to dominate, the result will be
computing for smart devices and appliances, such as Windows CE and Palm
Pilot, connected via the Internet. The term for this is ubiquitous or 5th
wave computing. Furthermore, without the right technology, distributed
information is less accessible and less secure. In conjunction with these
factors, companies are recognizing that meaningful, timely and secure
information is becoming a competitive advantage.
It was the proliferation of the microprocessor that ensured the
efficacy of Client/Server computing. Although inherently more
complicated than the Host Terminal computing environments of the 1970s,
Client/Server computing technologies also moved forward with powerful 4th
Generation Languages (4GL) and Relational Databases. Centura was the
first to market with both its award winning SQLWindows 4GL tool and its
powerful Database, SQLBase, for the PC. Early in the 1990's, additional
factors increased the deployment of Client/Server systems including the
continued decline in the costs of high-performance PCs and significant
improvements in operating systems, such as Microsoft Windows 3.11 and
Windows 95. In addition, connectivity software became available to enable
PC clients to access varied data sources, including existing mainframes
and minicomputers, thereby protecting an organization's investment in
these host-based systems. It was during these years that the packaged
application software industry exploded.
Today, the advent of mobile and Internet computing causes another
leap in the complexity of the computing environment. Many small to
medium size enterprises (SME) do not have the technical know how, budget
or interest to develop and deploy their own software business solutions.
Moreover, there are simply too many software companies claiming unique
solutions for these businesses to understand all that is necessary to
make informed decisions. Businesses are interested in maximizing their
return on investment, not in maximizing their understanding of
technology. New computing paradigms such as "thin client" or "n-tier"
are meaningless to most businesses in the SME segment. These people want
fast time to market, low cost of ownership, easy and safe software
solutions. Consequently, software technology providers, such as Centura,
work closely with independent software vendors (ISVs) to provide the
various solutions necessary for businesses in the SME segment of the
market. Forrester Research estimates that the SME segment is 97% of the
9 million businesses in the US. Moreover, Business Research Group
estimates that in 1998, only 22% of US companies with less than 1,000
employees had traditional Client/Server or Internet applications, where
larger organizations were over 90% penetrated. Finally, IDC estimates
that the SME market is growing much faster than the larger enterprise
market, over 33% per year.
The speed at which change is occurring is astonishing. IDC
estimates that the E-business market, a subset of the Internet market,
was $32 billion in 1998 and projects this market to grow to over $425
billion by 2002. In 1998, 66% of this market was business-to-business
commerce and IDC estimates this to increase to 79% by 2002. Furthermore,
IDC estimates that information appliances in 1997 was only 5% of a 33
million unit PC and appliance market and expects this to grow to over 68%
of a 87 million unit market by 2002. With the continued price/performance
curve of the microprocessor, the Company believes that these new
computing environments will continue to evolve and proliferate. Finally,
the Company believes that the new computing environments will require
robust, small footprint, secure embeddable database solutions that
connect to and access "shared" back office information systems and
business logic.
Centura's Solution and Strategies
The Company's goal is to become the market leader in Secure
Embeddable, E-business and Micro database solutions and to provide the
Connectivity products necessary to integrate these solutions into
business systems, thereby leveraging the market opportunities in the SME
markets as outlined above. The Company provides best-of-breed products
that meet the market requirements of fast time to market, low cost of
ownership, safety, performance and ease of use. These result inpurchase a total solution that helps customers maximize their growth and return on
investment. As the Client/Server world continues to evolve with new types
of clients using the Internet to access applications and databases, the
Company will introduce new products to support these new client
environments. (See Recent Developments) At the same time, the Company
plans to continue to invest in its object oriented development solutions
to deploy applications in Client/Server, Internet, and distributed
COM/DCOM environments. Finally, the Company is the first and only vendor
to provide complete "end-to-end" security in an embeddable RDBMS
product. In summary, Centura's products and services solutions provide:
Secure Embedded Database, for Windows and Java programmers, that
scale from smart devices to the Internet
Component, COM/DCOM development solutions for both Client/Server
and Internet applications
Connectivity for Client/Server, Internet and Information
Appliances that integrate to back office business systems
Comprehensive consulting services
Very low cost5,293,342 shares of ownership, due to zero database administration
(ZDBA), for both ISVs and end users
Our Credo that places the customer first
Essential elements of Centura's strategies are highlighted below.
Embeddable Database Server. The Company believes several industry
trends will continue to drive demand for a secure, robust, low total cost
of ownership (TCO), ZDBA, small footprint embeddable database server.
Typically, an embeddable database integrates with business application
code and is invisible to the end user. An embeddable database features a
high degree of server programmability, allowing developers to control the
database server from the applications, reducing the need for a database
administrator through self tuning and self recovery functions. SQLBase,
SQLBase SafeGarde, and SQLBase SafeGarde Max all meet these criteria for
embeddable database products.
The SQLBase SafeGarde product family is the first and only database
product on the market with complete end-to-end security. For Centura,
"end-to-end" incorporates data integrity, authentication, (where data
comes from), access control and audit. Centura's end-to-end security
solution encompasses encryption in: local data storage, transfer of
information to and from the client, through the network, to the server
and its backup files and log files. With more attention on security by
all industry segments, the Company believes that SQLBase SafeGarde is a
unique and compelling solution for application database security. In
essence, not only is this feature unique to other database vendors, it
competes laterally with products in the traditional security market. The
Company has received an export license exception from the United States
Department of Commerce to permit the international sales of both 56 bit
DES and 128 bit Triple DES products for certain vertical markets,
facilitating this strategy. Furthermore, Centura's secure database
product is fast, with very little drop in performance. This makes
SQLBase SafeGarde one of the fastest embedded databases on the market,
and the only one that is secure.
Certain industry analysts expect that the next growth opportunity
for PCs is the implementation of enterprise automation applications in
the SME segment. Application vendors selling to large corporations, as
well as application vendors selling to SME businesses target this market.
Both classes of application vendors may find their existing choice of a
relational database is not appropriate for the mid size business market.
The SME applications market requires robust, secure, ZDBA, scalable,
embeddable databases that operate in either a LAN or Internet
environment, while minimizing TCO. The Company believes that this market
will continue to grow as SME businesses buy and implement enterprise
transaction-oriented applications requiring an embeddable database server
like SQLBase.
The growth of operating platforms is also important for the
Company. In particular, the growth of the Windows NT Server platform and
its increasing adoption for application and database services is opening
more opportunities for the Company, particularly for small and medium
size businesses. In addition, SQLBase is one of the only database
products remaining in the market which continues to support 16-bit PC
platforms installed in many corporate sites worldwide.
With the proliferation of the Web, there is a growing need for
secure, ZDBA relational databases for use with common application
development tools, such as Java and Visual Basic. Centura provides direct
support for Java applications and applets. With the JDBC type 4 driver
supplied with SQLBase, developers can create and run information-centric
applications that are portable and well-designed to be used in secure
environments such as that offered by SQLBase SafeGarde. The SQLBase API
makes it easy for application developers to connect SQLBase within their
application development process. SQLBase supports open connectivity to a
variety of development tools, including Visual Basic, Java and Visual
C++, using high performance ODBC Version 3 and JDBC Type 4.
The foregoing factors combine to create, what the Company believes,
is a compelling opportunity forstock were granted under the Company's embeddable database server
and connectivity products.
Application Development Environment. The Company believes there will be
a continued demand for building applications that run in an n-tier
environment, with access to common, reusable business logic; termed
component or object oriented computing. Centura Team Developer (CTD) is a
4GL, 32 bit, object-oriented development environment, designed to
maximize productivity developing business logic code. CTD applications
have native connectivity to SQLBase, as well as to Oracle, Sybase and
Microsoft SQLServer with the same set of APIs. The same CTD business
logic can be deployed as both a Windows and browser client (using Centura
Web Developer for browser deployment), with minimal reprogramming of
code, providing an easy redefinition of application packages to support
Internet-based applications.
With the continued trend toward enterprise wide applications,
Centura expects a continued interest in the use of application
development tools that access and create components and business logic
objects available on either the server or the clients. In this
environment, developers will be able to create new application solutions
throughout the enterprise by customizing and modifying existing
components. These components will provide a common linkage between
disparate applications. For example, sales automation systems can link to
accounting systems with minimal modifications using common logic created
with CTD. The Company expects that in the future, a component's location
on the network will become irrelevant to the developer. Developers will
expect to be able to compose, distribute, and debug applications from any
location. In 1998, the Company released enhancements for CTD designed to
make it easy to manage and distribute ActiveX components in a COM/DCOM
distributed architecture.
The Company expects large segments of the SME market to move away
from buying custom applications towards the building of new systems by
integrating and customizing existing components in packaged software
solutions. The competitive advantage will come from customizing
off-the-shelf applications. This "buy and customize" approach offers the
best of both worlds: rapid development and the ability to customize the
application to meet existing business processes requirements. The
object-oriented architecture provided by CTD is conducive to individual
customization of applications. This component based reusable
architecture provides an advantage to the Company's application
developers, especially in sales situations where evaluation criteria
might be the ease in which components can be customized.
Internet and E-Business Solutions: Centura net.db is a Web authoring and
E-business tool, enabling anyone to publish and update information from a
database to customers using ordinary Web browsers. Centura net.db is
browser-based for both design and deployment phases, requires no special
programming expertise, and uses no browser plug-ins and special server
software. Centura Net.db works well with all popular Web servers and is
extremely fast. The Centura net.db architecture is intelligent about its
use of resources, accessing only the business logic code necessary to
satisfy a user/program request, and enabling hundreds of simultaneous
accesses on a single NT server.
Centura also provides HTML extensions to its CTD development
environment thought its Centura Web Developer (CWD) solution. CWD
provides an easy method to evolve Client/Server applications without the
necessity of rewriting code in a new language. This provides huge
savings for the Company's customers who have written business application
in CTD and have a market requirement to move those applications to the
Web.
Distribution Channels, Partnerships and Strategic Alliances. The Company
distributes its products using a blended distribution model of inside
channel representatives, field sales representatives, and independent
business partners. Centura provides incentives for its direct sales force
to work closely with its business partners. The Company's Synergy Partner
Program is designed to meet the needs of businesses that include
resellers, commercial and corporate application developers, systems
integrators, consultants, ISVs, and complementary solution providers. A
number of companies have partnerships with Centura, whereby Centura
provides these partners the right to remanufacture the SQLBase product
and build it into a product they resell.
Worldwide Markets. The Company has designed its products and established
its marketing and sales channels to address the worldwide market
opportunities, including markets requiring double-byte enabled source
code, for embeddable databases and PC client/server systems. The Company
has established operations on six continents that have exclusive rights
through either wholly owned subsidiaries or third-party distribution
partners. CTD is shipped with Object Nationalizer, which facilitates
application development in multiple languages. The Company's software
products support international data conventions, and certain products
have been localized into French, German and Japanese language editions.
Services and Support Programs. The Company provides product support
services directly and through third-party vendors to enable easy customer
implementation of its client/server systems. The Company provides a
variety of support programs for customers ranging from small development
groups to those who require access to qualified Centura technical
engineers 24 hours a day, seven days a week. Traditional service
offerings are augmented with an informal support network through multiple
Internet news groups, Centura-endorsed User Groups, and a strong presence
on the Web. The Company-certified training partners offer courses each
year to assure customers of the right mix of classroom or on-site
training. Customers can also opt to study at their own pace with a
specially developed computer-based training course. In addition, teams of
professional consulting engineers are available to help companies develop
application systems using Centura products. These consultants offer
services such as Centura Team Migrate, the ability to migrate from other
embedded databases. Further, Centura Team2000, the only offering in the
market that analyzes CTD and SQLWindows applications to determine that
the application is year 2000 compliant. These are solutions that are
consistent with the Company's Credo of always adding value for the
Customer.
Products
The Company's embeddable database, development environments, family
of connectivity products, and Web-based development environments, enable
teams of developers to embed, build and deploy scaleable client/server
applications throughout distributed computing environments. The Company's
major products include:
SQLBase. The SQLBase family consists of embeddable and
small-footprint database products that enable application developers to
provide low TCO applications with complete and robust functionality and
help businesses deploy decentralized and web-based applications easily,
cost-effectively, and in a secure environment. These products: SQLBase -
Server and SQLBase Desktop - help organizations store data on machines
ranging from small mobile devices and single-user PCs to workgroup
servers and company-wide LAN and Web database servers. SQLBase SafeGarde
and SQLBase SafeGarde Max provide 56-bit DES and 128-bit Triple DES
encryption, respectively. These products were developed for use in
environments and market segments where the need for secure data is
mission critical. These segments include: banks, insurance companies and
other financial institutions; hospitals, medical labs, and other health
care institutions; mobile environments where sensitive data resides; and
databases supporting applications on corporate Web servers. The Company
has received permission from the United States Department of Commerce for
the export of SQLBase SafeGarde Max to certain defined vertical
industries, foreign countries, and foreign subsidiaries of US
corporations; a first in the database market.
SQLHost. SQLHost products allow organizations to integrate
mainframe DB2 or legacy data into a Client/Server environment without
compromising performance, control or security. SQLHost for Visual Basic
allows Visual Basic applications to access mainframe data. IBM supports
the latest version of SQLHost for use in DB2 environments and is, in
fact, a customer for the product.
SQLBase Exchange. SQLBase Exchange is the Company's server to
server database synchronization connectivity product. Given that SQLBase
and SQLBase SafeGarde are embedded databases, they must be able to talk
to large enterprise level databases. Centura's product is cross-platform
and enables remote or mobile applications to synchronize with back-end
business systems that run on a mainframe database.
Centura Team Developer (CTD) and SQLWindows. The CTD and SQLWindows
products enable customers to develop and deploy 32- and 16-bit, next
generation and Web-centric client/server object-oriented applications.
CTD and SQLWindows are created specifically to meet the needs of
application development teams seeking the power to move from workgroup
and enterprise pilot projects into large enterprise applications. These
products deliver client/server application scalability, ActiveX
compatibility, Internet integration, and drag-and-drop replication
functionality. The product family includes CTD and SQLWindows, Centura
Application Server, and the Centura Developers Kit, a set of
object-oriented interfaces that help developers create reusable objects
in the CTD 32-bit and SQLWindows 16-bit environments.
Centura Web Developer. Centura Web Developer, a subset of CTD,
enables the development of Web-based, thin-client applications that allow
the deployment of CTD business logic and transaction processing
applications on the Internet.
Centura net.db. Centura net.db is a browser-based Web authoring
tool that enables anyone to publish information from a database on to the
Internet. Centura net.db verifies the referential integrity of a SQL
database, and automatically generates an HTML page view of each table.
Using smart wizards, users can easily customize and design dynamic
queries and updates of live databases. The SQL queries can be deployed in
any browser and are therefore platform independent. No special browser
plug-ins or server software is needed.
Customers and Applications
No customer accounted for more than 10% of net revenuesstock option plans during the fiscal yearsyear ended December 31, 1998, 1997, or 1996. The Company's
products are used by our customers to create and deploy applications in2000. These options generally vest over a varietyperiod of ways. In some instances, developers create applications using
only Centura products, or in some instances, developers createthree years, provided however, that the application combining Centura products with other software development
tools. Companies use CTD to writestock options of the application business logic, and
deploy the software application with the data stored in SQLBase or
SQLBase SafeGarde. Some use CTD to create the application business logic
and deploy the application with the data stored in Oracle, Microsoft,
Sybase or other enterprise databases. Others write their business logic
using programming languages such as Java and C++, and store the data in
SQLBase (with JDBC Type 4 drivers) or SQLBase SafeGarde. Still other
software companies use SQLHost to connect PC systems with host legacy
systems. Furthermore, other companies have added intelligence to devices
by embedding SQLBase in new smart devices, such as copiers and routers.
Finally, companies use Centura's web products to web enable their legacy
systems, using the same business logic but with a new HTML user
interface.
The Company has established worldwide distribution channels that
provide broad market coverage for its products and address the specific
needs of its varied customer segments worldwide. Customers use the
products in at least 75 countries. Major Customers include, but are not
limited to, Automatic Data Processing ("ADP"), Baan (Aurum), 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.
The Company's products have strong acceptance in several vertical
markets, including ERP, finance, government, health care, insurance,
retail and sales force automation (SFA).
Marketing, Distribution and Product Support
The Company's marketing and sales efforts are targeted to attract
worldwide developers of applications that operate on the web, are
embedded in smart appliances, or operate as PC client/server
applications. These developers include corporate developers, ISVs and
VARs who develop and install software application. The Company uses a
combination of direct sales, telesales, alliances and an indirect channel
to sell and support existing and new customers.
The Company has established a worldwide field sales organization,
which operatesofficers listed vest automatically in the United States, Canada, Mexico, Brazil, France,
Germany, Italy, Switzerland, Austria, the Netherlands, Belgium, the
United Kingdom and Australia.
The Company also distributes its products through major independent
distributors that may sell such products to smaller VARs, resellers and
dealers. The Company presently has a distribution agreement with
DistribuPro, for distributionevent of the Company's products in North America.
The Company also has a networkany sale of international distributors, including
Computer 2000 AG GmbH, ADN, Nocom and Illion in Europe and Mitsubishi
Corporation in Japan. Although many of the Company's distributors carry
competing product lines, the Company provides various forms of sales and
marketing programs to incent the channel to sell Centura products. The
Company's distributors may from time to time be granted stock exchangeall or
rotation rights. Such returns or exchanges are generally offset by an
immediate replacement order of equal or greater value. Although the
Company believes that, to date, it has provided adequate allowances for
exchanges and returns, there can be no certainty that actual returns will
not exceed the Company's allowances, particularly concerning introduction
of new products or enhancements.
In a number of markets, the Company has entered into multi-year
master distribution agreements with unrelated companies that have also
licensed the use of the Company's name. These agreements are in place to
increase the Company's opportunities and penetration in such markets.
While the Company believes that to date these agreements have increased
the Company's penetration in these markets, there can be no certainty
that this performance will continue or that these relationships will
remain in place.
The Company also sells its products through a worldwide network of
VARs and consultants that specialize in developing customized solutions
for smaller, departmental networks. These VARs bundle the Company's
products and products of other software vendors into systems that are
sold directly to end-users. The Company has certified over 1,000 VARs
marketing to industries such as financial services, telecommunications,
publishing, transportation and health care.
Marketing. To support its sales organizations, the Company conducts
comprehensive marketing programs and cooperative selling arrangements
with the Company's strategic partners. The Company's marketing programs
include direct mail, public relations, advertising, seminars, trade shows
and ongoing customer communication programs.
The marketing message focuses on the customer's benefits of using
Centura products, which offer a fast time to market, a low TCO and
security to both the developer and the end user, thereby maximizing their
Return on Investment ("ROI"). Our orientation is simple: the value of
information is directly proportional to the degree of accessibility and
security. The Company is building new marketing programs to attract
developers who are writing applications for new platforms and
architectures, including mobile, smart devices, and the Internet. Most
new customers will be attracted to the Company's new product offerings
that are available for the Web and smart devices. The Company's marketing
message intends to leverage its industry leadership in Client/Server into
new platforms for embedded devices and connectivity products.
New marketing programs are being put in place to support the ISVs
and VARs that sell and implement applications built with the Centura
environment.
The majority of the Company's revenues have been derived from the
licensing of software products for PC client/server systems, and such
products, and evolutions of such products and web based solutions, are
expected to continue to account for substantially all of the Company's revenuesassets or upon the effective date of any merger, consolidation or stock sale which results in the holders of the Company's common stock immediately prior to such transaction owning less than 50% of the voting power of the Company's common stock immediately after such transaction and such officer is not offered a comparable position with the surviving entity. The figures reported above do not include repriced options under the 1986 Incentive Stock Option Plan (which expired in accordance with its terms in July 1996) because such repricings were deemed to be amendments to the outstanding options rather than new issuances.
(2) Potential realizable values are reported net of the option exercise price but before taxes associated with exercise. These amounts represent certain assumed rates of appreciation only. Actual realized gains, if any, on stock option exercises are dependent on future performance of the Company's common stock, as well as the optionee's continued employment through the vesting period.
Aggregated Option Exercises in 2000 and Year-End Option Values
The following table sets forth information for the foreseeable future. Accordingly, continued broad market
acceptance of PC Client/Server and web-based systems is criticalexecutive officers named in the Summary Compensation Table with respect to the
Company's future success.
Customer Support and Service. The Company is committedoptions to providing
timely, high-quality technical support, which the Company believes is
critical to maintaining customer satisfaction. Customer requirements for
support and service vary depending on factors such as the number of
different hardware and software vendors involved in an installation, the
complexity of the application and the nature of the hardware
configuration. The Company offers flexible multi-tiered technical support
programs tailored to these specific customer needs. The Company offers a
licensed maintenance service to all its customers to provide bug fixes
and software enhancements. In addition, the Company provides technical
support through a telephone hotline service. For the large
enterprise-wide customer, the Company offers comprehensive premium
support programs. The Company broadens its support coverage through its
worldwide network of authorized support centers, certified business
partners and authorized consultants. The Company is building a Web self-
help database offering developers access to 24x7 on-line help.
Engineering and Product Development
Since inception, the Company has made substantial investments in
engineering and product development. During 1998, 1997, and 1996, the
Company's expenditures in engineering and product development, net of
capitalized software, were $7.9 million, $9.7 million, and $11.0 million,
representing 15%, 17%, and 17% of net revenues, respectively. The
Company's products have been developed by its internal product
development staff and, in certain instances, by strategic use of outside
consultants and third party developers. The Company believes that timely
development of new products and enhancements to existing products is
essential to maintain its competitive position.
The Company is committed to continued development of new
technologies for PC client/server and related evolutions of client server
and web-based computing, and the support of major 32-bit operating
systems, including Microsoft Windows 95 & 98, Microsoft Windows NT and
Novell NetWare. In addition, the Company plans to continue to offer
upgrades to its products. Delays or difficulties associated with new
products or product enhancements could have a material adverse effect on
the Company's business, operating results and financial condition.
Competition
The market for embeddable databases and application development
tools system software is intensely competitive and rapidly changing. The
Company's products are specifically targeted at the emerging portion of
this market relating to embeddable database PC and Web client/server
software, and the Company's current and prospective competitors offer a
variety of solutions to address this market segment.
Embeddable Database Market. As database capacity is often indicative of
differences in customer application, segments within the PC client/server
market in which the Company competes can generally be distinguished and
segregated by the number of anticipated users and target capacity of the
database utilized. The Company generally markets its database products in
environments utilizing capacity ranging up to in excess of five
Gigabytes. The most recent release of SQLBase (version 7.5) increases
the capacity limit up to 512 Gigabytes. Competitorspurchase common stock of the Company include Microsoft, Oracle, Computer Associates, IBM, Sybase, Pervasive,
and Informix. These competitors generally have product offerings that
compete with the Company's products in some or all of these capacity
ranges. There are also a number of smaller companies that provide
databases in the RTOS (Real Time Operating System) and Java environments
that could grow to challenge the Company. (See Recent Developments) In
addition, competitors include providers of sophisticated database
software, originally designed and marketed primarily for use with
mainframes and minicomputers, which, if successfully re-configured to
provide similar functionality in PC client/server, or smaller capacity
environments, could materially and adversely impact the Company's
revenues, results of operations and financial condition.
Tools and Connectivity Markets. The Company faces competition from
providers of application development software, suchheld as Sybase's Powersoft
Division, Microsoft, Inprise's Borland.com division, and connectivity
software competitors such as IBM. The Company 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 Web as an important platform for application development
and deployment, additional competitors or potential competitors have
emerged.
Many of the Company's competitors have longer operating histories
and significantly greater financial, technical, sales, marketing and
other resources, as well as greater name recognition and a larger
installed base, than the Company. In addition, many competitors have
established relationships with customers of the Company. The Company's
competitors could in the future introduce products with more features and
lower prices than the Company's offerings. These companies could also
bundle existing or new products with more established products to compete
with the Company. Furthermore, as the PC and Web client/server market
expands, a number of companies, with significantly greater resources than
the Company, could attempt to increase their presence in this market by
acquiring or forming strategic alliances with competitors of the Company,
or by introducing products specifically designed for the PC and Web
client/server market.
The principal competitive factors affecting the market for the
Company's products include breadth of distribution and name recognition
(visibility), product architecture, performance, functionality, price,
product quality, and customer support. The Company experienced increased
competition during 1998, 1997, and 1996, resulting in loss of market
share. The Company must continue to introduce enhancements to its
existing products and offer new products on a timely basis in order to
remain competitive. However, even if the Company introduces such products
in this manner, it may not be able to compete effectively because of the
significantly larger resources available to many of the Company's
competitors. There can be no assurance that the Company will be able to
compete successfully or that competition will not have a material adverse
effect on the Company's business, operating results and financial
condition.
Intellectual Property
The Company currently has one patent issued with respect to its
SQLWindows and CTD products and relies on a combination of trademark,
copyright and trade secret protection and nondisclosure agreements to
establish and protect its proprietary rights. Policing unauthorized use
of the Company's technology is expensive and difficult, and there can be
no assurance that these measures will be successful. While the Company's
competitive position may be affected by its ability to protect its
proprietary information, the Company believes that ultimately factors
such as the ability to effectively market the Company's products and
provide technical expertise and innovative skill of its personnel, its
name recognition, and ongoing product support and enhancements may be
more significant in maintaining the Company's competitive position.
The Company provides its software products to customers under
non-exclusive, non-transferable license agreements. As is customary in
the software industry to protect intellectual property rights, the
Company does not sell or transfer title to its software products to
customers. Under the Company's current standard form of end user license
agreement, licensed software may be used solely for the customer's
internal operations and, except for limited deployment rights provided in
certain of its SQLWindows packages, only on designated computers at
specified sites. The Company relies primarily on "shrink-wrap" licenses
for the protection of products intended for single, one-time use or
limited deployment. A shrink-wrap license agreement is a printed license
agreement included within packaged software that sets forth the terms and
conditions under which the purchaser can use the product, and binds the
purchaser by its acceptance and purchase of the software products to such
terms and conditions. Shrink-wrap licenses typically are not signed by
the licensee and therefore may be unenforceable under the laws of certain
jurisdictions.
The Company has entered into source code escrow agreements with a
number of resellers and end users that require release of source code to
such parties with a limited, nonexclusive right to use such code in the
event that there is a bankruptcy proceeding by or against the Company,
the Company ceases to do business or the Company breaches its contractual
obligations to the customer. The Company has, in certain cases, licensed
its source code to customers for specific uses.
There can be no assurance that third parties will not assert
infringement claims against the Company in the future with respect to
current or future products or that any such assertion may not result in
costly litigation or require the Company to obtain a license to
intellectual property rights of third parties. There can be no assurance
that such licenses will be available on reasonable terms, or at all. As
the number of software products in the industry increases and the
functionality of these products further overlap, the Company believes
that software developers may become increasingly subject to infringement
claims. Any such claims, with or without merit, can be time consuming and
expensive to defend.
Employees
As of December 31, 1998, the Company had 204 full-time employees,
including 43 in research and development, 8 in operations and
manufacturing, 94 in sales and marketing, 24 in technical services and
support and 35 in MIS, finance and administration. The Company maintains
competitive compensation, benefits, equity participation and work
environment policies to assist in attracting and retaining qualified
personnel. None of the Company's employees are covered by collective
bargaining agreements. The Company believes its relationship with its
employees2000.
Name | Shares Acquired |
Value | Number of Securities | Value of Unexercised |
Scott R. Broomfield | - | - | 816,667/383,333 | $637,817/$299,383 |
John Bowman | 20,000 | $217,494 | 519,584/360,416 | $405,795/$281,485 |
Joe Falcone | 110,001 | $991,920 | 0/0 | $0/$0 |
Richard Lucien | 20,000 | $299,027 | 54,236/175,764 | $42,358/$137,272 |
________________________
(1) Value realized is good. The Company believes that the success of its business
will depend in large part on its ability to attract and retain qualified
personnel. Competition for such personnel is intense, and there can be no
assurance that the Company will be successful in attracting and retaining
such personnel.
Risk Factors
This Annual Report on Form 10-K contains certain forward-looking
statements within the meaning of Section 27A of the Securities Act of
1933 and Section 21E of the Securities Exchange Act of 1934. Actual
results could differ materially from those projected in the
forward-looking statements as a result of certain of the risk factors set
forth below and elsewhere in this Annual Report on Form 10-K. In
evaluating the Company's business, prospective investors should carefully
consider the following factors in addition to the other information
presented in this report.
Changes in Strategic Direction: Restructuring. In efforts to stem
losses and maximize returncalculated based on the Company's core assets and technologies,
the Company has restructured its operations and announced changes in
strategic direction several times during the past three years. The first
of these changes, which began in December 1995, encompassed a change in
the Company's name from Gupta Corporation to Centura Software Corporation
and the identification of a flagship product bearing the name Centura. In
early 1997, the Company refocused its marketing and sales efforts away
from databases and development tools products to a middleware
connectivity products, and entered into an agreement to merge with
InfoSpinner, Inc., ("InfoSpinner") the developer of the underlying
product (the "InfoSpinner Merger"). The InfoSpinner Merger was not
consummated, and the Company entered into a distribution agreement with
InfoSpinner. In the second half of 1997, however, the Company
restructured and refocused operations on its core competencies, products
and technologies and terminated its distribution arrangement with
InfoSpinner. The Company continued to pursue this strategic direction
throughout 1998. There can be no assurance that the restructuring efforts
the Company has engaged in to date will be successful or that the Company
will be able to sustain profitability on a quarterly or annual basis. In
addition, there can be no assurance that the Company's management will
not deem it appropriate to undertake other major restructuring efforts or
changes in strategic direction in the future or to what degree any of
these efforts will result in improved operational performance, if at all.
Recent Changes in Senior Management. In the fourth quarter of 1997, the
Company announced significant changes in senior management. Such changes
included the appointment of Scott R. Broomfield as Chief Executive
Officer, John W. Bowman as Chief Financial Officer, and Kathy Lane as
Senior Vice President of Alliances, and the election of Messrs. Jack
King, Phillip Koen, Jr., and Earl Stahl to the Company's Board of
Directors, and the departure of Samuel M. Inman, III, Earl Stahl and
Richard Gelhaus from their positions as officers of the Company. In
February 1998 the Company announced the election of Messrs. William D.
Nicholas and Peter Micciche to the Board of Directors and the appointment
of Scott R. Broomfield to the position of Chairman & CEO. Mr. Nicholas
subsequently resigned from the Board of Directors in December, 1998. 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. There can
be no assurance that the new management team will be successful in
execution of its objectives or that the successful execution of these
objectives will result in improved operating results or financial
position of the Company.
Dependence on Key Personnel. The Company's future performance is
substantially dependent on the performance of its executive officers and
key product development, technical, sales, marketing and management
personnel. The Company does not have employment or non-competition
agreements with any of its employees. The loss of the services of any
executive officer or other key technical or management personnel of the
Company for any reason could have a material adverse effect on the
business, operating results and financial condition of the Company.
The future success of the Company also depends on its continuing
ability to identify, hire, train, motivate and retain other highly
qualified technical and managerial personnel. Competition for such
personnel is intense and the Company has experienced difficulty in
identifying and hiring qualified engineering and software development
personnel. There can be no assurance that the Company will be able to
attract, assimilate or retain other highly qualified technical and
managerial personnel in the future. The inability to attract and retain
the necessary technical and managerial personnel could have a material
and adverse effect upon its business, operating results and financial
condition.
Recent Fluctuations in Quarterly and Annual Results. The Company has
experienced in the past and may in the future to continue to experience
significant fluctuations in quarterly operating results. On an annual
basis, the Company 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. There can
be no assurance that the strategic direction the Company has engaged in
to date will be successful or that the Company will be able to sustain
profitability on a quarterly or annual basis. Many of the Company's
product licensing arrangements are subject to revenue recognition on a
per-unit deployed basis as the Company's deferred obligation to such
customers is gradually extinguished. Revenue recognition in such cases
is therefore dependent upon the business activities of the Company's
customers and the timely and accurate reporting of such activities to the
Company, which makes predictability of the related revenue extremely
uncertain. In addition, quarterly operating results of the Company will
depend on a number of other factors that are difficult to forecast,
including, general market demand for the Company's products; the size and
timing of individual orders during a quarter; the Company's ability to
fulfill such orders; introduction, localization or enhancement of
products by the Company; delays in the introduction and/or enhancement of
products by the Company and its competitors; market acceptance of new
products; reviews in the industry press concerning the products of the
Company or its competitors; software "bugs" or other product quality
problems; competition and pricing in the software industry; sales mix
among distribution channels; customer order deferrals in anticipation of
new products; reduction in demand for existing products and shortening of
product life cycles as a result of new product introductions; changes in
operating expenses; changes in the Company's strategy; personnel changes;
foreign currency exchange rates; mix of products sold; inventory
obsolescence; product returns and rotations; and general economic
conditions. Sales of the Company's products also may be negatively
affected by delays in the introduction or availability of new hardware
and software products from third parties. The Company's financial results
also may vary as a result of seasonal factors including year and quarter
end purchasing and the timing of marketing activities, such as industry
conventions and tradeshows.
Although the Company has operated historically with little or no
backlog of traditional boxed product shipments, it has experienced a
seasonal pattern of product revenue, 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. The Company has also experienced a
pattern of recording a substantial portion of its revenues in the third
month of a quarter. As a result, product revenues in any quarter are
dependent on orders booked in the last month. The Company's staffing and
other operating expenses are based in part on anticipated net revenues, a
substantial portion of which may not be generated until the end of each
quarter. Delays in the receipt or shipment of orders, including delays
that may be occasioned by failures of third party product fulfillment
firms to produce and ship products, or the actual loss of product orders
can cause significant variations in operating results from quarter to
quarter. The Company may be unable to adjust spending in a timely manner
to compensate for any unexpected revenue shortfall. Accordingly, any
significant shortfall in sales of the Company's products in relation to
the Company's expectations could have an immediate adverse impact on the
Company's business, operating results and financial condition. Due to the
foregoing factors, the Company's operating results may, during any fiscal
period, fall below the expectations of securities analysts and investors.
In such event, the tradingclosing price of the Company's common stock could be
materially adversely affected.
Volatilityas reported in the NASDAQ National Market (or a tier thereof) on the date of exercise minus the exercise price of the option, and does not necessarily indicate that the optionee sold such stock.
(2) No stock appreciation rights (SARs) were outstanding during 2000.
(3) The fair market value of the Company's common stock at the close of business on December 30, 2000 was $0.78 per share.
Directors are reimbursed for out-of-pocket travel expenses associated with their attendance at Board of Directors meetings. In addition, directors each receive a $15,000 retainer per year, $2,000 per each meeting attended in person, and $500 per telephone meeting. Nonemployee directors of the Company are automatically granted options to purchase shares of the Company's Common Stock Price. The market for the
Company's common stock is highly volatile. The trading price of the
Company's common stock fluctuated significantly in 1998, 1997, and 1996,
and may continuepursuant to be subject to wide fluctuations in response to
quarterly variations in operating and financial results, announcements of
new products or customer contracts by the Company or its competitors,
litigation and other factors including sales of substantial blocks of the
Company'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 the Company's common
stock in any given period. Additionally, the Company may not learn of, or
be able to confirm, revenue or earnings shortfalls until late in the
fiscal quarter or following the end of the quarter, which could result in
an even more immediate and adverse effect on the trading of the Company's
common stock. Finally, the Company participates in a highly dynamic
industry, which often results in significant volatility of its common
stock price, without necessarily any regard to whether the Company has
experienced changes in its business, operating results, or financial
condition.
Dilutive and Potential Dilutive Effect to Shareholders. The Company has
engaged in a number of transactions which have resulted in dilution to
the Company's shareholders. In February 1998, Computer Associates, Inc.
("CA"), and Newport Acquisition Company, LLP ("NAC") entered into a Note
Purchase and Sale Agreement (to which the Company consented) and the
Company and NAC entered into a Note Conversion Agreement (the
"Agreements"). Under the terms of the Agreements,Company's 1996 Directors' Stock Option Plan (the "Directors' Option Plan"). Under the Directors' Option Plan as currently structured, each nonemployee director receives an option to purchase 100,000 shares of Common Stock on the date on which such person first becomes a promissory note, plus
accrued interest,nonemployee director of the Company. Each option granted under the Directors' Option Plan becomes exercisable in installments of 1/36th of the shares subject to such option on each of the first thirty-six (36) monthly anniversaries of the date of grant of the option. Directors' Options issued Prior to 1998 become exercisable in installments of 1/48th of the shares subject to such option on each of the first forty-eight (48) monthly anniversaries of the date of the grant option. Options granted under the Directors' Option Plan have an exercise price equal to the fair market value of the Company's Common Stock on the date of grant, and a term of ten years.
In December 2000, the Board of Directors approved provisions for severance benefits and modification of the terms of Common Stock options for the Company's officers and certain other employees in the amountevent of $12,251,000, payablea Change of Control of the Company ("Change of Control"). A Change of Control is defined as a sale of all or substantially all of the Company's assets or a merger transaction as a result of which the Company's shareholders immediately prior to CA (the
"CA Note")the transaction own less than fifty percent of the ordinary voting power of the merged company immediately thereafter. Upon a Change of Control, the unvested Common Stock options of the Company's officers shall be one hundred percent vested and the exercise period of such options shall extend to the later of (i) the date which is one year after the Change of Control or (ii) the date such exercise period as it presently exists will terminate. If employment with the Company is involuntarily terminated (other than for cause) during the period of six months following a Change of Control, Messrs. Bowman and Lucien shall each receive a payment equal to six months of their annual base salary as in effect at the time of termination, or if they are not then receiving any base salary, a payment equal to six months of the pro forma Current Annual Base Salary of $250,000 for Mr. Bowman and $200,000 for Mr. Lucien. "Cause" is, for this purpose, defined as (i) a willful failure by the executive to substantially perform the executive's duties, other than a failure resulting from the executive's complete or partial incapacity due to physical or mental illness or impairment, (ii) a willful act by the executive that constitutes gross misconduct and that is materially injurious to the Company, or (iii) a material and willful violation of a federal or state law or regulation applicable to the business of the Company that is materially and demonstrably injurious to the Company. An act, or failure to act, by the executive shall be considered "willful" unless committed without good faith and without a reasonable belief that the act or omission was acquiredin the Company's best interest.
In December 2000, the Board of Directors suspended the Company's commitments to Messrs. Broomfield and Bowman relating to base salary, target cash bonus, and cash paid upon termination of employment, as approved by NAC,the Board in December 1999 and immediately converted into 11,415,094effective January 1, 2000. The Board of Directors had authorized agreements for three years, pursuant to which Messrs. Broomfield and Bowman are each entitled to receive 12 months' compensation if their respective employment is terminated without cause. In December 2000, the Board of Directors approved grants of options to both Messrs. Broomfield and Bowman to purchase 250,000 shares each of Common Stock of the Company under the 1995 Stock Option Plan in lieu of their receiving any base salary. Such options become exerciseable at the rate of 1/12th of the shares subject to the option for each period of one month lapsed after the optionee ceased receiving any base salary, so long as the optionee remains an employee of or a consultant to the Company as of the end of such month, with all such options not already exerciseable becoming fully exerciseable if (i) a Change of Control occurs and the optionee remains an employee of or a consultant to the Company as of the date of the Change of Control, and (ii) the optionee is involuntarily terminated, other than for cause, following a Change of Control. The Board of Directors also approved extension of the exercise period for such options for a period of five (5) years following termination of his employment or consulting relationship with the Company, but in no event later than December 13, 2010.
In December 2000 the Board of Directors approved extension of the exercise period for options to purchase 200,000 shares of the Company's Common Stock granted to Mr. Broomfield on December 9, 1999, and for options to purchase 150,000 shares of the Company's Common Stock granted to John Bowman on December 9, 1999, for a period of five (5) years following termination of his employment or consulting relationship with the Company, but in no event later than December 8, 2009.
The current members of the Compensation Committee are Messrs. King and Micciche.
None of these persons currently is or has ever been an officer or employee of the Company or any of its subsidiaries, nor were there any compensation committee interlocks or other relationships during 2000 requiring disclosure under item 402(j) of Regulation S-K of SEC.
The following table sets forth the beneficial ownership of the Company's Common Stock as of March 31, 2001 as to (i) each person who is known by the Company to beneficially own more than five percent of the Company's Common Stock, (ii) each of the Company's directors, (iii) each of the executive officers named in the Summary Compensation Table and (iv) all directors and executive officers as a group. The number of shares of the Company Common Stock outstanding as of March 31, 2001 was 43,019,817.
| Shares Beneficially Owned(1) | |
5% Stockholders, Directors, Named Executive Officers, | Number(2) | Percent ofTotal |
|
| |
Scott R. Broomfield | 1,283,422 | 2.98 |
John Bowman | 802,074 | 1.86 |
Joe Falcone(3) | 0 | 0 |
Richard Lucien | 91,391 | * |
Jack King | 91,319 | * |
Philip Koen | 91,319 | * |
Peter Micciche | 38,889 | * |
Edward Borey, Jr. | 47,223 | * |
Tom Clark | 61,112 | * |
|
| |
All directors and executive officers as group (9 persons) (4) | 2,506,749 | 5.83 |
________________________
* Less than one percent.
(1) Beneficial ownership is determined in accordance with the rules of the SEC. In computing the number of shares beneficially owned by a person and the percentage ownership of that person, shares of common stock (the "Shares"). Concurrentlysubject to options or warrants held by that person that are exercisable on or before May 31, 2001, are deemed outstanding. Such shares, however, are not deemed outstanding for purposes of computing the ownership of each other person. Except as indicated in the footnotes to this table and pursuant to applicable community property laws, the stockholder named in the table has sole voting and investment power with executionrespect to the shares set forth opposite such stockholder's name.
(2) Includes with respect to each named person the following shares subject to stock options and/or warrants exercisable within 60 days of March 31, 2001: Mr. Broomfield-1,007,573; Mr. Bowman-684,482; Mr. Falcone-0; Mr. Lucien-91,391; Mr. King-91,319; Mr. Koen-91,319; Mr. Micciche-38,889; Mr. Borey-47,223; and Mr. Clark-61,112.
(3) As of August 2000 Joe Falcone was no longer an executive officer or employee of the Agreements,Company.
(4) Includes shares subject to options held by directors and officers that are exercisable within 60 days of March 31, 2001.
In December 1997, the Board of Directors approved the installation of a new management team provided by Hickey & Hill, corporate restructuring specialists, pursuant to a letter agreement between the Company and NAC entered into an Investor
RightsHickey & Hill dated November 5, 1997, and approved by the Board of Directors on November 6, 1997 (the "H&H Agreement"). The H&H Agreement, (the "Rights Agreement"as amended on February 26, 1998, and again on March 17, 1998, provided that the three executive officers provided by Hickey & Hill would fill the positions of President and Chief Executive Officer, Chief Financial Officer, and the Company's principal marketing officer. Those three officers, Scott R. Broomfield, John Bowman, and Kathy Lane, respectively, (collectively, the "New Officers") whereinbecame full-time employees of the Company agreedeffective February 26, 1998. Also pursuant to register the Shares underH&H Agreement, the Securities Act of 1933, as amendedNew Officers were granted nonstatutory stock options (the "Securities Act""First Options"). In March 1998 the Company issued to NAC an
additional warrant to purchase 893,320a total of 1,500,000 shares of the Company's Common Stock at an exercise price of $1.906 per share. Additional options to purchase 125,000 shares of the Company's Common Stock at an exercise price of $1.81 per share (the "NAC Warrant"("Additional Options"),
pursuant were granted to a Right ofMr. Bowman and Ms. Lane on March 17, 1998. The First Refusal provision contained inOptions vest with respect to the Rights
Agreement. The NAC Warrant is subject to three-year vesting. The terms of
the Investor Rights Agreement were modified in favor of Centura in June,
1998, in exchange for an additional warrant to purchase 300,000underlying shares of
the Company's Common Stock at an exercise pricethe rate of $2.09 per share and
early registration of the NAC shares with limited rights to sell common
stock through February 27, 1999, at which time selling restrictions would
cease. The Company registered the shares issued under the terms of the
agreement.
Also in February 1998, pursuant to the terms of a Common Stock and
Warrant Purchase Agreement, the Company completed a management-led
private placement of 2,330,191 shares of the Company's common stock (the
"Private Placement"), resulting in gross proceeds to the Company of
$2,470,000. Transaction costs associated with both the Agreements and the
Private Placement were $600,000. The Company subsequently registered the
Private Placement shares under the Securities Act effective May 18, 1998.
Also in February 1998, in connection with the Agreements, the
Company entered into a Warrant Purchase Agreement with CA wherein the
Company issued and sold to CA, a warrant to purchase 500,000 shares of
the Company's common stock (the "CA Warrant"). The CA Warrant is
exercisable at $1.906 per share and expires on February 27, 2004. The
Company registered the shares issuable upon exercise of the CA Warrant
under the Securities Act. Also in February 1998, in connection with the
Private Placement the Company issued warrants to purchase 582,548 shares
of the Company's common stock at an exercise price of $1.25 per share
(the "Private Placement Warrants"). The Private Placement Warrants expire
on February 27, 2003. Also, in consideration of services rendered in
connection with the Private Placement, the Company issued to Rochon
Capital Group, Ltd. warrants to purchase 354,717 shares of the Company's
common stock at an exercise price of $2.12 (the "Rochon Warrants"). The
Rochon Warrants expire on February 27, 2003. The Company registered the
shares issuable under the terms of the Private Placement Warrants and the
Rochon Warrants under the Securities Act. In June 1997, the Company
issued warrants to purchase 90,000 and 10,000 shares of its common stock
to Pacific Business Funding Corporation and its affiliate Sand Hill
Capital, LLC, respectively, at an exercise price of $2.094 per share. The
warrants expire on June 30, 2002.
From time to time, the Company issues shares of common stock
pursuant to its 1992 Employee Stock Purchase Plan and pursuant to options
granted under its 1995 Incentive Stock Option Plan, 1998 Employee Stock
Option Plan and 1996 Directors' Stock Option Plan. Additional options
remain outstanding and are exercisable pursuant to the Company's 1986
Incentive Stock Option Plan, which terminated in July 1996. In addition,
the Company has issued non-plan options to purchase an aggregate of
1,500,000 shares of common stock to the Company's Chief Executive
Officer, Chief Financial Officer and Sr. Vice President of Alliances. In
March 1998, the Company's Board of Directors approved the 1998 Employee
Stock Option Plan, under which options to purchase 1,415,000 shares of
common stock are issuable to non-officer employees, of which 1,299,000
options net of cancellations, have been granted and are outstanding as of
December 31, 1998.
Future issuance of such shares of the Company's common stock
pursuant to any of the foregoing will dilute the beneficial ownership of
existing Company shareholders.
On March 15, 1999 the Company entered into a binding agreement (the
"Agreement") to acquire Raima? Corporation ("Raima"), a Seattle-based
vendor of cross-platform micro databases and data management tools for
real-time and Windows applications. Except for a small cash component
under certain limited circumstances, the acquisition will be a stock
purchase, is expected to close on or before June 7, 1999, and is
anticipated to be accounted for using the purchase method of accounting.
Under the terms of the agreement, the former shareholders of Raima will
receive a gross amount of 5,800,000 shares (subject to certain
adjustments) of the Company's common stock. 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 the Company's common stock on the NASDAQ SmallCap Market for
each of the ten (10) trading days ending on the day immediately preceding
closing) be at least $1.00 per share. Approximately 20% of the
consideration payable to the former Raima shareholders will be subject to
escrow which will be available to the Company to satisfy certain
indemnification rights. Approximately one-half of the consideration held
in escrow not needed to satisfy pending claims will be released to the
former Raima shareholders25% every six months after closing, and the balance not
needed to satisfy pending claims will be released one year after closing.
If consummated, the merger will enable Centura to provide customers
with a comprehensive cross-platform family of embeddable database
solutions, including Windows NT, Windows 95/98 and Windows CE, and widely
used versions of Unix (Solaris, AIX, HP-UX, Unix Ware, BSD/OS and Linux)
and RTOS. There can be no assurance that the merger will become
effective within the timeframe provided in the Agreement or, if
effective, whether Raima? Corporation can be successfully integrated into
the Company or that such integration efforts or other issues surrounding
the acquisition will not have a material and adverse impact on the
Company's business, operating results and financial condition. (See
Recent Developments)
Need for Additional Equity Financing. The Company may be required to
seek additional equity financing to finance the acquisition of new
products and technologies, capital equipment and continuing operations.
If the Company needs further financing, there can be no assurance that it
will be available on reasonable terms or at all. Any additional equity
financing will result in dilution to the Company's shareholders.
New Product Risks; Rapid Technological Change. The markets for the
Company's software products and services are characterized by rapid
technological developments, evolving industry standards, swift changes in
customer requirements and computer operating environments, and frequent
new product introductions and enhancements. As a result, the success of
the Company depends substantially upon its ability to continue to enhance
existing products, develop and introduce, new products incorporating
technological advances and meet increasing customer expectations, all on
a timely and cost-effective basis. To the extent one or more competitors
introduce products that better address customer needs, the Company's
businesses could be adversely affected. The Company's success will also
depend on the ability of its primary products, SQLBase, SQLBase
SafeGarde, 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 of the Company to timely
release new versions or upgrades, failure of such upgrades to achieve
market acceptance or otherwise, could have a material adverse effect on
the business, operating results and financial condition of the Company.
In addition, commercial acceptance of the Company's products and services
could be adversely affected by critical or negative statements or reports
by industry and financial analysts concerning the Company and its
products, or other factors such as the Company's financial performance.
If the Company is unable to develop and introduce new products or
enhancements to existing products in a timely manner in response to
changing market conditions or customer requirements, its business,
operating results and financial condition could be materially and
adversely affected.
The Company depends substantially upon internal efforts for the
development of new products and product enhancements. The Company has in
the past experienced delays in the development of new products and
product versions, which resulted in loss or delays of product revenues,
and there can be no assurance that the Company will not experience
further delays in connection with its current product development or
future development activities. Also, software products as complex as
those offered by the Company may contain undetected errors when first
introduced or as new versions are released. The Company has in the past
discovered software errors in certain of its new products and
enhancements, respectively, after their introduction. Although the
Company has not experienced material adverse effects resulting from any
such errors to date, there can be no assurance that errors will not be
found in new products or releases after commencement of commercial
shipments, resulting in adverse product reviews and a loss of or delay in
market acceptance, which could have a material adverse effect upon the
Company's business, operating results and financial condition.
From time to time, the Company or its competitors may announce new
products, product versions, capabilities or technologies that have the
potential to replace or shorten the life cycles of the Company's existing
products. The Company has historically experienced increased returns of a
particular product version following the announcement of a planned
release of a new version of that product. The Company provides allowances
for anticipated returns, and believes its existing policies result in the
establishment of allowances that are adequate, and have been adequate in
the past, but there can be no assurance that product returns will not
exceed such allowances in the future. The announcement of currently
planned or other new products may cause customers to delay their
purchasing decisions in anticipation of such products, which could have a
material adverse effect on business, operating results and financial
condition of the Company. See "Business Research and Product Development"
and "Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations".
Year 2000 Issue. Some computers, software, and other equipment include
programming code in which calendar year data is abbreviated to only two
digits. As a result of this design decision, some of these systems could
fail to operate or fail to produce correct results if "00" is
interpreted to mean 1900, rather than 2000. These problems are widely
expected to increase in frequency and severity as the year 2000
approaches, and are commonly referred to as the "Millennium Bug" or
"Year 2000 Problem".
Assessment. The Year 2000 Problem could affect computers,
software, and other equipment used, operated, or maintained by the
Company. Accordingly, the Company is reviewing its internal computer
programs and systems to ensure that the programs and systems will be
Year 2000 compliant. The Company presently believes that its computer
systems will be Year 2000 compliant in a timely manner. However, while
the estimated cost of these efforts is not expected to be material to
the Company's financial position or any year's results of operations,
there can be no assurance to this effect.
Software Sold to Consumers. All current products developed by
Centura are designed to allow developers to record, store and process
and present calendar dates occurring on or after January 1, 2000 with
the same degree of accuracy that such products process dates occurring
before such date. However, customers that may not be compliant may
experience cash flow difficulties and could negatively affect the
Company's accounts receivables Days Sales Outstanding (DSO) or bad debt
reserves. The Company has requested compliance letters from all of its
large customers. Moreover, the Company has created Centura Team2000,
which is a service that determines whether any application built in CTD
or SQLWindows is Y2K compliant. The Company charges for this service,
but does not, however, mandate that the service be purchased. This is a
proactive step to mitigate possible damage that may result from customer
non-compliance.
Internal Infrastructure. The Company believes that it has
identified substantially all of the major computers, software
applications, and related equipment used in connection with its internal
operations that must be modified, upgraded, or replaced to minimize the
possibility of a material disruption to its business. The Company has
commenced the process of modifying, upgrading, and replacing major
systems that have been identified as adversely affected, and expects to
complete this process in a timely manner.
Systems Other than Information Technology Systems. In addition to
computers and related systems, the operation of office and facilities
equipment, such as fax machines, photocopiers, telephone switches,
security systems, and other common devices may be affected by the Year
2000 Problem. The Company is currently assessing the potential effect
of, and costs of remediating, the Year 2000 Problem on its office and
facilities equipment.
The Company estimates the total cost to the Company of
completing any required modifications, upgrades, or replacements of
these internal systems will not have a material adverse effect on the
Company's business or results of operations. This estimate is being
monitored and will be revised as additional information becomes
available.
Suppliers. The Company has initiated communications with
third party suppliers of the major computers, software, and other
equipment used, operated, or maintained by the Company to identify and,
to the extent possible, to resolve issues involving the Year 2000
Problem. However, the Company has limited or no control over the
actions of these third party suppliers. Thus, while the Company expects
that it will be able to resolve any significant Year 2000 Problems with
these systems, there can be no assurance that these suppliers will
resolve any or all Year 2000 Problems with these systems before the
occurrence of a material disruption to the business of the Company or
any of its customers. Any failure of these third parties to resolve
Year 2000 problems with their systems in a timely manner could have a
material adverse effect on the Company's business, financial condition,
and results of operation. The Company has multi-year insurance coverage
that does not have Y2K exclusions.
Customers. The Company has initiated communications with its
customers to identify and, to the extent possible, to resolve issues
involving the Year 2000 Problem. However, the Company has limited or
no control over the actions of its customers. Thus, while the Company
expects that it will be able to resolve any significant Year 2000
Problems with its internal systems and products, there can be no
assurance that its customers will resolve any or all Year 2000 Problems
with their systems before the occurrence of a material disruption to the
business of the Company. Any failure of these third parties to resolve
Year 2000 problems with their systems in a timely manner could have a
material adverse effect on the Company's business, financial condition,
and results of operation. The Company has multi-year insurance coverage
that does not have Y2K exclusions.
Disclaimer. Management believes that it is not possible to
determine with complete certainty that all Year 2000 Problems affecting
the Company have been identified or corrected. The number of devices
that could be affected and the interactions among these devices are
simply too numerous. In addition, one cannot accurately predict how
many Year 2000 Problem-related failures will occur, or the severity,
duration, or financial consequences of these perhaps inevitable
failures. The discussion of the Company's efforts, and management's
expectations, relating to Year 2000 compliance are forward-looking
statements. The Company's ability to achieve Year 2000 compliance and
the level of incremental 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.
While the Company has begun the implementation of Year 2000
related upgrades appropriate for the Company's internal systems and
equipment and Year 2000 compliance issues in the systems of customers,
vendors and other related parties, there can be no assurance that
problems will not arise as a result of the Year 2000 issue.
Embeddable Database Market. Since database capacity is often indicative
of differences in customer application, segments within the PC
client/server market in which the Company competes can generally be
distinguished and segregated by the target capacity of the database
utilized. The Company generally markets its database products in
environments utilizing capacity ranging from very small environments of
less than five kilobytes to those in excess of five gigabytes.
Competitors of the Company, including Microsoft, Oracle, CA, IBM, Sybase,
borland.com (Inprise), Pervasive, and Informix, generally have product
offerings which compete with the Company's products in some or all of
these capacity ranges. In addition, some of these competitors are
providers of sophisticated database software, originally designed and
marketed primarily for use with mainframes and minicomputers, which, if
successfully re-configured to provide similar functionality in Windows or
Browser clients, or smaller capacity environments, could materially and
adversely impact the Company's revenues, results of operations and
financial condition.
Competition. The market for embeddable databases and application
development tools system software is intensely competitive and rapidly
changing. The Company's products are specifically targeted at the
emerging portion of this market relating to embeddable PC and Web
client/server software, and the Company's current and prospective
competitors offer a variety of solutions to address this market segment.
The Company faces competition from providers of application development
software, such as Oracle, Sybase's Powersoft Division, Microsoft, and
borland.com (Inprise), and connectivity software competitors such as IBM.
The Company 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.
Many of the Company's competitors have longer operating histories
and significantly greater financial, technical, sales, marketing and
other resources, as well as greater name recognition and a larger
installed base, than the Company. In addition, many competitors have
established relationships with customers of the Company. The Company's
competitors could in the future introduce products with more features and
lower prices than the Company's offerings. These companies could also
bundle existing or new products with more established products to compete
with the Company. Furthermore, as the PC and Web client/server market
expands, a number of companies, with significantly greater resources than
the Company, could attempt to increase their presence in this market by
acquiring or forming strategic alliances with competitors of the Company,
or by introducing products specifically designed for the PC and Web
client/server market.
The principal competitive factors affecting the market for the
Company's products include breadth of distribution and name recognition,
product architecture, performance, functionality, price, product quality,
customer support. The Company experienced increased competition during
1998, 1997, and 1996, resulting in loss of market share. The Company
must continue to introduce enhancements to its existing products and
offer new products on a timely basis in order to remain competitive.
However, even if the Company introduces such products in this manner, it
may not be able to compete effectively because of the significantly
larger resources available to many of the Company's competitors. There
can be no assurance that the Company will be able to compete successfully
or that competition will not have a material adverse effect on the
Company's business, operating results and financial condition.
Market Acceptance of PC Client/Server Systems. To date, substantially
all of the Company's revenues have been derived from the licensing of
software products for PC client/server systems and licensing of such
products is expected to continue to account for substantially all of the
Company's revenues for the foreseeable future. With the increasing focus
on enterprise-wide systems that embrace the World Wide Web, some
customers may opt for solutions that favor mainframe or mini-computer
solutions with associated Web connectivity. Accordingly, some companies
may substantially reduce or abandon the use of PC client/server systems,
which could have a material adverse effect on the Company's future
success.
Component Software Markets. The advent of component software may alter
the way in which customers buy software. In this structure, logical
statements or discreet "units of activity" can be distributed pursuant to
executable statements within a Windows or Browser client environment. As
specific software functionality can be bundled into smaller units or
objects rather than in broad, highly functional products such as the
Company's development tools, customers may be less willing to buy such
broad, highly functional products. If such a trend continues, the Company
may choose to introduce component-type products. The costs and efforts
necessary to package and distribute such components are largely unknown
and there can be no assurance that the Company will be able to repackage
and distribute its products in such a component-type software structure,
in an efficient manner, or at all.
Internet Software Market. The market for Internet software in general,
and the segments of such market addressed by the Company's products in
particular, are relatively new. The future financial performance of the
Company will depend in part on the continued expansion of this market and
these market segments and the growth in the demand for other products
developed by the Company, as well as increased acceptance of the
Company's products by MIS professionals. There can be no assurance that
the Internet software market and the relevant segments of the market will
continue to grow, that the Company will be able to respond effectively to
the evolving requirements of the market and market segments, or that MIS
professionals will accept the Company's products. If the Company is not
successful in developing, marketing, localizing and selling applications
that gain commercial acceptance in these markets and market segments on a
timely basis, the Company's business, operating results and financial
condition could be materially and adversely affected.
Dependence Upon Distribution Channels. The Company relies on
relationships with value-added resellers and independent third party
distributors for a substantial portion of its sales and revenues. Some of
the Company's resellers and distributors also offer competing products.
Most of the Company's resellers and distributors are not subject to any
minimum purchase requirements, they can cease marketing the Company's
products at any time, and they may from time to time be granted stock
exchange or rotation rights. Moreover, the introduction of new and
enhanced products may result in higher product returns and exchanges from
distributors and resellers. Any product returns or exchanges in excess of
recorded allowances could have a material adverse effect on the Company's
business, operating results and financial condition. The Company also
maintains strategic relationships with a number of vertical software
vendors and other technology companies for marketing or resale of the
Company's products. Any termination or significant disruption of the
Company's relationship with any of its resellers or distributors, or the
failure by such parties to renew agreements with the Company, could
materially and adversely affect the Company's business, operating results
and financial condition.
The distribution channels through which Client/Server software
products are sold have been characterized by rapid change, including
consolidations and financial difficulties of distributors, resellers and
other marketing partners including certain of the Company's current
distributors. The bankruptcy, deterioration in financial condition or
other business difficulties of a distributor or retailer could render the
Company's accounts receivable from such entity uncollectible, and this
could result in a material adverse effect on the Company's business,
operating results and financial condition. There can be no assurance that
distributors will continue to purchase the Company's products or provide
the Company's products with adequate promotional support. Failure of
distributors to do so could have a material and adverse effect on the
Company's business, operating results and financial condition.
In a number of international markets the Company has entered into
quasi-exclusive, multi-year agreements with independent companies that
have also licensed the use of the Company's name. These agreements are in
place to increase the Company's opportunities and penetration in such
markets where the rapid adoption of client/server technologies is
anticipated. While the Company believes that to date these agreements
have increased the Company's penetration in such markets, there can be no
certainty that this performance will continue nor that these
relationships will remain in place. The Company's future cost of
maintaining its business in these markets could increase substantially if
these agreements are not renewed.
Dependence on Third-Party Organizations. The Company is increasingly
dependent on the efforts of third party "partners", including
consultants, system houses and software developers to implement, service
and support the Company's products. These third parties increasingly have
opportunities to select from a very broad range of products from the
Company's competitors, many of whom have greater resources and market
acceptance than the Company. In order to succeed, the Company must
actively recruit and sustain relationships with these third parties.
There can be no assurance that the Company will be successful in
recruiting new partners or in sustaining its relationships with its
existing partners.
International Sales and Operations. International sales represented 54%,
58%, and 60% of the Company's net revenues for the years ended
December 31, 1998, 1997 and 1996, respectively. A key component of the
Company's strategy is continued expansion into international markets, and
the Company currently anticipates that international sales, particularly
in new and emerging markets, will continue to account for a significant
percentage of total revenues. The Company will need to retain effective
distributors, and hire, retain and motivate qualified personnel
internationally to maintain and/or expand its international presence.
There can be no assurance that the Company will be able to successfully
market, sell, localize and deliver its products in these international
markets. In addition to the uncertainty as to the Company's ability to
sustain or expand its international presence, there are certain risks
inherent in doing business on an international level, such as unexpected
changes in regulatory requirements and government controls, problems and
delays in collecting accounts receivable, tariffs, export license
requirements and other trade barriers, difficulties in staffing and
managing foreign operations, longer payment cycles, political and
economic instability, fluctuations in currency exchange rates, seasonal
reductions in business activity during summer months in Europe and
certain other parts of the world, restrictions on the export of critical
technology, and potentially adverse tax consequences, which could
adversely impact the success of international operations. Sales of the
Company's products are denominated 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
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. In addition,
effective copyright and trade secret protection may be limited or
unavailable under the laws of certain foreign jurisdictions. There can be
no assurance that one or more of such factors will not have a material
adverse effect on the Company's international operations and,
consequently, on the Company's business, operating results and financial
condition.
Proprietary Rights. The success and ability of the Company to compete is
dependent in part upon the Company's proprietary technology. While the
Company relies on trademark, trade secret and copyright laws to protect
its technology, the Company believes that factors such as the
technological and creative skills of its personnel, new product
developments, frequent product enhancements, name recognition and
customer support are more essential to establishing and maintaining a
technology leadership position. The Company has one patent with respect
to its SQLWindows and Centura Team Developer products. The Company
believes that its success does not depend on the ownership of patents,
but primarily on the innovative skills, technical competence and
marketing abilities of its personnel. Also, there can be no assurance
that others will not develop technologies that are similar or superior to
the Company's technology. The source code for the Company's proprietary
software is protected both as a trade secret and as a copyrighted work.
Despite these precautions, it may be possible for a third party to copy
or otherwise obtain and use their products or technology without
authorization, or to develop similar technology independently. In
addition, effective copyright and trade secret protection may be
unavailable or limited in certain foreign countries.
The Company generally enters into confidentiality or license
agreements with its employees, consultants and vendors, and generally
controls access to and distribution of its software, documentation and
other proprietary information. Despite efforts to protect proprietary
rights, unauthorized parties may attempt to copy aspects of the Company's
products or to obtain and use information that is regarded as
proprietary. Policing such unauthorized use is difficult. There can be no
assurance that the steps taken by the Company will prevent
misappropriation of the Company's technology or that such agreements will
be enforceable. In addition, litigation may be necessary in the future to
enforce intellectual property rights, to protect trade secrets or to
determine the validity and scope of the proprietary rights of others.
Such litigation could result in substantial costs and diversion of
resources and could have a material adverse effect on the Company's
business, operating results and financial condition.
There can be no assurance that third parties will not claim
infringement by the Company with respect to current or future products,
and the Company expects that it will increasingly be subject to such
claims as the number of products and competitors in the client/server and
Internet connectivity software market grows and the functionality of such
products overlaps with other industry segments. In the past, the Company
has received notices alleging that its products infringe trademarks of
third parties. The Company has historically dealt with and will in the
future continue to deal with such claims in the ordinary course of
business, evaluating the merits of each claim on an individual basis.
There are currently no material pending legal proceedings against the
Company regarding trademark infringement. Any such third party claims,
whether or not they are meritorious, could result in costly litigation or
require the Company to enter into royalty or licensing agreements. Such
royalty or license agreements, if required, may not be available on terms
acceptable to the Company, or at all. If the Company was found to have
infringed upon the proprietary rights of third parties, it could be
required to pay damages, cease sales of the infringing products and
redesign or discontinue such products, any of which could have a material
adverse effect on the Company's business, operating results and financial
condition.
Management of Potential Growth. In recent years, the Company has
experienced both expansion and contraction of its operations each of
which has placed significant demands on the Company's administrative,
operational and financial resources. To manage future growth, if any,
the Company must continue to improve its financial and management
controls, reporting systems and procedures on a timely basis and expand,
train and manage its work force. There can be no assurance that the
Company will be able to perform such actions successfully. The Company
intends to continue to invest in improving its financial systems and
controls in connection with higher levels of operations. Although the
Company believes that its systems and controls are adequate for the
current level of operations, the Company anticipates that it may need to
add additional personnel and expand and upgrade its financial systems to
manage any future growth. The Company's failure to do so could have a
material adverse effect upon the Company's business, operating results
and financial condition.
Legal Proceedings. There are currently no material pending legal
proceedings against the Company or any of its subsidiaries. The Company
operates in an environment, however, where litigation may occur in the
course of its normal business operations. In the complex and volatile
industry in which the Company operates, disputes, litigation, regulatory
proceedings and other actions are a necessary risk of doing business.
There can be no assurance that the Company will not participate in such
legal proceedings and that the costs and charges will not have a material
adverse impact on the Company's future success.
Directors and Executive Officers of Registrant
The following table sets forth information as of February 28, 1999,
regarding the directors and executive officers of the Company:
The First Options and Additional Options are exercisable at $1.91 per share. At December
31, 1998, 1,500,000 optionssubject to full acceleration of vesting in the event of a "Change of Control," defined as the occurrence of any of the following: (i) all or substantially all of the assets of the Company are outstanding.
The following table summarizes information regarding all stock
optionssold, exchanged or otherwise transferred in one or more transactions; (ii) the Company is merged or consolidated with or into another corporation with the effect that the common stockholders immediately prior to such merger or consolidation hold less than 75% of the ordinary voting power of the outstanding at December 31, 1998:
As of August 1999, Kathy Lane was no longer serving as an executive officer of the Company.
Each option is exercisable by the officer to which it was granted for five years following such officer's termination of employment with the Company other than for cause.
The Company's common stock or announcesCEO, Scott Broomfield, is a tender offer that would result
in such person owning 15% or moremember of the board of directors of CAM Commerce Solutions, Inc., one of the Company's common stock. If the
Rights become exercisable, the holder of each Right (other than the
person whose acquisition triggered the exercisability of the Rights) will
be entitled to purchase, at the Right's then current exercise price, a
number of shares of the Company's common stock having a market value of
twice the exercise price. In addition, if the Company were to be acquired
in a merger or the Company sells more than 50% of its assets or earning
power, each Right will entitle its holder to purchase, at the Right's
then current exercise price, common stock of the acquiring company having
a market value of twice the exercise price. The Rights are redeemable by
the Company at a price of $.01 per Right at any time within ten days
after a person has acquired 15% or more of the Company's common stock.
NAC Shareholder Rights Plan. Included with the Note Conversion
Agreement between the Company and NAC is an Investor Rights Agreement
("IRA") that carries certain anti-dilution rights for two years. In
June 1998, the Company and NAC entered into an agreement to amend the
IRA. The amendment included modifications to the IRA that limit NAC's
anti-dilution rights related to certain transactions, including the
grant of stock options to employees and shares that may be issued as
consideration in connection with certain strategic transactions, such
as, an acquisition, asset purchase, or license agreement.
Note 10. Income Taxes:
Income (loss) before income taxes are attributable to the
following jurisdictions:
The Company has the option to acquire 100% of the outstanding stock
of oneentered into indemnification agreements with each of its independent foreign distributors, using a purchase price
formula based on net profitsdirectors and revenues. The Company recognized revenue
of $328,000, $489,000 and $1,783,000 for the years ended December 31,
1998, 1997, and 1996, from this distributor.
Note 13. Subsequent Event (Unaudited):
On March 15, 1999executive officers which may require the Company, entered into an agreement (the
"Agreement")among other things, to acquire Raima? Corporation ("Raima"),indemnify them against certain liabilities that may arise by reason of their status or service as directors or officers, to advance their expenses incurred as a Seattle-based
vendorresult of cross-platform micro databases and data management tools for
real-time and Windows applications. Except for a small cash component
under certain limited circumstances, the acquisition willany proceeding against them as to which they could be a stock
purchase, is expected to close on or before June 7, 1999, and is
anticipated to be accounted for using the purchase method of accounting.
Under the terms of the Agreement, the former shareholders of Raima will
receive a gross amount of 5,800,000 shares (subject to certain
adjustments) of the Company's common stock. 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 the Company's common stock on the NASDAQ SmallCap Market for
each of the ten (10) trading days ending on the day immediately preceding
the closing) be at least $1.00 per share. Approximately 20% of the
consideration payable to the former Raima shareholders will be subject to
an escrow which will be available to the Company to satisfy certain
indemnification rights. Approximately one-half of the consideration held
in escrow not needed to satisfy pending claims will be released to the
former Raima shareholders six months after closing, and the balance not
needed to satisfy pending claims will be released one year after closing.
Item 9. Change in and Disagreements with Accountants on Accounting and
Financial Disclosure
Not applicable.
PART III
Item 10. Directors and Executive Officers of the Registrant
Information regarding the executive officers and directors of the
Company required by this item is contained in "Part I, Item 1. Directors
and Executive Officers of Registrant".
Additional information required by this item is incorporated by
reference from the Company's Proxy Statement for the 1999 Annual Meeting
of Shareholders to be held June 17, 1999, a copy of which will be filed
with the Securities and Exchange Commission no later than 120 days from
the end of the Company's last fiscal year.
Item 11. Executive Compensation
Incorporated by reference from the Proxy Statement for the 1999
Annual Meeting of Shareholders to be held June 17, 1999, a copy of which
will be filed with the Securities and Exchange Commission.
Item 12. Security Ownership of Certain Beneficial Owners and Management
Incorporated by reference from the Proxy Statement for the 1999
Annual Meeting of Shareholders to be held June 17, 1999, a copy of which
will be filed with the Securities and Exchange Commission.
Item 13. Certain Relationships and Related Transactions
Incorporated by reference from the Proxy Statement for the 1999
Annual Meeting of Shareholders to be held June 17, 1999, a copy of which
will be filed with the Securities and Exchange Commission.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) The following documents are filed as part of this Report:
(1) Financial Statements. The following financial statements of the Company
are contained in Item 8 of this Annual Report on Form 10-K:
1. Report of Price Waterhouse LLP, Independent Accountants.
2. Consolidated Balance Sheets at December 31, 1998 and 1997.
3. Consolidated Statements of Operations for each of the three years in
the period ended December 31, 1998.
4. Consolidated Statements of Shareholders' Equity (Deficit) at December
31, 1998, 1997 and 1996.
5. Consolidated Statements of Cash Flows for each of the three years in
the period ended December 31, 1998.
6. Notes to Consolidated Financial Statements.
(2) Financial Statement Schedules. The following financial statement
schedules of the Company for the year ended December 31, 1998, 1997 and
1996 is contained in Item 8 of this Annual Report on Form 10-K:
1. II--Valuation and Qualifying Accounts
2. Report of Price Waterhouse LLP, Independent Accountants. Refer to
Item 14(a)(1)1 above.
Schedules not listed above have been omitted because they are either
inapplicable or the required information has been given in
Management's Discussion and Analysis of Financial Condition and
Results of Operations or in the financial statements or the notes
thereto.
3. Exhibits. Refer to Item 14(c) below.
(b) Reports on Form 8-K.
Not applicable..
Exhibit
Number Exhibit Description
- - ------------- --------------------------------------------------------
2.1(1) Agreement and Plan of Reorganization dated January 6, 1997 by
and among the Registrant, IS Acquisition Corporation and
InfoSpinner, Inc.
2.2(1) Form of Certificate of Merger among the Registrant, IS
Acquisition Corporation and InfoSpinner, Inc.
3(i)(2) Articles of Incorporation of Registrant, as amended on
September 24, 1996.
3(iii) Bylaws of Registrant, as amended effective February 27, 1998.
4.1(13) Preferred Shares Rights Agreement, dated as of August 3, 1994,
between the Registrant and Chemical Trust Company of
California, including the Certificate of Determination of
Rights, Preferences and Privileges of Series A Participating
Preferred Stock, the form of Rights Certificate and the
Summary of Rights, attached thereto as Exhibits A, B and C,
respectively.
4.2 Amendment to Preferred Shares Rights Agreement effective
February 27, 1998.
10.1(3) Form of Directors' and Officers' Indemnification Agreement.
10.2(4)(5) 1986 Incentive Stock Option Plan, as amended, and forms of
agreements thereunder.
10.3(3) 1991 United Kingdom Sub Plan and forms of agreement thereunder.
10.4(2) 1992 Employee Stock Purchase Plan and forms of agreements
thereunder, as amended on September 24, 1996.
10.5(3)* 1992 Directors' Stock Option Plan and forms of agreements
thereunder.
10.8(3) Lease Agreement dated February 4, 1992 between Registrant and
Bohannon Associates.
10.9(6) 1996 Executive Officers' Compensation Plan.
10.12(3) Forms of License Agreements.
10.14(2) 1995 Stock Option Plan and forms of agreement thereunder, as
amended on September 24, 1996.
10.16(7) Note Purchase Agreement dated March 31, 1996 between the
Company and Computer Associates International, Inc.
10.17(8)* Executive Employment Agreement dated April 10, 1996 between
the Company and Sam M. Inman III.
10.18(9)* Loan Agreement Secured by Property and Securities dated August
31, 1996 between the Company and Earl and Ann Stahl.
10.19(2)* 1996 Directors' Stock Option Plan and forms of agreement
thereunder.
10.20(2) Stipulation of Settlement dated July 19, 1996, in regards to
the Registrant's securities litigation between plaintiff's
settlement counsel and the Registrant's counsel, including
exhibits thereto, and related Final Judgment and Order of
Dismissal dated September 30, 1996.
10.21(14) Distributorship Agreement dated January 6, 1997, between the
Registrant and InfoSpinner, Inc.
10.22* Intentionally omitted.
10.23(15) Factoring Agreement dated June 26, 1997, between Centura
Software Corporation and Pacific Business Funding Corporation.
10.24(15) Warrant to Purchase Common Stock issued June 30, 1997 by
Centura Software Corporation to Sand Hill Capital.
10.25(15)* 1997 Executive Retention Program.
10.26(16) Lease Agreement, dated October 14, 1996, between Westport
Investments and the Registrant.
10.27* Letter Agreement dated November 5, 1997 between the Registrant
and Hickey & Hill Incorporated, and form of Nonstatutory Stock
Options issued to new Executives.
10.28* Settlement Agreements and Mutual Releases between the
Registrant and Sam M. Inman, III and between the Registrant
and Earl Stahl.
10.29 Loan and Security Agreement dated January 19, 1998 between the
Registrant and Coast Business Credit, a division of Southern
Pacific Bank.
10.30 Common Stock and Warrant Purchase Agreement dated February 27,
1998 between the Registrant and certain Purchasers of the
Registrant's Common Stock.
10.31 Note Conversion Agreement dated February 27, 1998 between the
Registrant and Newport Acquisition Company No. 2, LLC.
10.32 Warrant Purchase Agreement dated February 27, 1998 between the
Registrant and Computer Associates International, Inc.
10.33 Investor Rights Agreement dated February 27, 1998 between the
Registrant and Newport Acquisition Company No. 2, LLC.
10.34 Common Stock Purchase Warrants issued to Rochon Capital Group,
Ltd. on February 27, 1998.
10.35* 1998 Employee Stock Option Plan and form of Nonstatutory
Option Agreements thereunder.
11.1(14) Statement regarding Computation of per share earnings.
16(10)(11)(12) Letter regarding change in Certifying Accountant.
21(1) Subsidiaries of Registrant.
23.1 Consent of PricewaterhouseCoopers LLP, Independent Accountants.
24.1 Power of Attorney. See Page 65.
27.1 Financial Data Schedules at December 31, 1998 and for the year
ended December 31, 1998.
- - ------------------------
* Management Compensatory Plan or Arrangement.
(1) Incorporated by reference from the Company's Registration
Statement on Form S-4 (No. 333-20491) filed with the Commission
on January 27, 1997.
(2) Incorporated by reference from the Company's Quarterly Report
on Form 10-Q for the quarter ended September 30, 1996.
(3) Incorporated by reference from the Company's Registration
Statement on Form S-1 (No. 33-55566), declared effective by
the Commission on February 4, 1993.
(4) Incorporated by reference from the Company's Registration
Statement on Form S-8 (No. 33-62194) filed with the Commission
on May 5, 1993.
(5) Incorporated by reference from the Company's Registration
Statement on Form S-8 (No. 33-83850) filed with the Commission
on September 9, 1994.
(6) Incorporated by reference from the Company's Annual Report
on Form 10-K for the year ended December 31, 1995.
(7) Incorporated by reference from the Company's Quarterly Report
on Form 10-Q for the quarter ended March 31, 1995.
(8) Incorporated by reference from the Company's Quarterly Report
on Form 10-Q for the quarter ended June 30, 1995.
(9) Incorporated by reference from the Company's Quarterly Report
on Form 10-Q for the quarter ended September 30, 1995.
(10) Incorporated by reference from the Company's Current Report on
Form 8-K dated July 2, 1993.
(11) Incorporated by reference from the Company's Current Report on
Form 8-K dated October 11, 1995 as amended by Amendment No. 1
dated October 25, 1995 (Form 8-K/A).
(12) Incorporated by reference from the Company's Current Report on
Form 8-K dated January 8, 1996.
(13) Incorporated by reference from the Company's Registration
Statement on Form 8-A filed with the Commission on August 10,
1994.
(14) Incorporated by reference from Amendment No. 1 to the
Company's Registration Statement on Form S-4 filed with the
Commission on March 10, 1997.
(15) Incorporated by reference from the Company's Quarterly Report
on Form 10-Q for the quarter ended June 30, 1997.
(16) Incorporated by reference from the Company's Quarterly Report
on Form 10-Q/A for the quarter ended June 30, 1997.
(17) Incorporated by reference from the Company's Quarterly Report
on Form 10-Q for the quarter ended March 31, 1998.
(18) Incorporated by reference from the Company's Annual Report on
Form 10-K for the year ended December 31, 1997.
(19) Incorporated by reference from the Company's Quarterly Report
on Form 10-Q for the quarter ended June 30, 1998.
(20) Incorporated by reference from the Company's Quarterly Report
on Form 10-Q for the quarter ended September 30, 1998.
(21) Incorporated by reference from the Company's Registration
Statement on Form S-8 (No. 333-65565) filed with the
Commission on October 13, 1998.
SIGNATURES
Pursuant to the requirements of Section 13 and 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
CENTURA SOFTWARE CORPORATION
By: /s/ SCOTT R. BROOMFIELD Date: March 30, 1999
- - ------------------------------
Scott R. Broomfield,
PRESIDENT, CHIEF EXECUTIVE
OFFICER AND CHAIRMAN OF THE
BOARD OF DIRECTORS (PRINCIPAL
EXECUTIVE OFFICER)
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Scott R. Broomfield or John W. Bowman, or either
of them, with the power to substitution, his attorney-in-fact and agents, to
sign any and all amendments to this Annual Report on Form 10-K,indemnified, and to file the
same, with exhibits theretoobtain directors' and other documents in connection therewith, with
the Securities and Exchange Commission, hereby ratifying and confirming all that
each of said attorney-in-fact, or substitute or substitutes may do or cause to
be done by virtue thereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following personsofficers' liability insurance if available on behalf of the
registrant and in the capacities and on the dates indicated.
By: /s/ SCOTT R. BROOMFIELD
-------------------------------------------
Scott R. Broomfield, PRESIDENT, CHIEF EXECUTIVE Date: March 30, 1999
OFFICER AND CHAIRMAN OF THE BOARD OF DIRECTORS
(PRINCIPAL EXECUTIVE OFFICER)
/s/ JOHN W. BOWMAN
-------------------------------------------
John W. Bowman, EXECUITIVE VICE PRESIDENT, Date: March 30, 1999
FINANCE AND OPERATIONS AND CHIEF FINANCIAL
OFFICER (PRINCIPAL FINANCIAL OFFICER)
By: /s/ RICHARD LUCIEN
-------------------------------------------
Richard Lucien, VICE PRESIDENT, FINANCE Date: March 30, 1999
AND OPERATIONS (PRINCIPAL ACCOUNTING OFFICER)
By: /s/ PETER MICCICHE
------------------------------------------- Date: March 30, 1999
Peter Micciche, DIRECTOR
By: /s/ WILLIAM D. NICHOLAS
------------------------------------------- Date: March 30, 1999
William D. Nicholas, DIRECTOR
By: /s/ EARL M. STAHL
------------------------------------------- Date: March 30, 1999
Earl M. Stahl, DIRECTOR
By: /s/ SAMUEL M. INMAN, III
------------------------------------------- Date: March 30, 1999
Samuel M. Inman, III, DIRECTOR
By: /s/ PHILIP KOEN, JR.
------------------------------------------- Date: March 30, 1999
Philip Koen, Jr., DIRECTOR
By: /s/ JACK KING
------------------------------------------- Date: March 30, 1999
Jack King, DIRECTOR
CENTURA SOFTWARE CORPORATION
INDEX TO EXHIBITS
Exhibit
Number Exhibit Description
- - ------------- --------------------------------------------------------
2.1(1) Agreement and Plan of Reorganization dated January 6, 1997 by
and among the Registrant, IS Acquisition Corporation and
InfoSpinner, Inc.
2.2(1) Form of Certificate of Merger among the Registrant, IS
Acquisition Corporation and InfoSpinner, Inc.
3(i)(2) Articles of Incorporation of Registrant, as amended on
September 24, 1996.
3(iii) Bylaws of Registrant, as amended effective February 27, 1998.
4.1(13) Preferred Shares Rights Agreement, dated as of August 3, 1994,
between the Registrant and Chemical Trust Company of
California, including the Certificate of Determination of
Rights, Preferences and Privileges of Series A Participating
Preferred Stock, the form of Rights Certificate and the
Summary of Rights, attached thereto as Exhibits A, B and C,
respectively.
4.2 Amendment to Preferred Shares Rights Agreement effective
February 27, 1998.
10.1(3) Form of Directors' and Officers' Indemnification Agreement.
10.2(4)(5) 1986 Incentive Stock Option Plan, as amended, and forms of
agreements thereunder.
10.3(3) 1991 United Kingdom Sub Plan and forms of agreement thereunder.
10.4(2) 1992 Employee Stock Purchase Plan and forms of agreements
thereunder, as amended on September 24, 1996.
10.5(3)* 1992 Directors' Stock Option Plan and forms of agreements
thereunder.
10.8(3) Lease Agreement dated February 4, 1992 between Registrant and
Bohannon Associates.
10.9(6) 1996 Executive Officers' Compensation Plan.
10.12(3) Forms of License Agreements.
10.14(2) 1995 Stock Option Plan and forms of agreement thereunder, as
amended on September 24, 1996.
10.16(7) Note Purchase Agreement dated March 31, 1996 between the
Company and Computer Associates International, Inc.
10.17(8)* Executive Employment Agreement dated April 10, 1996 between
the Company and Sam M. Inman III.
10.18(9)* Loan Agreement Secured by Property and Securities dated August
31, 1996 between the Company and Earl and Ann Stahl.
10.19(2)* 1996 Directors' Stock Option Plan and forms of agreement
thereunder.
10.20(2) Stipulation of Settlement dated July 19, 1996, in regards to
the Registrant's securities litigation between plaintiff's
settlement counsel and the Registrant's counsel, including
exhibits thereto, and related Final Judgment and Order of
Dismissal dated September 30, 1996.
10.21(14) Distributorship Agreement dated January 6, 1997, between the
Registrant and InfoSpinner, Inc.
10.22* Intentionally omitted.
10.23(15) Factoring Agreement dated June 26, 1997, between Centura
Software Corporation and Pacific Business Funding Corporation.
10.24(15) Warrant to Purchase Common Stock issued June 30, 1997 by
Centura Software Corporation to Sand Hill Capital.
10.25(15)* 1997 Executive Retention Program.
10.26(16) Lease Agreement, dated October 14, 1996, between Westport
Investments and the Registrant.
10.27* Letter Agreement dated November 5, 1997 between the Registrant
and Hickey & Hill Incorporated, and form of Nonstatutory Stock
Options issued to new Executives.
10.28* Settlement Agreements and Mutual Releases between the
Registrant and Sam M. Inman, III and between the Registrant
and Earl Stahl.
10.29 Loan and Security Agreement dated January 19, 1998 between the
Registrant and Coast Business Credit, a division of Southern
Pacific Bank.
10.30 Common Stock and Warrant Purchase Agreement dated February 27,
1998 between the Registrant and certain Purchasers of the
Registrant's Common Stock.
10.31 Note Conversion Agreement dated February 27, 1998 between the
Registrant and Newport Acquisition Company No. 2, LLC.
10.32 Warrant Purchase Agreement dated February 27, 1998 between the
Registrant and Computer Associates International, Inc.
10.33 Investor Rights Agreement dated February 27, 1998 between the
Registrant and Newport Acquisition Company No. 2, LLC.
10.34 Common Stock Purchase Warrants issued to Rochon Capital Group,
Ltd. on February 27, 1998.
10.35* 1998 Employee Stock Option Plan and form of Nonstatutory
Option Agreements thereunder.
11.1(14) Statement regarding Computation of per share earnings.
16(10)(11)(12) Letter regarding change in Certifying Accountant.
21(1) Subsidiaries of Registrant.
23.1 Consent of PricewaterhouseCoopers LLP, Independent Accountants.
24.1 Power of Attorney. See Page 65.
27.1 Financial Data Schedules at December 31, 1998 and for the year
ended December 31, 1998.
- - ------------------------
* Management Compensatory Plan or Arrangement.
(1) Incorporated by reference from the Company's Registration
Statement on Form S-4 (No. 333-20491) filed with the Commission
on January 27, 1997.
(2) Incorporated by reference from the Company's Quarterly Report
on Form 10-Q for the quarter ended September 30, 1996.
(3) Incorporated by reference from the Company's Registration
Statement on Form S-1 (No. 33-55566), declared effective by
the Commission on February 4, 1993.
(4) Incorporated by reference from the Company's Registration
Statement on Form S-8 (No. 33-62194) filed with the Commission
on May 5, 1993.
(5) Incorporated by reference from the Company's Registration
Statement on Form S-8 (No. 33-83850) filed with the Commission
on September 9, 1994.
(6) Incorporated by reference from the Company's Annual Report
on Form 10-K for the year ended December 31, 1995.
(7) Incorporated by reference from the Company's Quarterly Report
on Form 10-Q for the quarter ended March 31, 1995.
(8) Incorporated by reference from the Company's Quarterly Report
on Form 10-Q for the quarter ended June 30, 1995.
(9) Incorporated by reference from the Company's Quarterly Report
on Form 10-Q for the quarter ended September 30, 1995.
(10) Incorporated by reference from the Company's Current Report on
Form 8-K dated July 2, 1993.
(11) Incorporated by reference from the Company's Current Report on
Form 8-K dated October 11, 1995 as amended by Amendment No. 1
dated October 25, 1995 (Form 8-K/A).
(12) Incorporated by reference from the Company's Current Report on
Form 8-K dated January 8, 1996.
(13) Incorporated by reference from the Company's Registration
Statement on Form 8-A filed with the Commission on August 10,
1994.
(14) Incorporated by reference from Amendment No. 1 to the
Company's Registration Statement on Form S-4 filed with the
Commission on March 10, 1997.
(15) Incorporated by reference from the Company's Quarterly Report
on Form 10-Q for the quarter ended June 30, 1997.
(16) Incorporated by reference from the Company's Quarterly Report
on Form 10-Q/A for the quarter ended June 30, 1997.
(17) Incorporated by reference from the Company's Quarterly Report
on Form 10-Q for the quarter ended March 31, 1998.
(18) Incorporated by reference from the Company's Annual Report on
Form 10-K for the year ended December 31, 1997.
(19) Incorporated by reference from the Company's Quarterly Report
on Form 10-Q for the quarter ended June 30, 1998.
(20) Incorporated by reference from the Company's Quarterly Report
on Form 10-Q for the quarter ended September 30, 1998.
(21) Incorporated by reference from the Company's Registration
Statement on Form S-8 (No. 333-65565) filed with the
Commission on October 13, 1998.