Public Offering Registration - PERVASIVE SOFTWARE INC - 7-28-1997 by PVSW-Agreements

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									AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 28, 1997. REGISTRATION NO. 333-

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM S-1
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933

PERVASIVE SOFTWARE INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE (STATE OR OTHER JURISDICTION OF INCORPORATION OR ORGANIZATION) 7372 (PRIMARY STANDARD INDUSTRIAL CLASSIFICATION CODE NUMBER) 8834 CAPITAL OF TEXAS HIGHWAY AUSTIN, TEXAS 78759 (512) 794-1719 74-2693793 (I.R.S. EMPLOYER IDENTIFICATION NUMBER)

(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES) RON R. HARRIS CHIEF EXECUTIVE OFFICER PERVASIVE SOFTWARE INC. 8834 CAPITAL OF TEXAS HIGHWAY AUSTIN, TEXAS 78759 (512) 794-1719 (NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF AGENT FOR SERVICE) COPIES TO:
ROBERT V. GUNDERSON, JR. JAY K. HACHIGIAN BRIAN K. BEARD ANTHONY M. ALLEN GUNDERSON DETTMER STOUGH VILLENEUVE FRANKLIN & HACHIGIAN, LLP 8911 CAPITAL OF TEXAS HIGHWAY, SUITE 4140 AUSTIN, TEXAS 78759 (512) 342-2300 CARMELO M. GORDIAN S. MICHAEL DUNN BROBECK, PHLEGER & HARRISON LLP 301 CONGRESS AVENUE SUITE 1200 AUSTIN, TEXAS 78701 (512) 477-5495

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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as practicable after the effective date of this Registration Statement. If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, as amended, check the following box. [_] If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [_]

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [_] If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box. [_] CALCULATION OF REGISTRATION FEE
--------------------------------------------------------------------------------------------------------------------------------------------------------------PROPOSED MAXIMUM TITLE OF EACH CLASS OF AGGREGATE AMOUNT OF SECURITIES TO BE REGISTERED OFFERING PRICE (1) REGISTRATION FEE -------------------------------------------------------------------------------Common Stock, $.001 par value............... $46,000,000 $13,939 ---------------------------------------------------------------------------------------------------------------------------------------------------------------

(1) Estimated solely for the purpose of computing the amount of the registration fee pursuant to Rule 457(o).

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT THAT SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING PURSUANT TO SUCH SECTION 8(A), MAY DETERMINE.

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+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +ANY SUCH STATE. + + + + + + + + +

++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++ SUBJECT TO COMPLETION, DATED JULY 28, 1997 PERVASIVE SOFTWARE SHARES COMMON STOCK Of the shares of Common Stock offered hereby, shares are being sold by Pervasive Software Inc. ("Pervasive" or the "Company") and shares are being sold by the Selling Stockholders. See "Principal and Selling Stockholders." The Company will not receive any of the proceeds from the sale of shares by the Selling Stockholders. Prior to this offering, there has been no public market for the Common Stock of the Company. It is currently estimated that the initial public offering price will be between $ and $ per share. See "Underwriting" for information relating to the method of determining the initial public offering price.

THE COMMON STOCK OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK. SEE "RISK FACTORS" COMMENCING ON PAGE 6.

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

UNDERWRITING PROCEEDS TO PRICE TO DISCOUNTS AND PROCEEDS TO SELLING PUBLIC COMMISSIONS COMPANY(1) STOCKHOLDERS -------------------------------------------------------------------------------Per Share....................... $ $ $ $ -------------------------------------------------------------------------------Total(2)........................ $ $ $ $ ---------------------------------------------------------------------------------------------------------------------------------------------------------------

(1) Before deducting expenses payable by the Company estimated at $ . (2) The Selling Stockholders have granted to the Underwriters a 30-day option to purchase up to an additional shares of Common Stock solely to cover over-allotments, if any. See "Underwriting." If such option is exercised in full, the total Price to Public, Underwriting Discounts and Commissions and Proceeds to Selling Stockholders will be $ , $ and $ , respectively.

The Common Stock is offered by the Underwriters as stated herein, subject to receipt and acceptance by them and subject to their right to reject any order in whole or in part. It is expected that delivery of such shares will be made through the offices of Robertson, Stephens & Company LLC ("Robertson, Stephens & Company"), San Francisco, California, on or about , 1997. ROBERTSON, STEPHENS & COMPANY UBS SECURITIES FIRST ALBANY CORPORATION The date of this Prospectus is , 1997

CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK OF THE COMPANY, INCLUDING STABILIZING BIDS, SYNDICATE COVERING TRANSACTIONS AND THE IMPOSITION OF PENALTY BIDS. FOR A DISCUSSION OF THESE ACTIVITIES, SEE "UNDERWRITING." 2

NO DEALER, SALES REPRESENTATIVE OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS IN CONNECTION WITH THIS OFFERING OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY, ANY SELLING STOCKHOLDER OR ANY UNDERWRITER. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, ANY SECURITIES OTHER THAN THE REGISTERED SECURITIES TO WHICH IT RELATES OR AN OFFER TO, OR A SOLICITATION OF, ANY PERSON IN ANY JURISDICTION WHERE SUCH AN OFFER OR SOLICITATION WOULD BE UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF. UNTIL , 1997 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL DEALERS EFFECTING TRANSACTIONS IN THE REGISTERED SECURITIES, WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS DELIVERY REQUIREMENT IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.

TABLE OF CONTENTS
PAGE ---4 6 15 15 16 17 18

Summary.................................................................. Risk Factors............................................................. Use of Proceeds.......................................................... Dividend Policy.......................................................... Capitalization........................................................... Dilution................................................................. Selected Consolidated Financial Data..................................... Management's Discussion and Analysis of Financial Condition and Results of Operations........................................................... 19 Business................................................................. 26 Management............................................................... 38 Certain Transactions..................................................... 46 Principal and Selling Stockholders....................................... 48 Description of Capital Stock............................................. 50 Shares Eligible for Future Sale.......................................... 52 Underwriting............................................................. 54 Legal Matters............................................................ 56 Experts.................................................................. 56 Additional Information................................................... 56 Index to Consolidated Financial Statements............................... F-1

The Company intends to furnish to its stockholders annual reports containing audited consolidated financial statements examined by its independent public accountants and quarterly reports containing unaudited financial statements for each of the first three quarters of each fiscal year. Pervasive Software, Scalable SQL, MicroKernel Database Architecture and MicroKernel Database Engine are trademarks of the Company and Btrieve is a registered trademark of the Company. Trade names, service marks or trademarks of other companies appearing in this Prospectus are the property of their respective holders. The Company was incorporated in Delaware in January 1994 under the name Btrieve Technologies, Inc. and changed its name to Pervasive Software Inc. in June 1996. The Company's principal executive offices are located at 8834 Capital of Texas Highway, Austin, Texas 78759, and its telephone number is (512) 794-1719. Unless otherwise indicated, all references in this Prospectus to "Pervasive" or the "Company" refer to Pervasive Software Inc. and its subsidiaries. 3

SUMMARY The following summary is qualified in its entirety by the more detailed information, including "Risk Factors" and the Consolidated Financial Statements and Notes thereto, appearing elsewhere in this Prospectus. This Prospectus contains forward-looking statements that involve risks and uncertainties. The Company's actual results may differ materially from the results discussed in the forward-looking statements. Factors that might cause such a difference include, but are not limited to, those discussed in "Risk Factors." THE COMPANY Pervasive is a leading provider of embedded database software designed to enable the cost-effective development, deployment and support of low- maintenance, packaged client/server applications. The Company's database engines, Btrieve and Scalable SQL, are well suited for integration by software developers into business-critical applications that are reliable and scalable and can be rapidly deployed. These products enable independent software vendors ("ISVs") and value added resellers ("VARs") to develop, deploy and support packaged client/server applications that provide robust functionality and low overall cost of ownership to end users. In addition, the Company's comprehensive approach to selling, marketing and supporting its products is designed to address the specific needs of ISVs, VARs, in-house development organizations and their end users. Organizations are increasingly recognizing the importance of collecting, analyzing and disseminating information to obtain competitive advantage. This information is increasingly generated by sophisticated client/server applications and managed by underlying database software that allow for decentralized decision making and broader access to critical business information. However, client/server computing environments are inherently complex, typically involving a variety of hardware, operating systems, networking protocols, applications and database software. As a result of this complexity, large and costly information technology departments, typically found in large organizations, are required to develop, deploy and support client/server applications built on enterprise-scale database software. Many small and mid-sized organizations, including departments of large organizations, also face competitive pressures to achieve the benefits associated with client/server computing. These organizations typically do not have the information technology budgets, infrastructure, personnel or computing expertise required to deploy and support client/server applications built on enterprise-scale database software and consequently have been slow to adopt client/server computing environments. Because of the relatively low penetration of client/server applications in small and mid-sized organizations, ISVs and VARs have a significant market opportunity to develop, deploy and support packaged client/server applications that meet their customers' robust functionality needs and run in environments that often lack a well developed information technology infrastucture. Accordingly, there is a need for reliable, high-performance, low-maintenance database software that enables ISVs and VARs to cost-effectively develop, deploy and support robust client/server applications targeted at small and mid-sized organizations and departments of larger organizations. The Company's database software simplifies application development by enabling developers to write applications that are capable of running on multiple platforms and that can scale with little or no modification from single workstation to peer-to-peer and client/server environments. The Company's products currently operate on the Windows NT, NetWare, Windows 95, Windows 3.1, OS/2 Warp and DOS operating platforms. In addition, developers can embed the Company's databases into their applications, enabling organizations to implement client/server systems and automate critical business functions without the costs and complexities typically associated with enterprise-class client/server applications. The Company's sales and marketing organization focuses exclusively on indirect channels by targeting ISVs that build packaged client/server applications and VARs that sell and deploy the applications. The Company's sales, marketing, training and licensing programs are designed to encourage ISVs to embed the Company's databases into their own software products and to stimulate the sales of the applications by VARs to end users. The Company believes its strong relationships with ISVs and VARs provide the Company with market visibility and multiple sales opportunities and offer end users additional sources of service and technical support. 4

THE OFFERING
Common Stock Offered by the Company........... Common Stock Offered by the Selling Stockholders.......................................... Common Stock to be Outstanding after the Offering....................................... Use of Proceeds............................... Proposed Nasdaq National Market Symbol........ shares shares shares(1) For working capital and general corporate purposes. See "Use of Proceeds." PVSW

SUMMARY CONSOLIDATED FINANCIAL DATA (in thousands, except per share data)
PERIOD FROM JANUARY 12, 1994 YEAR ENDED JUNE 30, (INCEPTION) TO -----------------------JUNE 30, 1994 1995 1996 1997 ---------------- ------ ------- ------$ 933 (2,208) $(2,203) $8,601 $13,476 $24,481 (655) (3,109) 2,255 $ (609) $(3,205) $ 1,590 $ 0.12 13,368 JUNE 30, 1997 -------------------------------PRO ACTUAL FORMA(3) AS ADJUSTED(4) ------- -------- -------------$ --

CONSOLIDATED STATEMENTS OF OPERATIONS DATA: Revenues............................ Operating income (loss)............. Net income (loss)................... Pro forma net income per share(2)(3)........................ Shares used in computing pro forma net income per share(2)(3).........

CONSOLIDATED BALANCE SHEET DATA: Working capital................................ $ 1,795 $ 1,795 Total assets................................... 10,445 10,445 Redeemable convertible preferred stock......... 4,026 -Total stockholders' equity (deficit)........... (394) 3,632

(1) Based on the number of shares outstanding as of June 30, 1997. Excludes 2,259,697 shares subject to outstanding options as of June 30, 1997 at a weighted exercise price of approximately $0.59 per share; and 1,168,914 shares reserved for issuance under the Company's stock plans. See "Management--1997 Stock Incentive Plan," "--Employee Stock Purchase Plan" and Note 6 of Notes to Consolidated Financial Statements. (2) See Note 2 of Notes to Consolidated Financial Statements for an explanation of the method used to determine the number of shares used in computing pro forma net income per share. (3) Reflects the conversion of outstanding Preferred Stock into Common Stock upon the completion of the offering. (4) Adjusted to reflect the sale of shares of Common Stock by the Company at an assumed initial public offering price of $ per share and the application of the estimated net proceeds. See "Use of Proceeds" and "Capitalization." Unless otherwise indicated, the information in this Prospectus (i) assumes no exercise of the Underwriters' over-allotment option and (ii) except in the Consolidated Financial Statements, reflects the conversion of all outstanding shares of Preferred Stock into Common Stock upon completion of the offering. This Prospectus contains forward-looking statements that involve risks and uncertainties. The Company's actual results may differ significantly from the results discussed in the forward-looking statements. Factors that might cause such a difference include, but are not limited to, those discussed in "Risk Factors," "Management's Discussion and Analysis of Financial Condition and Results of Operations" and elsewhere in this Prospectus. 5

RISK FACTORS In addition to the other information in this Prospectus, the following risk factors should be considered carefully in evaluating the Company and its business before purchasing shares of the Common Stock offered hereby. This Prospectus contains forward-looking statements that involve risks and uncertainties. The Company's actual results may differ materially from the results discussed in the forward-looking statements. Factors that might cause such a difference include, but are not limited to, those discussed in "Risk Factors" and elsewhere in this Prospectus. LIMITED OPERATING HISTORY; MARGINAL PROFITABILITY; FUTURE OPERATING RESULTS UNCERTAIN The Company was founded in January 1994. Accordingly, the Company's prospects must be considered in light of the risks and difficulties frequently encountered by companies in the early stage of development, particularly companies in new and rapidly evolving markets. To address these risks, the Company must, among other things, respond to competitive developments, continue to attract, retain and motivate qualified personnel and continue to improve its products. Although the Company has been profitable for the five most recent fiscal quarters, this profitability has been marginal and, except for the quarters ended September 30, 1994 and December 31, 1994, the Company incurred net losses in each quarter from inception through the quarter ended March 31, 1996. The Company's operating losses and marginal profitability have been due in part to the commitment of significant resources to the Company's technical support, research and development and sales and marketing organizations. The Company expects to continue to devote substantial resources to these areas and as a result will need to recognize significant quarterly revenues to maintain profitability. In particular, the Company intends to hire a significant number of sales and research and development personnel in fiscal 1998 and beyond, which the Company believes is required if the Company is to achieve significant revenue growth in the future. Although the Company's revenues have increased in recent periods, there can be no assurance that the Company's revenues will grow in future periods, that they will grow at past rates or that the Company will remain profitable on a quarterly or annual basis in the future. See "Management's Discussion and Analysis of Financial Condition and Results of Operations." OPERATING RESULTS SUBJECT TO SIGNIFICANT FLUCTUATIONS; SEASONALITY The Company's quarterly revenues, expenses and operating results have varied significantly in the past and are likely to vary significantly in the future due to a variety of factors, such as demand for the Company's products, the size and timing of significant orders and their fulfillment, the number, timing and significance of product enhancements and new product announcements by the Company and its competitors, changes in pricing policies by the Company or its competitors, customer order deferrals in anticipation of enhancements or new products offered by the Company or its competitors, the ability of the Company to develop, introduce and market new and enhanced versions of its products on a timely basis, changes in the Company's level of operating expenses, budgeting cycles of its customers, product life cycles, software defects and other product quality problems, the Company's ability to attract and retain qualified personnel, changes in the Company's sales incentive plans, changes in the mix of domestic and international revenues, the level of international expansion, foreign currency exchange rate fluctuations, performance of indirect channel partners, changes in the mix of indirect channels through which the Company's products are offered, the impact of acquisitions of competitors and indirect channel partners, the Company's ability to control costs and general domestic and international economic and political conditions. The Company operates with virtually no order backlog because its software products are shipped shortly after orders are received, which makes product revenues in any quarter substantially dependent on orders booked and shipped throughout that quarter. As a result, if orders in the first month or two of a quarter fall short of expectations, it is unlikely that the Company will be able to meet its revenue targets for that quarter. In addition, the Company is substantially reliant upon indirect sales channels over which the Company has little or no control. Moreover, the Company's expense levels are based to a significant extent on the Company's expectations of future revenues and therefore are relatively fixed in the short term. If revenue levels are below expectations, operating results are likely to be adversely and disproportionately affected because only a small portion of the Company's expenses vary with its revenues. 6

The Company's business has experienced and is expected to continue to experience seasonality, largely due to customer buying patterns. In recent years, the Company has had relatively stronger demand for its products during the quarters ending December 31 and June 30 and demand has been relatively weaker in the quarters ending March 31 and September 30. The Company believes that this pattern will continue. To the extent future international operations constitute a greater percentage of the Company's revenues, the Company anticipates that the weaker demand in the quarter ending September 30 could be even more pronounced as a result of reduced sales activity in Europe and Japan during the summer months. Based upon all of the factors described above, the Company believes that its quarterly revenues, expenses and operating results are likely to vary significantly in the future, that period-to-period comparisons of its operating results are not necessarily meaningful and that, in any event, such comparisons should not be relied upon as indications of future performance. The Company has limited ability to forecast future revenues, and it is likely that in some future quarter the Company's operating results will be below the expectations of public market analysts and investors. In the event that operating results are below expectations, or in the event that adverse conditions prevail or are perceived to prevail generally or with respect to the Company's business, the price of the Company's Common Stock would likely be materially adversely affected. See "Management's Discussion and Analysis of Financial Condition and Results of Operations." DEPENDENCE ON INDIRECT SALES CHANNEL; DISTRIBUTOR CONCENTRATION The Company derives substantially all of its revenues from its indirect sales channel, consisting of ISVs, VARs, system integrators, consultants and distributors. The Company has invested, and intends to continue to invest, significant resources to develop this channel, which could adversely affect the Company's operating margins. There can be no assurance that the Company will be able to attract additional indirect channel partners that will be able to market and support the Company's products. In addition, many of the Company's indirect channel partners offer competing product lines. Therefore, there can be no assurance that any of the Company's current indirect channel partners will continue to represent or recommend the Company's products. Further, the inability to recruit new indirect channel partners, or the loss of, or a significant reduction in revenues from, any particular indirect channel partner could materially adversely affect the Company's business, operating results and financial condition. See "Business--Sales and Marketing." Some of the Company's ISVs, VARs and end users place their orders through distributors. A relatively small number of distributors have accounted for a significant percentage of the Company's revenues. In fiscal 1996 and 1997, two distributors accounted for 27% and 29% of revenues, respectively. In particular, Tech Data Corporation, a U.S. distributor, accounted for 9% and 19% of revenues in fiscal 1996 and 1997, respectively, and AG Tech Corporation ("AG Tech"), a Japanese distributor, accounted for 18% and 10% of revenues in fiscal 1996 and 1997, respectively. The Company expects that it will continue to be dependent upon a limited number of distributors for a significant portion of its revenues in future periods, and such distributors are expected to vary from period to period. The loss of a major distributor or any reduction in orders by such distributor, including reductions due to market or competitive conditions, combined with the inability to replace the distributor on a timely basis could have a material adverse effect on the Company's business, operating results and financial condition. The Company's operating results may in the future be subject to substantial period-to-period fluctuations as a consequence of such distributor concentration. See "Management's Discussion and Analysis of Financial Condition and Results of Operations." SIGNIFICANT COMPETITION The market for the Company's products is intensely competitive and subject to rapid change. The Company primarily encounters competition from large, public companies, including Microsoft Corporation ("Microsoft"), Oracle Corporation ("Oracle"), Informix Corporation ("Informix"), Sybase, Inc. ("Sybase") and International Business Machines Corporation ("IBM"). Each of these companies offers database software 7

products competitive with the Company's products. In particular, Sybase offers a small memory footprint database software product, SQL Anywhere, which directly competes with the Company's Scalable SQL product. In addition, because there are relatively low barriers to entry in the software market, the Company may encounter additional competition from other established and emerging companies. Most of the Company's competitors have longer operating histories, significantly greater financial, technical, marketing and other resources than the Company, significantly greater name recognition and a large installed base of customers. As a result, the Company's competitors may be able to respond more quickly to new or emerging technologies and changes in customer requirements, or to devote greater resources to the development, promotion and sale of competitive products, than can the Company. There is also a substantial risk that announcements of competing products by large competitors such as Microsoft or Oracle could result in the cancellation of customer orders in anticipation of the introduction of such new products. In addition, current and potential competitors have established or may establish cooperative relationships among themselves or with third parties to increase the ability of their products to address customer needs and which may limit the Company's ability to sell its products through particular distribution partners. Accordingly, new competitors or alliances among current and new competitors may emerge and rapidly gain significant market share. The Company also expects that competition will increase as a result of software industry consolidation. Increased competition is likely to result in price reductions, fewer customer orders, reduced margins and loss of market share, any of which could materially adversely affect the Company. There can be no assurance that the Company will be able to compete successfully against current and future competitors or that the competitive pressures faced by the Company will not materially adversely affect its business, operating results and financial condition. RELIANCE ON INSTALLED BASE In connection with the acquisition of certain software and related technology from Novell in April 1994, the Company entered into a license agreement permitting, among other things, the then-current version of Btrieve to be reproduced and distributed on a royalty-free basis as part of or together with current and future versions of any Novell products, including Novell's NetWare operating system ("NetWare"). The Company derives significant revenues from upgrade sales into the NetWare installed base. As a result, sales of the Company's products have been and will continue to be influenced by the market acceptance of NetWare. NetWare faces substantial competition from other operating systems, including Microsoft's Windows NT, which the Company believes has a large and growing share of the worldwide market for client/server operating systems. If sales of NetWare decrease, Novell discontinues NetWare or discontinues bundling Btrieve with NetWare or if ISVs, VARs or their end users migrate to competing client/server operating system platforms, and the Company is not able to substantially increase sales of its products that run on competing client/server operating systems, the Company's business, operating results and financial condition would be materially adversely affected. See "Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Business--Strategy." PRODUCT CONCENTRATION Substantially all of the Company's revenues to date have been attributable to the sale and license of its Btrieve and Scalable SQL products, and these products are currently expected to account for substantially all of the Company's revenues for the foreseeable future. The Company's future operating results are dependent upon continued market acceptance of its Btrieve and Scalable SQL products and enhancements to these products. Consequently, a decline in the demand for, or market acceptance of, the Company's Btrieve and Scalable SQL products as a result of competition, technological change or other factors, would have a material adverse effect on the Company's business, operating results and financial condition. See "Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Business-- Products." DEPENDENCE ON CONTINUED GROWTH OF THE MARKET FOR CLIENT/SERVER APPLICATIONS AND EMBEDDED DATABASES Although demand for client/server applications and embedded databases has grown in recent years, this market is still emerging and there can be no assurance that it will continue to grow or that, even if the market 8

does grow, organizations will continue to adopt the Company's products. The Company has spent, and intends to continue to spend, considerable resources educating potential customers about the Company's embedded database products and the packaged client/server applications market generally. However, there can be no assurance that such expenditures will enable the Company's products to achieve any additional degree of market acceptance. The rate at which organizations have adopted the Company's products has varied significantly by market and by product within each market, and the Company expects to continue to experience such variations with respect to its target markets and products in the future. There can be no assurance that the market for the Company's products will continue to develop or that the Company's products will be widely accepted. Additionally, there can be no assurance that the market for client/server and other applications in which the Company's products are embedded will continue to grow. If the markets for the Company's products or the applications in which they are embedded fail to develop, or develop more slowly than the Company currently anticipates, the Company's business, operating results and financial condition would be materially adversely affected. See "Business--Industry Background," "--Products" and "--Sales and Marketing." RAPID TECHNOLOGICAL CHANGE AND NEW PRODUCTS The market for the Company's products is characterized by rapid technological change, frequent new product introductions and enhancements, uncertain product life cycles, changes in customer demands and evolving industry standards. The introduction of products embodying new technologies and the emergence of new industry standards can render existing products obsolete and unmarketable. The Company's future success will depend upon its ability to continue to enhance its current products and to develop and introduce new products on a timely basis that keep pace with technological developments and satisfy increasingly sophisticated customer requirements. As a result of the complexities inherent in client/server computing environments and the performance demanded by customers for embedded databases, new products and product enhancements can require long development and testing periods. As a result, significant delays in the general availability of such new releases or significant problems in the installation or implementation of such new releases could have a material adverse effect on the Company's business, operating results and financial condition. There can be no assurance that the Company will be successful in developing and marketing, on a timely and cost effective basis, new products or new product enhancements that respond to technological change, evolving industry standards or customer requirements, that the Company will not experience difficulties that could delay or prevent the successful development, introduction or marketing of these products or that the Company's new products and product enhancements will achieve market acceptance. See "Business--Research and Development." RISK OF SOFTWARE DEFECTS Software products as complex as those offered by the Company may contain errors or defects, particularly when first introduced or when new versions or enhancements are released. The Company has in the past discovered software errors in certain of its new products after their introduction. There can be no assurance that, despite testing by the Company, defects and errors will not be found in current versions, new versions or enhancements of its products after commencement of commercial shipments, resulting in loss of revenues or delay in market acceptance, which could have a material adverse effect on the Company's business, operating results and financial condition. See "Business-Research and Development." YEAR 2000 COMPLIANCE Many currently installed computer systems and software products are coded to accept only two digit entries in the date code field. Beginning in the year 2000, these date code fields will need to accept four digit entries to distinguish twenty-first century dates from twentieth century dates. As a result, in less than three years, computer systems and/or software used by many companies may need to be upgraded to comply with such "Year 2000" requirements. Significant uncertainty exists in the software industry concerning the potential effects associated with such compliance. Although the latest versions of Btrieve and Scalable SQL are 9

designed to be Year 2000 compliant, an earlier release of Scalable SQL is not Year 2000 compliant. There can be no assurance that the Company's software products that are designed to be Year 2000 compliant contain all necessary date code changes. The Company believes that the purchasing patterns of customers and potential customers may be affected by Year 2000 issues in a variety of ways. Many companies are expending significant resources to correct or patch their current software systems for Year 2000 compliance. These expenditures may result in reduced funds available to purchase software products such as those offered by the Company. Potential customers may also choose to defer purchasing Year 2000 compliant products until they believe it is absolutely necessary, thus resulting in potentially stalled market sales within the industry. Conversely, Year 2000 issues may cause other companies to accelerate purchases, thereby causing an increase in short-term demand and a consequent decrease in long-term demand for software products. Additionally, Year 2000 issues could cause a significant number of companies, including current Company customers, to reevaluate their current software needs, and as a result switch to other systems or suppliers. Any of the foregoing could result in a material adverse effect on the Company's business, operating results and financial condition. MANAGEMENT OF CHANGING BUSINESS The Company has recently experienced a period of significant revenue growth and an expansion in the number of its employees, the scope of its operating and financial systems and geographic area of its operations. In particular, the Company had a total of 168 employees at June 30, 1997, as compared to 104 at June 30, 1996. This growth has resulted in new and increased responsibilities for management and has placed a strain upon the Company's financial and other resources. The Company expects that planned expansion of international operations will lead to increased financial and administrative demands, such as increased operational complexity associated with expanded facilities, administrative burdens associated with managing an increasing number of relationships with foreign partners and expanded treasury functions to manage foreign currency risks. The Company's future operating results will also depend on its ability to expand its sales and marketing organizations, further develop its sales channels to penetrate different and broader markets and expand its support organization to accommodate growth in the Company's installed base. The failure of the Company to manage its expansion effectively could have a material adverse effect on the Company's business, operating results and financial condition. See "Management's Discussion and Analysis of Financial Condition and Results of Operations," "Business--Sales and Marketing" and "Management." RISKS ASSOCIATED WITH INTERNATIONAL SALES AND OPERATIONS During fiscal 1995, 1996 and 1997, the Company derived approximately 41%, 43% and 34% of its revenues, respectively, from sales outside North America. The Company anticipates that for the foreseeable future a significant portion of its revenues will be derived from sources outside North America and the Company intends to continue to expand its sales and support operations internationally. In order to successfully expand international sales, the Company must establish additional foreign operations, expand its international sales channel management and support organizations, hire additional personnel, customize its products for local markets, recruit additional international resellers and increase the productivity of existing international resellers. To the extent that the Company is unable to do so in a timely and cost- effective manner, the Company's sales growth internationally, if any, will be limited, and the Company's business, operating results and financial condition could be materially adversely affected. Even if the Company is able to successfully expand its international operations there can be no assurance that the Company will be able to maintain or increase international market demand for its products. See "Business--Sales and Marketing." The Company's international operations are generally subject to a number of risks, including costs of customizing products for foreign countries, protectionist laws and business practices favoring local competition, dependence on local vendors, compliance with multiple, conflicting and changing government laws and regulations, longer sales cycles, greater difficulty or delay in accounts receivable collection, import and export restrictions and tariffs, difficulties in staffing and managing foreign operations, foreign currency 10

exchange rate fluctuations, multiple and conflicting tax laws and regulations and political and economic instability. To date, a majority of the Company's revenues and costs have been denominated in U.S. dollars. However, the Company believes that in the future, an increasing portion of the Company's revenues and costs will be denominated in foreign currencies. Although the Company may from time to time undertake foreign exchange hedging transactions to reduce its foreign currency transaction exposure, the Company does not currently attempt to eliminate all foreign currency transaction exposure. In the event the Company is able to increase its international sales, its total revenues may fluctuate to an even greater extent during the quarter ending September 30 due to weaker European and Japanese demand during the summer months. See "-- Operating Results Subject to Significant Fluctuations; Seasonality" and "Management's Discussion and Analysis of Financial Condition and Results of Operations." DEPENDENCE ON KEY PERSONNEL The Company's success depends to a significant extent upon the efforts of Ron R. Harris, the Company's President and Chief Executive Officer, and other key management, sales and marketing, technical support and research and development personnel, none of whom are bound by an employment contract. The loss of key management or technical personnel could adversely affect the Company. The Company believes that its future success will depend in large part upon its continuing ability to attract and retain highly skilled managerial, sales and marketing, technical support and research and development personnel. Like other software companies, the Company faces intense competition for such personnel, and the Company has at times experienced and continues to experience difficulty in recruiting qualified personnel. There can be no assurance that the Company will be successful in attracting, assimilating and retaining additional qualified personnel in the future. The loss of the services of one or more of the Company's key individuals, or the failure to attract and retain additional qualified personnel, could have a material adverse effect on the Company's business, operating results and financial condition. See "Business--Employees" and "Management." LIMITED PROTECTION OF PROPRIETARY TECHNOLOGY; RISKS OF INFRINGEMENT; USE OF LICENSED TECHNOLOGY The Company relies primarily on a combination of copyright, trademark and trade secret laws, confidentiality procedures and contractual provisions to protect its proprietary rights. However, the Company believes that such measures afford only limited protection. There can be no assurance that others will not develop technologies that are similar or superior to the Company's technology or design around the copyrights and trade secrets owned by the Company. The Company licenses its database software products primarily under "shrink wrap" licenses (i.e., licenses included as part of the product packaging). Shrink wrap licenses are not negotiated with or signed by individual licensees, and purport to take effect upon the opening of the product package. The Company believes, however, that these measures afford only limited protection. Despite the Company's efforts to protect its proprietary rights, unauthorized parties may attempt to copy aspects of the Company's products or to obtain and use information that the Company regards as proprietary. Policing unauthorized use of the Company's products is difficult, and although the Company is unable to determine the extent to which piracy of its software products exists, software piracy can be expected to be a persistent problem. Embedded software products, like those offered by the Company, can be especially susceptible to software piracy. In addition, the laws of some foreign countries do not protect the Company's proprietary rights as fully as do the laws of the U.S. There can be no assurance that the Company's means of protecting its proprietary rights will be adequate or that competition will not independently develop similar or superior technology. The Company is not aware that it is infringing any proprietary rights of third parties. There can be no assurance, however, that third parties will not claim infringement by the Company of their intellectual property rights. The Company expects that software product developers increasingly will be subject to infringement claims as the number of products and competitors in the Company's industry segment grows and the functionality of products in different industry segments overlaps. Any such claims, with or without 11

merit, could be time consuming to defend, result in costly litigation, divert management's attention and resources, cause product shipment delays or require the Company to enter into royalty or licensing agreements. Such royalty or licensing agreements, if required, may not be available on terms acceptable to the Company, if at all. In the event of a successful claim of product infringement against the Company and failure or inability of the Company to either license the infringed or similar technology or develop alternative technology on a timely basis, the Company's business, operating results and financial condition could be materially adversely affected. The Company relies upon certain software that it licenses from third parties, including software that is integrated with the Company's internally developed software and used in its products to perform key functions. There can be no assurance that these third-party software licenses will continue to be available to the Company on commercially reasonable terms. The loss of or inability to maintain any such software licenses could result in shipment delays or reductions until equivalent software could be developed, identified, licensed and integrated which could materially adversely affect the Company's business, operating results and financial condition. PRODUCT LIABILITY Although the Company's license agreements with its customers typically contain provisions designed to limit the Company's exposure to potential product liability claims, it is possible that such limitation of liability provisions may not be effective as a result of existing or future laws or unfavorable judicial decisions. The Company has not experienced any material product liability claims to date; however, the sale and support of the Company's products may entail the risks of such claims, which may be substantial in light of the use of the Company's products in business-critical applications. A successful product liability claim brought against the Company could have a material adverse effect on the Company's business, operating results and financial condition. See "Business--Products" and "--Research and Development." NO PRIOR TRADING MARKET FOR THE COMMON STOCK; POTENTIAL VOLATILITY OF STOCK PRICE Prior to this offering, there has been no public market for the Common Stock, and there can be no assurance that an active trading market will develop or be sustained after this offering. The initial public offering price will be determined by negotiation among the Company, the Selling Stockholders and the representatives of the Underwriters, and may not be indicative of the price that will prevail in the open market. See "Underwriting" for a discussion of the factors to be considered in determining the initial public offering price. The market price of the Common Stock is likely to be highly volatile and may be significantly affected by factors such as actual or anticipated fluctuations in the Company's revenue and operating results, announcements of technological innovations, new or enhanced products by the Company or its competitors, developments with respect to copyrights or proprietary rights, conditions and trends in the software and other technology industries, adoption of new accounting standards affecting the software industry, changes in financial estimates by securities analysts, general market conditions and other factors. In addition, the stock market has from time to time experienced significant price and volume fluctuations that have particularly affected the market prices for the common stocks of technology companies. In the past, following periods of volatility in the market price of a particular company's securities, securities class action litigation has often been brought against the company. There can be no assurance that such litigation will not occur in the future with respect to the Company. Such litigation could result in substantial costs and a diversion of management's attention and resources, which could have a material adverse effect upon the Company's business, operating results and financial condition. See "Underwriting." CONTROL OF COMPANY BY OFFICERS, DIRECTORS AND FIVE PERCENT STOCKHOLDERS Upon the consummation of this offering, the officers, directors, five percent or greater stockholders and their affiliates in the aggregate will beneficially own approximately % of the outstanding Common Stock 12

( % if the Underwriters' over-allotment option is exercised in full). As a result, these stockholders will be able to exercise control over all matters requiring stockholder approval, including the election of directors and approval of significant corporate transactions. Such concentration of ownership may have the effect of delaying or preventing a change in control of the Company. See "Principal and Selling Stockholders." ANTI-TAKEOVER EFFECTS OF CERTIFICATE OF INCORPORATION, BYLAWS AND DELAWARE LAW The Company's Restated Certificate of Incorporation and Bylaws to be in effect upon the closing of this offering will contain certain provisions that may have the effect of discouraging, delaying or preventing a change in control of the Company or unsolicited acquisition proposals that a stockholder might consider favorable, including provisions: authorizing the issuance of "blank check" preferred stock; establishing advance notice requirements for stockholder nominations for elections to the Board of Directors or for proposing matters that can be acted upon at stockholders' meetings; eliminating the ability of stockholders to act by written consent; and providing for a Board of Directors with staggered, three-year terms. In addition, certain provisions of Delaware law and the Company's 1997 Stock Incentive Plan (the "1997 Plan") may also have the effect of discouraging, delaying or preventing a change in control of the Company or unsolicited acquisition proposals. See "Management--1997 Stock Incentive Plan" and "Description of Capital Stock--Preferred Stock" and "--Anti-takeover Effects of Provisions of the Certificate of Incorporation, Bylaws and Delaware Law." SHARES ELIGIBLE FOR FUTURE SALE Sales of a substantial number of shares of Common Stock after the offering could adversely affect the market price of the Common Stock and could impair the Company's ability to raise capital through the sale of equity securities. Upon completion of the offering, the Company will have outstanding shares of Common Stock, assuming no exercise of options after June 30, 1997. Of these shares, the shares offered hereby ( shares if the Underwriters' over- allotment option is exercised in full) will be freely tradable without restriction or further registration under the Securities Act of 1933, as amended (the "Securities Act"), unless purchased by "affiliates" of the Company as that term is defined in Rule 144 under the Securities Act ("Rule 144") described below. The remaining shares of Common Stock outstanding upon completion of the offering will be "restricted securities" as that term is defined in Rule 144. Upon the expiration of lock-up agreements (the "Lock-Up Agreements") between certain stockholders of the Company (including the Selling Stockholders) and the representatives of the Underwriters 180 days after the date of this Prospectus, shares will be eligible for sale subject to the timing, volume and manner of sale restrictions of Rule 144. In addition, upon the expiration of the lock-up provisions set forth in the stock purchase agreements used under the 1997 Plan and its predecessor plan (the "Plan Stand- Off Agreements"), an additional shares will become eligible for sale pursuant to Rule 701 under the Securities Act ("Rule 701") beginning 180 days after the date of this Prospectus subject in certain cases to such shares becoming eligible for sale from time to time more than 180 days after the date of this Prospectus as the Company's rights to repurchase such shares expire. In addition to the foregoing, as of June 30, 1997, there were outstanding under the 1997 Plan and its predecessor plan options to purchase an aggregate of 2,259,697 shares of Common Stock. The shares underlying such options will be eligible for sale upon expiration of the lock-up provisions contained in the Plan Stand-Off Agreements beginning 180 days after the date of this Prospectus, subject in certain cases to such shares underlying outstanding options becoming eligible for sale more than 180 days after the date of this Prospectus as such options vest. The Company has agreed not to release shares from the lock-up provisions of the Plan Stand-Off Agreements without the prior written consent of Robertson, Stephens & Company LLC. The Company intends to register, 180 days following this offering, all shares of Common Stock subject to outstanding options or reserved for issuance under the Company's stock and option plans. Further, certain stockholders holding approximately shares of Common Stock are entitled to demand registration of their shares of Common Stock at the expiration of the 180-day lock-up period. By exercising their demand registration rights, such stockholders 13

could cause a large number of securities to be registered and sold in the public market, which could have an adverse effect on the market price of the Common Stock. See "Description of Capital Stock" and "Shares Eligible for Future Sale." IMMEDIATE AND SUBSTANTIAL DILUTION The initial public offering price is substantially higher than the book value per share of the outstanding Common Stock. As a result, investors purchasing Common Stock in this offering will incur immediate and substantial dilution. In addition, the Company has issued options to acquire Common Stock at prices significantly below the assumed initial public offering price. To the extent such outstanding options are exercised, there will be further dilution. See "Dilution" and "Shares Eligible for Future Sale." 14

USE OF PROCEEDS The net proceeds to the Company from the sale of the shares of Common Stock to be sold by the Company in this offering are estimated to be $ million, after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by the Company. The Company will not receive any of the proceeds from the sale of shares of Common Stock by the Selling Stockholders. The principal purposes of the offering are to increase the Company's equity capital, to create a public market for the Common Stock, to facilitate future access by the Company to public equity markets, to provide liquidity for certain of the Company's existing stockholders and to provide increased visibility of the Company in a marketplace where many of its competitors are publicly held companies. The Company intends to use the proceeds of the offering for working capital and general corporate purposes. The Company may also use a portion of the net proceeds for possible acquisition of businesses, products and technologies that are complementary to those of the Company. Although the Company has not identified any specific businesses, products or technologies that it may acquire, nor are there any current agreements or negotiations with respect to any such transactions, the Company from time to time evaluates such opportunities. Pending such uses, the Company plans to invest the net proceeds in short-term, interest-bearing, investment-grade securities. DIVIDEND POLICY The Company has never declared or paid any cash dividends on its capital stock and does not expect to do so in the foreseeable future. The Company anticipates that all future earnings, if any, generated from operations will be retained by the Company to develop and expand its business. Any future determination with respect to the payment of dividends will be at the discretion of the Board of Directors and will depend upon, among other things, the Company's operating results, financial condition and capital requirements, the terms of then-existing indebtedness, general business conditions and such other factors as the Board of Directors deems relevant. In addition, the terms of the Company's current credit facility prohibits the payment of cash dividends without the lender's consent. 15

CAPITALIZATION The following table sets forth the total capitalization of the Company as of June 30, 1997, (i) on an actual basis, (ii) on a pro forma basis to reflect the filing of a Restated Certificate of Incorporation and the conversion of all outstanding shares of the Company's Preferred Stock into Common Stock and (iii) on such pro forma basis as adjusted to reflect the sale of the shares of Common Stock offered hereby at an assumed initial public offering price of $ per share and the application of the estimated net proceeds therefrom. See "Use of Proceeds." This table should be read in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the Consolidated Financial Statements and Notes thereto appearing elsewhere in this Prospectus.
JUNE 30, 1997 -----------------------------ACTUAL PRO FORMA AS ADJUSTED ------- --------- ----------(IN THOUSANDS) Long-term liabilities, net of current portion... $ -$ -$ -Redeemable convertible preferred stock.......... 4,026 --Stockholders' equity: Preferred Stock: $0.001 par value, 6,164,851 shares authorized, 6,164,851 issued and outstanding, actual; 5,000,000 authorized, no shares issued and outstanding, pro forma and as adjusted................................... 3,915 -Common Stock: $0.001 par value, 15,000,000 shares authorized, 1,391,611 shares issued and outstanding, actual; 75,000,000 shares authorized, 11,104,743 shares issued and outstanding, pro forma; 75,000,000 shares authorized, shares issued and outstanding, as adjusted(1)................................ 205 8,146 Retained deficit............................... (4,514) (4,514) -----------------Total stockholders' equity (deficit).......... (394) 3,632 -----------------Total capitalization........................ $ 3,632 $3,632 $ ======= ======= ======

(1) Excludes 2,259,697 shares subject to options outstanding as of June 30, 1997 at a weighted exercise price of $0.59 per share; and 1,168,914 shares reserved for issuance under the Company's stock plans. See "Management-- 1997 Stock Incentive Plan," "--Employee Stock Purchase Plan" and Note 6 of Notes to Consolidated Financial Statements. 16

DILUTION The pro forma net tangible book value of the Company as of June 30, 1997, giving effect to the conversion of all outstanding shares of Preferred Stock into Common Stock upon the closing of this offering, was $3,632,000, or approximately $0.33 per share. "Pro forma net tangible book value" per share represents the amount of total tangible assets of the Company less total liabilities, divided by the number of shares of Common Stock outstanding on an as-converted basis. The pro forma net tangible book value of the Company as of June 30, 1997 would have been $ , or $ per share after giving effect to the sale of shares of Common Stock offered by the Company in this offering at an assumed initial public offering price of $ per share and the application of the estimated net proceeds therefrom. This represents an immediate increase in pro forma net tangible book value of $ per share to existing stockholders and an immediate dilution of $ per share to investors purchasing shares of Common Stock in the offering. The following table illustrates this per share dilution:
Assumed initial public offering price ........................ $ Pro forma net tangible book value as of June 30, 1997....... $0.33 Increase attributable to new investors...................... ----Adjusted pro forma net tangible book value as of June 30, 1997......................................................... -----Dilution to new investors..................................... $ ======

The following table summarizes, on a pro forma basis as of June 30, 1997, the difference between the number of shares of Common Stock purchased from the Company, the total consideration paid and the average price per share paid by existing stockholders and by the new investors after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by the Company at the assumed initial public offering price of $ per share.
SHARES PURCHASED TOTAL CONSIDERATION ------------------ --------------------------AVERAGE PRICE NUMBER PERCENT AMOUNT PERCENT PER SHARE ---------- ------- ---------------------------------Existing stockholders... 11,104,743 % $8,146,000(1) % $0.73 New investors(2)........ ---------- ----- -----------------Totals................ 100.0% 100.0% ========== ===== ============ =======

(1) Includes $1.5 million of non-cash consideration attributable to certain assets transferred by Novell to the Company under the Asset Purchase Agreement. (2) Sales by the Selling Stockholders in this offering will reduce the number of shares held by existing stockholders to , or % ( , or %, if the Underwriters' over-allotment option is exercised in full), and will increase the number of shares held by new investors to , or % ( , or %, if the Underwriters' over-allotment option is exercised in full), of the total number of shares of Common Stock outstanding after this offering. See "Principal and Selling Stockholders." As of June 30, 1997, there were 2,259,697 shares subject to options outstanding at a weighted exercise price of $0.59 per share; and an additional 1,168,914 shares are reserved for issuance under the Company's stock plans. To the extent outstanding options are exercised, there will be further dilution to new investors. See "Management--1997 Stock Incentive Plan," "--Employee Stock Purchase Plan" and Note 6 of Notes to Consolidated Financial Statements. 17

SELECTED CONSOLIDATED FINANCIAL DATA The following selected consolidated financial data should be read in conjunction with the Consolidated Financial Statements and Notes thereto and with "Management's Discussion and Analysis of Financial Condition and Results of Operations," which are included elsewhere in this Prospectus. The consolidated statements of operations data for the fiscal years ended June 30, 1995, 1996 and 1997, and the consolidated balance sheet data at June 30, 1996 and 1997 are derived from audited consolidated financial statements included elsewhere in this Prospectus. The consolidated statements of operations data for the period from January 12, 1994 (inception) to June 30, 1994, and the consolidated balance sheet data at June 30, 1994 and 1995 are derived from audited consolidated financial statements not included herein.
PERIOD FROM JANUARY 12, 1994 YEAR ENDED JUNE 30, (INCEPTION) TO -----------------------JUNE 30, 1994 1995 1996 1997 ---------------- ------ ------- ------(IN THOUSANDS, EXCEPT PER SHARE DATA) $ 933 $8,601 $13,476 $24,481

CONSOLIDATED STATEMENTS OF OPERATIONS DATA: Revenues........................... Costs and expenses: Cost of revenues and technical support......................... Sales and marketing.............. Research and development......... General and administrative....... Total costs and expenses........... Operating income (loss)............ Interest and other income, net... Provision for income taxes....... Minority interest in (earnings) loss of subsidiary.............. Net income (loss).................. Pro forma net income per share(1).. Shares used in computing pro forma net income per share(1)...........

424 216 2,303 198 ------3,141 ------(2,208) 5 --------$(2,203) =======

1,997 2,605 3,310 3,864 6,998 10,034 2,399 4,477 5,996 996 2,505 2,886 ------ ------- ------9,256 16,585 22,226 ------ ------- ------(655) (3,109) 2,255 86 99 55 (129) (170) (593) 89 (25) (127) ------ ------- ------$ (609) $(3,205) $ 1,590 ====== ======= ======= $ 0.12 ======= 13,368 =======

CONSOLIDATED BALANCE SHEET DATA: Working capital............................. $ 1,281 $ 5,740 $ 1,768 $ 1,795 Total assets................................ 2,937 8,480 7,471 10,445 Long-term liabilities, net of current portion.................................... 958 1,006 621 -Redeemable convertible preferred stock...... -4,026 4,026 4,026 Total stockholders' equity (deficit)........ 1,562 1,061 (2,083) (394)

JUNE 30, -------------------------------1994 1995 1996 1997 ------- ------- ------- ------(IN THOUSANDS)

(1) Pro forma net income per share reflects the conversion of all outstanding shares of Preferred Stock into Common Stock. See Note 2 of Notes to Consolidated Financial Statements for an explanation of the method used to determine the number of shares used in computing pro forma net income per share. 18

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS This Prospectus contains forward-looking statements that involve risks and uncertainties. The Company's actual results could differ significantly from the results discussed in the forward-looking statements as a result of certain factors, including, but not limited to, those discussed in "Risk Factors" and elsewhere in this Prospectus. OVERVIEW Pervasive is a leading provider of embedded database software designed to enable the cost-effective development, deployment and support of low- maintenance, packaged client/server applications. The Company has experienced significant revenue growth over the last three years and has been profitable for the five most recent fiscal quarters. The Company markets and sells its products through indirect channels by targeting both ISVs that build packaged client/server applications and VARs that recommend and sell applications to end users. The Company markets, sells and supports its products worldwide through its principal office in Austin, Texas and through offices in Frankfurt, Paris, Brussels and Dublin. In May 1995, the Company acquired a controlling interest in a newly formed entity located in Tokyo, Btrieve Technologies Japan, Ltd., to further the localization and sale of the Company's products in Japan. The Company was founded in January 1994 and, in April 1994, entered into an Asset Purchase Agreement with Novell (the "Novell Agreement") whereby the Company acquired certain software and technology related to Btrieve and Scalable SQL. Since April 1994, the Company has developed and released multiple Btrieve and Scalable SQL products for multiple operating system platforms, including Microsoft Windows NT. Significant releases of Btrieve and Scalable SQL since inception include Btrieve 6.15 server engine for NetWare in March 1995, Btrieve 6.15 server engine for Windows NT in May 1995, Btrieve 6.15 server engine for OS/2 Warp in December 1996, Scalable SQL 3.0 server engine for Windows NT in May 1995 and Scalable SQL 4 server engines for Windows NT and NetWare in February 1997. The Company derives its revenues primarily from shrink wrap licenses through ISVs, VARs and distributors and from OEM license agreements with ISVs. Additionally, the Company generates revenues from user count upgrades as well as from upgrades to client/server environments from single workstation or peer- to-peer environments. Shrink wrap license fees depend on both the user count of the license and whether the license is for the Company's client- or server- based products. The Company's OEM licensing program offers ISVs volume discounts and specialized technical support, training and consulting in exchange for embedding the Company's products in packaged applications and paying to the Company a royalty based on sales of the applications. Revenues are generally recognized from the license of software upon the later of shipment or when all significant vendor obligations have been satisfied. Revenues related to agreements involving nonrefundable fixed minimum license fees are generally recognized upon delivery of the product master or first copy if no significant vendor obligations remain. Per copy royalties in excess of a fixed minimum amount are recognized as revenues when such amounts are reported to the Company. The Company operates with virtually no order backlog because its software products are shipped shortly after orders are received, which makes product revenues in any quarter substantially dependent on orders booked and shipped throughout that quarter. The Company enters into agreements with certain distributors that provide for certain stock rotation and price protection rights. These rights allow the distributor to return products in a non-cash exchange for other products or for credits against future purchases. The Company reserves for the cost of estimated sales returns, stock rotation and price protection rights, as well as for uncollectable accounts based on experience. See "Risk Factors--Operating Results Subject to Significant Fluctuations; Seasonality," "--Dependence on Indirect Sales Channel; Distributor Concentration" and Note 2 of Notes to Consolidated Financial Statements. 19

Although the Company's revenues have increased in recent periods, profitability has been marginal and, except for the quarters ended September 30, 1994 and December 31, 1994, the Company incurred net losses in each quarter from inception through the quarter ended March 31, 1996. There can be no assurance that the Company's revenues will grow in future periods, that they will grow at past rates, or that the Company will remain profitable on a quarterly or annual basis in the future. Substantially all of the Company's revenues to date have been attributable to the sale and license of its Btrieve and Scalable SQL products, and these products are currently expected to account for substantially all of the Company's revenues for the foreseeable future. The Company's future operating results are dependent upon continued market acceptance of its Btrieve and Scalable SQL products and enhancements to these products. Consequently, a decline in the demand for, or market acceptance of, the Company's Btrieve and Scalable SQL products as a result of competition, technological change or other factors, would have a material adverse effect on the Company's business, operating results and financial condition. See "Risk Factors--Limited Operating History; Marginal Profitability; Future Operating Results Uncertain," "--Operating Results Subject to Significant Fluctuations; Seasonality" and "--Product Concentration." RESULTS OF OPERATIONS The following table sets forth for the periods indicated the percentage of revenues represented by certain lines in the Company's consolidated statements of operations:
YEAR ENDED JUNE 30, -------------------------1995 1996 1997 ---------------Revenues....................................... 100% 100% 100% Costs and expenses: Cost of revenues and technical support....... 23 19 14 Sales and marketing.......................... 45 52 41 Research and development..................... 28 33 24 General and administrative................... 12 19 12 ---------------Total costs and expenses....................... 108 123 91 ---------------Operating income (loss)........................ (8) (23) 9 Interest and other income, net............... 1 1 -Provision for income taxes................... (1) (2) (2) Minority interest in (earnings) loss of subsidiary..................................... 1 -(1) ---------------Net income (loss).............................. (7)% (24)% 6% ====== ====== ======

Revenues The Company's revenues increased from $8.6 million in fiscal 1995 to $13.5 million in fiscal 1996 and to $24.5 million in fiscal 1997, representing growth of 57% in fiscal 1996 and 81% growth in fiscal 1997. The increase in the Company's revenues in each period was attributable primarily to the increased revenues from the Company's OEM licensing programs and increased market acceptance of the Company's new product releases, principally new product releases for Windows NT. The increase in revenues from fiscal 1996 to 1997 was also attributable to market acceptance of price increases for most products instituted in June 1996. Although the Company's revenues have increased in recent periods, there can be no assurance that the Company's revenues will grow in future periods, that they will grow at past rates or that the Company will remain profitable on a quarterly or annual basis in the future. See "Risk Factors--Limited Operating History; Marginal Profitability; Future Operating Results Uncertain" and "--Operating Results Subject to Significant Fluctuations; Seasonality." 20

Prior to April 1994, Novell bundled then-current versions of Btrieve database technology with its NetWare product. As part of the Novell Agreement, the Company granted to Novell a worldwide, non-exclusive, perpetual, royalty- free license to continue to bundle these versions of Btrieve with Novell operating systems, including NetWare. Shortly thereafter, the Company developed and released upgraded versions of Btrieve and began charging a promotional license fee to customers. Effective June 1, 1996, the Company discontinued its promotional pricing and significantly increased the list prices of most of its Btrieve products in North America and Europe. The effect of the list price increase, combined with the effect of changes in product and channel mix, has been an increase of approximately 97% in average sales price per shrink wrap unit in fiscal 1997 relative to fiscal 1996. The number of units sold increased in anticipation of the pricing increase, and decreased in the quarter immediately subsequent to the price increase. However, the average sales price per shrink wrap unit has remained relatively constant since the price increase and the number of units sold in each of the last two fiscal quarters exceeded the number of units sold in the quarter ended March 31, 1996, the quarter prior to the price increase. International Revenues. International revenues, consisting of all revenues from customers located outside of North America, were $3.6 million, $5.7 million and $8.3 million in fiscal 1995, 1996 and 1997, representing 41%, 43% and 34% of revenues, respectively. The increase in dollar amount in each period was primarily attributable to increased market acceptance of the Company's new product releases, principally new product releases for Windows NT. The decrease in international revenues as a percentage of revenues from fiscal 1996 to 1997 was primarily due to the increasing contribution to revenues from the Company's domestic OEM licensing program and, to a lesser extent, from the June 1996 price increase. The Company believes that revenues from international markets represent a significant opportunity and expects that international revenues will account for an increasing portion of its revenues in the future as the Company expands internationally, primarily in Europe and Japan but also in other areas of the world. For a discussion of the risks associated with international sales, see "Risk Factors--Risks Associated with International Sales and Operations" and Notes 8 and 12 of Notes to Consolidated Financial Statements. Costs and Expenses Cost of Revenues and Technical Support. Cost of revenues and technical support consists primarily of the cost to manufacture and fulfill orders for the Company's shrink wrap software products and the cost to provide technical support, primarily telephone support, which is typically provided within 30 days of purchase. Cost of revenues and technical support was $2.0 million, $2.6 million and $3.3 million in fiscal 1995, 1996 and 1997, representing 23%, 19% and 14% of revenues, respectively. The dollar increase in cost of revenues and technical support was primarily due to increased sales volume and additional investment in personnel and related technical support resources. The Company anticipates that cost of revenues and technical support will continue to increase in dollar amount as the Company incurs higher support costs anticipated with the expansion of international operations and that such costs could vary as a percentage of revenues relative to fiscal 1997. Sales and Marketing. Sales and marketing expenses consist primarily of salaries, commissions and bonuses earned by sales and marketing personnel, foreign sales office expenses, travel and entertainment and promotional expenses. Sales and marketing expenses were $3.9 million, $7.0 million and $10.0 million in fiscal 1995, 1996 and 1997, representing 45%, 52% and 41% of revenues, respectively. The increases, both in dollar amount and as a percentage of revenues, from fiscal 1995 to 1996, were primarily due to a deliberate program of increased investment in most aspects of the Company's infrastructure, including sales and marketing, following the closing of the sale of $2.7 million of preferred stock in April 1995. In particular, the increases in sales and marketing expenses during that period reflect increased marketing and advertising expenses in the U.S. and Europe targeted at ISVs and VARs, hiring of additional sales and marketing personnel, as well as costs associated with expanded lead generation activities. The increases in dollar amounts from fiscal 1996 to 1997 reflect a continuation of these trends, including specific marketing activities related to the release of new 21

products such as Scalable SQL 4 in February 1997. Sales and marketing expenses decreased as a percentage of revenues in fiscal 1997 primarily because of significant revenue growth that outpaced sales and marketing expenditures. The Company expects that sales and marketing expenses will continue to increase in dollar amount as the Company continues to hire additional sales and marketing personnel, increase lead generation activities and expand the international reach of its activities. Sales and marketing expenses are likely to continue to fluctuate as a percentage of revenues due to the timing of costs associated with new product releases and international expansion activities. Research and Development. Research and development expenses primarily consist of personnel and related costs. Research and development expenses were $2.4 million, $4.5 million and $6.0 million in fiscal 1995, 1996 and 1997, representing 28%, 33% and 24% of revenues, respectively. The increases, both in dollar amount and as a percentage of revenues, from fiscal 1995 to 1996, are primarily due to the increased investments in the Company's infrastructure following the April 1995 private financing, in particular the hiring of additional research and development personnel and the development of new versions of the Company's products for additional operating system platforms. The increases in dollar amounts from fiscal 1996 to 1997 reflect a continuation of these trends. Research and development expenses decreased as a percentage of revenues in fiscal 1997 primarily because of significant revenue growth that outpaced research and development expenditures. The Company anticipates that it will continue to devote substantial resources to research and development and that such expenses will continue to increase in dollar amount. Research and development expenses are generally charged to operations as incurred. Costs that were eligible for capitalization in accordance with Statement of Financial Accounting Standards No. 86 were insignificant during these periods, and accordingly the Company charged all software development costs to research and development expenses. The Company capitalized certain costs related to the technology acquired from Novell in 1994, which were fully amortized as of the end of fiscal 1996. See Note 2 of Notes to Consolidated Financial Statements. General and Administrative. General and administrative expenses primarily consist of the personnel and other costs of the Company's finance, human resources, information systems and administrative departments. General and administrative expenses were $1.0 million, $2.5 million and $2.9 million in fiscal 1995, 1996 and 1997, representing 12%, 19% and 12% of revenues, respectively. The increases, both in dollar amount and as a percentage of revenues, from fiscal 1995 to 1996, were primarily due to the increased investments in the Company's infrastructure following the April 1995 private financing, in particular the increased staffing and associated expenses necessary to manage and support the Company's increased scale of operations, both domestically and internationally. The increases in dollar amounts from fiscal 1996 to 1997 reflect a continuation of these trends. General and administrative expenses decreased as a percentage of revenues in fiscal 1997 primarily because of significant revenue growth that outpaced general and administrative expenditures. The Company believes that its general and administrative expenses will continue to increase in dollar amount in fiscal 1998 as a result of the expansion of the Company's administrative staff to support its growing international operations and as a result of an increase in expense associated with being a public company. Provision for Income Taxes. Provision for income taxes was approximately $129,000, $170,000, and $593,000 in fiscal 1995, 1996 and 1997, respectively. Tax expense in fiscal 1995 and 1996, and an insignificant portion of the tax expense in fiscal 1997, represents withholding taxes paid or accrued to be paid to foreign countries on royalties earned by the Company. The Company had domestic and foreign net operating loss carryforwards of approximately $422,000 at June 30, 1996, which were fully utilized in fiscal 1997. The Company believes that, based on a number of factors, uncertainty exists regarding realization of substantial amounts of the Company's deferred tax assets. Accordingly, the Company has recorded a valuation allowance to the extent deferred tax assets exceed the potential benefit from carryback of deferred items to offset current or prior year taxable income. The Company had an effective tax rate of 26% in fiscal 1997 and expects its effective tax rate to increase in the future as the Company fully utilized its net operating loss carryforwards in fiscal 1997. See Note 4 of Notes to Consolidated Financial Statements. 22

RECENTLY ISSUED ACCOUNTING STANDARD In February 1997, the Financial Accounting Standards Board issued Statement No. 128 ("SFAS No. 128"), Earnings per Share, which the Company is required to adopt by June 30, 1998. At that time, the Company will be required to change the method currently used to compute earnings per share and to restate all prior periods. The impact of SFAS No. 128 on the calculation of pro forma fully diluted earnings per share for fiscal 1997 is not expected to be material. Under the new requirements for calculating primary earnings per share, the dilutive effect of stock options will be excluded. The impact is expected to result in an increase in pro forma earnings per share for fiscal 1997 of $0.77 per share, resulting in a basic pro forma earnings per share of $0.89. QUARTERLY RESULTS OF OPERATIONS The following tables set forth certain unaudited consolidated statements of operations data for the eight quarters ended June 30, 1997, as well as the percentage of the Company's revenues represented by each item. This data has been derived from unaudited interim consolidated financial statements prepared on the same basis as the audited Consolidated Financial Statements contained herein and include all adjustments (consisting only of normal recurring adjustments) that the Company considers necessary for a fair presentation of such information when read in conjunction with the Consolidated Financial Statements and Notes thereto.
QUARTER ENDED -------------------------------------------------------------------------SEPT. 30 DEC. 31 MAR. 31 JUNE 30 SEPT. 30 DEC. 31 MAR. 31 JUNE 30 1995 1995 1996 1996 1996 1996 1997 1997 -------------------------- -------- ------- ------- ------(IN THOUSANDS) Revenues................ $ 2,483 $ 3,171 $ 3,097 $4,725 $5,090 $5,676 $6,418 $7,297 Costs and expenses: Cost of revenues and technical support..... 506 651 665 783 734 744 861 971 Sales and marketing.... 1,675 1,873 1,883 1,567 1,905 2,481 2,651 2,997 Research and development.................. 894 1,063 1,304 1,216 1,120 1,204 1,691 1,981 General and administrative.................. 475 733 673 624 709 715 672 790 ----------------------------- ---------------Total costs and expenses................. 3,550 4,320 4,525 4,190 4,468 5,144 5,875 6,739 ----------------------------- ---------------Operating income (loss)................. (1,067) (1,149) (1,428) 535 622 532 543 558 Interest and other income (expense), net... 39 34 18 8 17 25 16 (3) Provision for income taxes................. (29) (51) (45) (45) (164) (144) (143) (142) Minority interest in (earnings) loss of subsidiary............ (12) -(13) -(17) (23) (44) (43) ----------------------------- ---------------Net income (loss)....... $(1,069) $(1,166) $(1,468) $ 498 $ 458 $ 390 $ 372 $ 370 ======= ======= ======= ====== ====== ====== ====== ====== AS A PERCENTAGE OF REVENUES: Revenues................ 100% 100% 100% 100% 100% 100% 100% 100% Costs and expenses: Cost of revenues and technical support..... 20 21 21 17 14 13 13 13 Sales and marketing.... 68 59 61 33 38 44 42 41 Research and development.................. 36 33 42 26 22 21 26 27 General and administrative.................. 19 23 22 13 14 13 11 11 ----------------------------- ---------------Total costs and expenses................. 143 136 146 89 88 91 92 92 ----------------------------- ---------------Operating income (loss)................. (43) (36) (46) 11 12 9 8 8 Interest and other income (expense), net... 1 1 ------Provision for income taxes................. (1) (2) (1) (1) (3) (2) (2) (2) Minority interest in (earnings) loss of subsidiary............ -------(1) ----------------------------- ---------------Net income (loss)....... (43)% (37)% (47)% 10% 9% 7% 6% 5% ======= ======= ======= ====== ====== ====== ====== ======

23

Revenues increased 53% in the quarter ended June 30, 1996 compared to the quarter ended March 31, 1996. This increase was primarily the result of increased unit sales of the Company's products prior to the June 1996 price increase. The significantly increased sales volume during that period led to a corresponding decrease in sales volume in the following period. Revenues increased in each quarter since the June 1996 price increase, however, due to other factors such as increased market acceptance of new product releases, particularly for the Windows NT platform and increased market acceptance of the Company's pricing strategy. Quarterly costs and expenses have generally increased primarily due to increased staffing levels in the Company's technical support, sales and marketing, research and development and administrative organizations, and related increase in costs such as facilities, equipment and travel. The Company's quarterly revenues, expenses and operating results have varied significantly in the past and are likely to vary significantly in the future due to a variety of factors such as demand for the Company's products, the size and timing of significant orders and their fulfillment, the number, timing and significance of product enhancements and new product announcements by the Company and its competitors, changes in pricing policies by the Company or its competitors, customer order deferrals in anticipation of enhancements or new products offered by the Company or its competitors, the ability of the Company to develop, introduce and market new and enhanced versions of its products on a timely basis, changes in the Company's level of operating expenses, budgeting cycles of its customers, product life cycles, software defects and other product quality problems, the Company's ability to attract and retain qualified personnel, changes in the Company's sales incentive plans, changes in the mix of domestic and international revenues, the level of international expansion, foreign currency exchange rate fluctuations, performance of indirect channel partners, changes in the mix of indirect channels through which the Company's products are offered, the impact of acquisitions of competitors and indirect channel partners, the Company's ability to control costs and general domestic and international economic and political conditions. The Company operates with virtually no order backlog because its software products are shipped shortly after orders are received, which makes product revenues in any quarter substantially dependent on orders booked and shipped throughout that quarter. As a result, if orders in the first month or two of a quarter fall short of expectations, it is unlikely that the Company will be able to meet its revenue targets for that quarter. In addition, the Company is substantially reliant upon indirect sales channels over which the Company has little or no control. Moreover, the Company's expense levels are based to a significant extent on the Company's expectations of future revenues and therefore are relatively fixed in the short term. If revenue levels are below expectations, operating results are likely to be adversely and disproportionately affected because only a small portion of the Company's expenses vary with its revenues. In addition, the Company's quarterly revenues and income may also vary significantly due to seasonal factors. Although the Company's revenues have increased in recent periods and the Company was profitable in fiscal 1997, there can be no assurance that the Company's revenues will grow in future periods, that they will grow at past rates, or that the Company will remain profitable on a quarterly basis, if at all. Based upon all of the foregoing, the Company believes that the Company's quarterly revenues, expenses and operating results are likely to vary significantly in the future, that period-to-period comparisons of its results of operations are not necessarily meaningful and that, in any event, such comparisons should not be relied upon as indications of future performance. See "Risk Factors--Limited Operating History; Marginal Profitability; Future Operating Results Uncertain" and "--Operating Results Subject to Significant Fluctuations; Seasonality." LIQUIDITY AND CAPITAL RESOURCES Since its inception, the Company has funded its operations and met its capital expenditure requirements through the private sale of $6.4 million of Preferred Stock and cash generated from operating activities. Cash generated from operating activities was insignificant in fiscal 1995 and cash used in operating activities was $1.5 million in fiscal 1996. Cash generated from operating activities was $3.5 million in fiscal 1997. For such periods cash generated by, or used in, operating activities resulted primarily from net income or net losses, net of changes in working capital. 24

To date, the Company's investing activities have consisted primarily of capital expenditures totaling approximately $598,000, $843,000 and $1.9 million in fiscal 1995, 1996 and 1997, respectively, to acquire equipment, mainly computer hardware and software, for the Company's growing employee base. The Company expects that its capital expenditures will increase as the Company's employee base grows. At June 30, 1997, the Company did not have any material commitments for capital expenditures. At June 30, 1997, the Company had $4.1 million in cash and cash equivalents and $1.8 million in working capital. The Company has a $2.0 million revolving line of credit and a $2.0 million equipment line with Texas Commerce Bank, but has at no time borrowed under such lines. Total borrowings under the revolving line are limited generally to 80% of eligible receivables with interest at the bank's prime lending rate. On June 30, 1997, the Company had approximately $2.1 million of borrowing capacity under the two lines. The Company's lines of credit contain certain financial covenants and restrictions as to various matters including the Company's ability to pay cash dividends and effect mergers or acquisitions without the bank's prior approval. The Company is currently in compliance with such financial covenants and restrictions. The Company has granted a first priority security interest in substantially all of its tangible assets as security for its obligations under its credit lines. See Note 9 of Notes to Consolidated Financial Statements. The Company believes that the net proceeds from the offering, existing cash and cash equivalents and cash generated from operating activities will be adequate to meet its cash needs for at least the next 12 months. Thereafter, the Company may require additional funds to support its working capital requirements or for other purposes and may seek to raise such additional funds through public or private equity financing or from other sources. There can be no assurance that additional financing will be available at all or that if available, such financing will be obtainable on terms favorable to the Company or that any additional financing would not be dilutive. 25

BUSINESS The following description of the Company's business should be read in conjunction with the information included elsewhere in this Prospectus. This description contains certain forward-looking statements that involve risks and uncertainties. The Company's actual results could differ significantly from the results discussed in the forward-looking statements as a result of certain of the risk factors set forth below and elsewhere in this Prospectus. OVERVIEW Pervasive is a leading provider of embedded database software designed to enable the cost-effective development, deployment and support of low- maintenance, packaged client/server applications. The Company's database engines, Btrieve and Scalable SQL, are well suited for integration by software developers into business-critical applications that are reliable and scalable and can be rapidly deployed. These products enable independent software vendors ("ISVs") and value added resellers ("VARs") to develop, deploy and support packaged client/server applications that provide robust functionality and low overall cost of ownership to end users. In addition, the Company's comprehensive approach to selling, marketing and supporting its products is designed to address the specific needs of ISVs, VARs, in-house development organizations and their end users. The Company markets, sells and supports its products worldwide through its principal office in Austin, Texas and through offices in Frankfurt, Paris, Brussels, Dublin and Tokyo. INDUSTRY BACKGROUND Organizations are increasingly recognizing the importance of collecting, analyzing and disseminating information to obtain competitive advantage. This information is increasingly generated by sophisticated client/server applications and managed by underlying database software that allow for decentralized decision making and broader access to critical business information. The benefits of client/server systems and computing trends such as improved hardware price performance and the proliferation of application development tools, have resulted in significant growth in the market for packaged client/server applications and underlying database software. According to Business Research Group, the domestic market for client/server software was approximately $25 billion in 1996, and is projected to grow to over $60 billion in 2000. In addition, according to Dataquest, the worldwide database software market was approximately $5.7 billion in 1996, and is projected to grow to approximately $9.4 billion in 2000. Client/server computing environments are inherently complex, typically involving a variety of hardware, operating systems, networking protocols, applications and database software. It is likely that this complexity will increase over time as organizations seek to exploit new technologies, such as the Internet, intranets and mobile computing. As a result of this complexity, large and costly information technology departments, typically found in large organizations, are required to develop, deploy and support applications built on enterprise-scale database software. Many small and mid-sized organizations, including departments of large organizations, also face competitive pressures to achieve the benefits associated with client/server computing. These organizations typically do not have the information technology budgets, infrastructure, personnel or computing expertise required to deploy and support client/server applications built on enterprise-scale database software. Consequently, these organizations have been slow to adopt client/server computing environments. Business Research Group estimates that, in 1997 approximately 22% of domestic organizations with less than 1,000 employees have deployed client/server applications while more than 90% of larger organizations have deployed such applications. According to 1990 U.S. Census data, in the U.S. alone there were over 6 million organizations with less than 1,000 employees, not including departments of larger organizations whose needs often mirror those of smaller organizations. This relatively low penetration of client/server applications in small and mid-sized organizations has created a market opportunity for ISVs and VARs. To effectively capitalize on this market opportunity, ISVs 26

and VARs must develop, deploy and support packaged client/server applications that meet their customers' robust functionality needs and run in environments that often lack a well developed information technology infrastucture. Only then can ISVs and VARs provide the benefits of client/server computing, ease of implementation and low overall cost of ownership that small and mid-sized organizations require. ISVs and VARs must also be able to develop, deploy and support their applications without having to become an expert in the complexities of client/server computing. To provide these benefits, ISVs and VARs require embeddable database software that facilitates the development, deployment and support of packaged client/server applications. ISVs require database software that enables them to develop these applications with minimal investments in networking, communications or client/server database expertise. VARs require reliable, high-performance, low-maintenance database software that they can cost- effectively deploy and support. Low-end desktop database products do not meet the needs of this market because they typically lack the scalability and functionality required for developing full featured client/server applications and are often sold through retail channels that provide minimal deployment or support to their customers. Likewise, enterprise-scale database software fails to meet the needs of this market because it typically either requires a large and costly information technology department or results in prohibitively high implementation and support costs. Accordingly, there is a need for reliable, high-performance, low-maintenance database software that enables ISVs and VARs to cost-effectively develop, deploy and support robust client/server applications targeted at small and mid-sized organizations and departments of larger organizations. THE PERVASIVE SOLUTION Pervasive is a leading provider of embedded database software designed to enable the cost-effective development, deployment and support of low- maintenance, packaged client/server applications. The Company's database engines, Btrieve and Scalable SQL, are well suited for integration by software developers into business-critical applications that are reliable and scalable and can be rapidly deployed. These products enable the Company's ISV and VAR customers to develop, deploy and support packaged client/server applications that, in turn, provide robust functionality and low overall cost of ownership to their small and mid-sized customers. In addition, the Company's comprehensive approach to selling, marketing and supporting its products is designed to address the specific needs of ISVs, VARs, in-house development organizations and their end users. The Company's database software simplifies application development by enabling developers to write applications that are capable of running on multiple platforms and that can scale with little or no modification from single workstation to peer-to-peer and client/server environments. The Company's products currently operate on the Windows NT, NetWare, Windows 95, Windows 3.1, OS/2 Warp and DOS operating platforms. In addition, the software is designed to allow developers to exercise a high degree of control over the database engine, enabling the tight integration, or embedding, of the database into their applications. As a result, packaged applications built on the Company's embedded databases enable organizations to implement client/server systems and automate critical business functions without the costs and complexities typically associated with enterprise-class client/server applications. In addition, the architecture of the Company's products incorporates network and communications protocols which monitor and manage the client/server connection. Further, the small memory footprint of the Company's software requires significantly smaller investments in memory and computing power than enterprise-class database software and permits portability to a wide range of PC desktop and server systems as well as personal digital assistant and hand-held devices. The Company's sales and marketing organization focuses exclusively on indirect channels by targeting ISVs that build packaged client/server applications and VARs that sell and deploy the applications. The Company's sales, marketing, training and licensing programs are designed to encourage ISVs to embed the Company's databases into their own software products and to stimulate the sales of the applications by VARs to end users. The Company believes its strong relationships with ISVs and VARs provide the Company with market visibility and multiple sales opportunities and offer end users additional sources of service and technical support. 27

STRATEGY Pervasive's objective is to be the leading provider of embedded database products for packaged client/server applications. The Company has tailored its database software products to meet the specific needs of ISVs and VARs that are developing solutions for small and mid-sized organizations and departments of larger organizations. Key elements of the Company's strategy include: Extend Technology Leadership into New Markets. The Company intends to extend its leadership position in embedded databases for packaged client/server applications. The Company continually upgrades its technology to ensure increased database functionality and reliable, low-maintenance connections between clients and servers to meet the needs of changing technological environments. As the Company's customers extend the use of client/server applications to Internet and intranet applications, the Company intends to further enhance the functionality of its products to exploit these opportunities. In addition, the Company is evaluating opportunities to utilize the technological advantages of its small memory footprint, highly reliable, low-maintenance databases for use in new and emerging markets, such as applications designed for hand-held devices, network computers, mobile computing and electronic commerce. Continue to Leverage Indirect Channel Model. The Company intends to continue to sell its embeddable database products exclusively through ISVs and VARs. The Company believes that its past investments in training and educating its channel partners, its long-term relationships with the diverse ISV and VAR communities and its success in encouraging them to embed the Company's products into their applications has created competitive advantage in the marketplace. The Company's channel approach is designed to further the integration of its products into client/server applications and to stimulate sales of the applications themselves. The Company intends to continue to leverage its large investment in U.S. channel programs by expanding its U.S. channels and replicating this success internationally. Focus on Microsoft Platforms. The Company has adopted the Windows NT platform as its development reference platform, and intends to expand its support for Microsoft technologies, including further integration with Microsoft Back Office products, and to provide products complementary to Windows NT. The Company believes that Microsoft's operating system platforms, which include Windows NT, Windows 95 and Windows CE, have emerged as the dominant platforms for client/server computing, and the adoption of Windows NT as its reference platform makes its products applicable to the broadest range of customers. Leverage Installed Base. A significant element of the Company's strategy is to leverage its large installed base. The Company has a large installed base in accounting and financial applications, which are often the first client/server applications purchased by small and mid-sized organizations. Once an end user standardizes on a functional application and embedded database, additional applications can be more easily integrated. Accordingly, the Company intends to leverage this strong position to penetrate additional application markets, such as sales force automation and others. In addition, since April 1994, Novell has bundled an older version of the Company's Btrieve product on a royalty-free basis with every copy of NetWare. The Company derives revenues from upgrade sales of its subsequent versions of Btrieve. The Company intends to leverage this large, worldwide installed base of NetWare users by providing incentives to upgrade to the most recent versions of Btrieve. Continue Client-Based "Seeding" Strategy. The Company's seeding strategy stimulates high-volume deployment of its client-based shrink wrap products. This strategy enables ISVs to develop client-based applications and to deploy them broadly with minimal incremental cost. The Company then works with its ISVs and VARs through a combination of promotional and lead referral programs to upgrade these applications to client/server environments. The Company intends to continue its seeding strategy in order to generate upgrade revenues while enabling ISVs and VARs to sell higher margin server products as end users upgrade from single workstation or peer-to-peer to client/server environments. 28

Expand Global Distribution Capabilities. The Company intends to expand its global sales capabilities by increasing the size of its channel and strategic sales organizations and continuing to leverage distribution partners in selected markets. In fiscal 1997, the Company derived 34% of its revenues from sales of its products in more than 30 countries outside North America, and the Company believes that significant opportunities exist for its products in international markets. The Company has established offices in Tokyo, Frankfurt, Paris, Brussels and Dublin and intends to continue to increase its international indirect sales and marketing activities. PRODUCTS The Company offers a range of embedded database products that enable commercial developers to combine the sophistication of client/server computing with the low cost of ownership and convenience of packaged software. The resulting applications enable small and mid-sized organizations and the departments of large organizations to automate business-critical functions in client/server environments. The following table provides an overview of these products and the platforms on which they operate:
PRODUCT DESCRIPTION PLATFORMS -----------------------------------------------------------------------------BTRIEVE Navigational, record-oriented database software Windows NT targeted at high volume transaction applications NetWare Windows 95 Windows 3.1 OS/2 Warp DOS -----------------------------------------------------------------------------SCALABLE SQL Relational database software optimized for Windows NT reporting, ad hoc query and decision support NetWare systems Windows 95 Windows 3.1 DOS ------------------------------------------------------------------------------

The Company's primary products are the Btrieve navigational database and the Scalable SQL relational database. Btrieve allows users to navigate quickly through data at the individual record level, while Scalable SQL leverages the relational data model and industry standard Structured Query Language (SQL), which is better suited for reporting, query and decision support applications. Because the Company's products are all built on its MicroKernel Database Engine ("MKDE"), developers and end users can simultaneously access common data sets through either Btrieve or Scalable SQL. Btrieve is a leading navigational client/server database offering high performance in high volume transaction processing environments such as accounting, banking and insurance. Btrieve offers a high degree of programming control through its record-oriented, navigational interface and delivers low- maintenance operation through self-tuning algorithms for index balancing, disk space allocation and cache management. Btrieve-based applications can scale from single workstation to peer-to-peer and client/server configurations without the need to modify the application or database. Scalable SQL is a leading relational client/server database built for high volume client/server applications with flexible reporting, ad hoc query and decision support requirements. Scalable SQL delivers SQL capabilities in an engine that shares many Btrieve characteristics, including high performance, multi-platform support, low maintenance operation, and application scalability from single workstations to peer-to-peer and client/server configurations. The Company also offers Inscribe, a Visual Basic compatible scripting tool that is currently supported by Scalable SQL. In addition, the Company offers Btrieve and Scalable SQL software developer kits, which include tools, documentation and licenses to enable programmers to develop, test and deploy applications that embed the Company's databases. 29

The Company has designed its Btrieve and Scalable SQL products with a number of common characteristics as set forth on the table below:
PRODUCT CHARACTERISTICS DESCRIPTION BENEFITS ---------------------------------------------------------------------------------------------Embeddable Designed to be "hidden" inside Allows broad deployment of an application, permitting complex distributed development of a tightly applications into environments integrated application. with minimal or no information technology infrastructure. ---------------------------------------------------------------------------------------------Small Memory Footprint Btrieve requires less than 350 Maximizes resources available KB of internal memory and to the application and enables Scalable SQL requires less than operation on a wide range of 4 MB. hardware. ---------------------------------------------------------------------------------------------Low Maintenance Administrative functions, such Requires low level of as disk space allocation, information technology support memory and index management are making complex applications automated, which eliminates the available to small and midneed for regular maintenance. sized organizations and the departments of large organizations. ---------------------------------------------------------------------------------------------Reliability Btrieve and Scalable SQL are Provides high degree of data based on industry-proven integrity and stability to technology. business applications. ---------------------------------------------------------------------------------------------Configurability Btrieve and Scalable SQL can Enables the storage and access local and distributed processing of databases to be data simultaneously. distributed throughout the network. ---------------------------------------------------------------------------------------------Application Scalability Applications can run in any Offers cost savings for configuration from single developers and end users workstation to peer-to-peer to because a single application supporting hundreds of can be deployed in multiple concurrent users in configurations without client/server environments. modification. ---------------------------------------------------------------------------------------------Open Database Connectivity Industry standard interface Allows ODBC-compliant ("ODBC") enabling any application to applications to access data communicate with any database. stored in any Btrieve or Scalable SQL database. ---------------------------------------------------------------------------------------------Common MicroKernel Navigational Btrieve and Allows developers to choose the Database Engine relational Scalable SQL-based appropriate data access method: applications can simultaneously navigational access for high share common databases. volume transactions and relational access for reporting, queries and decision support. ----------------------------------------------------------------------------------------------

30

CUSTOMERS The Company has over 1,000 ISV and VAR customers worldwide. The Company believes that the following list is representative of the Company's larger ISV customers and the markets into which the Company's products are deployed:
ACCOUNTING HEALTHCARE ADMINISTRATION Abacus Research AG AtWork Corporation ACCPAC International ComCotec Inc. AGRIS Corporation Enterprise Systems Dexter & Cheney Inc. IMPAC Medical Systems, Inc. DITEC Informationstechnologie GmbH & Co. KG Exact International Development B.V. MANUFACTURING Great Plains Software, Inc. Bergen Computer KHK Software GmbH & Co. KG Expandable Software, Inc. Macola Software, Incorporated Micro MRP Matrix International B.V. Platinum Software Corporation NETWORK ADMINISTRATION Scala ECE Overseas Ltd. Cheyenne Software Solomon Software Intel Corporation SU-A/S Systemutvikling Systems Union Group, Ltd. SALES FORCE AUTOMATION Maximizer Technologies Inc. DOCUMENT IMAGING Software of the Future, Inc. Cardiff Software, Inc. Document Solutions OTHER Ingenieurgesellschaft ADC Labs, Inc. Pliete-Gukelberger GmbH American Computer Software, LLC MACESS Corporation Apollo Travel Services Josten's Learning Corporation FINANCE La Societe de Programmation COBA Associated Software Consultants, Inc. inc. basoft Neue Bankensoftware AG Magic Software Enterprises, Ltd. Estweeka B.V. Smith, Abbott & Company, Inc. Fair Isaac and Company Software 4 Retail Solutions

The following illustrates the selection, implementation and use of Btrieve and Scalable SQL by certain of the Company's customers. Accounting ISV A leading provider of Windows, Windows NT and NetWare-based SQL accounting systems for small and mid-sized organizations serves over 45,000 customers in 100 countries worldwide. Prior to adopting Scalable SQL, the vendor marketed a character-based product built on the DOS version of Btrieve. While moving to the graphical environment, the vendor pursued an opportunity to build the new system around industry-standard SQL database technology. The vendor required a SQL database that would be affordable to its small and mid-sized customers, that would be scalable to support a broad mix of customer configurations from single-user implementations to full client/server systems and that would provide a high level of data security and performance across LANs and WANs. The vendor's familiarity with the Company's Btrieve product assisted in the transition to Scalable SQL. The vendor was able to release a Windows-based client/server application only a few months following commencement of development. To date the vendor has installed over 7,000 client/server applications using Scalable SQL. 31

Retailing Software ISV A retailing software vendor develops comprehensive supermarket systems that manage checkout operations, receiving, inventory labeling, vendor management, accounts receivable, and price modeling. This vendor sells its products through a network of over 100 resellers, as well as through a direct sales team, to customers including over 5,000 independently owned supermarkets and regional grocery chains. This vendor desired to migrate from proprietary systems into an open environment that would enable it to integrate all the information access needs of its customers' operations. Previously, the proprietary system required it to constantly synchronize two separate files of inventory items, one at the point-of-sale and the second on the back office PC. This vendor now offers systems built on Btrieve running on Microsoft Windows NT. The new system simplifies and streamlines supermarket operations by allowing every employee access to a single unified dataset with the assurance that the information is reliable, complete and up to date. In addition, this vendor has implemented dual server "hot file mirroring," which enables continuous operation in the event of the failure of one server. Btrieve also provides the ability to process in excess of 100 scans per minute, which this vendor believes provides it with a competitive advantage. Property Management VAR A VAR specializing in property management and real estate applications has utilized Scalable SQL in the design and implementation of a database-driven sales guide providing Internet access to hundreds of properties listed in the Manhattan area. The site features extensive property search capabilities including price range, number of rooms, amenities, location and school district. The user specifies the property search criteria and the application formulates a Scalable SQL database query that returns a list of suitable properties. The system has enabled customers to quickly search through thousands of listings and focus their search on the relevant properties. Department Within a Large Organization A department of a large national moving company specializes in transporting valuable commodities such as mainframe computers, electronics, and medical equipment. Prior to implementing its client/server mobile tracking system, this department used a mainframe system with a terminal in each distribution center. Clerks manually entered tracking information each time a shipment reached a check-in point. As the business expanded, the margin for manual tracking errors increased. In addition, real-time updates of the status and location of shipments was not feasible. The department selected Btrieve as the foundation for its new mobile wireless tracking system because Btrieve offers the performance required to process up to 25 million data transactions per year and the stand-alone reliability to operate in a tractor-trailer environment 24 hours a day, 7 days a week. The distribution centers can now handle more shipments in less time with greater accuracy. In addition, customers receive real-time, highly accurate information about the location of shipments via telephone or dial-in connection. SALES AND MARKETING Pervasive's sales and marketing organization focuses exclusively on indirect channels by targeting the ISVs that build packaged client/server applications and the VARs that sell and implement the applications to the end user. The Company's marketing group has primary responsibility for product direction and has developed a number of programs utilized by the sales organization to support the ISV and VAR channels, such as the manufacturing partner program and VAR partner programs. These programs are worldwide in scope and capture leads from a variety of additional marketing programs including direct response marketing and advertising, joint marketing and public relations. The Company's sales organization consists of a strategic sales 32

group focusing on larger ISVs and VARs, an inside sales group targeting small and mid-sized ISVs and VARs, and an international sales group, all of which are supported by the Company's marketing organization. The strategic sales group focuses on recruiting large ISVs to embed the Company's database products on an OEM basis through the Company's manufacturing partner program. This program is designed to generate mutually beneficial strategic relationships between the Company and its ISVs and ongoing royalties for the Company through licensing contracts, which are typically for three year terms. Through this program, the Company offers its manufacturing partners specialized technical support, training and consulting, enabling delivery of tightly integrated solutions to end users. The strategic sales group administers education and training programs for the VARs that work directly with large ISVs. These programs reduce the burden on the ISVs and allow the Company to access and influence the ISVs' reseller channel. The inside sales group recruits small and mid-sized ISVs to develop applications that are designed to be deployed with shrink wrap versions of the Company's database products. In addition, the inside sales group develops, supports and trains VARs to facilitate the deployment of packaged applications. As ISVs grow, the inside sales group also manages the transition of smaller ISVs to its manufacturing partner program. The international sales group utilizes distribution partners in 30 countries worldwide to implement its sales and marketing programs for a particular region, typically using the Company's business alliance, distributor or master distributor programs. In addition to managing these distributor relationships, the international sales group recruits and supports ISVs with the same programs as the domestic strategic and inside sales groups. The Company currently has sales offices in Frankfurt, Paris, Brussels and Tokyo. The Company's sales and marketing organization utilizes a seeding strategy for sales of its client-based shrink wrap products to stimulate high-volume deployment of these products. This strategy enables ISVs to develop client- based applications and to deploy them broadly with minimal incremental cost. The Company then works with its ISVs and VARs through a combination of promotional and lead referral programs to upgrade these applications to client/server environments. As a result, the Company generates upgrade revenues while enabling ISVs and VARs to sell higher margin server products as end users upgrade from single workstation or peer-to-peer networks to client/server environments. Although the Company focuses its sales and marketing efforts on ISVs and VARs, it often sells its products through distributors. Aggregate purchases by two distributors totaled $2.3 million in 1995, and purchases by two different distributors totaled $3.6 million and $7.1 million in fiscal 1996 and 1997, representing 27%, 27% and 29% of revenues, respectively. No other customers accounted for more than 10% of the Company's revenues in fiscal 1995, 1996 or 1997. CUSTOMER SERVICE AND SUPPORT The Company offers two levels of customer service. First level support responds to customer inquiries via telephone, electronic mail and fax. Second level support responds to higher level technical needs and supports the manufacturing partner accounts. To provide high quality customer support, the Company has established a specialized customer engineering group, consisting of both support and engineering personnel. The Company believes that combining support and engineering expertise in one group provides customers with more rapid resolution of software support issues. The Company's customer service and support organization also provides training and consulting services to its channel partners. Customer service is provided at no charge for the first 30 days after initial purchase and at any time via electronic mail or the Company's World Wide Web site. After the 30 days, the Company offers contract and fee-based premium support programs. Worldwide customer support is provided through the corporate offices in Austin, Texas, through a support and development center in Dublin, Ireland and through AG Tech, a company based in Nagoya, Japan. 33

RESEARCH AND DEVELOPMENT The Company has made substantial investments in research and development through both internal development and technology acquisition. Although the Company will evaluate on an ongoing basis externally developed technologies for integration into its product lines, the Company expects that most enhancements to existing and new products will be developed internally. The Company has invested the majority of its research and development activity on developing feature extensions to its Btrieve, Scalable SQL and ODBC Interface products. This development consists primarily of adding new competitive product features, expanding the number of computer and network operating systems on which the product can be installed and maintaining the ability to run in mixed operating system environments. Development activities continue to focus on developing database software characterized by a small memory footprint, high-performance and low-maintenance requirements, to better serve the ISVs, VARs and their end users. Recent developments are focused on further simplifying the installation and maintenance of the Company's database software while maintaining an emphasis on performance. The Company's research and development expenditures for fiscal 1995, 1996 and 1997 were $2.4 million, $4.5 million and $6.0 million, respectively. The Company expects that it will continue to commit significant resources to research and development in the future. To date, all research and development expenses have been expensed as incurred. The market for the Company's products and services is characterized by rapid technological change, frequent new product introductions and enhancements, evolving industry standards, and rapidly changing customer requirements. The introduction of products incorporating new technologies and the emergence of new industry standards could render existing products obsolete and unmarketable. The Company's future success will depend in part upon its ability to anticipate changes, enhance its current products, develop and introduce new products that keep pace with technological advancements and address the increasingly sophisticated needs of its customers. See "Risk Factors--Rapid Technological Change and New Products." 34

TECHNOLOGY Both Btrieve and Scalable SQL are based on Pervasive's MicroKernel Database Architecture. Within this architecture, the MKDE provides a modular foundation that enables Btrieve applications and Scalable SQL applications to share common data sets. A primary advantage of this architecture is that applications using new data access methods can work in conjunction with existing applications. For example, Btrieve customers that wish to add Scalable SQL for reporting, ad hoc queries and decision support can do so with minimal modification to the Btrieve applications. The following diagram depicts the modular nature of the MicroKernel Database Architecture: [FLOW CHART OF MICROKERNEL DATABASE ARCHITECTURE APPEARS HERE] Key functions of the Company's modular components include: MicroKernel Database Engine. The MKDE is a full 32-bit, multi-threaded implementation that is readily portable to new operating environments and that provides low level data management services for the access modules including: transaction processing, logging and roll forward, data integrity enforcement, referential integrity enforcement, data caching and physical data access. Data Access Modules: Btrieve, Scalable SQL and ODBC. Implements specific data models and appropriate data structures and access techniques including: data definition functions, schema (rows, columns, tables, etc.) and data operations (select, join, etc.). MicroKernel Extensions. The MKDE itself is extensible through direct interfaces to modular components such as Inscribe, a Visual Basic compatible scripting engine that is currently supported by Scalable SQL. Inscribe and future scripting engines enable the developer to write business rules and implement them through stored procedures and triggers. The business rules are enforced at the MKDE level and cannot be violated by any application. The modular architecture also enables Pervasive's database products to be highly configurable and allows configuration changes without affecting the applications. Applications can scale from single workstation to peer-to-peer and client/server environments with minimal code changes or relinking. Network environments can be customized to minimize network traffic and to balance resource loading by distributing database files and data processing throughout multi-platform computer networks. The configuration options for the Company's products include the following: Single Workstation. The single workstation configuration provides mobile and stand-alone operation. All access modules and MKDE components reside locally, and data files are stored on the workstation's disk drive. This configuration is used when the workstation is not connected to a network or when data files do not need to be shared. Peer-to-Peer. Peer-to-peer networks, such as Windows 95, Windows for Workgroups and LANtastic, enable database files stored on one workstation to be accessed by multiple users running applications on other workstations. 35

Client/Server. In a client/server configuration, database requests made by an application are typically processed on a server. A small requester module on the workstation routes requests from the application to a server database engine. Since all data processing and data files reside on the server, this configuration minimizes both network traffic and the use of workstation resources. COMPETITION The market for the Company's products is intensely competitive and subject to rapid change. The Company primarily encounters competition from large, public companies, including Microsoft, Oracle, Informix, Sybase and IBM. Each of these companies offers database software products competitive with the Company's products. In particular, Sybase offers a small memory footprint database software product, SQL Anywhere, which directly competes with the Company's Scalable SQL product. In addition, because there are relatively low barriers to entry in the software market, the Company may encounter additional competition from other established and emerging companies. Most of the Company's competitors have longer operating histories, significantly greater financial, technical, marketing and other resources than the Company, significantly greater name recognition and a larger installed base of customers. As a result, the Company's competitors may be able to respond more quickly to new or emerging technologies and changes in customer requirements, or to devote greater resources to the development, promotion and sale of competitive products, than can the Company. There is also a substantial risk that announcements of competing products by large competitors such as Microsoft or Oracle could result in the cancellation of customer orders in anticipation of the introduction of such new products. In addition, current and potential competitors have established or may establish cooperative relationships among themselves or with third parties to increase the ability of their products to address customer needs and which may limit the Company's ability to sell its products through particular distribution partners. Accordingly, new competitors or alliances among current and new competitors may emerge and rapidly gain significant market share. The Company also expects that competition will increase as a result of software industry consolidation. Increased competition is likely to result in price reductions, fewer customer orders, reduced margins and loss of market share, any of which could materially adversely affect the Company. There can be no assurance that the Company will be able to compete successfully against current and future competitors or that the competitive pressures faced by the Company will not materially adversely affect its business, operating results and financial condition. PROPRIETARY RIGHTS The Company relies primarily on a combination of copyright, trademark and trade secret laws, confidentiality procedures and contractual provisions to protect its proprietary rights. However, the Company believes that such measures afford only limited protection. There can be no assurance that others will not develop technologies that are similar or superior to the Company's technology or design around the copyrights and trade secrets owned by the Company. The Company licenses its database software products primarily under "shrink wrap" licenses (i.e., licenses included as part of the product packaging). Shrink wrap licenses are not negotiated with or signed by individual licensees, and purport to take effect upon the opening of the product package. The Company believes, however, that these measures afford only limited protection. Despite the Company's efforts to protect its proprietary rights, unauthorized parties may attempt to copy aspects of the Company's products or to obtain and use information that the Company regards as proprietary. Policing unauthorized use of the Company's products is difficult, and although the Company is unable to determine the extent to which piracy of its software products exists, software piracy can be expected to be a persistent problem. Embedded software products, like those offered by the Company, can be especially susceptible to software piracy. In addition, the laws of some foreign countries do not protect the Company's proprietary rights as fully as do the laws of the U.S. There can be no assurance that the Company's means of protecting its proprietary rights will be adequate or that competition will not independently develop similar or superior technology. The Company is not aware that it is infringing any proprietary rights of third parties. There can be no assurance, however, that third parties will not claim infringement by the Company of their intellectual 36

property rights. The Company expects that software product developers increasingly will be subject to infringement claims as the number of products and competitors in the Company's industry segment grows and the functionality of products in different industry segments overlaps. Any such claims, with or without merit, could be time consuming to defend, result in costly litigation, divert management's attention and resources, cause product shipment delays or require the Company to enter into royalty or licensing agreements. Such royalty or licensing agreements, if required, may not be available on terms acceptable to the Company, if at all. In the event of a successful claim of product infringement against the Company and failure or inability of the Company to either license the infringed or similar technology or develop alternative technology on a timely basis, the Company's business, operating results and financial condition could be materially adversely affected. The Company relies upon certain software that it licenses from third parties, including software that is integrated with the Company's internally developed software and used in its products to perform key functions. There can be no assurance that these third-party software licenses will continue to be available to the Company on commercially reasonable terms. The loss of or inability to maintain any such software licenses could result in shipment delays or reductions until equivalent software could be developed, identified, licensed and integrated which could materially adversely affect the Company's business, operating results and financial condition. EMPLOYEES As of June 30, 1997, the Company employed 168 full-time employees, including 68 in sales and marketing, 49 in research and development, 25 in technical support and 26 in general and administrative. The Company believes that its future success will depend in large part upon its continuing ability to attract and retain highly skilled managerial, sales, marketing, customer support and research and development personnel. Like other software companies, the Company faces intense competition for such personnel, and the Company has at times experienced and continues to experience difficulty in recruiting qualified personnel. There can be no assurance that the Company will be successful in attracting, assimilating and retaining other qualified personnel in the future. The Company is not subject to any collective bargaining agreement and it believes that its relationships with its employees are good. FACILITIES The Company's principal offices are located in approximately 33,700 square feet of office space in Austin, Texas. Approximately 30,000 square feet of this office space is leased pursuant to a lease and amendment that expire on November 30, 1999, at which time the Company has the option to extend the lease for an additional five-year term. The remaining 3,700 square feet of office space is subleased pursuant to an agreement that expires on December 31, 1997, at which time the Company has the option to enter into a primary lease for the space for two consecutive three-year periods beginning on January 1, 1998. The Company will assume the remaining term of a lease beginning on August 1, 1997 and ending on March 31, 1998 for approximately 3,000 square feet of office space in the same complex as its principal offices in Austin, Texas. The Company believes that its existing facilities are adequate to meet its current needs; however, the Company believes that it will need additional office space at its principal offices in Austin, Texas in the near future. The Company believes that adequate facilities will be available on commercially reasonable terms, as needed. LEGAL PROCEEDINGS The Company is not a party to any material legal proceeding. 37

MANAGEMENT EXECUTIVE OFFICERS AND DIRECTORS The executive officers and directors of the Company, and their ages as of June 30, 1997, are as follows:
NAME AGE POSITION ------------------------------------ --- ------------------------------------Ron R. Harris....................... 44 President, Chief Executive Officer and Director James R. Offerdahl.................. 40 Chief Financial Officer, Vice President, Finance and Administration and Secretary Timothy Abels....................... 38 Chief Technical Officer Robert J. Adams, Jr. ............... 38 Vice President, Marketing and Inside Sales Theodule J. (Ted) Doucet, Jr. ...... 40 Vice President, Strategic Sales Gordon A. (Casey) Leaman............ 50 Vice President, International Sales Marcus D. Marshall.................. 45 Vice President, Customer Engineering Nancy R. Woodward(1)................ 41 Director and Chairman of the Board Douglas W. Woodward(2).............. 45 Director Joseph C. Aragona(1)................ 40 Director David A. Boucher(2)................. 46 Director David R. Bradford................... 46 Director Shelby H. Carter, Jr.(1)(2)......... 66 Director

(1)Member of Compensation Committee (2) Member of Audit Committee Ron R. Harris has served as President and Chief Executive Officer since its inception and as a director since June 1995. He has also served as the Company's acting Vice President of Research and Development since May 1997. Prior to joining the Company, Mr. Harris served as a Vice President of Citrix Systems, Inc., a developer of thin-client/server software, from October 1990 to May 1993. Mr. Harris received his B.S. in Computer Science from Vanderbilt University and an M.B.A. from the University of Texas at Austin. James R. Offerdahl has served as the Company's Chief Financial Officer, Vice President, Finance and Administration and Secretary since October 1996. From May 1993 to September 1996, Mr. Offerdahl served as Chief Financial Officer and Vice President, Administration of Tivoli Systems Inc., a provider of enterprise systems management solutions, acquired by IBM in March 1996. From April 1991 to May 1993, Mr. Offerdahl served as Vice President, Finance and Administration of InterFlo Medical, a medical device company that was acquired by Baxter Healthcare Corporation in April 1992. Mr. Offerdahl received a B.S. in Accounting from Illinois State University and an M.B.A. from the University of Texas at Austin. Timothy Abels has served as the Company's Chief Technical Officer since March 1997. Prior to joining the Company, Mr. Abels served as Director of Development Tools for Microsoft Corporation from July 1996 to February 1997. From June 1989 to July 1997, Mr. Abels held several positions at CompuServe, Inc., a network services company, including Senior Manager of Internet Products and Senior Manager of Research & Development. Mr. Abels received a B.S. in Computer Science from Bowling Green State University and an M.S. in Computer Science from Purdue University. Robert J. Adams, Jr. has served as the Company's Vice President, Marketing since April 1996 and Vice President, Marketing and Inside Sales since August 1996. Prior to joining the Company, Mr. Adams served as 38

President and Chief Executive Officer of Adams & Co., Inc., a consulting company, from October 1995 to April 1996. From January 1993 to October 1995, Mr. Adams served as President and Chief Executive Officer of Business Matters, Inc., a software development company. From March 1984 to January 1993, Mr. Adams served in various capacities at Lotus Development Corporation, a software development company, most recently as Director of the Database Products Group. Mr. Adams currently serves as a director of PC Build, Inc., a privately held hardware manufacturing company. Mr. Adams received a B.S. in Industrial Engineering from Purdue University and an M.B.A. from Babson College. Theodule J. (Ted) Doucet, Jr. has served as the Company's Vice President, Strategic Sales since September 1995. From September 1995 to August 1996, Mr. Doucet also served as Vice President of Inside Sales. Prior to joining the Company, Mr. Doucet was a consultant from March 1995 to August 1995 for SunRiver Data Systems, Inc., an Internet software company, and Human Code, Inc., an interactive multimedia software company. From May 1993 to February 1995, Mr. Doucet served as Director of Business Development for Microelectronics and Computer Technology Corporation ("MCC"), an industrial research and development consortium. Prior to joining MCC, Mr. Doucet served as District Sales Manager of Edify Corporation, a supplier of self-service software products, from April 1992 to May 1993. From December 1989 to March 1992, Mr. Doucet was a sales representative for Sybase, Inc., a database software company. Mr. Doucet received a B.B.A. in General Business from Stephen F. Austin State University. Gordon A. (Casey) Leaman has served as the Company's Vice President, International Sales since February 1997. Prior to joining the Company, Mr. Leaman served as Vice President, International Sales of CenterLine Software, Inc., a developer of compilers and software testing tools, from October 1995 to October 1996. Prior to that time, Mr. Leaman served as a director of Kanishka Systems PTE Ltd. (Singapore), a developer of document management software, from March 1994 to May 1995 and as President and Chief Operating Officer from January 1995 to May 1995. From August 1992 to January 1994, Mr. Leaman served as Regional Managing Director-Asia for a division of ASK Computer Systems Inc., a software developer. From March 1989 through June 1992, Mr. Leaman served in various roles at Lotus Development Corporation, including Regional General Manager-Asia & Australia. Mr. Leaman received a B.S. in Agricultural Business Management from Penn State University and an M.S. in Agricultural Economics from Purdue University. Marcus D. Marshall has served as the Company's Vice President, Customer Engineering since May 1997. He served as the Company's Vice President, Research and Development from November 1995 to May 1997 and as Vice President, Engineering and Technical Support from June 1995 to November 1995. Prior to joining the Company, Mr. Marshall served as Director of Engineering (U.S.) of Computer Resources International, a developer of software engineering environments, from February 1994 to June 1995. From November 1991 to February 1994, Mr. Marshall served as Vice President, Development of International Software Systems, Inc., a developer of software engineering and simulation software. Mr. Marshall received a B.S. and an M.S. in Electrical Engineering from Rice University. Nancy R. Woodward is a founder of the Company and has served as a director and Chairman of the Board since its inception. Ms. Woodward also serves as a director of Scientific Measurement Systems, Inc., a technology-based, industrial measurement tool company. Ms. Woodward received a B.S. in Computer Science from the University of Michigan. Douglas W. Woodward is a founder of the Company and has served as a director of the Company since its inception. He served as Chief Technology Officer from April 1994 to March 1997. Prior to joining the Company, Mr. Woodward was Vice President of Software Development at Novell. Mr. Woodward received a B.S. in Math and Science from Sam Houston State University. Joseph C. Aragona has served as a director of the Company since June 1995. Since June 1982, Mr. Aragona has served as a General Partner of Austin Ventures, a venture capital firm. He also serves as a director for various private companies. Mr. Aragona received a B.A. from Harvard College and an M.B.A. from the Harvard University Graduate School of Business. 39

David A. Boucher has served as a director of the Company since October 1995. Mr. Boucher has served as a General Partner of Applied Technology, a venture capital firm, since January 1993. From January 1981 to August 1992, Mr. Boucher served as President and Chief Executive Officer of Interleaf, Inc., an electronic publishing software developer. Mr. Boucher also serves as director of Wang Laboratories, Inc., a network integration services company, Interleaf, Inc. and various private companies. David R. Bradford has served as a director of the Company since October 1995. Mr. Bradford has served as Senior Vice President, General Counsel of Novell, a networking software company, since 1985. Mr. Bradford also serves as a director of a private company. Mr. Bradford received a B.A. in Political Science and a J.D. from Brigham Young University and an M.B.A. from Pepperdine University. Shelby H. Carter, Jr. has served as a director of the Company since August 1996. Since January 1986, Mr. Carter has served as an adjunct professor at the University of Texas Graduate School of Business and College of Business Administration. Mr. Carter also serves as a director of Bay Networks, Inc., a computer network equipment and management system company, InPut/OutPut, Inc., a manufacturer of seismic data acquisition systems, and several private companies. Mr. Carter received a B.B.A. from the University of Texas at Austin. BOARD COMPOSITION The Company currently has authorized seven directors. Upon the completion of the offering, the terms of office of the Board of Directors will be divided into three classes: Class I, whose term will expire at the annual meeting of stockholders to be held in 1998; Class II, whose term will expire at the annual meeting of stockholders to be held in 1999; and Class III, whose term will expire at the annual meeting of stockholders to be held in 2000. The Class I directors are Joseph C. Aragona, Douglas W. Woodward and David R. Bradford, the Class II directors are Shelby H. Carter, Jr. and Nancy R. Woodward, and the Class III directors are Ron R. Harris and David A. Boucher. At each annual meeting of stockholders after the initial classification, the successors to directors whose term will then expire will be elected to serve from the time of election and qualification until the third annual meeting following election. This classification of the Board of Directors may have the effect of delaying or preventing changes in control or management of the Company. Each officer is elected by and serves at the discretion of the Board of Directors. Each of the Company's officers and directors, other than nonemployee directors, devotes substantially full time to the affairs of the Company. The Company's nonemployee directors devote such time to the affairs of the Company as is necessary to discharge their duties. Except for Douglas W. and Nancy R. Woodward, husband and wife, there are no family relationships among any of the directors, officers or key employees of the Company. COMMITTEES OF THE BOARD The Audit Committee reviews, acts on and reports to the Board of Directors with respect to various auditing and accounting matters, including the selection of the Company's independent accountants, the scope of the annual audits, fees to be paid to the independent accountants, the performance of the Company's independent accountants and the accounting practices of the Company. The Compensation Committee establishes salaries, incentives and other forms of compensation for officers and other employees of the Company and administers the incentive compensation and benefit plans of the Company. DIRECTOR COMPENSATION Directors receive no cash remuneration for serving on the Board of Directors but are reimbursed for reasonable expenses incurred by them in attending Board and Committee meetings. The Company's 1997 Stock Incentive Plan provides for automatic grants of non-qualified stock options to certain non-employee directors of the Company. See "Management--1997 Stock Incentive Plan." 40

EXECUTIVE COMPENSATION Summary Compensation Table. The following Summary Compensation Table sets forth the compensation earned by the Company's Chief Executive Officer and the four other most highly compensated officers whose salary and bonus for fiscal 1997 were in excess of $100,000 (collectively, the "Named Officers"), for services rendered in all capacities to the Company and its subsidiaries for that fiscal year. SUMMARY COMPENSATION TABLE
LONG-TERM COMPENSATION --------------AWARDS --------------ALL OTHER COMPENSATION(2) --------------$510 352

NAME AND PRINCIPAL POSITION --------------------------Ron R. Harris.................. President, Chief Executive Officer and Director James R. Offerdahl(3).......... Chief Financial Officer, Vice President, Finance and Administration and Secretary Robert J. Adams, Jr. .......... Vice President, Marketing and Inside Sales Theodule J. Doucet, Jr. ....... Vice President, Strategic Sales Marcus D. Marshall............. Vice President, Customer Engineering

ANNUAL COMPENSATION ----------------SALARY(1) BONUS --------- ------$150,587 $50,000 105,000 15,000

SECURITIES UNDERLYING OPTIONS(#) ---------0 200,000

142,654 104,112 115,390

24,200 56,281(4) 10,000

50,000 40,000 20,000

308 314 603

(1) Salary includes amounts deferred under the Company's 401(k) Plan. (2) All Other Compensation consists of life insurance premiums. (3) Mr. Offerdahl commenced employment with the Company on October 1, 1996; Mr. Offerdahl's annual salary is currently $140,000. (4) Represents sales commissions. 41

Option Grants in Last Fiscal Year. The following table contains information concerning the stock option grants made to each of the Named Officers in the fiscal year ended June 30, 1997. No stock appreciation rights were granted to these individuals during such year. OPTION GRANTS IN LAST FISCAL YEAR
POTENTIAL REALIZABLE VALUE AT ASSUMED ANNUAL RATES OF STOCK PRICE APPRECIATION INDIVIDUAL GRANTS FOR OPTION TERM(4) -------------------------------------------- ---------------------NUMBER OF % OF TOTAL SECURITIES OPTIONS UNDERLYING GRANTED TO EXERCISE OPTIONS EMPLOYEES IN PRICE PER EXPIRATION NAME GRANTED(1) 1997(2) SHARE(3) DATE 5% 10% ------------- ------------ --------- ---------- ---------- ----------Ron R. Harris........... 0 -----James R. Offerdahl...... 200,000 18.3% $0.13 8/21/06 $ 16,351 $ 41,437 Robert J. Adams, Jr. ... 50,000 4.6 3.60 5/22/07 113,201 286,873 Theodule J. Doucet, Jr. ................... 30,000 2.7 3.60 5/22/07 67,920 172,122 10,000 0.9 0.30 10/25/06 1,886 4,781 Marcus D. Marshall...... 10,000 0.9 3.60 5/22/07 22,640 57,374 10,000 0.9 0.20 9/25/06 1,257 3,187

(1) Each of the options listed in the table is immediately exercisable, but any shares purchased under the options are subject to vesting requirements and may be repurchased by the Company at the original exercise price paid per share upon the optionee's cessation of service prior to vesting in such shares. The repurchase right lapses and the optionee vests in the option shares in a series of four equal annual installments. Upon a merger or other change in control, the option shares shall become vested as if the optionee had been employed for an additional 12 months. In addition, the option shares shall vest in full if outstanding options are not assumed by the acquiring entity. Should options be assumed but the optionee's employment be involuntarily terminated within 12 months of such a change in control, then the option shares shall vest in full. Each option has a maximum term of ten years, subject to earlier termination in the event of the optionee's cessation of employment with the Company. (2) Based on an aggregate of 1,094,018 options granted in fiscal 1997. (3) The exercise price may be paid in cash or through a cashless exercise procedure. (4) The 5% and 10% assumed annual rates of compounded stock price appreciation are mandated by rules of the Securities and Exchange Commission. There can be no assurance provided to any executive officer or any other holder of the Company's securities that the actual stock price appreciation over the 10-year option term will be at the assumed 5% and 10% levels or at any other defined level. Unless the market price of the Common Stock appreciates over the option term, no value will be realized from the option grants made to the executive officers. 42

Aggregate Option Exercises in Last Fiscal Year and Fiscal Year-End Option Values. The following table sets forth information concerning the shares acquired and the value realized upon the exercise of stock options during fiscal 1997 and the year-end number and value of unexercised options with respect to each of the Named Officers. No stock appreciation rights were exercised by the Named Officers in fiscal 1997 or were outstanding at the end of that year.
AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION VALUES NUMBER OF SECURITIES UNDERLYING UNEXERCISED OPTIONS SHARES AT JUNE 30, 1997(#)(2) ACQUIRED ON VALUE -----------------------NAME EXERCISE(#) REALIZED(1) VESTED(3) UNVESTED -------------- ----------- ----------- ----------Ron R. Harris........... 250,000 $ 7,500 642,021 693,795 James R. Offerdahl...... 200,000(4) 14,000 0 0 Robert J. Adams, Jr. ... 100,000(4) 17,000 0 50,000 Theodule J. Doucet, Jr. ................... 32,500(4) 60,350 0 67,500 Marcus D. Marshall...... 60,000(4) 42,500 0 10,000

VALUE OF UNEXERCISED IN-THE-MONEY OPTIONS AT JUNE 30, 1997(3) --------------------VESTED UNVESTED ---------- ---------$2,889,095 $3,122,078 ---50,000 --196,350 10,000

(1) Market price at exercise less exercise price. (2) Each of the options listed in the table is immediately exercisable, but any shares purchased under the options will be subject to vesting requirements and may be repurchased by the Company at the original exercise price per share upon the optionee's cessation of service prior to vesting in such shares. (3) Based on the fair market value of the Company's Common Stock at fiscal year end (June 30, 1997) ($4.60 per share), as determined by the Company's Board of Directors less the exercise price payable for such shares. (4) The acquired shares include options exercised for vested and unvested shares. As of June 30, 1997, the repurchase right had lapsed with respect to shares acquired during the fiscal year as follows: Mr. Harris (250,000); Mr. Offerdahl (no shares); Mr. Adams (25,000); Mr. Doucet (15,000) and Mr. Marshall (12,500). BONUS PLAN The Company has adopted a bonus program pursuant to which all full-time, non-commissioned employees are eligible for annual cash bonuses based upon a combination of the Company achieving specified objects and the employee meeting specified individual performance objectives. 1997 STOCK INCENTIVE PLAN The Company's 1997 Stock Incentive Plan (the "1997 Plan") was adopted by the Board of Directors on May 22, 1997, subject to approval by the stockholders, as the successor to the First Amended and Restated 1994 Incentive Plan ("1994 Plan"). The Company has reserved 3,428,611 shares of Common Stock for issuance under the 1997 Plan, plus an additional number of shares equal to 5% of the number of shares of Common Stock and Common Stock equivalents outstanding on July 1 of each year beginning July 1, 1998. As of July 1, 1997, no shares had been issued under the 1997 Plan, options for 2,259,697 shares were outstanding (including options incorporated from the 1994 Plan) and 1,168,914 shares remained available for future grant. Shares of Common Stock subject to outstanding options, including options granted under the 1994 Plan, which expire or terminate prior to exercise will be available for future issuance under the 1997 Plan. Outstanding options under the 1994 Plan will be incorporated into the 1997 Plan effective July 1, 1997 and no further option grants will be made under the 1994 Plan. The incorporated options will continue to be governed by their existing terms, unless the Plan Administrator elects to extend one or more features of the 1997 Plan to those options. Except as otherwise noted below, the outstanding options under the 1994 Plan contain substantially the same terms and conditions specified below for the Discretionary Option Grant Program in effect under the 1997 Plan. 43

Under the 1997 Plan, employees, officers, directors and independent consultants may, at the discretion of the plan administrator, be granted options or awarded shares of Common Stock. Non-employee members of the Board of Directors, other than individuals who are preferred stockholders or who own 5% or more of the voting power of the Company or individuals who represent entities that own preferred stock or 5% or more of the voting power of the Company, will also be eligible for automatic option grants under the 1997 Plan. The 1997 Plan is divided into three separate components: (i) the Discretionary Option Grant Program under which eligible individuals may, at the discretion of the plan administrator, be granted options to purchase shares of Common Stock at an exercise price per share not less than 85% of fair market value on the grant date; (ii) the Stock Issuance Program under which eligible individuals may, at the discretion of the plan administrator, be issued shares of Common Stock directly, through the purchase of such shares at a price per share not less than 85% of fair market value at the time of issuance or as a fully-paid bonus for services rendered the Company; and (iii) the Automatic Option Grant Program under which option grants will automatically be made at periodic intervals to eligible non-employee Board members to purchase shares of Common Stock at an exercise price equal to the fair market value of the option shares on the grant date. The 1997 Plan will be administered by the Board or the Compensation Committee of the Board after this Offering. The plan administrator has complete discretion to determine which eligible individuals are to receive option grants or stock awards, the number of shares subject to each such grant, the status of any granted option as either an incentive option or a non-statutory option under the Federal tax laws, the vesting schedule to be in effect for each option grant or stock award and the maximum term for which each granted option is to remain outstanding. In no event, however, may any one participant in the 1997 Plan acquire shares of Common Stock under the 1997 Plan in excess of 500,000 shares each calendar year over the term of the Plan. The exercise price for options or purchase price for shares granted under the 1997 Plan may be paid in cash or in outstanding shares of Common Stock. Options may also be exercised on a cashless basis through the same-day sale of the purchased shares. The plan administrator may also permit the participant to pay the exercise price or purchase price through a promissory note payable in installments over a period of years. The amount financed may include any Federal or state income and employment taxes incurred by reason of the option exercise or share purchase. The plan administrator has the authority to effect, from time to time, the cancellation of outstanding options under the 1997 Plan in return for the grant of new options for the same or different number of option shares with an exercise price per share based upon the fair market value of the Common Stock on the new grant date. In the event the Company is acquired by merger or consolidation, or the sale of all or substantially all of the Company's assets or by a tender offer for 50% or more of the outstanding voting stock, the vesting of each option then outstanding under the 1994 Plan and 1997 Plan will accelerate as if the optionee remained employed an additional 12 months and will accelerate in full to the extent the options are not assumed by the successor or acquiring entity. Should the successor or acquiring entity assume an outstanding option and the optionee be involuntarily terminated within 12 months following the date of the transaction, the assumed options will become fully vested upon termination. The foregoing acceleration provisions apply both to options outstanding and shares issued under the 1994 Plan and the 1997 Plan. In addition, the plan administrator has the discretion to accelerate the vesting of outstanding options. Under the Automatic Option Grant Program, each individual who first joins the Board as an eligible non-employee director on or after the effective date of the 1997 Plan will receive at that time, an automatic option grant for 20,000 shares of Common Stock. In addition, at each annual stockholders meeting, beginning with the first annual meeting after June 30, 1998, each eligible non-employee director, whether or not he or she is standing for re- election at that particular meeting, will be granted a stock option to purchase 5,000 shares of 44

Common Stock. The optionee will vest in each automatic option grant in a series of four annual installments over the optionee's period of Board service, beginning one year from the grant date. Each option will have an exercise price equal to the fair market value of the Common Stock on the automatic grant date and a maximum term of ten years, subject to earlier termination following the optionee's cessation of Board service. Vesting of the automatic option shares will automatically accelerate and the options become fully exercisable upon (i) a change in control of the Company by merger or consolidation, sale of all or substantially all of its assets or tender offer for 50% or more of the Company's outstanding voting stock or (ii) the death or disability of the optionee while serving as a Board member. The Board may amend or modify the 1997 Plan at any time within limits prescribed by law. The 1997 Plan will terminate on June 30, 2007, unless sooner terminated by the Board. EMPLOYEE STOCK PURCHASE PLAN The Company expects to adopt before this offering an Employee Stock Purchase Plan (the "Purchase Plan"), subject to approval by the stockholders. A total of 500,000 shares of Common Stock will be reserved for issuance under the Purchase Plan. The Purchase Plan, which is intended to qualify under Section 423 of the Internal Revenue Code, will be implemented by overlapping offering periods, each with a maximum duration of 24-months, with purchases occurring at six-month intervals. The initial offering period will commence on the closing of this offering and will end on October 31, 1999, with the first purchase date to be April 30, 1998. The Purchase Plan will be administered by the Board or the Compensation Committee of the Board. Employees will be eligible to participate if they are employed by the Company for more than 20 hours per week. The Purchase Plan permits eligible employees to purchase Common Stock through payroll deductions, which may not exceed 10% of an employee's cash compensation. No more than 500 shares may be purchased by each participant on the initial purchase date and 250 shares per participant on all subsequent purchase dates. The price of stock purchased under the Purchase Plan will be 85% of the lower of the fair market value of the Common Stock at the beginning of the 24-month offering period or on the applicable semi-annual purchase date. Employees may end their participation in the offering at any time during the offering period, and participation ends automatically on termination of employment with the Company. Each outstanding purchase right will be exercised immediately prior to a merger or consolidation. The Board may amend or terminate the Purchase Plan immediately after the close of any purchase date. However, the Board may not, without stockholder approval, materially increase the number of shares of Common Stock available for issuance or materially modify the eligibility requirements for participation. The Purchase Plan will in all events terminate in April 2007. CHANGE OF CONTROL ARRANGEMENTS The Compensation Committee of the Board of Directors, as plan administrator of the 1997 Plan, has the authority to provide for accelerated vesting of the shares of Common Stock subject to outstanding options held by the Named Officers and any other executive officer, employee or director in connection with certain changes in control of the Company or the subsequent termination of the officer's employment following the change in control event. None of the Named Officers have employment agreements with the Company, and their employment may be terminated at any time. COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION The Compensation Committee of the Company's Board was formed in March 1997, and the members of the Compensation Committee are Joseph C. Aragona, Shelby H. Carter, Jr. and Nancy R. Woodward. Other than Nancy R. Woodward, who has served as Secretary of the Company and is currently Chairman of the Board, none of these individuals was at any time during fiscal 1997, or at any other time, an officer or employee of the Company. No member of the Compensation Committee of the Company serves as a member of the board of directors or compensation committee of any entity that has one or more executive officers serving as a member of the Company's Board or Compensation Committee. 45

CERTAIN TRANSACTIONS TRANSACTIONS WITH DIRECTORS AND OFFICERS The Company loaned Nancy R. and Douglas W. Woodward, both directors of the Company, $1,485,000 pursuant to a promissory note dated April 25, 1994. The proceeds of the loan were used to purchase Preferred Stock of the Company. The loan was repaid by the Woodwards, and the promissory note canceled by the Company, on April 26, 1995. In October 1995, the Company granted David R. Bradford, a director of the Company and General Counsel of Novell, a greater than 5% stockholder of the Company, options to purchase 10,000 shares of its Common Stock at an exercise price of $.013 per share. In August 1996, the Company granted options to purchase 10,000 shares of its Common Stock at an exercise price of $0.13 per share to Shelby H. Carter, Jr., a director of the Company. In March 1997, the Company granted Mr. Carter options to purchase 10,000 shares of its Common Stock at an exercise price of $2.00 per share. The Company has granted Novell a non-exclusive, perpetual, royalty-free, irrevocable license to reproduce and distribute an earlier version of Btrieve and to reproduce and use internally Btrieve-licensed products and source code. The Company has also entered into a Joint Venture Agreement with Novell Japan, Ltd. to form Btrieve Technologies Japan, Ltd. In April 1995, the Company sold 2,213,132 shares of Series C Preferred Stock to the following stockholders for $1.23 per share:
Austin Ventures IV-A, L.P. ...................................... Austin Ventures IV-B, L.P. ...................................... Technologies for Information and Entertainment, L.P. ............ Technologies for Information and Publishing, L.P. ............... Triad Ventures Limited, II....................................... 469,110 984,192 189,957 189,958 379,915 --------2,213,132

Pursuant to the Series C Stock Purchase Agreement, Joseph C. Aragona and David A. Boucher became directors of the Company. Mr. Aragona is a General Partner of AV Partners IV, L.P., which is the General Partner of Austin Ventures IV-A, L.P. and Austin Ventures IV-B, L.P. Mr. Boucher is a General Partner of Applied Technology. See "Principal and Selling Stockholders" for more information regarding securities held by these purchasers. INDEMNIFICATION The Company's Restated Certificate of Incorporation limits the liability of its directors for monetary damages arising from a breach of their fiduciary duty as directors, except to the extent otherwise required by the Delaware General Corporation Law. Such limitation of liability does not affect the availability of equitable remedies such as injunctive relief or rescission. The Company's Bylaws provide that the Company shall indemnify its directors and officers to the fullest extent permitted by Delaware law, including in circumstances in which indemnification is otherwise discretionary under Delaware law. The Company has also entered into indemnification agreements with its officers and directors containing provisions that may require the Company, among other things, to indemnify such officers and directors against certain liabilities that may arise by reason of their status or service as directors or officers (other than liabilities arising from willful misconduct of a culpable nature), to advance their expenses incurred as a result of any proceeding against them as to which they could be indemnified, and to obtain directors' and officers' insurance if available on reasonable terms. 46

The Company believes that all of the transactions set forth above were made on terms no less favorable to the Company than could have been obtained from unaffiliated third parties. All future transactions, including loans between the Company and its officers, directors, principal stockholders and their affiliates will be approved by a majority of the Board of Directors, including a majority of the independent and disinterested outside directors on the Board of Directors, and will continue to be on terms no less favorable to the Company than could be obtained from unaffiliated third parties. 47

PRINCIPAL AND SELLING STOCKHOLDERS The following table sets forth certain information known to the Company regarding beneficial ownership of its Common Stock as of June 30, 1997, and as adjusted to reflect the sale of shares offered hereby, by (i) each person who is known by the Company to own beneficially more than five percent of the Company's Common Stock, (ii) each of the Company's directors, (iii) each of the Named Officers and (iv) all current executive officers and directors as a group.
SHARES BENEFICIALLY OWNED SHARES BENEFICIALLY OWNED PRIOR TO OFFERING NUMBER OF AFTER OFFERING(2) ------------------------------ SHARES BEING ----------------------------NUMBER PERCENT(3) OFFERED(2) NUMBER PERCENT(3) --------------- -------------- ------------ ------------------------2,330,057 21.0% %

NAME AND ADDRESS OF BENEFICIAL OWNER(1) ------------------Funds affiliated with Austin Ventures (4).... 114 West Seventh Street 1300 Norwood Tower Austin, TX 78701 Novell, Inc............. 122 East 1100 South Provo, UT 84606 Triad Ventures Limited, II..................... 4600 Post Oak Place, Suite 100 Houston, TX 77027 Funds affiliated with Applied Technology(5).. 1001 West Avenue Austin, TX 78701 Ron R. Harris (6)....... Robert J. Adams, Jr. (7)................ Theodule J. Doucet, Jr. (8)................ Marcus D. Marshall (9).. James R. Offerdahl...... Nancy R. and Douglas W. Woodward............... Joseph C. Aragona (4)... David A. Boucher (5).... David R. Bradford (10).. Shelby H. Carter, Jr. (11)............... All directors and executive officers as a group (13 persons) (12).............

1,500,000 609,112

13.5 5.5

609,112

5.5

1,585,816 150,000 100,000 70,000 200,000 4,666,851 2,330,057 609,112 10,000 20,000 * *

12.8 1.3

1.8 42.0 21.0 5.5

* *

9,881,836

77.6%

* Represents beneficial ownership of less than 1% of the outstanding shares of Common Stock. (1) Beneficial ownership is determined in accordance with the rules of the Securities and Exchange Commission and includes voting or investment power with respect to securities. Unless otherwise indicated, the address for each listed stockholder is c/o Pervasive Software Inc., 8834 Capital of Texas Highway, Austin, Texas 78759. To the Company's knowledge, except as indicated in the footnotes to this table and pursuant to applicable community property laws, the persons named in the table have sole voting and investment power with respect to the shares of Common Stock indicated. (2) Assumes no exercise of the Underwriters' over-allotment option. See "Underwriting." (3) Percentage of beneficial ownership is based on 11,104,743 shares of Common Stock outstanding as of June 30, 1997, and shares of Common Stock outstanding after the completion of this offering. The number of shares of Common Stock beneficially owned includes the shares issuable pursuant to stock options that are exercisable within 60 days of June 30, 1997. Shares issuable pursuant to stock options are deemed outstanding for computing the percentage of the person holding such options but are not outstanding for computing the percentage of any other person. The number of shares of Common Stock outstanding after this offering includes shares of Common Stock being offered for sale by the Company in this offering. 48

(4) Includes 752,117 shares held by Austin Ventures IV-A, L.P. and 1,577,940 shares held by Austin Ventures IV-B, L.P. Mr. Aragona, a director of the Company, is a General Partner of AV Partners IV, L.P., which is the general partner of Austin Ventures IV-A, L.P. and Austin Ventures IV-B, L.P. Mr. Aragona disclaims beneficial ownership of the shares held by Austin Ventures IV-A, L.P. and Austin Ventures IV-B, L.P. except to the extent of his pecuniary interest therein arising from his general partnership interest in AV Partners IV, L.P. (5) Includes 304,556 shares held by Technologies for Information and Publishing, L.P. and 304,556 shares held by Technologies for Information and Entertainment, L.P. Mr. Boucher, a director of the Company, is the Managing General Partner of Technologies for Information and Publishing, L.P. and Technologies for Information and Entertainment, L.P. Mr. Boucher disclaims beneficial ownership of the shares held by Technologies for Information and Publishing, L.P. and Technologies for Information and Entertainment, L.P. except to the extent of his pecuniary interest therein arising from his general partnership interest in Technologies for Information and Publishing, L.P. and Technologies for Information and Entertainment, L.P. (6) Includes options immediately exercisable for 1,335,816 shares of Common Stock. (7) Includes options immediately exercisable for 50,000 shares of Common Stock. (8) Includes options immediately exercisable for 67,500 shares of Common Stock. (9) Includes options immediately exercisable for 10,000 shares of Common Stock. (10) Includes options immediately exercisable for 10,000 shares of Common Stock. (11) Includes options immediately exercisable for 10,000 shares of Common Stock. (12) Includes options immediately exercisable for 1,623,316 shares of Common Stock. 49

DESCRIPTION OF CAPITAL STOCK Upon the closing of this offering, the authorized capital stock of the Company will consist of 75,000,000 shares of Common Stock, $0.001 par value, and 5,000,000 shares of Preferred Stock, $0.001 par value. COMMON STOCK As of June 30, 1997, there were 1,391,611 shares of Common Stock outstanding that were held of record by approximately 95 stockholders. There will be shares of Common Stock outstanding (assuming no exercise of the Underwriters' over-allotment option and assuming no exercise after June 30, 1997, of outstanding options) after giving effect to the sale of the shares of Common Stock to the public offered hereby and the conversion of the Company's Preferred Stock into Common Stock at a one-to-one ratio. The holders of Common Stock are entitled to one vote per share on all matters to be voted upon by the stockholders. Subject to preferences that may be applicable to any outstanding Preferred Stock, the holders of Common Stock are entitled to receive ratably such dividends, if any, as may be declared from time to time by the Board of Directors out of funds legally available therefor. See "Dividend Policy." In the event of the liquidation, dissolution, or winding up of the Company, the holders of Common Stock are entitled to share ratably in all assets remaining after payment of liabilities, subject to prior distribution rights of Preferred Stock, if any, then outstanding. The Common Stock has no preemptive or conversion rights or other subscription rights. There are no redemption or sinking fund provisions applicable to the Common Stock. All outstanding shares of Common Stock are fully paid and nonassessable, and the shares of Common Stock to be issued upon completion of this offering will be fully paid and nonassessable. PREFERRED STOCK The Board of Directors has the authority to issue the Preferred Stock in one or more series and to fix the rights, preferences, privileges and restrictions thereof, including dividend rights, dividend rates, conversion rights, voting rights, terms of redemption, redemption prices, liquidation preferences and the number of shares constituting any series or the designation of such series, without further vote or action by the stockholders. The issuance of Preferred Stock may have the effect of delaying, deferring or preventing a change in control of the Company without further action by the stockholders and may adversely affect the voting and other rights of the holders of Common Stock. The issuance of Preferred Stock with voting and conversion rights may adversely affect the voting power of the holders of Common Stock, including the loss of voting control to others. At present, the Company has no plans to issue any of the Preferred Stock. ANTI-TAKEOVER EFFECTS OF PROVISIONS OF THE CERTIFICATE OF INCORPORATION, BYLAWS AND DELAWARE LAW Certificate of Incorporation and Bylaws The Company's Restated Certificate of Incorporation provides that, upon the closing of this offering, the Board of Directors will be divided into three classes of directors, with each class serving a staggered three-year term. The classification of the Board of Directors has the effect of generally requiring at least two annual stockholder meetings, instead of one, to replace a majority of the Board members. The Restated Certificate of Incorporation also provides that, effective upon the closing of this offering, all stockholder actions must be effected at a duly called meeting and not by a consent in writing. Further, provisions of the Bylaws and the Restated Certificate of Incorporation provide that the stockholders may amend the Bylaws or certain provisions of the Restated Certificate of Incorporation only with the affirmative vote of 75% of the Company's capital stock. These provisions of the Restated Certificate of Incorporation and Bylaws could discourage potential acquisition proposals and could delay or prevent a change in control of the Company. These provisions are intended to enhance the likelihood of continuity and stability in the composition of the Board of Directors and in the policies formulated by the Board of Directors and to discourage certain types of transactions that may involve an actual or threatened change of control of the Company. These provisions are designed to reduce the vulnerability of the Company to an unsolicited acquisition proposal. The provisions also are intended to discourage certain tactics that may be used in proxy fights. However, such provisions 50

could have the effect of discouraging others from making tender offers for the Company's shares and, as a consequence, they also may inhibit fluctuations in the market price of the Company's shares that could result from actual or rumored takeover attempts. Such provisions also may have the effect of preventing changes in the management of the Company. See "Risk Factors--Anti- takeover Effects of Certificate of Incorporation, Bylaws and Delaware Law." Delaware Takeover Statute The Company is subject to Section 203 of the Delaware General Corporation Law ("Section 203"), which, subject to certain exceptions, prohibits a Delaware corporation from engaging in any business combination with any interested stockholder for a period of three years following the date that such stockholder became an interested stockholder, unless: (i) prior to such date, the board of directors of the corporation approved either the business combination or the transaction that resulted in the stockholder becoming an interested stockholder; (ii) upon consummation of the transaction that resulted in the stockholder becoming an interested stockholder, the interested stockholder owned at least 85% of the voting stock of the corporation outstanding at the time the transaction commenced, excluding for purposes of determining the number of shares outstanding those shares owned (x) by persons who are directors and also officers and (y) by employee stock plans in which employee participants do not have the right to determine confidentially whether shares held subject to the plan will be tendered in a tender or exchange offer; or (iii) on or subsequent to such date, the business combination is approved by the board of directors and authorized at an annual or special meeting of stockholders, and not by written consent, by the affirmative vote of at least 66 2/3% of the outstanding voting stock that is not owned by the interested stockholder. Section 203 defines business combination to include: (i) any merger or consolidation involving the corporation and the interested stockholder; (ii) any sale, transfer, pledge or other disposition of 10% or more of the assets of the corporation involving the interested stockholder; (iii) subject to certain exceptions, any transaction that results in the issuance or transfer by the corporation of any stock of the corporation to the interested stockholder; (iv) any transaction involving the corporation that has the effect of increasing the proportionate share of the stock of any class or series of the corporation beneficially owned by the interested stockholder; or (v) the receipt by the interested stockholder of the benefit of any loans, advances, guarantees, pledges or other financial benefits provided by or through the corporation. In general, Section 203 defines an interested stockholder as any entity or person beneficially owning 15% or more of the outstanding voting stock of the corporation and any entity or person affiliated with or controlling or controlled by such entity or person. REGISTRATION RIGHTS After this offering, the holders of approximately shares of Common Stock will be entitled to certain rights with respect to the registration of such shares under the Securities Act. Under the terms of the agreement between the Company and the holders of such registrable securities, if the company proposes to register any of its securities under the Securities Act, either for its own account or for the account of other security holders exercising registration rights, such holders are entitled to notice of such registration and are entitled to include share of such Common Stock therein. Additionally, such holders are also entitled to certain demand registration rights pursuant to which they may require the Company to file a registration statement under the Securities Act at its expense with respect to their shares of Common Stock, and the Company is required to use its best efforts to effect such registration. Further, holders may require the Company to file additional registration statements on Form S-3 at the Company's expense. All of these registration rights are subject to certain conditions and limitations, among them the right of the underwriters of an offering to limit the number of shares included in such registration and the right of the Company not to effect a requested registration within six months following an offering of the Company's securities, including the offering made hereby. TRANSFER AGENT AND REGISTRAR The Transfer Agent and Registrar for the Common Stock is , and its telephone number is . 51

SHARES ELIGIBLE FOR FUTURE SALE Upon completion of this offering, the Company will have shares of Common Stock outstanding. Of this amount, the shares offered hereby will be available for immediate sale in the public market as of the date of this Prospectus. Approximately additional shares will be available for sale in the public market following the expiration of 180-day lockup agreements with the Representatives of the Underwriters or the Company, subject in some cases to compliance with the volume and other limitations of Rule 144.
DAYS AFTER DATE OF APPROXIMATE SHARES THIS PROSPECTUS ELIGIBLE FOR FUTURE SALE COMMENT ----------------------------------------------Upon Effectiveness...... Freely tradeable shares sold in offering and shares salable under Rule 144(k) that are not subject to 180-day lockup 180 days................ Lockup released; shares salable under Rule 144, 144(k) or 701 Thereafter.............. Restricted securities held for one year or less

In general, under Rule 144 as currently in effect, a person (or persons whose shares are aggregated) who has beneficially owned shares for at least one year is entitled to sell within any three-month period commencing 90 days after the date of this Prospectus a number of shares that does not exceed the greater of (i) 1% of the then outstanding shares of Common Stock (approximately shares immediately after the offering) or (ii) the average weekly trading volume during the four calendar weeks preceding such sale, subject to the filing of a Form 144 with respect to such sale. A person (or persons whose shares are aggregated) who is not deemed to have been an affiliate of the Company at any time during the 90 days immediately preceding the sale who has beneficially owned his or her shares for at least two years is entitled to sell such shares pursuant to Rule 144(k) without regard to the limitations described above. Persons deemed to be affiliates must always sell pursuant to Rule 144, even after the applicable holding periods have been satisfied. The Company is unable to estimate the number of shares that will be sold under Rule 144, since this will depend on the market price for the Common Stock of the Company, the personal circumstances of the sellers and other factors. Prior to this offering, there has been no public market for the Common Stock, and there can be no assurance that a significant public market for the Common Stock will develop or be sustained after the offering. Any future sale of substantial amounts of the Common Stock in the open market may adversely affect the market price of the Common Stock offered hereby. The Company, its directors, executive officers, stockholders with registration rights and certain other stockholders have agreed pursuant to the Underwriting Agreement and other agreements that they will not sell any Common Stock without the prior consent of Robertson, Stephens & Company LLC for a period of 180 days from the date of this Prospectus (the "180-day Lockup Period"), except that the Company may, without such consent, grant options and sell shares pursuant to the Company's stock plans. Any employee or consultant to the Company who purchased his or her shares pursuant to a written compensatory plan or contract is entitled to rely on the resale provisions of Rule 701, which permits nonaffiliates to sell their Rule 701 shares without having to comply with the public information, holding period, volume limitation or notice provisions of Rule 144 and permits affiliates to sell their Rule 701 shares without having to comply with the Rule 144 holding period restrictions, in each case commencing 90 days after the date of this Prospectus. As of the date of this Prospectus, the holders of options exercisable into approximately 2,259,697 shares of Common Stock will be eligible to sell their shares upon the expiration of the 180-day Lockup Period, or subject in certain cases to vesting of such options. The Company intends to file a registration statement on Form S-8 under the Securities Act to register shares of Common Stock issued or reserved for issuance under the Company's stock plans within 180 days after the date of this Prospectus, thus permitting the resale of such shares by nonaffiliates in the public market 52

without restriction under the Securities Act. The Company intends to register these shares on Form S-8, along with options that have not been issued under the Company's stock plans as of the date of this Prospectus. In addition, after this offering, the holders of approximately shares of Common Stock will be entitled to certain rights with respect to registration of such shares under the Securities Act. Registration of such shares under the Securities Act would result in such shares becoming freely tradeable without restriction under the Securities Act (except for shares purchased by affiliates of the Company) immediately upon the effectiveness of such registration. See "Description of Capital Stock--Registration Rights." 53

UNDERWRITING The Underwriters named below, acting through their representatives, Robertson, Stephens & Company LLC, UBS Securities LLC and First Albany Corporation (the "Representatives"), have severally agreed with the Company and the Selling Stockholders, subject to the terms and conditions of the Underwriting Agreement, to purchase the number of shares of Common Stock set forth opposite their respective names below. The Underwriters are committed to purchase and pay for all such shares if any are purchased.
NUMBER UNDERWRITER OF SHARES ------------------Robertson, Stephens & Company LLC.................................. UBS Securities LLC................................................. First Albany Corporation........................................... --Total............................................................ ===

The Representatives have advised the Company that the Underwriters propose to offer the shares of Common Stock to the public at the initial public offering price set forth on the cover page of this Prospectus and to certain dealers at such price less a concession of not in excess of $ per share, of which $ may be reallowed to other dealers. After the initial public offering, the public offering price, concession, and reallowance to dealers may be reduced by the Representatives. No such reduction shall change the amount of proceeds to be received by the Company as set forth on the cover page of this Prospectus. The Selling Stockholders have granted to the Underwriters an option, exercisable during the 30-day period after the date of this Prospectus, to purchase up to additional shares of Common Stock at the same price per share as the Company and Selling Stockholders will receive for the shares that the Underwriters have agreed to purchase. To the extent that the Underwriters exercise such option, each of the Underwriters will have a firm commitment to purchase approximately the same percentage of such additional shares that the number of shares of Common Stock to be purchased by it shown in the above table represents as a percentage of the shares offered hereby. If purchased, such additional shares will be sold by the Underwriters on the same terms as those on which the shares are being sold. The Underwriting Agreement contains covenants of indemnity among the Underwriters, the Company and the Selling Stockholders against certain civil liabilities, including liabilities under the Securities Act and liabilities arising from breaches of representations and warranties contained in the Underwriting Agreement. Each officer and director who holds shares of the Company and holders (including such officers and directors) of shares of Common Stock have agreed, for the 180-day Lockup Period, subject to certain exceptions, not to offer to sell, contract to sell, or otherwise sell, dispose of, loan, pledge, or grant any rights with respect to any shares of Common Stock, any options or warrants to purchase any shares of Common Stock, or any securities convertible into or exchangeable for shares of Common Stock owned as of the date of this Prospectus directly by such holders or with respect to which they have the power of disposition, without the prior written consent of Robertson, Stephens & Company LLC. However, Robertson, Stephens & Company LLC may, in its sole discretion and at any time without notice, release all or any portion of the securities subject to lock-up agreements. There are no agreements between the Representatives and any of the Company's stockholders providing consent by the Representatives to the sale of shares prior to the expiration of the 180-day Lockup Period. In addition, the Company has agreed that during the 180-day Lockup Period, the Company will not, without the prior written consent of Robertson, Stephens & Company 54

LLC, subject to certain exceptions, issue, sell, contract to sell, or otherwise dispose of, any shares of Common Stock, any options or warrants to purchase any shares of Common Stock or any securities convertible into, exercisable for or exchangeable for shares of Common Stock other than the Company's sale of shares in this offering, the issuance of Common Stock upon the exercise of outstanding options, and the Company's issuance of options and shares under existing employee stock option and stock purchase plans. See "Shares Eligible For Future Sale." The Underwriters do not intend to confirm sales to any accounts over which they exercise discretionary authority. Prior to this offering, there has been no public market for the Common Stock of the Company. Consequently, the initial public offering price for the Common Stock offered hereby will be determined through negotiations among the Company, the Selling Stockholders and the Representatives. Among the factors to be considered in such negotiations are prevailing market conditions, certain financial information of the Company, market valuations of other companies that the Company and the Representatives believe to be comparable to the Company, estimates of the business potential of the Company, the present state of the Company's development and other factors deemed relevant. The Representatives have advised the Company that, pursuant to Regulation M under the Securities Act, certain persons participating in the offering may engage in transactions, including stabilizing bids, syndicate covering transactions or the imposition of penalty bids, that may have the effect of stabilizing or maintaining the market price of the Common Stock at a level above that which might otherwise prevail in the open market. A "stabilizing bid" is a bid for or the purchase of the Common Stock on behalf of the Underwriters for the purpose of fixing or maintaining the price of the Common Stock. A "syndicate covering transaction" is the bid for or the purchase of the Common Stock on behalf of the Underwriters to reduce a short position incurred by the Underwriters in connection with the offering. A "penalty bid" is an arrangement permitting the Representatives to reclaim the selling concession otherwise accruing to an Underwriter or syndicate member in connection with the offering if the Common Stock originally sold by such Underwriter or syndicate member is purchased by the Representatives in a syndicate covering transaction and has therefore not been effectively placed by such Underwriter or syndicate member. The Representatives have advised the Company that such transactions may be effected on the Nasdaq National Market or otherwise and, if commenced, may be discontinued at any time. 55

LEGAL MATTERS The validity of the Common Stock offered hereby will be passed upon for the Company and certain of the Selling Stockholders by Gunderson Dettmer Stough Villeneuve Franklin & Hachigian, LLP, Austin, Texas. Certain legal matters in connection with the offering will be passed upon for the Underwriters by Brobeck, Phleger & Harrison LLP, Austin, Texas. EXPERTS The consolidated financial statements and the related financial schedule of Pervasive Software Inc. at June 30, 1996 and 1997 and for each of the three years ended June 30, 1995, 1996 and 1997, appearing in this Prospectus and Registration Statement have been audited by Ernst & Young LLP, independent auditors, as set forth in their reports thereon appearing elsewhere herein and are included in reliance upon such reports given upon the authority of such firm as experts in accounting and auditing. ADDITIONAL INFORMATION The Company has filed with the Securities and Exchange Commission (the "Commission"), Washington, D.C. 20549, a Registration Statement on Form S-1 under the Securities Act with respect to the Common Stock offered hereby. This Prospectus does not contain all of the information set forth in the Registration Statement and the exhibits and schedules to the Registration Statement. For further information with respect to the Company and such Common Stock offered hereby, reference is made to the Registration Statement and the exhibits and schedules filed as a part of the Registration Statement. Statements contained in this Prospectus concerning the contents of any contract or any other document referred to are not necessarily complete; reference is made in each instance to the copy of such contract or document filed as an exhibit to the Registration Statement. Each such statement is qualified in all respects by such reference to such exhibit. The Registration Statement, including exhibits and schedules thereto, may be inspected without charge at the Commission's principal office in Washington, D.C., and copies of all or any part thereof may be obtained from such office after payment of fees prescribed by the Commission. The Commission maintains a Web site that contains reports, proxy and information statements and other information regarding registrants that file electronically with the Commission at http://www.sec.gov. 56

PERVASIVE SOFTWARE INC. INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
PAGE ---Report of Ernst & Young LLP, Independent Auditors........................ F-2 Consolidated Balance Sheets.............................................. F-3 Consolidated Statements of Operations.................................... F-4 Consolidated Statements of Changes in Redeemable Convertible Preferred Stock and Stockholders' Equity (Deficit)................................ F-5 Consolidated Statements of Cash Flows.................................... F-6 Notes to Consolidated Financial Statements............................... F-7

F-1

REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS Board of Directors and StockholdersPervasive Software Inc. We have audited the accompanying consolidated balance sheets of Pervasive Software Inc. as of June 30, 1997 and 1996, and the related consolidated statements of operations, changes in redeemable convertible preferred stock and stockholders' equity (deficit) and cash flows for each of the three years in the period ended June 30, 1997. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Pervasive Software Inc. at June 30, 1997 and 1996, and the consolidated results of its operations and its cash flows for each of the three years in the period ended June 30, 1997, in conformity with generally accepted accounting principles. Austin, Texas July 24, 1997, except for Note 14, as to which the date is August , 1997 The foregoing report is in the form that will be signed when the per share price for the public offering of common stock referred to in Note 14 of the Notes to Consolidated Financial Statements is known and the effect on the Consolidated Financial Statements, if any, has been adjusted to reflect such price.
/s/ Ernst & Young LLP Austin, Texas July 24, 1997

F-2

PERVASIVE SOFTWARE INC. CONSOLIDATED BALANCE SHEETS (IN THOUSANDS, EXCEPT SHARE DATA)
UNAUDITED PRO FORMA STOCKHOLDERS' EQUITY AT JUNE 30, 1997 (NOTE 14) ----------------

ASSETS Current assets: Cash and cash equivalents............. $ 2,739 Trade accounts receivable, net of allowance for doubtful accounts of $100 in 1997......................... 2,568 Inventory............................. 89 Deferred income taxes................. -Prepaid expenses and other current assets............................... 695 ------Total current assets.................... 6,091 Property and equipment, net............. 1,232 Other assets............................ 148 ------Total assets............................ $ 7,471 ======= LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) Current liabilities: Trade accounts payable................ $ 735 Accrued payroll and payroll related costs................................ 459 Other accrued expenses................ 916 Deferred revenue...................... 1,792 Income taxes payable.................. -Deferred royalty payable--Novell, current portion...................... 421 ------Total current liabilities.............. 4,323 Deferred royalty payable--Novell, net of current portion.................... 621 Minority interest in subsidiary........ 584 COMMITMENTS AND CONTINGENCIES Redeemable convertible preferred stock................................. 4,026 Stockholders' equity (deficit): Convertible preferred stock........... 3,915 Common stock, $0.001 par value; authorized--15,000,000 shares; issued and outstanding--2,000 shares in 1996, 1,391,611 shares in 1997, and 11,104,743 shares on a pro forma basis............................... -Retained deficit...................... (5,998) ------Total stockholders' equity (deficit).... (2,083) ------Total liabilities and stockholders' equity (deficit)....................... $ 7,471 =======

JUNE 30, ---------------1996 1997 ------- ------$ 4,058 2,803 105 157 790 ------7,913 2,429 103 ------$10,445 =======

$ 1,052 517 2,273 1,267 301 708 ------6,118 -695 4,026 3,915 $ ---

205 (4,514) ------(394) ------$10,445 =======

8,146 (4,514) ------$ 3,632 =======

See accompanying notes. F-3

PERVASIVE SOFTWARE INC. CONSOLIDATED STATEMENTS OF OPERATIONS (IN THOUSANDS, EXCEPT PER SHARE DATA)
YEAR ENDED JUNE 30, ------------------------1995 1996 1997 ------ -------- ------Revenues............................................ $8,601 $ 13,476 $24,481 Costs and expenses: Cost of revenues and technical support............ 1,997 2,605 3,310 Sales and marketing............................... 3,864 6,998 10,034 Research and development.......................... 2,399 4,477 5,996 General and administrative........................ 996 2,505 2,886 ------ -------- ------Total costs and expenses............................ 9,256 16,585 22,226 ------ -------- ------Operating income (loss)............................. (655) (3,109) 2,255 Interest and other income, net.................... 86 99 55 ------ -------- ------Income (loss) before income taxes and minority interest........................................... (569) (3,010) 2,310 Provision for income taxes........................ (129) (170) (593) Minority interest in (earnings) loss of subsidiary, net of tax........................... 89 (25) (127) ------ -------- ------Net income (loss)................................... $ (609) $ (3,205) $ 1,590 ====== ======== ======= Pro forma net income per share...................... $ 0.12 ======= Shares used in computing pro forma net income per share.............................................. 13,368 =======

See accompanying notes. F-4

PERVASIVE SOFTWARE INC. CONSOLIDATED STATEMENTS OF CHANGES IN REDEEMABLE CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS' EQUITY (DEFICIT) (IN THOUSANDS, EXCEPT SHARE DATA)
STOCKHOLDERS' EQUITY (DEFICIT) ----------------------------------------------------REDEEMABLE TOTAL CONVERTIBLE CONVERTIBLE STOCKHOLDERS' PREFERRED PREFERRED NOTE COMMON RETAINED EQUITY STOCK STOCK RECEIVABLE STOCK DEFICIT (DEFICIT) ----------- ----------- ---------- ------ -------- ------------$ -2,691 1,335 --------4,026 -------4,026 $ 5,250 -(1,335) ---------3,915 --------3,915 $(1,485) --1,485 ------------------$ ----$(2,203) ---$ 1,562 -(1,335) 1,485 (42) (609) ------1,061 61 (3,205) ------(2,083)

Balances at July 1, 1994................... Issuance of Series C Preferred Stock (Note 7).............. Conversion of Series B Preferred Stock (Note 7).............. Payment received on note receivable....... Foreign currency translation adjustment............ Net loss............... Balances at June 30, 1995................... Foreign currency translation adjustment............ Net loss............... Balances at June 30, 1996................... Issuance of 1,389,611 shares of common stock pursuant to the exercise of stock options............... Foreign currency translation adjustment, cumulative amount of $(87) at June 30, 1997 ........ Net income............. Balances at June 30, 1997................... Unaudited Pro Forma Stockholders' Equity at June 30, 1997 (Note 14)....................

-(42) -(609) ------ -------(2,854)

-61 -(3,205) ------ -------(5,998)

--

--

--

205

--

205

-------$4,026 ======

--------$ 3,915 =======

--------$ -=======

-(106) -1,590 ------ ------$ 205 $(4,514) ====== =======

(106) 1,590 ------$ (394) =======

$ -======

$ -=======

$ -=======

$8,146 $(4,514) ====== =======

$ 3,632 =======

See accompanying notes. F-5

PERVASIVE SOFTWARE INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (IN THOUSANDS)
YEAR ENDED JUNE 30, ------------------------1995 1996 1997 ------- ------- ------$(3,205) $ 1,590 575 132 (1,663) 878 1,738 ------(1,545) 749 6 (408) 2,085 (525) ------3,497

CASH FROM OPERATING ACTIVITIES Net income (loss).................................. $ (609) Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: Depreciation and amortization..................... 884 Other non cash items.............................. (112) Change in current assets and liabilities: Increase in current assets....................... (1,171) Increase in accounts payable and accrued liabilities............................................ 986 Increase (decrease) in deferred revenue.......... (62) ------Net cash provided by (used in) operating activities......................................... (84) CASH FROM INVESTING ACTIVITIES Purchase of property and equipment................. (598) Purchase of investment securities.................. (500) Proceeds from maturity of investment securities.... 500 ------Net cash used in investing activities............... (598) CASH FROM FINANCING ACTIVITIES Proceeds from issuance of redeemable convertible preferred stock .................................. 2,691 Proceeds from payment on note receivable........... 1,485 Proceeds from minority interest investment in subsidiary........................................... 813 Payment of royalty to Novell....................... -Proceeds from exercise of stock options............ -------Net cash provided by (used in) financing activities......................................... 4,989 Effect of exchange rate on cash and cash equivalents........................................ (42) ------Increase (decrease) in cash and cash equivalents.... 4,265 Cash and cash equivalents at beginning of year...... 831 ------Cash and cash equivalents at end of year............ $ 5,096 =======

(843) (1,926) ----------- ------(843) (1,926) ------------31 ------(2,357) 5,096 ------$ 2,739 ======= ---(370) 205 ------(165) (87) ------1,319 2,739 ------$ 4,058 =======

See accompanying notes. F-6

PERVASIVE SOFTWARE INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS JUNE 30, 1997 1. THE COMPANY Pervasive Software Inc. (the Company), formerly Btrieve Technologies, Inc., was incorporated in Delaware on January 12, 1994. The Company is a leading provider of embedded database software designed to enable the cost-effective development, deployment and support of low-maintenance packaged client/server applications. The consolidated financial statements include the accounts of the Company and its majority-owned subsidiaries. All material intercompany accounts and transactions have been eliminated in consolidation. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Revenue Recognition The Company licenses its software through OEM license agreements with independent software vendors (ISVs) and through shrink-wrap software licenses, sold through ISVs, value-added resellers (VARs) and distributors. Revenues are generally recognized from the license of software upon the later of shipment or when all significant vendor obligations have been satisfied. Revenues related to agreements involving nonrefundable fixed minimum license fees are generally recognized upon delivery of the product master or first copy if no significant vendor obligations remain. Per copy royalties in excess of a fixed minimum amount are recognized as revenue when such amounts are reported to the Company. The Company generally provides telephone support to customers and end users in the 30 days immediately following the sale at no additional charge and at a minimal cost per call. When material, the Company accrues the cost of providing this support. Revenue from training is recognized when the related services are performed. The Company enters into agreements with certain distributors that provide for certain stock rotation and price protection rights. These rights allow the distributor to return products in a non-cash exchange for other products or for credits against future purchases. The Company reserves for the cost of estimated sales returns, rotation and price protection rights as well as uncollectible accounts based on experience. Software Development Costs and Purchased Technology Software development costs incurred by the Company in connection with its long-term development projects are accounted for in accordance with Statement of Financial Accounting Standards No. 86, Accounting for the Cost of Computer Software to be Sold, Leased or Otherwise Marketed (Statement 86). The Company has not capitalized any internal costs through June 30, 1997 related to its software development activities. The Company recorded purchased technology resulting from the acquisition of certain software and related technology from Novell, Inc. (Novell) in April 1994. These costs have been allocated among the Company's various product lines and amortized over the estimated life of each product line, (six months to thirty-three months). Amortization expense related to purchased technology was approximately $639,000 and $83,000 for the years ended June 30, 1995 and 1996, respectively, and is reflected in the costs of revenues and technical support. Purchased technology was fully amortized as of June 30, 1996. Advertising Costs The Company expenses costs of producing advertising and sales related collateral materials as incurred. Other production costs associated with direct mail programs, placement costs associated with magazine or F-7

PERVASIVE SOFTWARE INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED) other printed media and all direct costs associated with trade shows and other sales related events are expensed when the related direct mail is sent, advertising space is used or the event is held. These expenses in 1995, 1996 and 1997 were approximately $1,300,000, $1,900,000 and $700,000, respectively. Income Taxes Under the asset and liability method of Statement of Financial Accounting Standards No. 109, Accounting for Income Taxes (Statement 109), deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and net operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Under Statement 109, the effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Cash and Cash Equivalents Cash and cash equivalents in the statement of cash flows includes cash, certificates of deposit, and securities with original maturities less than thirty days. Inventory Inventories, consisting primarily of finished goods, are stated at the lower of cost (first in, first out) or market. The Company utilizes the services of a fulfillment house to manufacture, store, and ship inventory and process returned product. The Company does not take title to product in inventory until the point at which the product is packaged by the fulfillment house and is available for shipping. Property and Equipment Property and equipment are stated at cost and are being depreciated over their estimated useful lives (2 to 5 years) using the straight-line method. Leasehold improvements are amortized over the life of the lease or the estimated useful life, whichever is shorter. Foreign Currency Transactions For the Company's foreign subsidiaries, the functional currency has been determined to be the local currency, and therefore, assets and liabilities are translated at year end exchange rates, and income statement items are translated at average exchange rates prevailing during the year. Such translation adjustments are recorded in aggregate as a component of stockholders' equity. Gains and losses from foreign currency denominated transactions are included in other income (expense) and were not material in 1995, 1996 or 1997. Financial instruments, principally forward pricing contracts, are used by the Company in the management of its foreign currency exposures. Gains and losses on foreign currency transaction hedges are recognized in income and offset the foreign exchange gains and losses on the underlying transactions. The Company does not hold or issue derivative financial instruments for trading purposes. Fair Value of Financial Instruments Cash, accounts receivable, accounts payable, accrued liabilities and other liabilities are stated at cost which approximates fair value due to the short- term maturity of these instruments. F-8

PERVASIVE SOFTWARE INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED) Concentration of Credit Risk Financial instruments which potentially subject the Company to concentrations of credit risk consist of short-term investments and trade receivables. The Company's short-term investments, which are included in cash and cash equivalents for reporting purposes, are placed with high credit quality financial institutions and issuers. The Company performs periodic credit evaluations of its customers' financial condition and generally does not require collateral. Estimated credit losses are provided for in the financial statements and historically have been within management's expectations. For the year ended June 30, 1995, Customers A and B accounted for $973,000 and $1,335,000, respectively, of the Company's total revenues. For the year ended June 30, 1996, Customer C accounted for $2,390,000 of the Company's total revenues. For the year ended June 30, 1997, Customers C and D accounted for $2,530,000 and $4,530,000, respectively, of the Company's total revenues. No other customers accounted for more than 10% of the Company's revenues during the years ended June 30, 1995, 1996 or 1997. Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. Net Income (Loss) Per Share The Company's historical capital structure is not indicative of its prospective structure due to the automatic conversion of all shares of convertible preferred stock into common stock concurrent with the closing of the Company's anticipated initial public offering. Accordingly, historical net income (loss) per share is not considered meaningful and has not been presented herein. Instead, a pro forma calculation assuming the conversion of all outstanding shares of convertible preferred stock into common stock upon the Company's initial public offering using the if-converted method is presented. Pro forma net income (loss) per share is computed using the weighted average number of shares of common stock and dilutive common equivalent shares from convertible preferred stock (using the if-converted method) and from stock options (using the treasury stock method). Pursuant to Securities and Exchange Commission Staff Accounting Bulletins, common stock and common equivalent shares issued by the Company during the 12-month period prior to the proposed offering (See Note 14) have been included in the calculation (using the treasury stock method at an assumed public offering price) as if they were outstanding for all periods presented regardless of whether they are dilutive. Recently Issued Accounting Standard In February 1997, the Financial Accounting Standards Board issued Statement No. 128, Earnings Per Share (Statement 128), which is required to be adopted for financial statements issued for periods ending after December 15, 1997. At that time, the Company will be required to change the method currently used to compute earnings per share and to restate all prior periods. Under the new requirements, the presentation of primary earnings per share is replaced with a presentation of basic earnings per share, the calculation of which excludes the dilutive effect of common stock equivalents. The adoption of Statement 128 is expected to result in a basic earnings (loss) per share of $0.89 for the year ended June 30, 1997. Compared to pro forma earnings per share as currently presented, the adoption of Statement 128 results in an increase of $0.77 per share for 1997. There is no impact on the fully diluted earnings per share calculation for the year presented. F-9

PERVASIVE SOFTWARE INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED) Reclassifications Certain reclassifications have been made to prior period's financial statements to conform to the 1997 presentation. 3. PROPERTY AND EQUIPMENT Property and equipment consists of the following (in thousands):
JUNE 30, --------------1996 1997 ------ ------$1,238 $ 2,646 538 932 135 213 ------ ------1,911 3,791 (679) (1,362) ------ ------$1,232 $ 2,429 ====== =======

Computer equipment and purchased software................... Office equipment, furniture and fixtures.................... Leasehold improvements...................................... Less accumulated depreciation and amortization..............

4. INCOME TAXES The components of income (loss) before income taxes and minority interest consist of the following (in thousands):
YEAR ENDED JUNE 30, ---------------------1995 1996 1997 ----- ------- -----Domestic income (loss).............................. $(311) $(3,083) $1,384 Foreign income (loss)............................... (258) 73 926 ----- ------- -----Income (loss) before taxes and minority interest.... $(569) $(3,010) $2,310 ===== ======= ====== Details of the income tax provision consist of the following (in thousands): YEAR ENDED JUNE 30, ---------------------1995 1996 1997 ----- ------- -----$ (61) $ 185 160 551 -14 ------- -----99 750 (157) -----(157) -----$ 593 ======

Income tax provision: Current: Federal......................................... $ 71 Foreign......................................... 129 State........................................... -----Total current................................. 200 Deferred: Federal......................................... (71) ----Total deferred................................ (71) ----$ 129 =====

71 ------71 ------$ 170 =======

The foreign taxes incurred in the years ended June 30, 1995 and 1996 are predominantly withholdings on royalties from foreign countries. F-10

PERVASIVE SOFTWARE INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) 4. INCOME TAXES--(CONTINUED) The Company's provision for income taxes differs from the expected provision (benefit) amount computed by applying the statutory federal income tax rate of 34% to income before income taxes and minority interest for 1995, 1996 and 1997 as a result of the following (in thousands):
YEAR ENDED JUNE 30, --------------------1995 1996 1997 ----- ------- ----$(193) $(1,023) $ 785 129 159 236 189 1,023 (285) --(170) 4 11 27 ----- ------- ----$ 129 $ 170 $ 593 ===== ======= =====

Computed at statutory rate of 34%..................... Foreign income taxed at different rates............... Future benefits not currently recognized.............. Utilization of tax loss and credit carryforward....... Other.................................................

The components of deferred income taxes at June 30, 1996 and 1997 are as follows (in thousands):
JUNE 30, ---------------1996 1997 ------- ------$ 799 -308 352 296 100 ------1,855 (1,698) ------$ 157 =======

Deferred tax assets: Purchased technology, net................................ $ 868 Net operating loss carryforwards......................... 168 Tax credit carryforwards................................. 288 Accrued expenses not deductible for tax purposes......... 114 Revenue deferred for financial purposes.................. 671 Other.................................................... 17 ------Total deferred tax assets.............................. 2,126 Valuation allowance for deferred tax assets................ (2,126) ------Net deferred tax assets................................ $ -=======

Management believes that, based on a number of factors, significant uncertainty exists regarding realization of the Company's deferred tax assets. These factors include the lack of a significant history of profits, recent increases in expense levels to support the Company's growth and the fact that the Company competes in an intensely competitive market subject to rapid change. Accordingly, the Company has recorded a valuation allowance to the extent deferred tax assets exceed the potential benefit from carryback of deferred items to offset current or prior year taxable income. As of June 30, 1997, the Company has a foreign tax credit carryforward of approximately $308,000, which will begin to expire in the year ending June 30, 1999. 5. EMPLOYEE BENEFITS Effective January 1, 1995, the Company's employees were offered health and dental coverage under a partially self-funded plan in which the Company purchases specific stop-loss insurance coverage at $30,000 per year, per employee, and aggregate stop-loss insurance coverage at approximately $212,000 per year. The Company pays a fixed fee per individual covered for administrative costs of the administrator and the cost of F-11

PERVASIVE SOFTWARE INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) 5. EMPLOYEE BENEFITS--(CONTINUED) the stop-loss insurance purchased on the Company's behalf. The Company contributes 100% toward the cost to insure each employee and 75% toward the cost to insure dependents for which coverage is requested by the employee. The Company adopted a 401(k) retirement plan which is available to all domestic, full-time employees beginning in April, 1995. The Company's expenses related to the plan were not significant in the years ended June 30, 1995, 1996 or 1997. 6. COMMON STOCK AND STOCK OPTIONS The Company has adopted the Pervasive Software Inc., First Amended and Restated 1994 Incentive Plan (the 1994 Plan), under which incentive stock options may be granted to employees of the Company entitling them to purchase shares of common stock for a maximum of ten years (five years in the case of options granted to a person possessing more than 10% of the combined voting power of the Company as of the date of grant). The exercise price for incentive stock options may not be less than fair market value of the common stock on the date of the grant (110% of fair market value in the case of options granted to a person possessing more than 10% of the combined voting power of the Company). Nonqualified stock options may be granted to employees, officers, directors, independent contractors and consultants of the Company under the 1994 Plan. The exercise price for nonqualified stock options may not be less than 85% of the fair market value of the common stock on the date of the grant (110% of fair market value in the case of options granted to a person possessing more than 10% of the combined voting power of the Company). The Company may also award Restricted Stock and Stock Appreciation Rights subject to provisions in the Plan. The vesting period for stock options is generally a four-year period. The stock options are exercisable by the holder prior to vesting, however, unvested shares are subject to repurchase by the Company at the exercise price should the employee be terminated or leave the Company prior to vesting in such options. The Company's 1997 Stock Incentive Plan (the 1997 Plan) was adopted by the Board of Directors on May 22, 1997, subject to approval by the stockholders as the successor to the 1994 Plan. Outstanding options under the 1994 Plan will be incorporated into the 1997 Plan and no further option grants will be made under the 1994 Plan. The incorporated options will continue to be governed by their existing terms, unless the Plan Administrator elects to extend one or more features of the 1997 Plan to those options. The Company has elected to follow Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees (APB 25), and related interpretations in accounting for its employee stock options because, as discussed below, the alternative fair value accounting provided for under FASB Statement No. 123, Accounting for Stock-Based Compensation (Statement 123), requires use of option valuation models that were not developed for use in valuing employee stock options. Under APB 25, because the exercise price of the Company's employee stock options equals market price of the underlying stock on the date of grant, no compensation expense is recognized. Pro forma information regarding net income and earnings per share is required by Statement 123, which also requires that the information be determined as if the Company had accounted for its employee stock options granted subsequent to June 30, 1995 under the fair value method prescribed by Statement 123. The Company has evaluated the effects of Statement 123 and determined that it does not have a material effect on the Company's statement of operations or earnings per share. F-12

PERVASIVE SOFTWARE INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) 6. COMMON STOCK AND STOCK OPTIONS--(CONTINUED) A summary of changes in common stock options during the year ended June 30, 1995, 1996 and 1997 is as follows:
WEIGHTED RANGE OF AVERAGE EXERCISE EXERCISE PRICES PRICE ----------- -------$ -$ -0.10- 0.13 0.10 --0.10 0.10 ----------- ----0.10- 0.13 0.10 0.13 0.13 --0.10- 0.13 0.11 ----------- ----0.10- 0.13 0.11 0.13- 4.60 1.17 0.10- 2.00 0.15 0.10- 2.00 0.15 ----------- ----$0.10-$4.60 $0.59 =========== =====

Options outstanding, July 1, 1994........... Granted................................... Exercised................................. Surrendered............................... Options outstanding, June 30, 1995.......... Granted................................... Exercised................................. Surrendered............................... Options outstanding, June 30, 1996.......... Granted................................... Exercised................................. Surrendered............................... Options outstanding, June 30, 1997..........

SHARES ----------2,297,316 -(42,250) ---------2,255,066 644,510 -(108,600) ---------2,790,976 1,094,018 (1,389,611) (235,686) ---------2,259,697 ==========

The following is additional information relating to options outstanding at June 30, 1997:
OPTIONS OUTSTANDING -----------------------------------------------------------------------WEIGHTEDWEIGHTEDAVERAGE NUMBER AVERAGE REMAINING RANGE OF OF EXERCISE CONTRACTUAL EXERCISE PRICE OPTIONS PRICE LIFE OF OPTIONS ------------------------------------------------$0.10 to $0.30 1,676,172 $0.11 7.96 0.60 to 0.90 294,200 0.52 9.53 2.00 to 4.60 289,325 3.21 9.85 -------------------------------------$0.10 to $4.60 2,259,697 $0.11 to $3.21 8.39 ============== ========= ============== ====

Of the options exercised, 670,699 shares remain unvested at June 30, 1997 and may be repurchased by the Company should vesting requirements not be fulfilled. Common stock reserved at June 30, 1997 consists of the following:
For conversion of Preferred Stock................................. For exercise of stock options..................................... 9,713,132 3,428,611 ---------13,141,743 ==========

F-13

PERVASIVE SOFTWARE INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) 7. PREFERRED STOCK At June 30, 1996 and 1997 preferred stock outstanding is as follows (in thousands, except share data):
JUNE 30, ------------1996 1997 ------ -----$1,335 2,691 -----$4,026 ====== $1,500 2,415 -----$3,915 ======

Redeemable convertible preferred stock: Series B; $0.001 par value; 1,335,149 shares authorized, issued and outstanding in 1996 and 1997................... $1,335 Series C; $0.001 par value; 2,213,132 shares authorized, issued and outstanding in 1996 and 1997................... 2,691 -----$4,026 ====== Convertible preferred stock: Series A; $0.001 par value; 1,500,000 shares authorized, issued and outstanding in 1996 and 1997................... $1,500 Series B; $0.001 par value; 4,664,851 shares authorized, issued and outstanding in 1996 and 1997................... 2,415 -----$3,915 ======

During the year ended June 30, 1995, the Company issued 2,213,132 shares of Series C Preferred Stock at $1.23 per share resulting in net proceeds of $2,691,000 including $34,000 of expenses. Concurrent with the issuance of Series C Preferred Stock, the Series C Preferred shareholders also purchased 1,335,149 shares of Series B Preferred Stock from existing Series B Preferred shareholders. There was no preferred stock activity during the years ended June 30, 1996 and 1997. Series A, B and C Preferred shares are subject to the rights, preferences, restrictions and other matters set forth in the Company's Second Amended and Restated Certificate of Incorporation (Articles), effective April 1995, and the Series B and C Preferred Stock Purchase Agreements, Investors' Rights Agreement, Voting Agreement, Amendment to Co-Sale Agreement and Management Rights Agreement, all effective April 1995. The holders of preferred shares are entitled to, among other things, voting rights, non-cumulative dividend rights, liquidation rights and conversion rights. The Series C Preferred shares, and the 1,335,149 shares of Series B Preferred shares held by Series C Preferred shareholders, are redeemable at the Series C Preferred and Series B Preferred Preference Amount, respectively, as defined in the following paragraph, on or after April 19, 2001, but only if certain events have occurred or not occurred as defined in the Articles. Series A Preferred shares and Series B Preferred shares not held by holders of Series C Preferred shares are not redeemable. The holders of each share of Series A, B and C Preferred have the right to one vote for each share of voting common stock into which such Preferred Stock could then be converted, subject to the provisions in the Articles. Holders of Series A, B and C Preferred shares may receive dividends as may be declared by the Board of Directors. In the event of a voluntary or involuntary liquidation, dissolution, or winding up the affairs of the Company, the holders of shares of Series A, B or C Preferred shall be entitled to receive, out of available assets, an amount equal to $1.00 per share for each share of Series A Preferred held (the Series A Preferred Preference Amount), an amount equal to $0.4855 per share for each share of Series B Preferred held (the Series B Preferred Preference Amount) and an amount equal to $1.6812 per share for each share of Series C Preferred held (the Series C Preferred Preference Amount). In each case, the Preferred Preference F-14

PERVASIVE SOFTWARE INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) 7. PREFERRED STOCK--(CONTINUED) Amount is subject to adjustments in the future related to certain events defined in Articles. Further, Series A, B and C Preferred shares may be converted, at the option of the holder, at any time into shares of voting common stock at a rate, presently on a one-to-one basis, subject to formula antidilution adjustments as defined in the Articles. Conversion is automatic upon the closing of a public offering which meets certain defined criteria. 8. INVESTMENT IN BTRIEVE TECHNOLOGIES JAPAN, LTD. In May 1995, the Company acquired a 65.5% controlling interest in a newly formed entity, Btrieve Technologies Japan, Ltd. (Btrieve Japan). Btrieve Japan was formed for the purpose of localization, support and marketing in Japan of the Company's embedded database products for packaged client/server applications. Btrieve Japan's net assets before elimination of intercompany balances at June 30, 1996 and 1997 were approximately $1,700,000 and $2,000,000, respectively. Btrieve Japan has entered into various operating agreements with certain of its minority shareholders in which these certain shareholders provide localization, pre- and post-sales support, management and marketing services. Expenses related to these agreements were $100,000, $590,000 and $616,000 in 1995, 1996 and 1997, respectively. One of the minority shareholders is also a distributor for Btrieve Japan. Sales to this distributor were approximately $320,000, $2,390,000 and $2,530,000 in 1995, 1996 and 1997, respectively. Receivables from this shareholder were $390,000 and $530,000 as of June 30, 1996 and 1997, respectively. 9. LINES OF CREDIT At June 30, 1997, the Company has a $2,000,000 revolving line of credit and a $2,000,000 equipment line of credit with a bank, but at no time has borrowed under such lines. Total borrowings under the revolving line of credit are generally limited to 80% of eligible accounts receivable. The revolving line of credit will expire on March 31, 1998. Borrowings under the equipment line of credit are limited to 80% of eligible equipment purchases during the 1997 calendar year and must be borrowed prior to December 31, 1997. The equipment line of credit must be repaid in 24 equal installments beginning January 31, 1998. Both lines of credit are collateralized by substantially all accounts receivable, inventory and equipment and bear interest at the bank's prime lending rate. On June 30, 1997, the Company had approximately $2,100,000 of borrowing capacity under the two lines. 10. COMMITMENTS AND CONTINGENCIES The Company leases office space under a lease with an unrelated party. The Company is obligated for its proportionate share of utilities and other defined operating expenses of the building. Office rent expense for the year ended June 30, 1995, 1996 and 1997, was approximately $318,000, $451,000 and $573,000, respectively. Future minimum lease payments at June 30, 1997 under the operating lease for office space are as follows (in thousands):
1998.................... $ 539 1999.................... 528 2000.................... 224 -----$1,291 ======

The lease for office space includes one option to renew the lease for an additional five year period and is partially collateralized by a letter of credit in the amount of $126,000 to and in favor of the landlord. F-15

PERVASIVE SOFTWARE INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) 10. COMMITMENTS AND CONTINGENCIES--(CONTINUED) In connection with the acquisition of technology rights and other intangible assets from Novell, the Company agreed to pay a deferred royalty equal to 5% of the Company's net revenues, up to a maximum royalty of $1,100,000. Payments for royalties earned in each calendar quarter are due two years after the end of each calendar quarter. The total estimated royalty of $950,000, net of an imputed interest discount of $150,000, was recorded at the acquisition date. Royalty payments to be paid to Novell will be approximately $708,000 in 1998 at which time the Company will have paid the maximum amount and will have no further obligations. 11. FOREIGN CURRENCY SWAP AGREEMENT The Company has entered into foreign currency swap contracts to minimize foreign exchange exposure related to yen-denominated intercompany transactions. At June 30, 1995, the notional amount of the foreign currency contract outstanding was approximately $1.4 million and matured in 1996. At June 30, 1996, there were no foreign currency contracts outstanding. At June 30, 1997, the notional amount of the foreign currency contract outstanding was approximately $224,000 and matures in 1999. Gains and losses on currency swaps were not material to the consolidated financial statements as of June 30, 1995, 1996 and 1997. 12. SEGMENTS OF BUSINESS AND GEOGRAPHIC AREA INFORMATION The Company is engaged in the design, development and marketing of embedded database products for packaged client/server applications. The Company considers its business activities to constitute a single segment of business. A summary of the Company's operations by geographic area follows:
YEAR ENDED JUNE 30, ------------------------1995 1996 1997 ------ -------- ------$ 7,747 $16,135 4,693 -790 ------21,618 -2,863 ------$24,481 ======= $ 5,054 (3,562) 763 ------$ 2,255 ======= $ 6,644 810 2,991 ------$10,445 =======

Revenue: United States Domestic...................................... $5,050 Export Europe....................................... 1,591 Japan........................................ 1,335 Rest of World................................ 304 -----Total United States......................... 8,280 Europe......................................... -Japan.......................................... 321 -----Total....................................... $8,601 ====== Operating income (loss): United States.................................. $ (397) Europe......................................... -Japan.......................................... (258) -----Total....................................... $ (655) ====== Identifiable assets: United States.................................. $5,814 Europe......................................... -Japan.......................................... 2,666 -----Total....................................... $8,480 ======

2,716 -588 -------11,051 -2,425 -------$13,476 ======== $ (267) (2,918) 76 -------$ (3,109) ========

$

5,646 392 1,433 -------$ 7,471 ========

F-16

PERVASIVE SOFTWARE INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) 13. STATEMENTS OF CASH FLOWS The increase in current assets reflected in the statements of cash flows is comprised of the following (in thousands):
YEAR ENDED JUNE 30, ----------------------1995 1996 1997 ------- ------- ----$(1,036) $(1,485) $(259) 593 --(126) 123 (19) (602) (301) (130) ------- ------- ----$(1,171) $(1,663) $(408) ======= ======= =====

Increase Decrease Decrease Increase

in trade accounts receivable.............. in Novell receivable...................... (increase) in inventory................... in prepaid expenses and other.............

The increase in accounts payable and accrued liabilities reflected in the statements of cash flows is comprised of the following (in thousands):
YEAR ENDED JUNE 30, -------------------1995 1996 1997 ----- ----- -----Increase (decrease) in trade accounts payable......... $ 721 $(126) $ 342 Increase in accrued payroll and payroll related costs................................................ 181 213 57 Increase in income taxes refundable/payable........... (321) 311 301 Increase in accrued expenses.......................... 405 480 1,385 ----- ----- -----$ 986 $ 878 $2,085 ===== ===== ====== Supplemental disclosures: Interest paid during the year....................... $ -$ -$ -===== ===== ====== Income taxes paid (refunded) during the year: Domestic.......................................... $ 392 $(316) $ 376 ===== ===== ====== Foreign........................................... $ 129 $ 159 $ -===== ===== ======

14. SUBSEQUENT EVENT On July 18, 1997, the Board of Directors authorized management of the Company to file a registration statement with the Securities and Exchange Commission permitting the Company to sell shares of its common stock to the public. If the offering is consummated under the terms presently anticipated, all of the currently outstanding preferred stock will convert to 9,713,132 shares of common stock. Unaudited pro forma stockholders' equity as adjusted for the conversion of the preferred stock is set forth in the accompanying consolidated balance sheet and Consolidated Statements of Changes in Redeemable Convertible Preferred Stock and Stockholders' Equity (Deficit). The shareholders of the Company will consider an amendment to the Articles to change the number of authorized shares of common stock to 75,000,000 shares of common stock and 5,000,000 shares of preferred stock upon closing of the offering. F-17

PERVASIVE SOFTWARE

PART II INFORMATION NOT REQUIRED IN PROSPECTUS ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION The following table sets forth the costs and expenses, other than underwriting discounts and commissions, payable by the Company in connection with the sale of Common Stock being registered. All amounts are estimates except the SEC registration fee and the NASD filing fees.
SEC Registration fee.................................................. $ NASD fee.............................................................. Nasdaq National Market listing fee.................................... Printing and engraving expenses....................................... Legal fees and expenses............................................... Accounting fees and expenses.......................................... Blue sky fees and expenses............................................ Transfer agent fees................................................... Miscellaneous fees and expenses....................................... ----Total............................................................. $ =====

ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS Section 145 of the Delaware General Corporation Law authorizes a court to award or a corporation's Board of Directors to grant indemnification to directors and officers in terms sufficiently broad to permit such indemnification under certain circumstances for liabilities (including reimbursement for expenses incurred) arising under the Securities Act of 1933, as amended (the "Securities Act"). Article VII, Section 6, of the Registrant's Bylaws provides for mandatory indemnification of its directors and officers and permissible indemnification of employees and other agents to the maximum extent permitted by the Delaware General Corporation Law. The Registrant's Certificate of Incorporation provides that, pursuant to Delaware law, its directors shall not be liable for monetary damages for breach of the directors' fiduciary duty as directors to the Company and its stockholders. This provision in the Certificate of Incorporation does not eliminate the directors' fiduciary duty, and in appropriate circumstances equitable remedies such as injunctive or other forms of non-monetary relief will remain available under Delaware law. In addition, each director will continue to be subject to liability for breach of the director's duty of loyalty to the Company for acts or omissions not in good faith or involving intentional misconduct, for knowing violations of law, for actions leading to improper personal benefit to the director, and for payment of dividends or approval of stock repurchases or redemptions that are unlawful under Delaware law. The provision also does not affect a director's responsibilities under any other law, such as the federal securities laws or state or federal environmental laws. The Registrant has entered into Indemnification Agreements with its officers and directors, a form of which is attached as Exhibit 10.1 hereto and incorporated herein by reference. The Indemnification Agreements provide the Registrant's officers and directors with further indemnification to the maximum extent permitted by the Delaware General Corporation Law." The Registrant maintains $ million of directors and officers liability insurance. Reference is made to Section 8 of the Underwriting Agreement contained in Exhibit 1.1 hereto, indemnifying officers and directors of the Registrant against certain liabilities. ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES On April 19, 1995, the Company issued and sold 2,213,132 shares of its Series C Preferred Stock to Austin Ventures IV-A, L.P., Austin Ventures IV-B, L.P., Technologies for Information and Publishing, L.P., II-1

Technologies for Information and Entertainment, L.P. and Triad Ventures Limited, II for an aggregate purchase price of $2,725,029.42. The issuance described above was deemed to be exempt from registration under the Securities Act in reliance on Section 4(2) of such Act as a transaction by an issuer not involving any public offering. In addition, the recipients of securities in such transaction represented their intentions to acquire the securities for investment only and not with a view to or for sale in connection with any distribution thereof and appropriate legends were affixed to the share certificates issued in such transaction. To the Registrant's knowledge, all recipients had adequate access, through their relationships with the Registrant, to information about the Registrant. II-2

ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES (A) EXHIBITS
EXHIBIT NO DESCRIPTION -------------------1.1* Form of Underwriting Agreement (preliminary form) 3.1 Certificate of Incorporation of the Registrant, as amended to date 3.2 Form of Restated Certificate of Incorporation to be filed upon the closing of the offering made hereby 3.3 Bylaws of the Registrant 3.4 Form of Bylaws to be filed upon the closing of the offering made hereby 4.1 Reference is made to Exhibits 3.1, 3.2, 3.3, 3.4 and 4.3 4.2* Specimen Common Stock certificate 4.3 Investors' Rights Agreement dated April 19, 1995, between the Registrant and the investors named therein 5.1* Opinion of Gunderson Dettmer Stough Villeneuve Franklin & Hachigian, LLP 10.1 Form of Indemnification Agreement 10.2* 1997 Stock Incentive Plan 10.3* Employee Stock Purchase Plan 10.4 First Amended and Restated 1994 Incentive Plan 10.5 Amendment and Restatement of Credit Agreement dated March 31, 1997 between the Registrant and Texas Commerce Bank National Association 10.6 Lease Agreement dated October 5, 1994 between the Registrant and Colina West Limited 10.7 First Amendment to Lease Agreement dated September 8, 1995 between the Registrant and Colina West Limited 10.8 Sublease Agreement dated December 10, 1996 between the Registrant and Reynolds, Loeffler & Dowling, P.C. 11.1 Computation of Earnings Per Share 21.1 Subsidiaries of the Registrant 23.1 Consent of Ernst & Young LLP, Independent Auditors (see page II-6) 23.2* Consent of Counsel. Reference is made to Exhibit 5.1 24.1 Power of Attorney (see page II-5) 27.1 Financial Data Schedule

* To be filed by amendment. (B) FINANCIAL STATEMENT SCHEDULES Report of Ernst & Young, LLP, Independent Auditors, on Financial Statement Schedule Schedule II--Valuation and Qualifying Accounts Schedules not listed above have been omitted because the information required to be set forth therein is not applicable or is shown in the financial statements or notes thereto. ITEM 17. UNDERTAKINGS The Registrant hereby undertakes to provide to the Underwriters at the closing specified in the Underwriting Agreement, certificates in such denominations and registered in such names as required by the Underwriters to permit prompt delivery to each purchaser. II-3

Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the Registrant pursuant to the Delaware General Corporation Law, the Certificate of Incorporation or the Bylaws of the Registrant, the Underwriting Agreement, or otherwise, the Registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act, and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer, or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered hereunder, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question of whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue. The Registrant hereby undertakes that: (1) For purposes of determining any liability under the Securities Act, the information omitted from the form of Prospectus filed as part of this Registration Statement in reliance upon Rule 430A and contained in a form of Prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this Registration Statement as of the time it was declared effective. (2) For the purpose of determining any liability under the Securities Act, each post-effective amendment that contains a form of Prospectus shall be deemed to be a new Registration Statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. II-4

SIGNATURES PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THE REGISTRANT HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF AUSTIN, STATE OF TEXAS, ON THIS DAY OF , 1997. Pervasive Software Inc. By: _________________________________ RON R. HARRIS PRESIDENT AND CHIEF EXECUTIVE OFFICER POWER OF ATTORNEY KNOW ALL PERSONS BY THESE PRESENTS, that each individual whose signature appears below constitutes and appoints Ron R. Harris and James R. Offerdahl, and each of them, his true and lawful attorneys-in-fact and agents with full power of substitution, for him and in his name, place and stead, in any and all capacities, to sign any and all amendments (including post-effective amendments) to this Registration Statement, and to sign any registration statement for the same offering covered by this Registration Statement that is to be effective upon filing pursuant to Rule 462(b) promulgated under the Securities Act of 1933, and all post-effective amendments thereto, and to file the same, with all exhibits thereto and all documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in- fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them, or his or their substitute or substitutes, may lawfully do or cause to be done by virtue hereof. PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THIS REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE CAPACITIES AND ON THE DATES INDICATED:
SIGNATURE ------------------------------------RON R. HARRIS TITLE President, Chief Executive Officer and Director (Principal Executive Officer) Chief Financial Officer, Vice President, Administration and Secretary (Principal Financial and Accounting Officer) Director DATE , 1997

------------------------------------JAMES R. OFFERDAHL

, 1997

------------------------------------DOUGLAS W. WOODWARD

, 1997

II-5

SIGNATURE ------------------------------------NANCY R. WOODWARD ------------------------------------JOSEPH C. ARAGONA ------------------------------------DAVID A. BOUCHER ------------------------------------DAVID R. BRADFORD ------------------------------------SHELBY H. CARTER, JR.

TITLE Director

DATE , 1997

Director

, 1997

Director

, 1997

Director

, 1997

Director

, 1997

II-6

REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS, ON FINANCIAL STATEMENT SCHEDULE We have audited the consolidated financial statements of Pervasive Software Inc. as of June 30, 1997 and 1996, and for each of the three years in the period ended June 30, 1997, and have issued our report thereon dated July 24, 1997, except for Note 14, as to which the date is August , 1997 (included elsewhere in this Registration Statement). Our audits also included the financial statement schedule listed in Item 16(b) of this Registration Statement. This schedule is the responsibility of the Company's management. Our responsibility is to express an opinion based on our audits. In our opinion, the financial statement schedule referred to above, when considered in relation to the basic financial statements taken as whole, presents fairly in all material respects the information set forth therein. Austin, Texas August , 1997 The foregoing report is in the form that will be signed when our report on the consolidated financial statements has been signed. The report on the consolidated financial statements will be signed when the per share price for the public offering of common stock referred to in Note 14 of the Notes to Consolidated Financial Statements is known and the effect on the Consolidated Financial Statements, if any, has been adjusted to reflect such price.
/s/ Ernst & Young LLP Austin, Texas July 24, 1997

SCHEDULE II PERVASIVE SOFTWARE INC. VALUATION AND QUALIFYING ACCOUNTS
ADDITIONSBALANCE AT CHARGED BEGINNING TO COSTS AND OF PERIOD EXPENSES ----------- -----------$ - $ 100,000 823,000 256,000 1,079,000 1,047,000 2,126,000 DEDUCTIONSWRITE-OFFS BALANCE AT CHARGED TO END OF ALLOWANCE PERIOD ----------- ----------$ - $ 100,000 1,079,000 2,126,000 428,000 1,698,000

FISCAL YEAR -----1995 1996 1997 1995 1996 1997

DESCRIPTION -----------------------------------------Allowance for doubtful accounts Allowance for doubtful accounts Allowance for doubtful accounts Valuation allowance for deferred tax asset Valuation allowance for deferred tax asset Valuation allowance for deferred tax asset

2

Exhibit 3.1 SECOND AMENDED AND RESTATED CERTIFICATE OF INCORPORATION OF BTRIEVE TECHNOLOGIES, INC. The Corporation's original Certificate of Incorporation was filed with the Secretary of State of the State of Delaware on January 12, 1994 and was amended and restated by filing with the Secretary of State of the State of Delaware on April 26, 1994. This Second Amended and Restated Certificate of Incorporation was duly adopted in accordance with the provisions of Section 245 of the General Corporation Law of Delaware, as amended (the "Delaware Law"). I. The name of the Corporation is Btrieve Technologies, Inc. (the "Corporation"). II. The address of the Corporation's registered office in the State of Delaware is Corporation Trust Center, 1209 Orange Street, in the City of Wilmington, County of New Castle, Delaware 19801. The name of its registered agent at such address is The Corporation Trust Company. III. The purpose of the Corporation is to engage in any lawful act or activity for which a corporation may be organized under the Delaware Law. IV. A. The Corporation is authorized to issue a total of 24,713,132 shares of two classes of stock: 15,000,000 shares of Common Stock ($.001 par value) and 9,713,132 shares of Preferred Stock. B. Holders of Common Stock are entitled to one vote per share on any matter submitted to the stockholders. On dissolution of the Corporation, after any preferential amount with respect to the Series A Preferred, Series B Preferred and Series C Preferred (as defined below), and to the Common Stock, has been paid or set aside, the holders of Common Stock and the holders of any Series A Preferred, Series B Preferred and Series C Preferred entitled to participate in the distribution of assets are entitled to receive the net assets of the Corporation. 1

C. There shall be three series of Preferred Stock consisting of 1,500,000 shares of Series A Preferred Stock, $.001 par value ("Series A Preferred"), 6,000,000 shares of Series B Preferred Stock, $.001 par value ("Series B Preferred") and 2,213,132 shares of Series C Preferred Stock, $.001 par value ("Series C Preferred"). The Series A Preferred, the Series B Preferred and the Series C Preferred shall be referred to collectively herein as the "Preferred Stock." 1. Voting Rights. (a) Each holder of Preferred Stock shall be entitled to vote on all matters and, except as otherwise expressly provided herein, shall be entitled to the number of votes equal to the largest whole number of shares of Common Stock into which such shares of Preferred Stock could be converted, pursuant to the provisions of this Section C, on the record date for the determination of the stockholders entitled to vote on such matters or, if no such record date is established, in accordance with Delaware Law. Except as otherwise expressly provided herein or as required by law, the holders of Preferred Stock and the holders of Common Stock shall vote together and not as separate classes. (b) Each holder of Series A Preferred shall be entitled to one vote for each share thereof held, the Series A Preferred voting as a single class separate from the Common Stock and any other series of preferred stock, with respect to any of the following matters: (i) the creation or designation of any class or series of securities of the Corporation having rights senior to or pari passu with the Series A Preferred as to dividend or liquidation preference or as to redemption preference in the event that funds are not legally available to satisfy such redemption preference as to all classes of stock entitled to the benefit thereof, or the issuance of any other security convertible into or exchangeable for shares of such class or series; (ii) any increase in the number of authorized shares of Series A Preferred or any material or adverse change to the rights, preferences or privileges of the Series A Preferred; (iii) any sale or other conveyance by the Corporation or any of its subsidiaries of all or substantially all of the Corporation's total assets, any merger or consolidation of the Corporation with any other person, other than a merger or consolidation which would result in the capital stock of the Corporation outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into capital stock of the surviving entity) fifty percent (50%) or more of the total voting power represented by the capital stock of the Corporation or such surviving entity outstanding immediately after such merger or consolidation, any sale of more than fifty percent (50%) of the Corporation's capital stock, or any sale of securities of any of the Corporation's subsidiaries; (iv) the payment of any dividends on Common Stock or Preferred Stock; 2

(v) redemption or repurchase in a single transaction or series of related transactions of more than 5% of any outstanding capital stock (except for repurchases pursuant to the Corporation's employee stock option and stock purchase plans or pursuant to the provisions of Section 5(a)(ii) hereof); or (vi) any other matter as to which the Series A Preferred shall be entitled to vote as a separate class, or in a single class with other classes of voting stock, to the extent required by applicable law. (c) Each holder of Series B Preferred shall be entitled to one vote for each share thereof held, the Series B Preferred voting as a single class separate from the Common Stock and any other series of preferred stock, with respect to any of the following matters: (i) the creation or designation of any class or series of securities of the Corporation having rights senior to or pari passu with the Series B Preferred as to dividend or liquidation preference or as to redemption preference in the event that funds are not legally available to satisfy such redemption preference as to all classes of stock entitled to the benefit thereof, or the issuance of any other security convertible into or exchangeable for shares of such class or series; (ii) any increase in the number of authorized shares of Series B Preferred or any material or adverse change to the rights, preferences or privileges of the Series B Preferred; (iii) any sale or other conveyance by the Corporation or any of its subsidiaries of all or substantially all of the Corporation's total assets, any merger or consolidation of the Corporation with any other person, other than a merger or consolidation which would result in the capital stock of the Corporation outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into capital stock of the surviving entity) fifty percent (50%) or more of the total voting power represented by the capital stock of the Corporation or such surviving entity outstanding immediately after such merger or consolidation, any sale of more than fifty percent (50%) of the Corporation's capital stock, or any sale of securities of any of the Corporation's subsidiaries; (iv) the payment of any dividends on Common Stock or Preferred Stock; (v) redemption or repurchase of any outstanding capital stock (except for repurchases pursuant to the Corporation's employee stock option and stock purchase plans or pursuant to the provisions of Section 5(a)(ii) hereof); or (vi) any other matter as to which the Series B Preferred shall be entitled to vote as a separate class, or in a single class with other classes of voting stock, to the extent required by applicable law. 3

(d) Each holder of Series C Preferred shall be entitled to one vote for each share thereof held, the Series C Preferred voting as a single class separate from the Common Stock and any other series of preferred stock, with respect to any of the following matters: (i) the creation or designation of any class or series of securities of the Corporation having rights senior to or pari passu with the Series C Preferred as to dividend or liquidation preference or as to redemption preference in the event that funds are not legally available to satisfy such redemption preference as to all classes of stock entitled to the benefit thereof, or the issuance of any other security convertible into or exchangeable for shares of such class or series; (ii) any increase in the number of authorized shares of Series C Preferred or any material or adverse change to the rights, preferences or privileges of the Series C Preferred; (iii) any sale or other conveyance by the Corporation or any of its subsidiaries of all or substantially all of the Corporation's total assets, any merger or consolidation of the Corporation with any other person, other than a merger or consolidation which would result in the capital stock of the Corporation outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into capital stock of the surviving entity) fifty percent (50%) or more of the total voting power represented by the capital stock of the Corporation or such surviving entity outstanding immediately after such merger or consolidation, any sale of more than fifty percent (50%) of the Corporation's capital stock, or any sale of securities of any of the Corporation's subsidiaries; (iv) the payment of any dividends on Common Stock or Preferred Stock; (v) redemption or repurchase of any outstanding capital stock (except for repurchases pursuant to the Corporation's employee stock option and stock purchase plans or pursuant to the provisions of Section 5(a)(ii) hereof); or (vi) any other matter as to which the Series C Preferred shall be entitled to vote as a separate class, or in a single class with other classes of voting stock, to the extent required by applicable law. (e) Except as otherwise required by Delaware Law, with respect to any vote relating to an event described in Section C.1(b), (c) and (d), approval of such event shall require the affirmative vote of a majority of the outstanding shares of Series A Preferred, Series B Preferred, and Series C Preferred and a majority of Common Stock voting thereon, as applicable, as separate classes. 4

2. Dividend Rights. The holders of the Series A Preferred, Series B Preferred, Series C Preferred and the Common Stock will be entitled to receive, in any calendar year, such dividends as may be declared by the Board of Directors, out of any funds legally available therefor; provided, however, no dividends (other than those payable solely in the Common Stock of the Corporation) shall be paid on any Common Stock of the Corporation unless the Corporation has paid, or declared and set apart, for any one or more current or prior fiscal years of the Corporation, aggregate dividends on each share of Preferred Stock then outstanding (as adjusted for any stock dividends, combinations or splits with respect to such shares), in the following amounts:
Series A Preferred Stock: Series B Preferred Stock: Series C Preferred Stock: $1.00 per share $0.4855 per share $1.6812 per share

No right shall accrue to holders of shares of Series A Preferred, Series B Preferred or Series C Preferred by reason of the fact that dividends on said shares are not declared in any prior year. Any unpaid dividend shall not bear or accrue any interest. 3. Liquidation Rights. (a) In the event of a voluntary or involuntary liquidation, dissolution, or winding up of the Corporation, the holders of record of shares of Series A Preferred, Series B Preferred and Series C Preferred shall be entitled to receive, out of the assets of the Corporation legally available therefor, (i) an amount equal to $1.00 per share for each share of Series A Preferred held by them (the "Series A Preferred Preference Amount"), (ii) an amount equal to $0.4855 per share for each share of Series B Preferred held by them (the "Series B Preference Amount") and (iii) an amount equal to $1.6812 per share for each share of Series C Preferred held by them (the "Series C Preferred Preference Amount"), in each case, as appropriately adjusted for stock splits, stock dividends, recapitalizations and the like (collectively, "Recapitalization Event"), plus all accrued and unpaid dividends, if any, on account of shares of Series A Preferred, Series B Preferred and Series C Preferred, before any payment shall be made or any assets distributed to the holders of shares of Common Stock. If upon the occurrence of such event the assets and property thus distributed among the holders of the Series A Preferred, Series B Preferred and Series C Preferred shall be insufficient to permit the payment to such holders of the full preferential amounts aforesaid, then the entire assets and property of the Corporation legally available for distribution shall be allocated among the holders of Preferred Stock in proportion to the aggregate liquidation preferences of the respective series, and pro rata within each series. (b) In the event of a voluntary or involuntary liquidation, dissolution, or winding up of the Corporation, and subject to the payment in full of the liquidation preferences with respect to the Preferred Stock as provided in Section C.3(a), the holders of record of Common Stock shall be entitled to receive, prior and in preference to any further distribution of any of the assets or surplus funds of the Corporation to the holders of Preferred 5

Stock by reason of their ownership thereof, an amount equal to the amount at which each share of Common Stock held by such holder was originally issued by the Corporation (the Corporation's books and records being conclusive evidence of such amount), (as adjusted for any stock dividends, combinations or splits with respect to such shares) for each share of Common Stock then held by them. Subject to the payment in full of the liquidation preferences with respect to the Preferred Stock, as provided in Section C.3(a), if upon the occurrence of such event, the assets and funds thus distributed among the holders of the Common Stock shall be insufficient to permit the payment to such holders of the full aforesaid preferential amount, then the entire remaining assets and funds of the Corporation legally available for distribution shall be distributed among the holders of the Common Stock in proportion to the shares of Common Stock then held by them. (c) After payment to the holders of record of the shares of Series A Preferred, Series B Preferred, Series C Preferred and Common Stock of the foregoing amounts, the remaining assets of the Corporation shall be distributed in like amounts per share to the holders of record of the Corporation's stock, each share of Preferred Stock being treated as the number of shares of Common Stock into which it could then be converted for such purpose. (d) A consolidation or merger of the Corporation with or into any other corporation or corporations, or a sale of all or substantially all of the assets of the Corporation, shall be deemed to be a liquidation, dissolution or winding up within the meaning of this Section C.3, unless (i) the Corporation is the sole surviving corporation in such merger, (ii) the holders of Series A Preferred, Series B Preferred and Series C Preferred, respectively, have substantially identical designations, preferences, limitations, and relative rights, immediately after the merger as they held immediately prior to the merger, (iii) the voting power of the number of voting shares outstanding immediately after the merger, plus the number of voting shares issuable as a result of the merger (either by conversion of securities issued pursuant to the merger or the exercise of rights to purchase securities issued pursuant to the merger), will not exceed by more than 33 1/3% the voting power of the total number of voting shares of the Corporation outstanding immediately prior to the merger, and (iv) the number of participating shares outstanding immediately after the merger, plus the number of participating shares issuable as a result of the merger (either by conversion of securities issued pursuant to the merger or the exercise of rights to purchase securities issued pursuant to the merger), will not exceed by more than 33 1/3% the total number of participating shares of the Corporation outstanding immediately before the merger. As used in this Section C.3, "voting shares" means shares that entitle the holders thereof to vote unconditionally in elections of directors, and "participating shares" means shares that entitle the holders thereof to participate without limitation in distributions by the Corporation. 6

4. Conversion Rights. (a) Right to Convert. (i) Optional Conversion. (A) Each share of Series A Preferred shall be convertible, at the option of the holder thereof, at the office the Corporation or any transfer agent for the Series A Preferred, into Common Stock. The number of shares of Common Stock into which one share of Series A Preferred will be converted will be equal to $1.00 (the "Series A Original Purchase Price") divided by the Series A Conversion Price (as hereinafter defined) then in effect, such conversion ratio being referred to as the "Series A Conversion Rate." The initial Series A Conversion Price will be the Series A Original Purchase Price and will be subject to adjustment as provided herein. Upon any decrease or increase of the Series A Conversion Price or the Series A Conversion Rate as described in this Section C.4, the Series A Conversion Rate or Series A Conversion Price, as the case may be, will be increased or decreased appropriately. (B) Each share of Series B Preferred shall be convertible, at the option of the holder thereof, at the office of the Corporation or any transfer agent for the Series B Preferred, into Common Stock. The number of shares of Common Stock into which one share of Series B Preferred will be converted will be equal to $.4855 (the "Series B Original Purchase Price") divided by the Series B Conversion Price (as hereinafter defined) then in effect, such conversion ratio being referred to as the "Series B Conversion Rate." The initial Series B Conversion Price will be the Series B Original Purchase Price and will be subject to adjustment as provided herein. Upon any decrease or increase of the Series B Conversion Price or the Series B Conversion Rate as described in this Section C.4, the Series B Conversion Rate or Series B Conversion Price, as the case may be, will be increased or decreased appropriately. (C) Each share of Series C Preferred shall be convertible, at the option of the holder thereof, at the office of the Corporation or any transfer agent for the Series C Preferred, into Common Stock. The number of shares of Common Stock into which one share of Series C Preferred will be converted will be equal to $1.2313 (the "Series C Original Purchase Price") divided by the Series C Conversion Price (as hereinafter defined) then in effect, such conversion ratio being referred to as the "Series C Conversion Rate." The initial Series C Conversion Price will be the Series C Original Purchase Price and will be subject to adjustment as provided herein. Upon any decrease or increase of the Series C Conversion Price or the Series C Conversion Rate as described in this Section C.4, the Series C Conversion Rate or Series C Conversion Price, as the case may be, will be increased or decreased appropriately; and concurrent therewith, a holder of Series C Preferred who also is the holder of Series B Preferred, shall be subject to an additional adjustment with respect to the Series C Conversion Rate in an amount, subject to the following sentence, sufficient to cause the aggregate number of shares of Common Stock issuable upon conversion of the Series B Preferred and the Series C Preferred, to equal the number of shares of Common Stock that would be issuable if such Series B Preferred had the same Conversion Rate as then applied to the 7

Series C Preferred. The right of a holder of Series C Preferred described in the immediately preceding clause shall be limited to 0.6033 shares of Series B Preferred for each one share of Series C Preferred held (in each case, as adjusted for any stock dividends, combinations or splits with respect to such shares). (ii) Automatic Conversion of Preferred Stock. Each share of Preferred Stock will be converted into shares of Common Stock at the then effective Conversion Rate for such Series immediately upon the closing of the sale of stock pursuant to a registration statement under the Securities Act of 1933, as amended, for a firmly underwritten public offering (other than a registration on Form S-8, Form S-4 or comparable forms) of the Corporation's Common Stock that results in aggregate cash proceeds (prior to underwriters' commissions and expenses) to the Corporation of an amount equal to or more than $15,000,000, and that has a public offering price of not less than $3.75 per share (as adjusted for any Recapitalization Events). (iii) Fractional Shares Upon Conversion. No fractional shares of Common Stock will be issued upon conversion of Preferred Stock, and any fractional share that otherwise would result from conversion by a holder of all of such holder's shares of Preferred Stock (in the aggregate) will be redeemed by payment in an amount equal to such fraction of the then effective Conversion Price as promptly as funds legally are available therefor. (b) Mechanics of Conversion. Any holder of Preferred Stock wishing to convert shares of Preferred Stock into Common Stock pursuant to Section C.4(a)(i) shall surrender the certificate or certificates therefor, duly endorsed, at the office of the Corporation or any transfer agent for the Preferred Stock and will give the Corporation written notice stating the name or names in which the holder wishes the certificate or certificates for shares of Common Stock to be issued. Any conversion pursuant to Section C.4(a)(i) shall be deemed to be effective for all purposes upon receipt by the Corporation or a transfer agent for the Preferred Stock of such certificates, duly endorsed, and such written notice and shall be deemed to have been made immediately prior to the close of business on the date thereof. As soon as practicable after the effectiveness of any conversion of Preferred Stock and receipt by the Corporation or the appropriate transfer agent of certificates representing such Preferred Stock, duly endorsed, together with written notice stating the name or names in which the holder wishes the certificate or certificates for shares of Common Stock to be issued, the Corporation shall cause to be issued and delivered pursuant to the written instructions of the holder of the converted Preferred Stock certificates representing the Common Stock into which such Preferred Stock has been converted; provided, however, that the Corporation shall not be required to issue certificates for Common Stock in any name other than that of the holder in the absence of assurances reasonably satisfactory to the Corporation that all stamp and other transfer taxes relating to the transfer of such securities have been or will be paid. Notwithstanding any issuance or lack thereof of certificates representing Common Stock, from and after the effectiveness of any conversion of Preferred Stock, the person or persons entitled to receive the shares of Common Stock issuable upon conversion shall be treated by the Corporation for all purposes as the record holders of the Common Stock obtainable upon such conversion and shall cease to have any other rights of holders of Series A Preferred, Series B Preferred or Series C Preferred, as the case may be. 8

(c) Adjustment for Subdivisions or Combinations of Common Stock. In the event the corporation at any time or from time to time effects a subdivision or combination of its outstanding Common Stock into a greater or lesser number of shares (a "Recapitalization Event") without a proportionate and corresponding subdivision or combination of Preferred Stock, then the existing Series A Conversion Price, Series B Conversion Price and Series C Conversion Price, as the case may be, will be decreased or increased proportionately. (d) Adjustment for Dividends, Distributions and Common Stock Equivalents. In the event the Corporation at any time or from time to time makes or issues, or fixes a record date for the determination of holders of Common Stock (but not holders of Preferred Stock ) entitled to receive, a dividend or other distribution payable in additional shares of Common Stock or other securities or rights (hereinafter referred to as "Common Stock Equivalents") convertible into or entitling the holder thereof to receive additional shares of Common Stock without payment of any consideration by such holder for such Common Stock Equivalents or the additional shares of Common Stock, then and in each such event the maximum number of shares (as set forth in the instrument relating thereto without regard to any provisions contained therein for a subsequent adjustment of such number) of Common Stock issuable in payment of such dividend or distribution or upon conversion or exercise of such Common Stock Equivalents will be deemed to be issued and outstanding as of the time of such issuance or, in the event such a record date has been fixed, as of the close of business on such record date. In each such event, the then existing Series A Conversion Rate, Series B Conversion Rate and Series C Conversion Rate will be increased as of the time of such issuance or, in the event such a record date has been fixed, as of the close of business on such record date, by multiplying the then effective Conversion Rate by a fraction. (i) the numerator of which will be the total number of shares of Common Stock issued and outstanding immediately prior to the time of such issuance on the close of business on such record date plus the number of shares of Common Stock issuable in payment of such dividend or distribution or upon conversion or exercise of such Common Stock Equivalents, and (ii) the denominator of which will be the total number of shares of Common Stock issued and outstanding immediately prior to the time of such issuance on the close of business on such record date; provided, however, that if such record date has been flied and such dividend is not fully paid or if such distribution is not fully made on the date fixed therefor, the Series A Conversion Rate, Series B Conversion Rate and Series C Conversion Rate will be recomputed accordingly as of the close of business on such record date and thereafter the Series A Conversion Rate, Series B Conversion Rate and Series C Conversion Rate will be adjusted pursuant to this Section C.4(d) as of the time of actual payment of such dividends or distribution. (e) Adjustment for Sale of Additional Stock. If at any time the Corporation issues or sells any Additional Stock (as defined below) without consideration or at a price per share less than the Series A Conversion Price in effect immediately prior to the issuance of such Additional Stock, then and in each such case, the Series A Conversion Price in effect 9

immediately prior to such issuance shall automatically (except as otherwise provided below) be reduced, concurrently with such issue, to a price determined by multiplying such Series A Conversion Price by a fraction, the numerator of which shall be the number of shares of Preferred Stock outstanding immediately prior to such issue plus the number of shares of Preferred Stock which the aggregate consideration received by the Corporation for the total number of shares of Additional Stock so issued would purchase at such Conversion Price; and the denominator of which shall be the number of shares of Preferred Stock outstanding immediately prior to such issue plus the number of such shares of Additional Stock so issued. If at any time the Corporation issues or sells any Additional Stock without consideration or at a price per share less than the Series B Conversion Price in effect immediately prior to the issuance of such Additional Stock, then and in each such case, the Series B Conversion Price in effect immediately prior to such issuance shall automatically (except as otherwise provided below) be reduced, concurrently with such issue, to a price determined by multiplying such Series B Conversion Price by a fraction, the numerator of which shall be the number of shares of Preferred Stock outstanding immediately prior to such issue plus the number of shares of Preferred Stock which the aggregate consideration received by the Corporation for the total number of shares of Additional Stock so issued would purchase at such Conversion Price; and the denominator of which shall be the number of shares of Preferred Stock outstanding immediately prior to such issue plus the number of such shares of Additional Stock so issued. If at any time the Corporation issues or sells any Additional Stock without consideration or at a price per share less than the Series C Conversion Price in effect immediately prior to the issuance of such Additional Stock, then and in each such case, the Series C Conversion Price in effect immediately prior to such issuance shall automatically (except as otherwise provided below) be reduced, concurrently with such issue, to a price determined by multiplying such Series C Conversion Price by a fraction, the numerator of which shall be the number of shares of Preferred Stock outstanding immediately prior to such issue plus the number of shares of Preferred Stock which the aggregate consideration received by the Corporation for the total number of shares of Additional Stock so issued would purchase at such Conversion Price; and the denominator of which shall be the number of shares of Preferred Stock outstanding immediately prior to such issue plus the number of shares of Additional Stock so issued. (i) No adjustment of the Conversion Price shall be made in an amount less than one cent per share, provided that any adjustment that is not required to be made by reason of this Section C(4)(e)(i) shall be carried forward and taken into account in any subsequent adjustment. (ii) Except to the limited extent provided for in Sections C.4(e)(iii)(D)(3) and C.4(e)(iii)(D)(4), no adjustment of the Series A Conversion Price, Series B Conversion Price or Series C Conversion Price shall have the effect of increasing the Series A Conversion Price, Series B Conversion Price or Series C Conversion Price above the applicable Conversion Price in effect immediately prior to such adjustment. (iii) For the purpose of making any adjustment in the Series A Conversion Price, Series B Conversion Price or Series C Conversion Price as provided above, 10

the consideration received by the Corporation for any issue or sale of Additional Stock will be computed as follows: (A) To the extent it consists of cash, as the amount of cash received by the Corporation before deduction of any offering expenses payable by the Corporation and any reasonable underwriting or similar commissions, compensation, or concessions paid or allowed by the Corporation in connection with such issue or sale. (B) To the extent it consists of consideration in whole or in part other than cash, the consideration other than cash shall be deemed to be at the fair market value of that property as determined in good faith by the Corporation's Board of Directors. (C) If Additional Stock is issued or sold together with other stock or securities or other assets of the Corporation for a consideration which covers both, as the portion of the consideration so received that may be reasonably determined in good faith by the Board of Directors to be allocable to such Additional Stock. (D) In the case of the issuance of options to purchase or rights to subscribe for Common Stock, securities by their terms convertible into or exchangeable for Common Stock or options to purchase or rights to subscribe for such convertible or exchangeable securities (where the shares of Common Stock issuable upon the exercise of such options or rights or upon conversion or exchange of such securities are not excluded from the definition of Additional Stock), the following provisions shall apply: (1) the aggregate maximum number of shares of Common Stock deliverable upon exercise of such options to purchase or rights to subscribe for Common Stock shall be deemed to have been issued at the time such options or rights were issued and for a consideration equal to the consideration (determined in the manner provided in Sections C.4(e)(iii)(A)-(C), if any, received by the Corporation upon the issuance of such options or rights plus the minimum purchase price provided in such options or rights for the Common Stock covered thereby; (2) the aggregate maximum number of shares of Common Stock deliverable upon conversion of or in exchange for any such convertible or exchangeable securities or upon the exercise of options to purchase or rights to subscribe for such convertible or exchangeable securities and subsequent conversion or exchange thereof shall be deemed to have been issued at the time such securities were issued or such options or rights were issued and for a consideration equal to the consideration, if any, received by the Corporation for any such securities and related options or rights (excluding any cash received on account of accrued interest or accrued dividends), plus the minimum additional consideration, if any, to be received by the Corporation upon the conversion or exchange of such securities or the exercise of any related options or rights (the consideration in each case to be determined in the manner provided in Sections C.4(e)(iii)(A)-(C). 11

(3) in the event of any change in the number of shares of Common Stock deliverable upon exercise of such options or rights or upon conversion of or in exchange for such convertible or exchangeable securities, including, but not limited to, a change resulting from the antidilution provisions hereof, the Series A Conversion Price, Series B Conversion Price or Series C Conversion Price in effect at the time shall forthwith be readjusted to such Series A Conversion Price, Series B Conversion Price or Series C Conversion Price as would have been obtained had the adjustment that was made upon the issuance of such options, rights or securities not converted prior to such change or the options or rights related to such securities not converted prior to such change been made upon the basis of such change, but no further adjustment shall be made for the actual issuance of Common Stock upon the exercise of any such options or rights or the conversion or exchange of such securities; and (4) upon the expiration of any such options or rights, the termination of any such rights to convert or exchange or the expiration of any options or rights related to such convertible or exchangeable securities, the Series A Conversion Price, Series B Conversion Price or Series C Conversion Price shall forthwith be readjusted to such Series A Conversion Price, Series B Conversion Price or Series C Conversion Price as would have been obtained had the adjustment which was made upon the issuance of such options, rights or securities or options or rights related to such securities been made upon the basis of the issuance of only the number of shares of Common Stock actually issued upon the exercise of such options or rights, upon the conversion or exchange of such securities or upon the exercise of the options or rights related to such securities. (E) "Additional Stock" shall mean any shares of Common Stock issued (or deemed to have been issued pursuant to Section C.4(e)(iii)(D) by this Corporation after the date of filing of this Certificate of Incorporation (the "Effective Date"), other than: (1) Common Stock issued to effect any stock split or stock dividend by the Corporation. (2) Up to 3,500,000 shares of Common Stock issued or issuable to employees, directors or consultants of this Corporation for the purpose of incentive or under any stock option, stock purchase or similar plan which is approved by a majority of the Board. (3) Common Stock issued or issuable upon conversion of shares of Series A Preferred, Series B Preferred or Series C Preferred. (4) Common Stock issued in connection with the acquisition of another corporation. 12

(f) No Impairment. The Corporation, whether by amendment of its Certificate of Incorporation or through any reorganization, transfer of assets, merger, dissolution, issue or sale of securities or any other voluntary action, will not avoid or seek to avoid the observance or performance of any of the terms to be observed or performed hereunder by the Corporation, but at all times in good faith will assist in the carrying out of all such action as may be necessary or appropriate in order to protect the conversion rights pursuant to this Section C.4 of the holders of Series A Preferred, Series B Preferred and Series C Preferred against impairment. (g) Certificate as to Adjustments. Upon the occurrence of each adjustment or readjustment of the Series A Conversion Rate, the Series B Conversion Rate or the Series C Conversion Rate pursuant to this Section C.4, the Corporation at its expense will compute such adjustment or readjustment in accordance with the terms hereof and prepare and promptly furnish to each holder of Preferred Stock a certificate setting forth (i) such adjustment or readjustment and showing in detail the facts upon which such adjustment or readjustment is based, (ii) the Series A Conversion Rate, Series B Conversion Rate or the Series C Conversion Rate, as the case may be, at the time in effect, and (iii) the number of shares of Common Stock and the amount, if any, of other property which at the time would be received upon the conversion of the Series A Preferred, the Series B Preferred or the Series C Preferred held by such holder. (h) Notices of Record Date. In the event of any taking by the Corporation of a record of the holders of any class of securities for the purpose of determining the holders thereof who are entitled to receive any dividend (other than a cash dividend) or other distribution, any Common Stock Equivalents or any right to subscribe for or otherwise acquire any shares of stock of any class or any other securities or property, or to receive any other right, the Corporation will deliver to each holder of Preferred Stock at least ten (10) days prior to the date specified therein, a notice specifying the date on which any such record is to be taken for the purpose of such dividend, distribution or rights, and the amount and character of such dividend, distribution or right. (i) Reservation of Stock Issuable Upon Conversion. The Corporation at all times will reserve and keep available out of its authorized but unissued shares of Common Stock solely for the purpose of effecting the conversion of the shares of Preferred Stock such number of its shares of Common Stock as from time to time will be sufficient to effect the conversion of all then outstanding shares of Preferred Stock; and if at any time the number of authorized but unissued shares of Common Stock is not sufficient to effect the conversion of all then outstanding shares of Preferred Stock, in addition to such other remedies as may be available to the holders of Preferred Stock for such failure, the Corporation will take such corporate action as, in the opinion of its counsel, may be necessary to increase its authorized but unissued shares of Common Stock to such number of shares as will be sufficient for such purpose. (j) Notices. Any notices required by the provisions of this Section C.4 to be given to the holders of shares of Preferred Stock must be in writing and will be deemed given when delivered at the address of the recipient; provided, however, that such address shall have been furnished in writing to the person giving notice and the address shall be at an entity that maintains regular business hours (except for holidays) through the entire year. In the event that the address furnished is not at an entity that maintains regular business hours, notice shall be deemed given upon the earlier of its receipt or seventy-two (72) hours after deposit in a regularly maintained receptacle for the deposit of the United States mail, addressed and mailed as aforesaid. (k) Recapitalization. If at any time or from time to time there shall be a recapitalization of the Common Stock (other than a subdivision, combination or merger or sale of assets transaction provided for elsewhere in this Section C.4), provision shall be made so that each holder of Preferred Stock will thereafter be entitled to receive upon conversion of such Preferred Stock the number of shares of stock or other securities or property of the Corporation or otherwise, to which a holder of Preferred Stock would have been entitled had such holder converted his shares of Preferred Stock to Common Stock immediately prior to the recapitalization. In any such case, appropriate adjustment shall be made in the application of the provisions of this 13

Section C.4 with respect to the rights of the holders of such Preferred Stock after the recapitalization to the end that the provisions of this Section C.4 (including adjustment of the applicable Conversion Price then in effect and the number of shares issuable upon conversion of the Series A Preferred, Series B Preferred or Series C Preferred, as the case may be) shall be applicable after that event in as nearly an equivalent manner as may be practicable. 5. Redemption. (a) Optional Redemption. (i) Series A and Series B Preferred. The Series A Preferred and the Series B Preferred shall not be redeemable, except that the Series B Preferred shall be redeemable to the extent expressly set forth in Section 5(a)(ii). (ii) Series C Preferred. By written notice given to the Corporation and to all holders of Series C Preferred after April 19, 2001, executed by a majority of the holders of the outstanding Series C Preferred, each holder of Series C Preferred Stock may elect to require the Corporation to redeem all (but not less than all) of the Series C Preferred and all (but not less than all) of any Series B Preferred then held by such holder for cash in an amount equal to the Series B Preferred Preference Amount for each share of Series B Preferred to be redeemed and the Series C Preferred Preference Amount for each share of Series C Preferred to be redeemed as of the Redemption Date. Each party shall be responsible for paying its own expenses associated with the redemption of the Series C Preferred and any Series B Preferred. (b) Redemption Procedures. In the case of any redemption pursuant to Section 5(a), the date which is 30 days after the notice by the holders of the shares of Series C Preferred of their election to require the Corporation to redeem such shares, together with all shares of Series B Preferred held by such holder, shall be the date on which such redemption is to be effected (the "Redemption Date"). Except as provided in Section 5(c), on or after the Redemption Date, each such holder of Series C Preferred and Serial B Preferred shall surrender to the Corporation the certificate or certificates representing such shares, at the principal office of the Corporation and thereupon the redemption price of such shares shall be payable to the order of the record holder of such shares and each surrendered certificate shall be cancelled. (c) Rights of Holder. From and after the Redemption Date, unless there shall have been a default in payment of the redemption price, all rights of the holders of such shares as holders of Series C Preferred and Series B Preferred (except the right to receive the applicable redemption price therefor without interest upon surrender of their certificate or certificates) shall cease with respect to such shares, and such shares shall not thereafter be transferred on the books of the Corporation or be deemed to be outstanding for any purpose whatsoever. If the assets and funds of the Corporation legally available for redemption of shares of Series C Preferred and Series B Preferred on any Redemption Date are insufficient to redeem the total number of shares of Series C Preferred and Series B Preferred to be redeemed on such date, then those assets and funds of the Corporation which are legally available therefor will be used to redeem the maximum possible number of such shares ratably among the holders of such shares to be redeemed on the basis of total respective aggregate redemption price of all shares of Series C Preferred and Series B Preferred held by such holders. Provided however, the Corporation shall have the option to pay the redemption price in twelve equal quarterly installments such that one-twelfth of the outstanding shares of Series C Preferred and Series B Preferred shall be redeemed ratably among the holders of such shares to be redeemed on the basis of the total respective aggregate redemption price of all shares of Series C Preferred and Series B Preferred with respect to which the holders have made proper requests for redemption. The shares of Series C Preferred not redeemed shall remain outstanding and entitled to all the rights, preferences and privileges provided for such shares herein. (d) Exception. Notwithstanding the provisions of Sections 5(a) through 5(c), if there has been a sale of the Corporation, the holders of Series C Preferred shall not have any redemption right provided for in Section 5(a). The term 14

"sale of the Corporation" shall mean either (i) a sale of all or substantially all of the assets, or all of the capital stock, of the Corporation or the subsidiaries of the Corporation, in one or more transactions for cash or freely saleable securities and a subsequent liquidation of the Corporation in which its shareholders receive liquidating distributions of such proceeds of sale after payment or provision for the valid debts and liabilities of the Corporation, (ii) a merger or consolidation of the subsidiaries of the Corporation with or into one or more corporations or partnerships in which the Corporation receives cash or freely saleable securities for all of the stock of the subsidiaries, and a subsequent liquidation of the Corporation, in which the shareholders of the Corporation receive liquidating distributions of such proceeds of sale, merger or consolidation after payment or provision for the valid debts and liabilities of the Corporation, or (iii) a merger or consolidation of the Corporation with or into another corporation or a partnership in which the shareholders receive cash or freely saleable securities for all of their stock of the Corporation. V. No director of the Corporation shall be personally liable to the Corporation or its stockholders for monetary damages for conduct as a director, provided that this Article shall not eliminate the liability of a director for any act or omission for which such elimination of liability is not permitted under the Delaware Law. No amendment to the Delaware Law that further limits the acts or omissions for which elimination of liability is permitted shall affect the liability of a director for any act or omission which occurs prior to the effective date of the amendment. VI. No contract or transaction between the Corporation and one or more of its directors, officers, or stockholders or between the Corporation and any person (as used herein "person" means other corporation, partnership, association, firm, trust, joint venture, political subdivision or instrumentality) or other organization in which one or more of its directors, officers, or stockholders are directors, officers or stockholders, or have a financial interest, shall be void or voidable solely for this reason, or solely because the director or officer is present at or participates in the meeting of the board or committee which authorizes the contract or transaction, or solely because his, her, or their votes are counted for such purpose, if: (i) the material facts as to his or her relationship or interest and as to the contract or transaction are disclosed or are known to the board of directors or the committee, and the board of directors or committee in good faith authorizes the contract or transaction by the affirmative votes of a majority of the disinterested directors, even though the disinterested directors be less than a quorum; or (ii) the material facts as to his or her relationship or interest and as to the contract or transaction are disclosed or are known to the stockholders entitled to vote thereon, and the contract or transaction is specifically approved in good faith by vote of the stockholders; or (iii) the contract or transaction is fair as to the Corporation as of the time it is authorized, approved, or ratified by the board of directors, a committee thereof, or the stockholders. Common or interested directors may be counted in determining the presence of a quorum at a meeting of the board of directors or of a committee which authorizes the contract or transaction. 15

VII. The Corporation shall indemnify any person who was, is or is threatened to be made a party to a proceeding (as hereinafter defined) by reason of the fact that he or she (i) is or was a director or officer of the Corporation or (ii) while a director or officer of the Corporation, is or was serving at the request of the Corporation as a director, officer, partner, venturer, proprietor, trustee, employee, agent, or similar functionary of another foreign or domestic corporation, partnership, joint venture, sole proprietorship, trust, employee benefit plan, or other enterprise, to the fullest extent permitted under the Delaware General Corporation Law, as the same exists or may hereafter be amended. Such right shall be a contract right and as such shall run to the benefit of any director or officer who is elected and accepts the position of director or officer of the Corporation or elects to continue to serve as a director or officer of the Corporation. Any repeal or amendment of this Article VII shall be prospective only and shall not limit the rights of any such director or officer or the obligation of the Corporation with respect to any claim arising from or related to the services of such director or officer in any of the foregoing capacities prior to any such repeal of or amendment to this Article VII. Such right shall include the right to be paid by the Corporation expenses incurred in defending any such proceeding in advance of its final disposition to the maximum extent permitted under the Delaware General Corporation Law, as the same exists or may hereafter be amended. If a claim for indemnification or advancement of expenses hereunder is not paid in full by the Corporation within sixty (60) days after a written claim has been received by the Corporation, the claimant may at any time thereafter bring suit against the Corporation to recover the unpaid amount of the claim, and if successful in whole or in part, the claimant shall also be entitled to be paid the expenses of prosecuting such claim. It shall be a defense to any such action that such indemnification or advancement of costs of defense are not permitted under the Delaware General Corporation Law, but the burden of proving such defense shall be on the Corporation. Neither the failure of the Corporation (including its board of directors or any committee thereof, independent legal counsel, or stockholders) to have made its determination prior to the commencement of such action that indemnification of or advancement of costs of defense to, the claimant is permissible in the circumstances nor an actual determination by the Corporation (including its board of directors or any committee thereof, independent legal counsel, or stockholders) that such indemnification or advancement is not permissible shall be a defense to the action or create a presumption that such indemnification or advancement is not permissible. In the event of the death of any person having a right of indemnification under the foregoing provisions, such right shall inure to the benefit of his or her heirs, executors, administrators, and personal representatives. The rights conferred above shall not be exclusive of any other right which any person may have or hereafter acquire under any statute, bylaw, resolution of stockholders or directors, agreement, or otherwise. The Corporation may additionally indemnify any employee or agent of the Corporation to the fullest extent permitted by law. As used herein, the term "proceeding" means any threatened, pending, or completed action, suit, or proceeding, whether civil, criminal, administrative, arbitrative, or investigative, any appeal in such an action, suit or proceeding, and any inquiry or investigation that could lead to such an action, suit, or proceeding. 16

VIII. A director of the Corporation shall not be personally liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a director, except for liability (i) for any breach of the director's duty of loyalty to the Corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or knowing violation of law, (iii) under Section 174 of the Delaware General Corporation Law, or (iv) for any transaction from which the director derived an improper personal benefit. Any repeal or amendment of this Article VIII by the stockholders of the Corporation shall be prospective only, and shall not adversely affect any limitation on the personal liability of a director of the Corporation arising from an act or omission occurring prior to the time of such repeal or amendment. In addition to the circumstances in which a director of the Corporation is not personally liable as set forth in the foregoing provisions of this Article VIII, a director shall not be liable to the Corporation or its stockholders to such further extent as permitted by any law hereafter enacted, including without limitation any subsequent amendment to the Delaware General Corporation Law. IX. The Corporation expressly elects not to be governed by Section 203 of the Delaware General Corporation Law. X. Pursuit to Section 109 of the Delaware Law, the Board of Directors is authorized to the maximum extent permitted under the Delaware Law to adopt, amend or repeal from time to time any or all of the bylaws of the Corporation. 17

EXHIBIT 3.2 RESTATED CERTIFICATE OF INCORPORATION OF PERVASIVE SOFTWARE INC. a Delaware corporation (Pursuant to Sections 228, 242 and 245 of the Delaware General Corporation Law) Pervasive Software Inc., a corporation organized and existing under the General Corporation Law of the State of Delaware (the "General Corporation Law") DOES HEREBY CERTIFY: FIRST: That this corporation was originally incorporated on January 12, 1994, pursuant to the General Corporation Law. SECOND: That the Board of Directors duly adopted resolutions proposing to amend and restate the Amended and Restated Certificate of Incorporation of this corporation, declaring said amendment and restatement to be advisable and in the best interests of this corporation and its stockholders, and authorizing the appropriate officers of this corporation to solicit the consent of the stockholders therefor, which resolution setting forth the proposed amendment and restatement is as follows: "RESOLVED, that the Restated Certificate of Incorporation of this corporation, as amended, be amended and restated in its entirety as follows: ARTICLE I The name of the corporation is Pervasive Software Inc. (the "Corporation"). ARTICLE II The address of the registered office of this corporation in the State of Delaware is Corporation Trust Center, 1209 Orange Street, in the City of Wilmington, County of New Castle, Delaware 19801. The name of its registered agent at such address is The Corporation Trust Company. ARTICLE III The nature of the business or purposes to be conducted or promoted is to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of Delaware.

ARTICLE IV The Corporation is authorized to issue two classes of stock to be designated common stock ("Common Stock") and preferred stock ("Preferred Stock"). The number of shares of Common Stock authorized to be issued is Seventy Five Million (75,000,000), par value $.001 per share, and the number of Preferred Stock authorized to be issued is Five Million (5,000,000), par value $.001 per share. The Preferred Stock may be issued from time to time in one or more series, without further stockholder approval. The Board of Directors is hereby authorized, in the resolution or resolutions adopted by the Board of Directors providing for the issue of any wholly unissued series of Preferred Stock, within the limitations and restrictions stated in this Restated Certificate of Incorporation (the "Restated Certificate"), to fix or alter the dividend rights, dividend rate, conversion rights, voting rights, rights and terms of redemption (including sinking fund provisions), the redemption price or prices, and the liquidation preferences of any wholly unissued series of Preferred Stock, and the number of shares constituting any such series and the designation thereof, or any of them, and to increase or decrease the number of shares of any series subsequent to the issue of shares of that series, but not below the number of shares of such series then outstanding. In case the number of shares of any series shall be so decreased, the shares constituting such decrease shall resume the status that they had prior to the adoption of the resolution originally fixing the number of shares of such series. ARTICLE V Except as otherwise provided in this Restated Certificate, in furtherance and not in limitation of the powers conferred by statute, the Board of Directors is expressly authorized to make, repeal, alter, amend and rescind any or all of the Bylaws of the Corporation. ARTICLE VI The number of directors of the Corporation shall be fixed from time to time by a bylaw or amendment thereof duly adopted by the Board of Directors. The Board of Directors shall be and is divided into three classes, Class I, Class II and Class III. Such classes shall be as nearly equal in number of directors as possible. Each director shall serve for a term ending on the third annual meeting following the annual meeting at which such director was elected; provided, however, that the directors first elected to Class I shall serve for a term ending on the annual meeting next following the end of fiscal year 1998, the directors first elected to Class II shall serve for a term ending on the second annual meeting next following the end of fiscal year 1999, and the directors first elected to Class III shall serve for a term ending on the third annual meeting next following the end of fiscal year 2000. The foregoing notwithstanding, each director shall serve until such director's successor shall have been duly elected and qualified, unless such director shall resign, become disqualified, disabled or shall otherwise be removed. 2

At each annual election, directors chosen to succeed those whose terms then expire shall be of the same class as the directors they succeed, unless by reason of any intervening changes in the authorized number of directors, the Board shall designate one or more directorships whose term then expires as directorships of another class in order more nearly to achieve equality of number of directors among the classes. Notwithstanding the rule that the three classes shall be as nearly equal in number of directors as possible, in the event of any change in the authorized number of directors each director then continuing to serve as such shall nevertheless continue as a director of the class of which the director is a member until the expiration of the director's current term, or the director's prior death, resignation or removal. If any newly created directorship may, consistently with the rule that the three classes shall be as nearly equal in number of directors as possible, be allocated to either class, the Board shall allocate it to that of the available class whose term of office is due to expire at the earliest date following such allocation. ARTICLE VII Elections of directors need not be by written ballot unless the Bylaws of the Corporation shall so provide. ARTICLE VIII Except as otherwise provided in this Restated Certificate, any action required or permitted to be taken by the stockholders of the Corporation must be effected at an annual or special meeting of the stockholders of the Corporation, and may not be effected by any consent in writing of such stockholders. ARTICLE IX A director of the Corporation shall not be personally liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a director, except for liability (i) for any breach of the director's duty of loyalty to the Corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) under Section 174 of the Delaware General Corporation Law, or (iv) for any transaction from which the director derived any improper personal benefit. If the Delaware General Corporation Law is amended after approval by the stockholders of this Article to authorize corporate action further eliminating or limiting the personal liability of directors then the liability of a director of the Corporation shall be eliminated or limited to the fullest extent permitted by the Delaware General Corporation Law as so amended. Any repeal or modification of the foregoing provisions of this Article IX by the stockholders of the Corporation shall not adversely affect any right or protection of a director of the Corporation existing at the time of, or increase the liability of any director of this Corporation with respect to any acts or omissions of such director occurring prior to, such repeal or modification. 3

ARTICLE X In addition to any vote of the holders of any class or series of the stock of this Corporation required by law or by this Restated Certificate, the affirmative vote of the holders of a majority of the voting power of all of the then outstanding shares of capital stock of the Corporation entitled to vote generally in the election of directors, voting together as a single class, shall be required to amend or repeal the provisions of ARTICLE I, ARTICLE II, and ARTICLE III of this Restated Certificate. Notwithstanding any other provision of this Certificate of Incorporation or any provision of law which might otherwise permit a lesser vote or no vote, but in addition to any vote of the holders of any class or series of the stock of this Corporation required by law or by this Restated Certificate, the affirmative vote of the holders of at least seventy-five percent (75%) of the voting power of all of the then outstanding shares of the capital stock of the Corporation entitled to vote generally in the election of directors, voting together as a single class, shall be required to amend or repeal any provision of this Restated Certificate not specified in the preceding sentence. * * * * THIRD: The foregoing Restated Certificate of Incorporation has been duly adopted by the Corporation's Board of Directors in accordance with the applicable provisions of Section 245 of the General Corporation Law of the State of Delaware. 4

IN WITNESS WHEREOF, the undersigned has signed this Certificate this ___ day of July, 1997.
/s/ Ron R. Harris --------------------------------------Ron R. Harris President and Chief Executive Officer ATTEST: /s/ James R. Offerdahl -----------------------------James R. Offerdahl Secretary

EXHIBIT 3.3 BY-LAWS OF BTRIEVE TECHNOLOGIES, INC. A Delaware Corporation

TABLE OF CONTENTS

PAGE ----

ARTICLE ONE: OFFICES........................................................ 1 1.1 1.2 Registered Office and Agent.......................................... 1 Other Offices........................................................ 1

ARTICLE TWO: MEETINGS OF STOCKHOLDERS....................................... 1 2.1 2.2 2.3 2.4 2.5 2.6 2.7 2.8 2.9 2.10 2.11 Annual Meeting....................................................... Special Meeting...................................................... Place of Meetings.................................................... Notice............................................................... Voting List.......................................................... Quorum............................................................... Required Vote; Withdrawal of Quorum.................................. Method of Voting; Proxies............................................ Record Date.......................................................... Conduct of Meeting................................................... Inspectors........................................................... 1 1 2 2 2 2 3 3 3 4 4

ARTICLE THREE: DIRECTORS.................................................... 5 3.1 3.2 3.3 3.4 3.5 3.6 3.7 3.8 3.9 3.10 3.11 3.12 3.13 3.14 3.15 Management........................................................... Number; Qualification; Election; Term................................ Chance in Number..................................................... Removal.............................................................. Vacancies............................................................ Meetings of Directors................................................ First Meeting........................................................ Election of Officers................................................. Regular Meetings..................................................... Special Meeting...................................................... Notice............................................................... Quorum; Majority Vote................................................ Procedure............................................................ Presumption of Assent................................................ Compensation......................................................... 5 5 5 5 6 6 6 6 6 6 6 7 7 7 7

ARTICLE FOUR: COMMITTEES.................................................... 7 4.1 4.2 Designation.......................................................... 7 Number; Qualification; Term.......................................... 8

TABLE OF CONTENTS (CONTINUED) PAGE ---4.3 Authority............................................................... 4.4 Committee Changes....................................................... 4.5 Alternate Members of Committees......................................... 4.6 Regular Meetings........................................................ 4.7 Special Meetings........................................................ 4.8 Quorum; Majority Vote................................................... 4.9 Minutes................................................................. 4.10 Compensation........................................................... 4.11 Responsibility......................................................... 8 8 8 8 8 8 9 9 9

ARTICLE FIVE: NOTICE.......................................................... 9 5.1 Method.................................................................. 9 5.2 Waiver.................................................................. 9 ARTICLE SIX: OFFICERS......................................................... 9 6.1 Number; Titles; Term of Office.......................................... 9 6.2 Removal.................................................................10 6.3 Vacancies...............................................................10 6.4 Authority...............................................................10 6.5 Compensation............................................................10 6.6 Chairman of the Board...................................................10 6.7 President...............................................................10 6.8 Vice Presidents.........................................................10 6.9 Treasurer...............................................................11 6.10 Assistant Treasurers...................................................11 6.11 Secretary..............................................................11 6.12 Assistant Secretaries..................................................11 ARTICLE SEVEN: CERTIFICATES AND STOCKHOLDERS..................................11 7.1 7.2 7.3 7.4 7.5 7.6 Certificates for Shares.................................................11 Replacement of Lost or Destroyed Certificates...........................12 Transfer of Shares......................................................12 Registered Stockholders.................................................12 Regulations.............................................................12 Legends.................................................................12

ii

TABLE OF CONTENTS (CONTINUED) PAGE ---ARTICLE EIGHT: MISCELLANEOUS PROVISIONS.......................................12 8.1 Dividends...............................................................12 8.2 Reserves................................................................13 8.3 Books and Records.......................................................13 8.4 Fiscal Year.............................................................13 8.5 Seal....................................................................13 8.6 Resignations............................................................13 8.7 Securities of Other Corporations........................................13 8.8 Telephone Meetings......................................................13 8.9 Action Without A Meeting................................................14 8.10 Invalid Provisions.....................................................14 8.11 Mortgages, etc.........................................................14 8.12 Headings...............................................................14 8.13 References.............................................................15 8.14 Amendments.............................................................15

iii

BY-LAWS OF BTRIEVE TECHNOLOGIES, INC. A Delaware Corporation PREAMBLE These by-laws are subject to, and governed by, the General Corporation Law of the State of Delaware (the "Delaware General Corporation Law") and the certificate of incorporation of Btrieve Technologies, Inc., a Delaware corporation (the "Corporations"). In the event of a direct conflict between the provisions of these by-laws and the mandatory provisions of the Delaware General Corporation Law or the provisions of the certificate of incorporation of the Corporation, such provisions of the Delaware General Corporation Law or the certificate of incorporation of the Corporation, as the case may be, will be controlling. ARTICLE ONE: OFFICES 1.1 Registered Office and Agent. The registered office and registered agent of the Corporation shall be as designated from time to time by the appropriate filing by the Corporation in the office of the Secretary of State of the State of Delaware. 1.2 Other Offices. The Corporation may also have offices at such other places, both within and without the State of Delaware, as the board of directors may from time to time determine or as the business of the Corporation may require. ARTICLE TWO: MEETINGS OF STOCKHOLDERS 2.1 Annual Meeting. An annual meeting of stockholders of the Corporation shall be held each calendar year on such date and at such time as shall be designated from time to time by the board of directors and stated in the notice of the meeting or in a duly executed waiver of notice of such meeting. At such meeting, the stockholders shall elect directors and transact such other business as may properly be brought before the meeting. 2.2 Special Meeting. A special meeting of the stockholders may be called at any time by the Chairman of the Board, the President, the board of directors, and shall be called by the President or the Secretary at the request in writing of the stockholders of record of not less than ten percent of all shares entitled to vote at such meeting or as otherwise provided by the certificate of incorporation of the Corporation. A special meeting shall be held on such date and at such time as shall be designated by the person(s) calling the meeting and stated in the notice of the meeting or in a duly executed waiver of notice of such meeting. Only such business shall be

transacted at a special meeting as may be stated or indicated in the notice of such meeting or in a duly executed waiver of notice of such meeting. 2.3 Place of Meetings. An annual meeting of stockholders may be held at any place within or without the State of Delaware designated by the board of directors. A special meeting of stockholders may be held at any place within or without the State of Delaware designated in the notice of the meeting or a duly executed waiver of notice of such meeting. Meetings of stockholders shall be held at the principal office of the Corporation unless another place is designated for meetings in the manner provided herein. 2.4 Notice. Written or printed notice stating the place, day, and time of each meeting of the stockholders and, in case of a special meeting, the purpose or purposes for which the meeting is called shall be delivered not less than ten nor more than 60 days before the date of the meeting, either personally or by mail, by or at the direction of the President, the Secretary, or the officer or person(s) calling the meeting, to each stockholder of record entitled to vote at such meeting. If such notice is to be sent by mail, it shall be directed to such stockholder at his address as it appears on the records of the Corporation, unless he shall have filed with the Secretary of the Corporation a written request that notices to him be mailed to some other address, in which case it shall be directed to him at such other address. Notice of any meeting of stockholders shall not be required to be given to any stockholder who shall attend such meeting in person or by proxy and shall not, at the beginning of such meeting, object to the transaction of any business because the meeting is not lawfully called or convened, or who shall, either before or after the meeting, submit a signed waiver of notice, in person or by proxy. 2.5 Voting List. At least ten days before each meeting of stockholders, the Secretary or other officer of the Corporation who has charge of the Corporation's stock ledger, either directly or through another officer appointed by him or through a transfer agent appointed by the board of directors, shall prepare a complete list of stockholders entitled to vote thereat, arranged in alphabetical order and showing the address of each stockholder and number of shares registered in the name of each stockholder. For a period of ten days prior to such meeting, such list shall be kept on file at a place within the city where the meeting is to be held, which place shall be specified in the notice of meeting or a duly executed waiver of notice of such meeting or, if not so specified, at the place where the meeting is to be held and shall be open to examination by any stockholder during ordinary business hours. Such list shall be produced at such meeting and kept at the meeting at all times during such meeting and may be inspected by any stockholder who is present. 2.6 Quorum. The holders of a majority of the outstanding shares entitled to vote on a matter, present in person or by proxy, shall constitute a quorum at any meeting of stockholders, except as otherwise provided by law, the certificate of incorporation of the Corporation, or these by-laws. If a quorum shall not be present, in person or by proxy, at any meeting of stockholders, the stockholders entitled to vote thereat who are present, in person or by proxy, or, if no stockholder entitled to vote is present, any officer of the Corporation may adjourn the meeting from time to time, without notice other than announcement at the meeting (unless the board of directors, after such adjournment, fixes a new record date for the adjourned 2

meeting), until a quorum shall be present, in person or by proxy. At any adjourned meeting at which a quorum shall be present, in person or by proxy, any business may be transacted which may have been transacted at the original meeting had a quorum been present; provided that, if the adjournment is for more than 30 days or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the adjourned meeting. 2.7 Required Vote; Withdrawal of Quorum. When a quorum is present at any meeting, the vote of the holders of at least a majority of the outstanding shares entitled to vote who are present, in person or by proxy, shall decide any question brought before such meeting, unless the question is one on which, by express provision of statute, the certificate of incorporation of the Corporation, or these by-laws, a different vote is required, in which case such express provision shall govern and control the decision of such question. The stockholders present at a duly constituted meeting may continue to transact business until adjournment, notwithstanding the withdrawal of enough stockholders to leave less than a quorum. 2.8 Method of Voting; Proxies. Except as otherwise provided in the certificate of incorporation of the Corporation or by law, each outstanding share, regardless of class, shall be entitled to one vote on each matter submitted to a vote at a meeting of stockholders. Elections of directors need not be by written ballot. At any meeting of stockholders, every stockholder having the right to vote may vote either in person or by a proxy executed in writing by the stockholder or by his duly authorized attorney-in-fact. Each such proxy shall be filed with the Secretary of the Corporation before or at the time of the meeting. No proxy shall be valid after three years from the date of its execution, unless otherwise provided in the proxy. If no date is stated in a proxy, such proxy shall be presumed to have been executed on the date of the meeting at which it is to be voted. Each proxy shall be revocable unless expressly provided therein to be irrevocable and coupled with an interest sufficient in law to support an irrevocable power or unless otherwise made irrevocable by law. 2.9 Record Date. (a) For the purpose of determining stockholders entitled to notice of or to vote at any meeting of stockholders, or any adjournment thereof, or entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion, or exchange of stock or for the purpose of any other lawful action, the board of directors may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted by the board of directors, for any such determination of stockholders, such date in any case to be not more than 60 days and not less than ten days prior to such meeting nor more than 60 days prior to any other action. If no record date is fixed: (i) The record date for determining stockholders entitled to notice of or to vote at a meeting of stockholders shall be at the close of business on the day next preceding the day on which notice is given or, if notice is waived, at the close of business on the day next preceding the day on which the meeting is held. 3

(ii) The record date for determining stockholders for any other purpose shall be at the close of business on the day on which the board of directors adopts the resolution relating thereto. (iii) A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the board of directors may fix a new record date for the adjourned meeting. (b) In order that the Corporation may determine the stockholders entitled to consent to corporate action in writing without a meeting, the board of directors may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted by the board of directors, and which date shall not be more than ten days after the date upon which the resolution fixing the record date is adopted by the board of directors. If no record date has been fixed by the board of directors, the record date for determining stockholders entitled to consent to corporate action in writing without a meeting, when no prior action by the board of directors is required by law or these by-laws, shall be the first date on which a signed written consent setting forth the action taken or proposed to be taken is delivered to the Corporation by delivery to its registered office in the State of Delaware, its principal place of business, or an officer or agent of the Corporation having custody of the book in which proceedings of meetings of stockholders are recorded. Delivery made to the Corporation's registered office in the State of Delaware, principal place of business, or such officer or agent shall be by hand or by certified or registered mail, return receipt requested. If no record date has been fixed by the board of directors and prior action by the board of directors is required by law or these by-laws, the record date for determining stockholders entitled to consent to corporate action in writing without a meeting shall be at the close of business on the day on which the board of directors adopts the resolution taking such prior action. 2.10 Conduct of Meeting. The Chairman of the Board, if such office has been filled, and, if not or if the Chairman of the Board is absent or otherwise unable to act, the President shall preside at all meetings of stockholders. The Secretary shall keep the records of each meeting of stockholders. In the absence or inability to act of any such officer, such officer's duties shall be performed by the officer given the authority to act for such absent or non- acting officer under these by-laws or by some person appointed by the meeting. 2.11 Inspectors. The board of directors may, in advance of any meeting of stockholders, appoint one or more inspectors to act at such meeting or any adjournment thereof. If any of the inspectors so appointed shall fail to appear or act, the chairman of the meeting shall, or if inspectors shall not have been appointed, the chairman of the meeting may, appoint one or more inspectors. Each inspector, before entering upon the discharge of his duties, shall take and sign an oath faithfully to execute the duties of inspector at such meeting with strict impartiality and according to the best of his ability. The inspectors shall determine the number of shares of capital stock of the Corporation outstanding and the voting power of each, the number of shares represented at the meeting, the existence of a quorum, and the validity and effect of proxies and shall receive votes, ballots, or consents, hear and determine all challenges and questions arising 4

in connection with the right to vote, count and tabulate all votes, ballots, or consents, determine the results, and do such acts as are proper to conduct the election or vote with fairness to all stockholders. On request of the chairman of the meeting, the inspectors shall make a report in writing of any challenge, request, or matter determined by them and shall execute a certificate of any fact found by them. No director or candidate for the office of director shall act as an inspector of an election of directors. Inspectors need not be stockholders. ARTICLE THREE: DIRECTORS 3.1 Management. The business and property of the Corporation shall be managed by the board of directors. Subject to the restrictions imposed by law, the certificate of incorporation of the Corporation, or these by-laws, the board of directors may exercise all the powers of the Corporation. 3.2 Number; Qualification; Election; Term. The number of directors which shall constitute the entire board of directors shall be not less than one. The first board of directors shall consist of the number of directors named in the certificate of incorporation of the Corporation or, if no directors are so named, shall consist of the number of directors elected by the incorporator(s) at an organizational meeting or by unanimous written consent in lieu thereof. Thereafter, within the limits above specified, the number of directors which shall constitute the entire board of directors shall be determined by resolution of the board of directors or by resolution of the stockholders at the annual meeting thereof or at a special meeting thereof called for that purpose. Except as otherwise required by law, the certificate of incorporation of the Corporation, or these by-laws, the directors shall be elected at an annual meeting of stockholders at which a quorum is present. Directors shall be elected by a plurality of the votes of the shares present in person or represented by proxy and entitled to vote on the election of directors. Each director so chosen shall hold office until the first annual meeting of stockholders held after his election and until his successor is elected and qualified or, if earlier, until his death, resignation, or removal from office. None of the directors need be a stockholder of the Corporation or a resident of the State of Delaware. Each director must have attained the age of majority. 3.3 Chance in Number. No decrease in the number of directors constituting the entire board of directors shall have the effect of shortening the term of any incumbent director. 3.4 Removal. Except as otherwise provided in the certificate of incorporation of the Corporation or these by-laws, at any meeting of stockholders called expressly for that purpose, any director or the entire board of directors may be removed, with or without cause, by a vote of the holders of a majority of the shares then entitled to vote on the election of directors; provided, however, that so long as stockholders have the right to cumulate votes in the election of directors pursuant to the certificate of incorporation of the Corporation, if less than the entire board of directors is to be removed, no one of the directors may be removed if the votes cast against his removal would be sufficient to elect him if then cumulatively voted at an election of the entire board of directors. 5

3.5 Vacancies. Vacancies and newly-created directorships resulting from any increase in the authorized number of directors may be filled by a majority of the directors then in office, though less than a quorum, or by the sole remaining director, and each director so chosen shall hold office until the first annual meeting of stockholders held after his election and until his successor is elected and qualified or, if earlier, until his death, resignation, or removal from office. If there are no directors in office, an election of directors may be held in the manner provided by statute. If, at the time of filling any vacancy or any newly-created directorship, the directors then in office shall constitute less than a majority of the whole board of directors (as constituted immediately prior to any such increase), the Court of Chancery may, upon application of any stockholder or stockholders holding at least 10% of the total number of the shares at the time outstanding having the right to vote for such directors, summarily order an election to be held to fill any such vacancies or newly-created directorships or to replace the directors chosen by the directors then in office. Except as otherwise provided in these by-laws, when one or more directors shall resign from the board of directors, effective at a future date, a majority of the directors then in office, including those who have so resigned, shall have the power to fill such vacancy or vacancies, the vote thereon to take effect when such resignation or resignations shall become effective, and each director so chosen shall hold office as provided in these by-laws with respect to the filling of other vacancies. 3.6 Meetings of Directors. The directors may hold their meetings and may have an office and keep the books of the Corporation, except as otherwise provided by statute, in such place or places within or without the State of Delaware as the board of directors may from time to time determine or as shall be specified in the notice of such meeting or duly executed waiver of notice of such meeting. 3.7 First Meeting. Each newly elected board of directors may hold its first meeting for the purpose of organization and the transaction of business, if a quorum is present, immediately after and at the same place as the annual meeting of stockholders, and no notice of such meeting shall be necessary. 3.8 Election of Officers. At the first meeting of the board of directors after each annual meeting of stockholders at which a quorum shall be present, the board of directors shall elect the officers of the Corporation. 3.9 Regular Meetings. Regular meetings of the board of directors shall be held at such times and places as shall be designated from time to time by resolution of the board of directors. Notice of such regular meetings shall not be required. 3.10 Special Meetings. Special meetings of the board of directors shall be held whenever called by the Chairman of the Board, the President, or any director. 3.11 Notice. The Secretary shall give notice of each special meeting to each director at least 24 hours before the meeting. Notice of any such meeting need not be given to any director who shall, either before or after the meeting, submit a signed waiver of notice or who shall attend such meeting without protesting, prior to or at its commencement, the lack of notice to him. Neither the business to be transacted at, nor the purpose of, any regular or special 6

meeting of the board of directors need be specified in the notice or waiver of notice of such meeting. 3.12 Quorum; Majority Vote. At all meetings of the board of directors, a majority of the directors fixed in the manner provided in these by-laws shall constitute a quorum for the transaction of business. If at any meeting of the board of directors there be less than a quorum present, a majority of those present or any director solely present may adjourn the meeting from time to time without further notice. Unless the act of a greater number is required by law, the certificate of incorporation of the Corporation, or these by-laws, the act of a majority of the directors present at a meeting at which a quorum is in attendance shall be the act of the board of directors. At any time that the certificate of incorporation of the Corporation provides that directors elected by the holders of a class or series of stock shall have more or less than one vote per director on any matter, every reference in these by-laws to a majority or other proportion of directors shall refer to a majority or other proportion of the votes of such directors. 3.13 Procedure. At meetings of the board of directors, business shall be transacted in such order as from time to time the board of directors may determine. The Chairman of the Board, if such office has been filled, and, if not or if the Chairman of the Board is absent or otherwise unable to act, the remaining members of the board in attendance shall select a director who shall preside at that meeting of the board of directors. In the absence or inability to act of either such officer, a chairman shall be chosen by the board of directors from among the directors present. The Secretary of the Corporation shall act as the secretary of each meeting of the board of directors unless the board of directors appoints another person to act as secretary of the meeting. The board of directors shall keep regular minutes of its proceedings which shall be placed in the minute book of the Corporation. 3.14 Presumption of Assent. A director of the Corporation who is present at the meeting of the board of directors at which action on any corporate matter is taken shall be presumed to have assented to the action unless his dissent shall be entered in the minutes of the meeting or unless he shall file his written dissent to such action with the person acting as secretary of the meeting before the adjournment thereof or shall forward any dissent by certified or registered mail to the Secretary of the Corporation immediately after the adjournment of the meeting. Such right to dissent shall not apply to a director who voted in favor of such action. 3.15 Compensation. The board of directors shall have the authority to fix the compensation, including fees and reimbursement of expenses, paid to directors for attendance at regular or special meetings of the board of directors or any committee thereof; provided, that nothing contained herein shall be construed to preclude any director from serving the Corporation in any other capacity or receiving compensation therefor. ARTICLE FOUR: COMMITTEES 4.1 Designation. The board of directors may, by resolution adopted by a majority of the entire board of directors, designate one or more committees. 7

4.2 Number; Qualification; Term. Each committee shall consist of one or more directors appointed by resolution adopted by a majority of the entire board of directors. The number of committee members may be increased or decreased from time to time by resolution adopted by a majority of the entire board of directors. Each committee member shall serve as such until the earliest of (i) the expiration of his term as director, (ii) his resignation as a committee member or as a director, or (iii) his removal as a committee member or as a director. 4.3 Authority. Each committee, to the extent expressly provided in the resolution establishing such committee, shall have and may exercise all of the authority of the board of directors in the management of the business and property of the Corporation except to the extent expressly restricted by law, the certificate of incorporation of the Corporation, or these by-laws. 4.4 Committee Changes. The board of directors shall have the power at any time to fill vacancies in, to change the membership of, and to discharge any committee. 4.5 Alternate Members of Committees. The board of directors may designate one or more directors as alternate members of any committee. Any such alternate member may replace any absent or disqualified member at any meeting of the committee. If no alternate committee members have been so appointed to a committee or each such alternate committee member is absent or disqualified, the member or members of such committee present at any meeting and not disqualified from voting, whether or not he or they constitute a quorum, may unanimously appoint another member of the board of directors to act at the meeting in the place of any such absent or disqualified member. 4.6 Regular Meetings. Regular meetings of any committee may be held without notice at such time and place as may be designated from time to time by the committee and communicated to all members thereof. 4.7 Special Meetings. Special meetings of any committee may be held whenever called by any committee member. The committee member calling any special meeting shall cause notice of such special meeting, including therein the time and place of such special meeting, to be given to each committee member at least two days before such special meeting. Neither the business to be transacted at, nor the purpose of, any special meeting of any committee need be specified in the notice or waiver of notice of any special meeting. 4.8 Quorum; Majority Vote. At meetings of any committee, a majority of the number of members designated by the board of directors shall constitute a quorum for the transaction of business. If a quorum is not present at a meeting of any committee, a majority of the members present may adjourn the meeting from time to time, without notice other than an announcement at the meeting, until a quorum is present. The act of a majority of the members present at any meeting at which a quorum is in attendance shall be the act of a committee, unless the act of a greater number is required by law, the certificate of incorporation of the Corporation, or these by-laws. 8

4.9 Minutes. Each committee shall cause minutes of its proceedings to be prepared and shall report the same to the board of directors upon the request of the board of directors. The minutes of the proceedings of each committee shall be delivered to the Secretary of the Corporation for placement in the minute books of the Corporation. 4.10 Compensation. Committee members may, by resolution of the board of directors, be allowed a fixed sum and expenses of attendance, if any, for attending any committee meetings or a stated salary. 4.11 Responsibility. The designation of any committee and the delegation of authority to it shall not operate to relieve the board of directors or any director of any responsibility imposed upon it or such director by law. ARTICLE FIVE: NOTICE 5.1 Method. Whenever by statute, the certificate of incorporation of the Corporation, or these by-laws, notice is required to be given to any committee member, director, or stockholder and no provision is made as to how such notice shall be given, personal notice shall not be required and any such notice may be given (a) in writing, by mail, postage prepaid, addressed to such committee member, director, or stockholder at his address as it appears on the books or (in the case of a stockholder) the stock transfer records of the Corporation, or (b) by any other method permitted by law (including but not limited to overnight courier service, telegram, telex, or telefax). Any notice required or permitted to be given by mail shall be deemed to be delivered and given at the time when the same is deposited in the United States mail as aforesaid. Any notice required or permitted to be given by overnight courier service shall be deemed to be delivered and given at the time delivered to such service with all charges prepaid and addressed as aforesaid. Any notice required or permitted to be given by telegram, telex, or telefax shall be deemed to be delivered and given at the time transmitted with all charges prepaid and addressed as aforesaid. 5.2 Waiver. Whenever any notice is required to be given to any stockholder, director, or committee member of the Corporation by statute, the certificate of incorporation of the Corporation, or these by-laws, a waiver thereof in writing signed by the person or persons entitled to such notice, whether before or after the time stated therein, shall be equivalent to the giving of such notice. Attendance of a stockholder, director, or committee member at a meeting shall constitute a waiver of notice of such meeting, except where such person attends for the express purpose of objecting to the transaction of any business on the ground that the meeting is not lawfully called or convened. ARTICLE SIX: OFFICERS 6.1 Number; Titles; Term of Office. The officers of the Corporation shall be a President, a Secretary, and such other officers as the board of directors may from time to time elect or appoint, including a Chairman of the Board, one or more Vice Presidents (with each Vice President to have such descriptive title, if any, as the board of directors shall determine), and a 9

Treasurer. Each officer shall hold office until his successor shall have been duly elected and shall have qualified, until his death, or until he shall resign or shall have been removed in the manner hereinafter provided. Any two or more offices may be held by the same person. None of the officers need be a stockholder or a director of the Corporation or a resident of the State of Delaware. 6.2 Removal. Any officer or agent elected or appointed by the board of directors may be removed by the board of directors whenever in its judgment the best interest of the Corporation will be served thereby, but such removal shall be without prejudice to the contract rights, if any, of the person so removed. Election or appointment of an officer or agent shall not of itself create contract rights. 6.3 Vacancies. Any vacancy occurring in any office of the Corporation (by death, resignation, removal, or otherwise) may be filled by the board of directors. 6.4 Authority. Officers shall have such authority and perform such duties in the management of the Corporation as are provided in these by-laws or as may be determined by resolution of the board of directors not inconsistent with these by-laws. 6.5 Compensation. The compensation, if any, of officers and agents shall be fixed from time to time by the board of directors; provided, however, that the board of directors may delegate the power to determine the compensation of any officer and agent (other than the officer to whom such power is delegated) to the Chairman of the Board or the President. 6.6 Chairman of the Board. The Chairman of the Board, if elected by the board of directors, shall have such powers and duties as may be prescribed by the board of directors. Such officer shall preside at all meetings of the stockholders and of the board of directors. Such officer may sign all certificates for shares of stock of the Corporation. 6.7 President. The President shall be the chief executive officer of the Corporation and, subject to the board of directors, he shall have general executive charge, management, and control of the properties and operations of the Corporation in the ordinary course of its business, with all such powers with respect to such properties and operations as may be reasonably incident to such responsibilities. If the board of directors has not elected a Chairman of the Board or in the absence or inability to act of the Chairman of the Board, the President shall exercise all of the powers and discharge all of the duties of the Chairman of the Board. As between the Corporation and third parties, any action taken by the President in the performance of the duties of the Chairman of the Board shall be conclusive evidence that there is no Chairman of the Board or that the Chairman of the Board is absent or unable to act. 6.8 Vice Presidents. Each Vice President shall have such powers and duties as may be assigned to him by the board of directors, the Chairman of the Board, or the President, and (in order of their seniority as determined by the board of directors or, in the absence of such determination, as determined by the length of time they have held the office of Vice President) shall exercise the powers of the President during that officer's absence or inability to act. As between the Corporation and third parties, any action taken by a Vice President in the 10

performance of the duties of the President shall be conclusive evidence of the absence or inability to act of the President at the time such action was taken. 6.9 Treasurer. The Treasurer shall have custody of the Corporation's funds and securities, shall keep full and accurate account of receipts and disbursements, shall deposit all monies and valuable effects in the name and to the credit of the Corporation in such depository or depositories as may be designated by the board of directors, and shall perform such other duties as may be prescribed by the board of directors, the Chairman of the Board, or the President. 6.10 Assistant Treasurers. Each Assistant Treasurer shall have such powers and duties as may be assigned to him by the board of directors, the Chairman of the Board, or the President. The Assistant Treasurers (in the order of their seniority as determined by the board of directors or, in the absence of such a determination, as determined by the length of time they have held the office of Assistant Treasurer) shall exercise the powers of the Treasurer during that officer's absence or inability to act. 6.11 Secretary. Except as otherwise provided in these by-laws, the Secretary shall keep the minutes of all meetings of the board of directors and of the stockholders in books provided for that purpose, and he shall attend to the giving and service of all notices. He may sign with the Chairman of the Board or the President, in the name of the Corporation, all contracts of the Corporation and affix the seal of the Corporation thereto. He may sign with the Chairman of the Board or the President all certificates for shares of stock of the Corporation, and he shall have charge of the certificate books, transfer books, and stock papers as the board of directors may direct, all of which shall at all reasonable times be open to inspection by any director upon application at the office of the Corporation during business hours. He shall in general perform all duties incident to the office of the Secretary, subject to the control of the board of directors, the Chairman of the Board, and the President. 6.12 Assistant Secretaries. Each Assistant Secretary shall have such powers and duties as may be assigned to him by the board of directors, the Chairman of the Board, or the President. The Assistant Secretaries (in the order of their seniority as determined by the board of directors or, in the absence of such a determination, as determined by the length of time they have held the office of Assistant Secretary) shall exercise the powers of the Secretary during that officer's absence or inability to act. ARTICLE SEVEN: CERTIFICATES AND STOCKHOLDERS 7.1 Certificates for Shares. Certificates for shares of stock of the Corporation shall be in such form as shall be approved by the board of directors. The certificates shall be signed by the Chairman of the Board or the President or a Vice President and also by the Secretary or an Assistant Secretary or by the Treasurer or an Assistant Treasurer. Any and all signatures on the certificate may be a facsimile and may be sealed with the seal of the Corporation or a facsimile thereof. If any officer, transfer agent, or registrar who has signed, or whose facsimile signature has been placed upon, a certificate has ceased to be such officer, 11

transfer agent, or registrar before such certificate is issued, such certificate may be issued by the Corporation with the same effect as if he were such officer, transfer agent, or registrar at the date of issue. The certificates shall be consecutively numbered and shall be entered in the books of the Corporation as they are issued and shall exhibit the holder's name and the number of shares. 7.2 Replacement of Lost or Destroyed Certificates. The board of directors may direct a new certificate or certificates to be issued in place of a certificate or certificates theretofore issued by the Corporation and alleged to have been lost or destroyed, upon the making of an affidavit of that fact by the person claiming the certificate or certificates representing shares to be lost or destroyed. When authorizing such issue of a new certificate or certificates the board of directors may, in its discretion and as a condition precedent to the issuance thereof, require the owner of such lost or destroyed certificate or certificates, or his legal representative, to advertise the same in such manner as it shall require and/or to give the Corporation a bond with a surety or sureties satisfactory to the Corporation in such sum as it may direct as indemnity against any claim, or expense resulting from a claim, that may be made against the Corporation with respect to the certificate or certificates alleged to have been lost or destroyed. 7.3 Transfer of Shares. Shares of stock of the Corporation shall be transferable only on the books of the Corporation by the holders thereof in person or by their duly authorized attorneys or legal representatives. Upon surrender to the Corporation or the transfer agent of the Corporation of a certificate representing shares duly endorsed or accompanied by proper evidence of succession, assignment, or authority to transfer, the Corporation or its transfer agent shall issue a new certificate to the person entitled thereto, cancel the old certificate, and record the transaction upon its books. 7.4 Registered Stockholders. The Corporation shall be entitled to treat the holder of record of any share or shares of stock as the holder in fact thereof and, accordingly, shall not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of any other person, whether or not it shall have express or other notice thereof, except as otherwise provided by law. 7.5 Regulations. The board of directors shall have the power and authority to make all such rules and regulations as they may deem expedient concerning the issue, transfer, and registration or the replacement of certificates for shares of stock of the Corporation. 7.6 Legends. The board of directors shall have the power and authority to provide that certificates representing shares of stock bear such legends as the board of directors deems appropriate to assure that the Corporation does not become liable for violations of federal or state securities laws or other applicable law. ARTICLE EIGHT: MISCELLANEOUS PROVISIONS 8.1 Dividends. Subject to provisions of law and the certificate of incorporation of the Corporation, dividends may be declared by the board of directors at any 12

regular or special meeting and may be paid in cash, in property, or in shares of stock of the Corporation. Such declaration and payment shall be at the discretion of the board of directors. 8.2 Reserves. There may be created by the board of directors out of funds of the Corporation legally available therefor such reserve or reserves as the directors from time to time, in their discretion, consider proper to provide for contingencies, to equalize dividends, or to repair or maintain any property of the Corporation, or for such other purpose as the board of directors shall consider beneficial to the Corporation, and the board of directors may modify or abolish any such reserve in the manner in which it was created. 8.3 Books and Records. The Corporation shall keep correct and complete books and records of account, shall keep minutes of the proceedings of its stockholders and board of directors and shall keep at its registered office or principal place of business, or at the office of its transfer agent or registrar, a record of its stockholders, giving the names and addresses of all stockholders and the number and class of the shares held by each. 8.4 Fiscal Year. The fiscal year of the Corporation shall be fixed by the board of directors; provided, that if such fiscal year is not fixed by the board of directors and the selection of the fiscal year is not expressly deferred by the board of directors, the fiscal year shall be the calendar year. 8.5 Seal. The seal of the Corporation shall be such as from time to time may be approved by the board of directors. 8.6 Resignations. Any director, committee member, or officer may resign by so stating at any meeting of the board of directors or by giving written notice to the board of directors, the Chairman of the Board, the President, or the Secretary. Such resignation shall take effect at the time specified therein or, if no time is specified therein, immediately upon its receipt. Unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective. 8.7 Securities of Other Corporations. The Chairman of the Board, the President, or any Vice President of the Corporation shall have the power and authority to transfer, endorse for transfer, vote, consent, or take any other action with respect to any securities of another issuer which may be held or owned by the Corporation and to make, execute, and deliver any waiver, proxy, or consent with respect to any such securities. 8.8 Telephone Meetings. Stockholders (acting for themselves or through a proxy), members of the board of directors, and members of a committee of the board of directors may participate in and hold a meeting of such stockholders, board of directors, or committee by means of a conference telephone or similar communications equipment by means of which persons participating in the meeting can hear each other, and participation in a meeting pursuant to this section shall constitute presence in person at such meeting, except where a person participates in the meeting for the express purpose of objecting to the transaction of any business on the ground that the meeting is not lawfully called or convened. 13

8.9 Action Without a Meeting. (a) Unless otherwise provided in the certificate of incorporation of the Corporation, any action required by the Delaware General Corporation Law to be taken at any annual or special meeting of the stockholders, or any action which may be taken at any annual or special meeting of the stockholders, may be taken without a meeting, without prior notice, and without a vote, if a consent or consents in writing, setting forth the action so taken, shall be signed by the holders (acting for themselves or through a proxy) of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which the holders of all shares entitled to vote thereon were present and voted and shall be delivered to the Corporation by delivery to its registered office in the State of Delaware, its principal place of business, or an officer or agent of the Corporation having custody of the book in which proceedings of meetings of stockholders are recorded. Every written consent of stockholders shall bear the date of signature of each stockholder who signs the consent and no written consent shall be effective to take the corporate action referred to therein unless, within sixty days of the earliest dated consent delivered in the manner required by this Section 8.9(a) to the Corporation, written consents signed by a sufficient number of holders to take action are delivered to the Corporation by delivery to its registered office in the State of Delaware, its principal place of business, or an officer or agent of the Corporation having custody of the book in which proceedings of meetings of stockholders are recorded. Delivery made to the Corporation's registered office, principal place of business, or such officer or agent shall be by hand or by certified or registered mail, return receipt requested. (b) Unless otherwise restricted by the certificate of incorporation of the Corporation or by these by-laws, any action required or permitted to be taken at a meeting of the board of directors, or of any committee of the board of directors, may be taken without a meeting if a consent or consents in writing, setting forth the action so taken, shall be signed by all the directors or all the committee members, as the case may be, entitled to vote with respect to the subject matter thereof, and such consent shall have the same force and effect as a vote of such directors or committee members, as the case may be, and may be stated as such in any certificate or document filed with the Secretary of State of the State of Delaware or in any certificate delivered to any person. Such consent or consents shall be filed with the minutes of proceedings of the board or committee, as the case may be. 8.10 Invalid Provisions. If any part of these by-laws shall be held invalid or inoperative for any reason, the remaining parts, so far as it is possible and reasonable, shall remain valid and operative. 8.11 Mortgages, etc.. With respect to any deed, deed of trust, mortgage, or other instrument executed by the Corporation through its duly authorized officer or officers, the attestation to such execution by the Secretary of the Corporation shall not be necessary to constitute such deed, deed of trust, mortgage, or other instrument a valid and binding obligation against the Corporation unless the resolution, if any, of the board of directors authorizing such execution expressly state that such attestation is necessary. 8.12 Headings. The headings used in these by-laws have been inserted for administrative convenience only and do not constitute matter to be construed in interpretation. 14

8.13 References. Whenever herein the singular number is used, the same shall include the plural where appropriate, and words of any gender should include each other gender where appropriate. 8.14 Amendments. These by-laws may be altered, amended, or repealed or new by-laws may be adopted by the stockholders or by the board of directors at any regular meeting of the stockholders or the board of directors or at any special meeting of the stockholders or the board of directors if notice of such alteration, amendment, repeal, or adoption of new by-laws be contained in the notice of such special meeting. The undersigned, the Secretary of the Corporation, hereby certifies that the foregoing by-laws were adopted by unanimous consent of the directors of the Corporation as of January 12, 1994.

Nancy Woodward, Secretary

EXHIBIT 3.4 BYLAWS OF PERVASIVE SOFTWARE INC. A Delaware Corporation ARTICLE I OFFICES Section 1. The registered office shall be in the City of Wilmington, County of New Castle, State of Delaware. Section 2. The corporation may also have offices at such other places both within and without the State of Delaware as the Board of Directors may from time to time determine or the business of the corporation may require. ARTICLE II MEETINGS OF STOCKHOLDERS Section 1. All meetings of the stockholders for the election of directors shall be held at such time and place, within or without the State of Delaware, as may be fixed from time to time by the Board of Directors, and stated in the notice of the meeting. Meetings of stockholders for any other purpose may be held at such time and place, within or without the State of Delaware, as shall be stated in the notice of the meeting or in a duly executed waiver of notice thereof. Section 2. (a) Annual meetings of stockholders, commencing with the year 1998, shall be held at such date and time as shall be designated from time to time by the Board of Directors and stated in the notice of the meeting, at which they shall elect by a plurality vote a board of directors, and transact such other business as may properly be brought before the meeting. (b) Nominations of persons for election to the Board of Directors of the Corporation and the proposal of business to be considered by the stockholders may be made at an annual meeting of stockholders (i) pursuant to the Corporation's notice of meeting, (ii) by or at the direction of the Board of Directors or (iii) by any stockholder of the Corporation who was a stockholder of record at the time of giving of the notice provided for in this by-law, who is entitled to vote at the meeting and who complied with the notice procedures set forth in this by-law. (c) For nominations or other business to be properly brought before an annual meeting by a stockholder pursuant to clause (iii) of paragraph (b) of this by-law, the stockholder must have given timely notice thereof in writing to the Secretary of the Corporation and any such

business must otherwise be a proper matter for stockholder action under Delaware law. To be timely, a stockholder's notice shall be delivered to the Secretary at the principal executive offices of the Corporation not less than 60 days nor more than 90 days prior to the first anniversary of the preceding year's annual meeting; provided, however, that in the event that the date of the annual meeting is advanced by more than 30 days or delayed by more than 60 days from such anniversary date, notice by the stockholder to be timely must be so delivered not earlier than the 90/th/ day prior to such annual meeting and not later than the close of business on the later of the 60/th/ day prior to such annual meeting or the 10/th/ day following the day on which public announcement of the date of such meeting is first made. Such stockholder's notice shall set forth (i) as to each person whom the stockholder proposes to nominate for election or reelection as a director all information relating to such person that is required to be disclosed in solicitations of proxies for election of directors, or is otherwise required, in each case pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended (the "Exchange Act") (including such person's written consent to being named in the proxy statement as a nominee and to serving as a director if elected); (ii) as to any other business that the stockholder proposes to bring before the meeting, a brief description of the business desired to be brought before the meeting, the reasons for conducting such business at the meeting and any material interest in such business of such stockholder and the beneficial owner, if any, on whose behalf the proposal is made; and (iii) as to the stockholder giving the notice and the beneficial owner, if any, on whose behalf the nomination or proposal is made (a) the name and address of such stockholder, as they appear on the Corporation's books, and of such beneficial owner and (b) the class and number of shares of the Corporation which are owned beneficially and of record by such stockholder and such beneficial owner. (d) Notwithstanding anything in the second sentence of paragraph (c) of this by-law to the contrary, in the event that the number of directors to be elected to the Board of Directors of the Corporation is increased and there is no public announcement naming all of the nominees for director or specifying the size of the increased Board of Directors made by the Corporation at least 70 days prior to the first anniversary of the preceding year's annual meeting, a stockholder's notice required by this by-law shall also be considered timely, but only with respect to nominees for any new positions created by such increase, if it shall be delivered to the Secretary at the principal executive offices of the Corporation not later than the close of business on the 10/th/ day following the day on which such public announcement is first made by the Corporation. (e) Only such persons who are nominated in accordance with the procedures set forth in these By-laws shall be eligible to serve as directors and only such business shall be conducted at an annual meeting of stockholders as shall have been brought before the meeting in accordance with the procedures set forth in these By-laws. The chairman of the meeting shall have the power and duty to determine whether a nomination or any business proposed to be brought before the meeting was made in accordance with the procedures set forth in these By-laws. The chairman of the meeting shall have the power and duty to determine whether a nomination or any business proposed to be brought before the meeting was made in accordance with the procedures set forth in these By-laws, and, if any proposed nomination or business is not in compliance with these By-laws, to declare that such defective proposed business or nomination shall be disregarded. 2

(f) For purposes of these By-laws, "public announcement" shall mean disclosure in a press release reported by the Dow Jones News Service, Associated Press or a comparable national news service or in a document publicly filed by the Corporation with the Securities and Exchange Commission pursuant to Section 13, 14 or 15(d) of the Exchange Act. (g) Notwithstanding the foregoing provisions of this by-law, a stockholder shall also comply with all applicable requirements of the Exchange Act and the rules and regulations thereunder with respect to the matters set forth in this by-law. Nothing in this by-law shall be deemed to affect any rights of stockholders to request inclusion of proposals in the Corporation's proxy statement pursuant to Rule 14a-8 under the Exchange Act. Section 3. Written notice of the annual meeting stating the place, date and hour of the meeting shall be given to each stockholder entitled to vote at such meeting not fewer than ten (10) nor more than sixty (60) days before the date of the meeting. Section 4. The officer who has charge of the stock ledger of the corporation shall prepare and make, at least ten (10) days before every meeting of stockholders, a complete list of the stockholders entitled to vote at the meeting, arranged in alphabetical order, and showing the address of each stockholder and the number of shares registered in the name of each stockholder. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting, during ordinary business hours, for a period of at least ten (10) days prior to the meeting, either at a place within the city where the meeting is to be held, which place shall be specified in the notice of the meeting, or, if not so specified, at the place where the meeting is to be held. The list shall also be produced and kept at the time and place of the meeting during the whole time thereof, and may be inspected by any stockholder who is present. Section 5. Special meetings of the stockholders, for any purpose or purposes, unless otherwise prescribed by statute or by the certificate of incorporation, may be called at any time by the Board of Directors pursuant to a resolution approved by a majority of the whole Board of Directors. Such resolution shall state the purpose or purposes of the proposed meeting. Section 6. Written notice of a special meeting stating the place, date and hour of the meeting and the purpose or purposes for which the meeting is called, shall be given not fewer than ten (10) nor more than sixty (60) days before the date of the meeting, to each stockholder entitled to vote at such meeting. Section 7. Business transacted at any special meeting of stockholders shall be limited to the purposes stated in the notice. Section 8. The holders of a majority of the stock issued and outstanding and entitled to vote thereat, present in person or represented by proxy, shall constitute a quorum at all meetings of the stockholders for the transaction of business except as otherwise provided by statute or by the certificate of incorporation. If, however, such quorum shall not be present or represented at any meeting of the stockholders, the stockholders entitled to vote thereat, present in person or represented by proxy, shall have power to adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present or represented. At such adjourned meeting at which a quorum shall be present or 3

represented any business may be transacted that might have been transacted at the meeting as originally notified. If the adjournment is for more than thirty (30) days, or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting. Section 9. When a quorum is present at any meeting, the vote of the holders of a majority of the stock having voting power present in person or represented by proxy shall decide any question brought before such meeting, unless the question is one upon which by express provision of the statutes or of the certificate of incorporation, a different vote is required, in which case such express provision shall govern and control the decision of such question. Section 10. Unless otherwise provided in the certificate of incorporation, each stockholder shall at every meeting of the stockholders be entitled to one vote in person or by proxy for each share of the capital stock having voting power held by such stockholder, but no proxy shall be voted on after three (3) years from its date, unless the proxy provides for a longer period. ARTICLE III DIRECTORS Section 1. The number of directors shall be fixed from time to time exclusively by the Board of Directors pursuant to a resolution adopted by a majority of the total number of authorized directors (whether or not there exist any vacancies in previously authorized directorships at the time any such resolution is presented to the Board for adoption). Directors shall be divided into three classes, as nearly equal in number as reasonably possible, with the term of office of the first class to expire at the 1998 annual meeting of stockholders, the term of office of the second class to expire at the 1999 annual meeting of stockholders and the term of office of the third class to expire at the 2000 annual meeting of stockholders. At each annual meeting of stockholders following such initial classification and election, directors elected to succeed those directors whose terms expire shall be elected for a term of office to expire at the third succeeding annual meeting of stockholders after their election. All directors shall hold office until the expiration of term for which elected, and until their respective successors are elected and qualified, except in the case of the death, resignation or removal of any director. Directors need not be stockholders. Section 2. Vacancies and newly created directorships resulting from any increase in the authorized number of directors may be filled by a majority of the directors then in office, though less than a quorum, or by a sole remaining director, and not by stockholders, and the directors so chosen shall hold office until the next annual election and until their successors are duly elected and shall qualify, unless sooner displaced. If there are no directors in office, then an election of directors may be held in the manner provided by statute. 4

Section 3. The business of the corporation shall be managed by or under the direction of its board of directors, which may exercise all such powers of the corporation and do all such lawful acts and things as are not by statute or by the certificate of incorporation or by these bylaws directed or required to be exercised or done by the stockholders. MEETINGS OF THE BOARD OF DIRECTORS Section 4. The Board of Directors of the corporation may hold meetings, both regular and special, either within or without the State of Delaware. Section 5. The first meeting of each newly elected Board of Directors shall be held at such time and place as shall be fixed by the vote of the stockholders at the annual meeting and no notice of such meeting shall be necessary to the newly elected directors in order legally to constitute the meeting, provided a quorum shall be present. In the event of the failure of the stockholders to fix the time or place of such first meeting of the newly elected Board of Directors, or in the event such meeting is not held at the time and place so fixed by the stockholders, the meeting may be held at such time and place as shall be specified in a notice given as hereinafter provided for special meetings of the Board of Directors, or as shall be specified in a written waiver signed by all of the directors. Section 6. Regular meetings of the Board of Directors may be held without notice at such time and at such place as shall from time to time be determined by the board. Section 7. Special meetings of the Board of Directors may be called by the president on ten (10) days' notice to each director by mail or forty-eight (48) hours notice to each director either personally or by telephone, telegram or facsimile; special meetings shall be called by the president or secretary in like manner and on like notice on the written request of two (2) directors unless the board consists of only one director, in which case special meetings shall be called by the president or secretary in like manner and on like notice on the written request of the sole director. Section 8. At all meetings of the board a majority of the directors shall constitute a quorum for the transaction of business and the act of a majority of the directors present at any meeting at which there is a quorum shall be the act of the Board of Directors, except as may be otherwise specifically provided by statute or by the certificate of incorporation. If a quorum shall not be present at any meeting of the Board of Directors, the directors present thereat may adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present. Section 9. Unless otherwise restricted by the certificate of incorporation of these bylaws, any action required or permitted to be taken at any meeting of the Board of Directors or of any committee thereof may be taken without a meeting, if all members of the board or committee, as the case may be, consent thereto in writing, and the writing or writings are filed with the minutes of proceedings of the board or committee. 5

Section 10. Unless otherwise restricted by the certificate of incorporation or these bylaws, members of the Board of Directors, or any committee designated by the Board of Directors, may participate in a meeting of the Board of Directors, or any committee, by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other, and such participation in a meeting shall constitute presence in person at the meeting. COMMITTEES OF DIRECTORS Section 11. The Board of Directors may, by resolution passed by a majority of the whole board, designate one (1) or more committees, each committee to consist of one (1) or more of the directors of the corporation. The board may designate one (1) or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee. In the absence of disqualification of a member of a committee, the member or members thereof present at any meeting and not disqualified from voting, whether or not he or she or they constitute a quorum, may unanimously appoint another member of the Board of Directors to act at the meeting in the place of any such absent or disqualified member. Any such committee, to the extent provided in the resolution of the Board of Directors, shall have and may exercise all the powers and authority of the Board of Directors in the management of the business and affairs of the corporation, and may authorize the seal of the corporation to be affixed to all papers that may require it; but no such committee shall have the power or authority in reference to amending the certificate of incorporation, adopting an agreement of merger or consolidation, recommending to the stockholders the sale, lease or exchange of all or substantially all of the corporation's property and assets, recommending to the stockholders a dissolution of the corporation or a revocation of a dissolution, or amending the bylaws of the corporation; and, unless the resolution or the certificate of incorporation expressly so provide, no such committee shall have the power or authority to declare a dividend or to authorize the issuance of stock. Such committee or committees shall have such name or names as may be determined from time to time by resolution adopted by the Board of Directors. Section 12. Each committee shall keep regular minutes of its meetings and report the same to the Board of Directors when required. COMPENSATION OF DIRECTORS Section 13. Unless otherwise restricted by the certificate of incorporation or these bylaws, the Board of Directors shall have the authority to fix the compensation of directors. The directors may be paid their expenses, if any, of attendance at each meeting of the Board of Directors and may be paid a fixed sum for attendance at each meeting of the Board of Directors or a stated salary as director. No such payment shall preclude any director from serving the corporation in any other capacity and receiving compensation therefor. Members of special or standing committees may be allowed like compensation for attending committee meetings. 6

ARTICLE IV NOTICES Section 1. Whenever, under the provisions of the statutes or of the certificate of incorporation or of these bylaws, notice is required to be given to any director or stockholder, it shall not be construed to mean personal notice, but such notice may be given in writing, by mail, addressed to such director or stockholder, at his address as it appears on the records of the corporation, with postage thereon prepaid, and such notice shall be deemed to be given at the time when the same shall be deposited in the United States mail. Notice to directors may also be given by telegram, telephone or facsimile. Section 2. Whenever any notice is required to be given under the provisions of the statutes or of the certificate of incorporation or of these bylaws, a waiver thereof in writing, signed by the person or persons entitled to said notice, whether before or after the time stated therein, shall be deemed equivalent thereto. ARTICLE V OFFICERS Section 1. The officers of the corporation shall be chosen by the Board of Directors and shall be a president, treasurer and a secretary. The Board of Directors may elect from among its members a Chairman of the Board and a Vice Chairman of the Board. The Board of Directors may also choose one or more vice-presidents, assistant secretaries and assistant treasurers. Any number of offices may be held by the same person, unless the certificate of incorporation or these bylaws otherwise provide. Section 2. The Board of Directors at its first meeting after each annual meeting of stockholders shall choose a president, a treasurer, and a secretary, and may choose vice presidents, assistant secretaries and assistant treasurers. Section 3. The Board of Directors may appoint such other officers and agents as it shall deem necessary who shall hold their offices for such terms and shall exercise such powers and perform such duties as shall be determined from time to time by the board. Section 4. The salaries of all officers and agents of the corporation shall be fixed by the Board of Directors. Section 5. The officers of the corporation shall hold office until their successors are chosen and qualify. Any officer elected or appointed by the Board of Directors may be removed at any time by the affirmative vote of a majority of the Board of Directors. Any vacancy occurring in any office of the corporation shall be filled by the Board of Directors. THE CHAIRMAN OF THE BOARD Section 6. The Chairman of the Board, if any, shall preside at all meetings of the 7

Board of Directors and of the stockholders at which he or she shall be present. He or she shall have and may exercise such powers as are, from time to time, assigned to him or her by the Board and as may be provided by law. Section 7. In the absence of the Chairman of the Board, the Vice Chairman of the Board, if any, shall preside at all meetings of the Board of Directors and of the stockholders at which he or she shall be present. He or she shall have and may exercise such powers as are, from time to time, assigned to him or her by the Board and as may be provided by law. THE PRESIDENT AND VICE-PRESIDENTS Section 8. The president shall be the chief operating officer of the corporation; and in the absence of the Chairman and Vice Chairman of the Board the president shall preside at all meetings of the stockholders and the Board of Directors; the president shall have general and active management of the business of the corporation and shall see that all orders and resolutions of the Board of Directors are carried into effect. Section 9. The president shall execute bonds, mortgages and other contracts requiring a seal, under the seal of the corporation, except where required or permitted by law to be otherwise signed and executed and except where the signing and execution thereof shall be expressly delegated by the Board of Directors to some other officer or agent of the corporation. Section 10. In the absence of the president or in the event of the president's inability or refusal to act, the vice-president, if any, (or in the event there be more than one vice-president, the vice-presidents in the order designated by the directors, or in the absence of any designation, then in the order of their election) shall perform the duties of the president, and when so acting, shall have all the powers of and be subject to all the restrictions upon the president. The vice-presidents shall perform such other duties and have such other powers as the Board of Directors may from time to time prescribe. THE SECRETARY AND ASSISTANT SECRETARY Section 11. The secretary shall attend all meetings of the Board of Directors and all meetings of the stockholders and record all the proceedings of the meetings of the corporation and of the Board of Directors in a book to be kept for that purpose and shall perform like duties for the standing committees when required. The secretary or she shall give, or cause to be given, notice of all meetings of the stockholders and special meetings of the Board of Directors, and shall perform such other duties as may be prescribed by the Board of Directors or president, under whose supervision he or she shall be. The secretary shall have custody of the corporate seal of the corporation and the secretary, or an assistant secretary, shall have authority to affix the same to any instrument requiring it and when so affixed, it may be attested by his signature or by the signature of such assistant secretary. The Board of Directors may give general authority to any other officer to affix the seal of the corporation and to attest the affixing by his signature. Section 12. The assistant secretary, or if there be more than one, the assistant secretaries in the order determined by the Board of Directors (or if there be no such 8

determination, then in the order of their election) shall, in the absence of the secretary or in the event of his inability or refusal to act, perform the duties and exercise the powers of the secretary and shall perform such other duties and have such other powers as the board of directors may from time to time prescribe. TREASURER AND ASSISTANT TREASURERS Section 13. The treasurer shall have the custody of the corporate funds and securities and shall keep full and accurate accounts of receipts and disbursements in books belonging to the corporation and shall deposit all moneys and other valuable effects in the name and to the credit of the corporation in such depositories as may be designated by the Board of Directors. Unless otherwise appointed, the chief financial officer shall be the treasurer. Section 14. The treasurer shall disburse the funds of the corporation as may be ordered by the Board of Directors, taking proper vouchers for such disbursements, and shall render to the president and the Board of Directors, at its regular meetings, or when the Board of Directors so requires, an account of all his or her transactions as treasurer and of the financial condition of the corporation. Section 15. If required by the Board of Directors, the treasurer shall give the corporation a bond (which shall be renewed every six years) in such sum and with such surety or sureties as shall be satisfactory to the Board of Directors for the faithful performance of the duties of the treasurer's office and for the restoration to the corporation, in case of the treasurer's death, resignation, retirement or removal from office, of all books, papers, vouchers, money and other property of whatever kind in the treasurer's possession or under the treasurer's control belonging to the corporation. Section 16. The assistant treasurer, or if there shall be more than one, the assistant treasurers in the order determined by the Board of Directors (or if there be no such determination, then in the order of their election) shall, in the absence of the treasurer or in the event of the treasurer's inability or refusal to act, perform the duties and exercise the powers of the treasurer and shall perform such other duties and have such other powers as the Board of Directors may from time to time prescribe. ARTICLE VI CERTIFICATE OF STOCK Section 1. Every holder of stock in the corporation shall be entitled to have a certificate, signed by, or in the name of the corporation by, the chairman or vice-chairman of the Board of Directors, or the president or a vice- president and the treasurer or an assistant treasurer, or the secretary or an assistant secretary of the corporation, certifying the number of shares owned by such stockholder in the corporation. Certificates may be issued for partly paid shares and in such case upon the face or back of the certificates issued to represent any such partly paid shares, the total amount of the consideration to be paid therefor, and the amount paid thereon shall be specified. 9

If the corporation shall be authorized to issue more than one class of stock or more than one series of any class, the powers, designations, preferences and relative, participating, optional or other special rights of each class of stock or series thereof and the qualification, limitations or restrictions of such preferences and/or rights shall be set forth in full or summarized on the face or back of the certificate that the corporation shall issue to represent such class or series of stock, provided that, except as otherwise provided in section 202 of the General Corporation Law of Delaware, in lieu of the foregoing requirements, there may be set forth on the face or back of the certificate that the corporation shall issue to represent such class or series of stock, a statement that the corporation will furnish without charge to each stockholder who so requests the powers, designations, preferences and relative, participating, optional or other special rights of each class of stock or series thereof and the qualifications, limitations or restrictions of such preferences and/or rights. Section 2. Any of or all the signatures on the certificate may be facsimile. In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer, transfer agent or registrar before such certificate is issued, it may be issued by the corporation with the same effect as if he or she were such officer, transfer agent or registrar at the date of issue. LOST CERTIFICATES Section 3. The Board of Directors may direct a new certificate or certificates to be issued in place of any certificate or certificates theretofore issued by the corporation alleged to have been lost, stolen or destroyed, upon the making of an affidavit of that fact by the person claiming the certificate of stock to be lost, stolen or destroyed. When authorizing such issue of a new certificate or certificates, the Board of Directors may, in its discretion and as a condition precedent to the issuance thereof, require the owner of such lost, stolen or destroyed certificate or certificates, or his legal representative, to advertise the same in such manner as it shall require and/or to give the corporation a bond in such sum as it may direct as indemnity against any claim that may be made against the corporation with respect to the certificate alleged to have been lost, stolen or destroyed. TRANSFER OF STOCK Section 4. Upon surrender to the corporation or the transfer agent of the corporation of a certificate for shares duly endorsed or accompanied by proper evidence of succession, assignation or authority to transfer, it shall be the duty of the corporation to issue a new certificate to the person entitled thereto, cancel the old certificate and record the transaction upon its books. FIXING RECORD DATE Section 5. In order that the corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholder or any adjournment thereof, or to express consent to corporate action in writing without a meeting, or entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in 10

respect of any change, conversion or exchange of stock or for the purpose of any other lawful action, the Board of Directors may fix, in advance, a record date, which shall not be more than sixty (60) nor less than ten (10) days before the date of such meeting, nor more than sixty (60) days prior to any other action. A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the Board of Directors may fix a new record date for the adjourned meeting. REGISTERED STOCKHOLDERS Section 6. The corporation shall be entitled to recognize the exclusive right of a person registered on its books as the owner of shares to receive dividends, and to vote as such owner, and to hold liable for calls and assessments a person registered on its books as the owner of shares and shall not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of any other person, whether or not it shall have express or other notice thereof, except as otherwise provided by the laws of Delaware. ARTICLE VII GENERAL PROVISIONS DIVIDENDS Section 1. Dividends upon the capital stock of the corporation, subject to the provisions of the certificate of incorporation, if any, may be declared by the Board of Directors at any regular or special meeting, pursuant to law. Dividends may be paid in cash, in property, or in shares of the capital stock, subject to the provisions of the certificate of incorporation. Section 2. Before payment of any dividend, there may be set aside out of any funds of the corporation available for dividends such sum or sums as the directors from time to time, in their absolute discretion, think proper as a reserve or reserves to meet contingencies, or for equalizing dividends, or for repairing or maintaining any property of the corporation, or for such other purposes as the directors shall think conducive to the interest of the corporation, and the directors may modify or abolish any such reserve in the manner in which it was created. CHECKS Section 3. All checks or demands for money and notes of the corporation shall be signed by such officer or officers or such other person or persons as the Board of Directors may from time to time designate. FISCAL YEAR Section 4. The fiscal year of the corporation shall be fixed by resolution of the Board of Directors. SEAL 11

Section 5. The Board of Directors may adopt a corporate seal having inscribed thereon the name of the corporation, the year of its organization and the words "Corporate Seal, Delaware." The seal may be used by causing it or a facsimile thereof to be impressed or affixed or reproduced or otherwise. INDEMNIFICATION Section 6. The corporation shall, to the fullest extent authorized under the laws of the State of Delaware, as those laws may be amended and supplemented from time to time, indemnify any director made, or threatened to be made, a party to an action or proceeding, whether criminal, civil, administrative or investigative, by reason of being a director of the corporation or a predecessor corporation or, at the corporation's request, a director or officer of another corporation, provided, however, that the corporation shall indemnify any such agent in connection with a proceeding initiated by such agent only if such proceeding was authorized by the Board of Directors of the corporation. The indemnification provided for in this Section 6 shall: (i) not be deemed exclusive of any other rights to which those indemnified may be entitled under any bylaw, agreement or vote of stockholders or disinterested directors or otherwise, both as to action in their official capacities and as to action in another capacity while holding such office, (ii) continue as to a person who has ceased to be a director, and (iii) inure to the benefit of the heirs, executors and administrators of such a person. The corporation's obligation to provide indemnification under this Section 6 shall be offset to the extent of any other source of indemnification or any otherwise applicable insurance coverage under a policy maintained by the corporation or any other person. Expenses incurred by a director or officer of the corporation in defending a civil or criminal action, suit or proceeding by reason of the fact that he or she is or was a director or officer of the corporation (or was serving at the corporation's request as a director or officer of another corporation) shall be paid by the corporation in advance of the final disposition of such action, suit or proceeding upon receipt of an undertaking by or on behalf of such director or officer to repay such amount if it shall ultimately be determined that such director or officer is not entitled to be indemnified by the corporation as authorized by relevant sections of the General Corporation Law of Delaware. Notwithstanding the foregoing, the corporation shall not be required to advance such expenses to an agent who is a party to an action, suit or proceeding brought by the corporation and approved by a majority of the Board of Directors of the corporation that alleges willful misappropriation of corporate assets by such agent, disclosure of confidential information in violation of such agent's fiduciary or contractual obligations to the corporation or any other willful and deliberate breach in bad faith of such agent's duty to the corporation or its stockholders. The foregoing provisions of this Section 6 shall be deemed to be a contract between the corporation and each director or officer who serves in such capacity at any time while this bylaw is in effect, and any repeal or modification thereof shall not affect any rights or obligations then existing with respect to any state of facts then or theretofore existing or any action, suit or proceeding theretofore or thereafter brought based in whole or in part upon any such state of facts. 12

The Board of Directors in its discretion shall have power on behalf of the corporation to indemnify any person, other than a director or officer, made a party to any action, suit or proceeding by reason of the fact that such person, their testator or intestate, is or was an officer or employee of the corporation. To assure indemnification under this Section 6 of all directors, officers and employees who are determined by the corporation or otherwise to be or to have been "fiduciaries" of any employee benefit plan of the corporation that may exist from time to time, Section 145 of the General Corporation Law of Delaware shall, for the purposes of this Section 6, be interpreted as follows: an "other enterprise" shall be deemed to include such an employee benefit plan, including without limitation, any plan of the corporation that is governed by the Act of Congress entitled "Employee Retirement Income Security Act of 1974," as amended from time to time; the corporation shall be deemed to have requested a person to serve an employee benefit plan where the performance by such person of his duties to the corporation also imposes duties on, or otherwise involves services by, such person to the plan or participants or beneficiaries of the plan; excise taxes assessed on a person with respect to an employee benefit plan pursuant to such Act of Congress shall be deemed "fines." ARTICLE VIII AMENDMENTS Section 1. These bylaws may be altered, amended or repealed or new bylaws may be adopted by stockholders holding at least seventy-five percent (75%) of the Company's outstanding capital stock ("Amending Stockholders") or by the Board of Directors, when such power is conferred upon the Board of Directors by the certificate of incorporation at any regular meeting of the stockholders or of the Board of Directors or by the Amending Stockholders at any special meeting of the stockholders or by the Board of Directors at any special meeting of the Board of Directors if notice of such alteration, amendment, repeal or adoption of new bylaws be contained in the notice of such special meeting. If the power to adopt, amend or repeal bylaws is conferred upon the Board of Directors by the certificate or incorporation it shall not divest or limit the power of the stockholders to adopt, amend or repeal bylaws. 13

EXHIBIT 4.3 BTRIEVE TECHNOLOGIES, INC. INVESTORS' RIGHTS AGREEMENT APRIL 19, 1995

TABLE OF CONTENTS
Page ---Registration Rights.................................................... 1 1.1 Definitions...................................................... 1 1.2 Request for Registration......................................... 2 1.3 Company Registration............................................. 4 1.4 Obligations of the Company....................................... 4 1.5 Furnish Information.............................................. 6 1.6 Expenses of Demand Registration.................................. 6 1.7 Expenses of Company Registration................................. 6 1.8 Underwriting Requirements........................................ 7 1.9 Delay of Registration............................................ 7 1.10 Indemnification.................................................. 7 1.11 Reports Under Securities Exchange Act of 1934.................... 9 1.12 Form S-3 Registration............................................ 10 1.13 Assignment of Registration Rights................................ 11 1.14 Limitations on Subsequent Registration Rights.................... 11 1.15 "Market Stand-Off" Agreement..................................... 12 1.16 Termination of Registration Rights............................... 12 Covenants of the Company............................................... 2.1 Delivery of Financial Statements................................. 2.2 Additional Information........................................... 2.3 Termination of Information and Inspection Covenants.............. 2.4 Right of First Refusal........................................... 2.5 Key-Man Insurance................................................ 2.6 Board of Directors............................................... 2.7 Additional Covenants............................................. 2.8 Termination of Certain Covenants................................. Miscellaneous.......................................................... 3.1 Successors and Assigns........................................... 3.2 Governing Law.................................................... 3.3 Counterparts..................................................... 3.4 Titles and Subtitles............................................. 3.5 Notices.......................................................... 3.6 Expenses......................................................... 3.7 Amendments and Waivers........................................... 3.8 Severability..................................................... 3.9 Aggregation of Stock............................................. 13 13 13 14 14 15 15 16 16 16 16 17 17 17 17 17 17 17 17

1.

2.

3.

3.10 3.11

Entire Agreement; Amendment; Waiver.............................. 18 Prior Agreement.................................................. 18

SCHEDULES Schedule A -- Schedule of Investors

INVESTORS' RIGHTS AGREEMENT THIS INVESTORS' RIGHTS AGREEMENT is made as of the 19th day of April, 1995, by and between Btrieve Technologies, Inc., a Delaware corporation (the "Company"), and the investors listed on Schedule A hereto, each of which is herein referred to as an "Investor." RECITALS WHEREAS, the Company and certain of the Investors are parties to that certain Registration Rights Agreement dated April 29, 1994 (the "Prior Agreement"); WHEREAS, the Company and certain of the Investors are parties to that certain Series C Preferred Stock Purchase Agreement of even date herewith (the "Series C Agreement"); WHEREAS, in order to induce the Company to enter into the Series C Agreement and to induce certain of the Investors to invest funds in the Company pursuant to the Series C Agreement, the Investors and the Company desire to terminate the Prior Agreement and to enter into this Agreement which shall govern the rights of the Investors to cause the Company to register shares of Common Stock issuable to the Investors and certain other matters as set forth herein, and replace and supersede the Prior Agreement; NOW, THEREFORE, THE PARTIES HEREBY AGREE AS FOLLOWS: 1. Registration Rights. The Company covenants and agrees as follows: 1.1 Definitions. For purposes of this Section 1: (a) The term "Act" means the Securities Act of 1933, as amended. (b) The term "Form S-3" means such form under the Act as in effect on the date hereof or any registration form under the Act subsequently adopted by the SEC which permits inclusion or incorporation of substantial information by reference to other documents filed by the Company with the SEC. (c) The term "Holder" means any person owning or having the right to acquire Registrable Securities or any assignee thereof in accordance with Section 1.13 hereof. (d) The term "1934 Act" shall mean the Securities Exchange Act of 1934, as amended. (e) The term "register", "registered," and "registration" refer to a registration

effected by preparing and filing a registration statement or similar document in compliance with the Act, and the declaration or ordering of effectiveness of such registration statement or document. (f) The term "Registrable Securities" means (i) the Common Stock issuable or issued upon conversion of the Series A Preferred Stock, Series B Preferred Stock and Series C Preferred Stock held by the Investors, their permitted assignees or transferees, and (ii) any Common Stock of the Company issued as (or issuable upon the conversion or exercise of any warrant, right or other security which is issued as) a dividend or other distribution with respect to, or in exchange for or in replacement of the shares referenced in (i) above, excluding in all cases, however, any Registrable Securities sold by a person in a transaction in which his rights under this Section 1 are not assigned. (g) The number of shares of "Registrable Securities then outstanding" shall be determined by the number of shares of Common Stock outstanding which are, and the number of shares of Common Stock issuable pursuant to then exercisable or convertible securities which are, Registrable Securities. (h) The term "SEC" shall mean the Securities and Exchange Commission. 1.2 Request for Registration. (a) If the Company shall receive at any time after the earlier of (i) April 19, 1997 or (ii) three (3) months after the effective date of the first registration statement for a public offering of securities of the Company (other than a registration statement relating either to the sale of securities to employees of the Company pursuant to a stock option, stock purchase or similar plan or a SEC Rule 145 transaction), a written request from the Holders of a majority of the Registrable Securities then outstanding that the Company file a registration statement under the Act covering the registration of at least 30% of the Registrable Securities then outstanding for aggregate proceeds, net of underwriting discounts and commissions, in excess of $15,000,000 then the Company shall: (i) within ten (10) days of the receipt thereof, give written notice of such request to all Holders; and (ii) effect as soon as practicable, and in any event within 90 days of the receipt of such request, the registration under the Act of all Registrable Securities which the Holders request to be registered, subject to the limitations of subsection 1.2(b), within twenty (20) days of the mailing of such notice by the Company in accordance with Section 3.5. (b) If the Holders initiating the registration request hereunder ("Initiating Holders") intend to distribute the Registrable Securities covered by their request by means of an underwriting, they shall so advise the Company as a part of their request made pursuant to

subsection 1.2(a) and the Company shall include such information in the written notice referred to in subsection 1.2(a). The underwriter will be selected by the Company and shall be reasonably acceptable to a majority in interest of the Initiating Holders. In such event, the right of any Holder to include his Registrable Securities in such registration shall be conditioned upon such Holder's participation in such underwriting and the inclusion of such Holder's Registrable Securities in the underwriting (unless otherwise mutually agreed by a majority in interest of the Initiating Holders and such Holder) to the extent provided herein. All Holders proposing to distribute their securities through such underwriting shall (together with the Company as provided in subsection 1.4(e)) enter into an underwriting agreement in customary form with the underwriter or underwriters selected for such underwriting. Notwithstanding any other provision of this Section 1.2, if the underwriter advises the Initiating Holders in writing that marketing factors require a limitation of the number of shares to be underwritten, then the Initiating Holders shall so advise all Holders of Registrable Securities which would otherwise be underwritten pursuant hereto, and the number of shares of Registrable Securities that may be included in the underwriting shall be allocated among all Holders thereof, including the Initiating Holders, in proportion (as nearly as practicable) to the amount of Registrable Securities of the Company owned by each Holder; provided, however, that the number of shares of Registrable Securities to be included in such underwriting shall not be reduced unless all other securities proposed to be sold for the account of any person other than the Company are first entirely excluded from the underwriting. (c) Notwithstanding the foregoing, if the Company shall furnish to Holders requesting a registration statement pursuant to this Section 1.2, a certificate signed by the Chief Executive Officer of the Company stating that in the good faith judgment of the Board of Directors of the Company, it would be detrimental to the Company and its shareholders for such registration statement to be filed or the Company could not at such time comply with applicable law or regulations in connection with such filing and it is therefore essential to defer the filing of such registration statement, the Company shall have the right to defer taking action with respect to such filing for a period of not more than 120 days after receipt of the request of the Initiating Holders; provided, however, that the Company may not utilize this right more than once in any twelve-month period. (d) In addition, the Company shall not be obligated to effect, or to take any action to effect, any registration pursuant to this Section 1.2: (i) After the Company has effected two registrations pursuant to this Section 1.2 and such registrations have been declared or ordered effective; (ii) During the period starting with the date sixty (60) days prior to the Company's good faith estimate of the date of filing of, and ending on a date one hundred eighty (180) days after the effective date of, a registration subject to Section 1.3 hereof; provided that the Company is actively employing in good faith all reasonable efforts to cause such registration statement to become effective; or

(iii) If the Initiating Holders propose to dispose of shares of Registrable Securities that may be immediately registered on Form S-3 pursuant to a request made pursuant to Section 1.12 below. 1.3 Company Registration. If (but without any obligation to do so) the Company proposes to register (including for this purpose a registration effected by the Company for shareholders other than the Holders) any of its stock or other securities under the Act in connection with the public offering of such securities solely for cash (other than a registration relating solely to the sale of securities to participants in a Company stock plan, a registration on any form which does not include substantially the same information as would be required to be included in a registration statement covering the sale of the Registrable Securities or a registration in which the only Common Stock being registered is Common Stock issuable upon conversion of debt securities which are also being registered), the Company shall, at such time, promptly give each Holder written notice of such registration. Upon the written request of each Holder given within twenty (20) days after mailing of such notice by the Company in accordance with Section 3.5, the Company shall, subject to the provisions of Section 1.8, cause to be registered under the Act all of the Registrable Securities that each such Holder has requested to be registered. 1.4 Obligations of the Company. Whenever required under this Section 1 to effect the registration of any Registrable Securities, the Company shall, as expeditiously as reasonably possible: (a) Prepare and file with the SEC a registration statement with respect to such Registrable Securities and use its best efforts to cause such registration statement to become effective, and, upon the request of the Holders of a majority of the Registrable Securities registered thereunder, keep such registration statement effective for a period of up to one hundred twenty (120) days or until the distribution contemplated in the Registration Statement has been completed; provided, however, that (i) such 120-day period shall be extended for a period of time equal to the period the Holder refrains from selling any securities included in such registration at the request of an underwriter of Common Stock (or other securities) of the Company; and (ii) in the case of any registration of Registrable Securities on Form S-3 which are intended to be offered on a continuous or delayed basis, such 120-day period shall be extended, if necessary, to keep the registration statement effective until all such Registrable Securities are sold, provided that Rule 415, or any successor rule under the Act, permits an offering on a continuous or delayed basis, and provided further that applicable rules under the Act governing the obligation to file a post-effective amendment permit, in lieu of filing a post- effective amendment which (I) includes any prospectus required by Section 10(a)(3) of the Act or (II) reflects facts or events representing a material or fundamental change in the information set forth in the registration statement, the incorporation by reference of information required to be included in (I) and (II) above to be contained in periodic reports filed pursuant to Section 13 or 15(d) of the 1934 Act in the registration statement.

(b) Prepare and file with the SEC such amendments and supplements to such registration statement and the prospectus used in connection with such registration statement as may be necessary to comply with the provisions of the Act with respect to the disposition of all securities covered by such registration statement. (c) Furnish to the Holders of Registrable Securities such numbers of copies of a prospectus, including a preliminary prospectus, in conformity with the requirements of the Act, and such other documents as they may reasonably request in order to facilitate the disposition of Registrable Securities owned by them. (d) Use its best efforts to register and qualify the securities covered by such registration statement under such other securities or Blue Sky laws of such jurisdictions as shall be reasonably requested by the Holders; provided that the Company shall not be required in connection therewith or as a condition thereto to qualify to do business or to file a general consent to service of process in any such states or jurisdictions, unless the Company is already subject to service in such jurisdiction and except as may be required by the Act. (e) In the event of any underwritten public offering, enter into and perform its obligations under an underwriting agreement, in usual and customary form, with the managing underwriter of such offering. Each Holder participating in such underwriting shall also enter into and perform its obligations under such an agreement. (f) Notify each Holder of Registrable Securities covered by such registration statement at any time when a prospectus relating thereto is required to be delivered under the Act of the happening of any event as a result of which the prospectus included in such registration statement, as then in effect, includes an untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein not misleading in the light of the circumstances then existing. (g) Cause all such Registrable Securities registered pursuant hereunder to be listed on each securities exchange or trading market on which similar securities issued by the Company are then so listed or traded. (h) Provide a transfer agent and registrar for all Registrable Securities registered pursuant hereunder and a CUSIP number for all such Registrable Securities, in each case not later than the effective date of such registration.

1.5 Furnish Information. (a) It shall be a condition precedent to the obligations of the Company to take any action pursuant to this Section 1 with respect to the Registrable Securities of any selling Holder that such Holder shall furnish to the Company such information regarding itself, the Registrable Securities held by it, and the intended method of disposition of such securities as shall be required to effect the registration of such Holder's Registrable Securities. (b) The Company shall have no obligation with respect to any registration requested pursuant to Section 1.2 or Section 1.12 if, due to the operation of subsection 1.5(a), the number of shares or the anticipated aggregate offering price of the Registrable Securities to be included in the registration does not equal or exceed the number of shares or the anticipated aggregate offering price required to originally trigger the Company's obligation to initiate such registration as specified in subsection 1.2(a) or subsection 1.12(b)(2), whichever is applicable. 1.6 Expenses of Demand Registration. All expenses other than underwriting discounts and commissions incurred in connection with registrations, filings or qualifications pursuant to Section 1.2, including (without limitation) all registration, filing and qualification fees, printers' and accounting fees, and fees and disbursements of counsel for the Company and the reasonable fees and disbursements of one counsel for the selling Holders shall be borne by the Company; provided, however, that the Company shall not be required to pay for any expenses of any registration proceeding begun pursuant to Section 1.2 if the registration request is subsequently withdrawn at the request of the Holders of a majority of the Registrable Securities to be registered (in which case all participating Holders shall bear such expenses), unless the Holders of a majority of the Registrable Securities agree to forfeit their right to one demand registration pursuant to Section 1.2; provided further, however, that if at the time of such withdrawal, the Holders have learned of a material adverse change in the condition, business, or prospects of the Company from that known to the Holders at the time of their request and have withdrawn the request with reasonable promptness following disclosure by the Company of such material adverse change, then the Holders shall not be required to pay any of such expenses and shall retain their rights pursuant to Section 1.2. 1.7 Expenses of Company Registration. The Company shall bear and pay all expenses incurred in connection with any registration, filing or qualification of Registrable Securities with respect to the registrations pursuant to Section 1.3 for each Holder (which right may be assigned as provided in Section 1.13), including (without limitation) all registration, filing, and qualification fees, printers and accounting fees relating or apportionable thereto and the fees and disbursements of counsel for the Company in its capacity as counsel to the selling Holders hereunder, but excluding underwriting discounts and commissions relating to Registrable Securities. If Company counsel does not make itself available to the selling Holders for this purpose, the Company will pay the reasonable fees and disbursements of one counsel for the selling Holders selected by them.

1.8 Underwriting Requirements. In connection with any offering involving an underwriting of shares of the Company's capital stock, the Company shall not be required under Section 1.3 to include any of the Holders' securities in such underwriting unless they accept the terms of the underwriting as agreed upon between the Company and the underwriters selected by it (or by other persons entitled to select the underwriters), and then only in such quantity as the underwriters determine in their sole discretion will not jeopardize the success of the offering by the Company. If the total amount of securities, including Registrable Securities, requested by shareholders to be included in such offering exceeds the amount of securities sold other than by the Company that the underwriters determine in their sole discretion is compatible with the success of the offering, then the Company shall be required to include in the offering only that number of such securities, including Registrable Securities, which the underwriters determine in their sole discretion will not jeopardize the success of the offering (the securities so included to be apportioned pro rata among the selling shareholders according to the total amount of securities entitled to be included therein owned by each selling shareholder or in such other proportions as shall mutually be agreed to by such selling shareholders) but in no event shall the amount of securities of the selling Holders included in the offering be reduced below thirty percent of the total amount of securities included in such offering, unless such offering is the initial public offering of the Company's securities in which case the selling shareholders may be excluded completely if the underwriters make the determination described above and no other shareholder's securities are included. For purposes of the preceding parenthetical concerning apportionment, for any selling shareholder which is a holder of Registrable Securities and which is a partnership or corporation, the partners, retired partners and shareholders of such holder, or the estates and family members of any such partners and retired partners and any trusts for the benefit of any of the foregoing persons shall be deemed to be a single "selling shareholder", and any pro-rata reduction with respect to such "selling shareholder" shall be based upon the aggregate amount of shares carrying registration rights owned by all entities and individuals included in such "selling shareholder", as defined in this sentence. 1.9 Delay of Registration. No Holder shall have any right to obtain or seek an injunction restraining or otherwise delaying any such registration as the result of any controversy that might arise with respect to the interpretation or implementation of this Section 1. 1.10 Indemnification. In the event any Registrable Securities are included in a registration statement under this Section 1: (a) To the extent permitted by law, the Company will indemnify and hold harmless each Holder, any underwriter (as defined in the Act) for such Holder and each person, if any, who controls such Holder or underwriter within the meaning of the Act, the 1934 Act, or other federal or state law, against any losses, claims, damages, or liabilities (joint or several) to which they may become subject under the Act, the 1934 Act or other federal or state law, insofar as such losses, claims, damages, or liabilities (or actions in respect thereof) arise out of or are based upon any of the following statements, omissions or violations (collectively a "Violation"): (i) any untrue statement or alleged untrue statement of a material fact contained in such

registration statement, including any preliminary prospectus or final prospectus contained therein or any amendments or supplements thereto, (ii) the omission or alleged omission to state therein a material fact required to be stated therein, or necessary to make the statements therein not misleading, or (iii) any violation or alleged violation by the Company of the Act, the 1934 Act, any state securities law or any rule or regulation promulgated under the Act, the 1934 Act or any state securities law; and the Company will pay to each such Holder, underwriter or controlling person any legal or other expenses reasonably incurred by them in connection with investigating or defending any such loss, claim, damage, liability, or action; provided, however, that the indemnity agreement contained in this subsection 1.10(a) shall not apply to amounts paid in settlement of any such loss, claim, damage, liability, or action if such settlement is effected without the consent of the Company (which consent shall not be unreasonably withheld), nor shall the Company be liable in any such case for any such loss, claim, damage, liability, or action to the extent that it arises out of or is based upon a Violation which occurs in reliance upon and in conformity with written information furnished expressly for use in connection with such registration by any such Holder, underwriter or controlling person. (b) To the extent permitted by law, each selling Holder will indemnify and hold harmless the Company, each of its directors, each of its officers who has signed the registration statement, each person, if any, who controls the Company within the meaning of the Act, any underwriter, any other Holder selling securities in such registration statement and any controlling person of any such underwriter or other Holder, against any losses, claims, damages, or liabilities (joint or several) to which any of the foregoing persons may become subject, under the Act, the 1934 Act or other federal or state law, insofar as such losses, claims, damages, or liabilities (or actions in respect thereto) arise out of or are based upon any Violation, in each case to the extent (and only to the extent) that such Violation occurs in reliance upon and in conformity with written information furnished expressly for use in connection with such registration by such Holder or its controlling person; and each such Holder will pay any legal or other expenses reasonably incurred by any person intended to be indemnified pursuant to this subsection 1.10(b), in connection with investigating or defending any such loss, claim, damage, liability, or action; provided, however, that the indemnity agreement contained in this subsection 1.10(b) shall not apply to amounts paid in settlement of any such loss, claim, damage, liability or action if such settlement is effected without the consent of the Holder, which consent shall not be unreasonably withheld; provided, that, in no event shall any indemnity under this subsection 1.10(b) exceed the gross proceeds from the offering received by such Holder. (c) Promptly after receipt by an indemnified party under this Section 1.10 of notice of the commencement of any action (including any governmental action), such indemnified party will, if a claim in respect thereof is to be made against any indemnifying party under this Section 1.10, deliver to the indemnifying party a written notice of the commencement thereof and the indemnifying party shall have the right to participate in, and, to the extent the indemnifying party so desires, jointly with any other indemnifying party similarly noticed, to assume the defense thereof with counsel mutually satisfactory to the parties; provided, however, that an indemnified party (together with all other indemnified parties which may be represented

without conflict by one counsel) shall have the right to retain one separate counsel, with the fees and expenses to be paid by the indemnifying party, if representation of such indemnified party by the counsel retained by the indemnifying party would be inappropriate due to actual or potential differing interests between such indemnified party and any other party represented by such counsel in such proceeding. The failure to deliver written notice to the indemnifying party within a reasonable time of the commencement of any such action, if prejudicial to its ability to defend such action, shall relieve such indemnifying party of any liability to the indemnified party under this Section 1.10, but the omission so to deliver written notice to the indemnifying party will not relieve it of any liability that it may have to any indemnified party otherwise than under this Section 1.10. (d) If the indemnification provided for in this Section 1.10 is held by a court of competent jurisdiction to be unavailable to an indemnified party with respect to any loss, liability, claim, damage, or expense referred to therein, then the indemnifying party, in lieu of indemnifying such indemnified party hereunder, shall contribute to the amount paid or payable by such indemnified party as a result of such loss, liability, claim, damage, or expense in such proportion as is appropriate to reflect the relative fault of the indemnifying party on the one hand and of the indemnified party on the other in connection with the statements or omissions that resulted in such loss, liability, claim, damage, or expense as well as any other relevant equitable considerations. The relative fault of the indemnifying party and of the indemnified party shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission to state a material fact relates to information supplied by the indemnifying party or by the indemnified party and the parties' relative intent, knowledge, access to information, and opportunity to correct or prevent such statement or omission. (e) Notwithstanding the foregoing, to the extent that the provisions on indemnification and contribution contained in the underwriting agreement entered into in connection with the underwritten public offering are in conflict with the foregoing provisions, the provisions in the underwriting agreement shall control. (f) The obligations of the Company and Holders under this Section 1.10 shall survive the completion of any offering of Registrable Securities in a registration statement under this Section 1. 1.11 Reports Under Securities Exchange Act of 1934. With a view to making available to the Holders the benefits of Rule 144 promulgated under the Act and any other rule or regulation of the SEC that may at any time permit a Holder to sell securities of the Company to the public without registration or pursuant to a registration on Form S-3, the Company agrees to: (a) make and keep public information available, as those terms are understood and defined in SEC Rule 144, at all times after ninety (90) days after the effective date of the first registration statement filed by the Company for the offering of its securities to the general public;

(b) file with the SEC in a timely manner all reports and other documents required of the Company under the Act and the 1934 Act; and (c) furnish to any Holder, so long as the Holder owns any Registrable Securities, forthwith upon request (i) a written statement by the Company that it has complied with the reporting requirements of SEC Rule 144 (at any time after ninety (90) days after the effective date of the first registration statement filed by the Company), the Act and the 1934 Act (at any time after it has become subject to such reporting requirements), or that it qualifies as a registrant whose securities may be resold pursuant to Form S-3 (at any time after it so qualifies), (ii) a copy of the most recent annual or quarterly report of the Company and such other reports and documents so filed by the Company, and (iii) such other information as may be reasonably requested in availing any Holder of any rule or regulation of the SEC which permits the selling of any such securities without registration or pursuant to such form. 1.12 Form S-3 Registration. In case the Company shall receive a written request from any Holder or Holders of at least 20% of the Registrable Securities that the Company effect a registration on Form S-3 and any related qualification or compliance with respect to all or a part of the Registrable Securities owned by such Holder or Holders, the Company will: (a) promptly give written notice of the proposed registration, and any related qualification or compliance, to all other Holders; and (b) as soon as practicable, effect such registration and all such qualifications and compliances as may be so requested and as would permit or facilitate the sale and distribution of all or such portion of such Holder's or Holders' Registrable Securities as are specified in such request, together with all or such portion of the Registrable Securities of any other Holder or Holders joining in such request as are specified in a written request given within 15 days after receipt of such written notice from the Company; provided, however, that the Company shall not be obligated to effect any such registration, qualification or compliance, pursuant to this section 1.12: (1) if Form S-3 is not available for such offering by the Holders; (2) if the Holders, together with the holders of any other securities of the Company entitled to inclusion in such registration, propose to sell Registrable Securities and such other securities (if any) at an aggregate price to the public (net of any underwriters' discounts or commissions) of less than $2,000,000; (3) if the Company shall furnish to the Holders a certificate signed by the President of the Company stating that in the good faith judgment of the Board of Directors of the Company, it would be seriously detrimental to the Company and its shareholders for such Form S-3 Registration to be effected at such time, in which event the Company shall have the right to defer the filing of the Form S-3 registration statement for a period of not more than 60 days after receipt of the request of the Holder or Holders under this Section 1.12; provided, however, that the Company shall not utilize this right more than once in any twelve month period; (4) if the Company has, within the twelve (12) month period preceding the date of such request, already effected one registration on Form S-3 for the Holders pursuant to this Section 1.12; or (5) in any

particular jurisdiction in which the Company would be required to qualify to do business or to execute a general consent to service of process in effecting such registration, qualification or compliance. (c) Subject to the foregoing, the Company shall file a registration statement covering the Registrable Securities and other securities so requested to be registered as soon as practicable after receipt of the request or requests of the Holders. All expenses incurred in connection with a registration requested pursuant to Section 1.12, including (without limitation) all registration, filing, qualification, printer's and accounting fees and the reasonable fees and disbursements of counsel for the selling Holder or Holders and counsel for the Company, but excluding any underwriters' discounts or commissions associated with Registrable Securities, shall be borne by the Company. Registrations effected pursuant to this Section 1.12 shall not be counted as demands for registration or registrations effected pursuant to Sections 1.2 or 1.3, respectively. 1.13 Assignment of Registration Rights. The rights to cause the Company to register Registrable Securities pursuant to this Section 1 may be assigned (but only with all related obligations) by a Holder to a transferee or assignee of such securities, who, after such assignment or transfer, holds at least 150,000 shares of Registrable Securities (subject to appropriate adjustment for stock splits, stock dividends, combinations and other recapitalizations), provided: (a) the Company is, within a reasonable time after such transfer, furnished with written notice of the name and address of such transferee or assignee and the securities with respect to which such registration rights are being assigned; (b) such transferee or assignee agrees in writing to be bound by and subject to the terms and conditions of this Agreement, including without limitation the provisions of Section 1.15 below; and (c) such assignment shall be effective only if immediately following such transfer the further disposition of such securities by the transferee or assignee is restricted under the Act. For the purposes of determining the number of shares of Registrable Securities held by a transferee or assignee, the holdings of transferees and assignees of an Investor that is a partnership who are partners or retired partners of such partnership (including spouses and ancestors, lineal descendants and siblings of such partners or spouses who acquire Registrable Securities by gift, will or intestate succession) shall be aggregated together and with the partnership; provided that all assignees and transferees who would not qualify individually for assignment of registration rights shall have a single attorney-in-fact for the purpose of exercising any rights, receiving notices or taking any action under this Section 1. 1.14 Limitations on Subsequent Registration Rights. From and after the date of this Agreement, the Company shall not, without the prior written consent of the Holders of a majority of the outstanding Registrable Securities, enter into any agreement with any holder or prospective holder of any securities of the Company which would allow such holder or prospective holder any registration rights the terms of which are more favorable or as favorable as the registration rights granted to the Holders hereunder.

1.15 "Market Stand-Off" Agreement. Each Investor and each Holder hereby agrees that, during the period of duration specified by the Company and an underwriter of common stock or other securities of the Company, following the effective date of a registration statement of the Company filed under the Act, it shall not, to the extent requested by the Company and such underwriter, directly or indirectly sell, offer to sell, contract to sell (including, without limitation, any short sale), grant any option to purchase or otherwise transfer or dispose of (other than to donees who agree to be similarly bound) any securities of the Company held by it at any time during such period except common stock included in such registration; provided, however, that: (a) such agreement shall be applicable only to the first such registration statement of the Company which covers common stock (or other securities) to be sold on its behalf to the public in an underwritten offering; (b) all officers and directors of the Company and all other persons with registration rights (whether or not pursuant to this Agreement) enter into similar agreements; and (c) such market stand-off time period shall not exceed 180 days or such additional period (not to exceed forty-five (45) days) as the Company and the underwriters may deem appropriate to permit the Company's announcement of earnings before the termination of such market stand-off period. In order to enforce the foregoing covenant, the Company may impose stop-transfer instructions with respect to the Registrable Securities of each Investor and each Holder (and the shares or securities of every other person subject to the foregoing restriction) until the end of such period. Notwithstanding the foregoing, the obligations described in this Section 1.15 shall not apply to a registration relating solely to employee benefit plans on Form S-l or Form S-8 or similar forms which may be promulgated in the future, or a registration relating solely to a SEC Rule 145 transaction. 1.16 Termination of Registration Rights. (a) No Holder shall be entitled to exercise any right provided for in this Section 1 after five (5) years following the consummation of the sale of securities pursuant to a registration statement filed by the Company under the Act in connection with the initial firm commitment underwritten offering of its securities to the general public. (b) In addition, the right of any Holder to request registration or inclusion in any registration pursuant to Sections 1.2, 1.3 or 1.12 shall terminate on the closing of the first Company-initiated registered public offering of Common Stock of the Company if all shares of Registrable Securities held or entitled to be held upon conversion by such Holder may

immediately be sold under Rule 144 during any 90-day period; or on such date after the closing of the first Company-initiated registered public offering of Common Stock of the Company as all shares of Registrable Securities held or entitled to be held upon conversion by such Holder may immediately be sold under Rule 144 during any 90-day period. 2. Covenants of the Company. 2.1 Delivery of Financial Statements. The Company shall deliver to each initial Investor, so long as such Investor owns at least five percent (5%) of the capital stock of the Company as determined on a fully-diluted basis (each such Investor referred to hereinafter as a "Significant Investor"): (a) Within ninety (90) days after the end of each fiscal year of the Company, statements of income for such fiscal year, a balance sheet of the Company and statement of shareholder's equity as of the end of such year, and a statement of cash flows for such year, such year-end financial reports to be in reasonable detail, prepared in accordance with generally accepted accounting principles ("gaap"), and audited and certified by independent public accountants of nationally recognized standing selected by the Company. (b) As soon as practicable, but in any event within forty-five (45) days after the end of each of the first three (3) quarters of each fiscal year of the Company, an unaudited statement of income and statement of cash flows for such fiscal quarter and an unaudited balance sheet as of the end of such fiscal quarter. (c) Within thirty (30) days of the end of each month, an unaudited statement of income and statement of cash flows and balance sheet for and as of the end of such month, in reasonable detail. (d) As soon as practicable, a budget and an updated business plan for the next fiscal year, prepared on a monthly basis, including balance sheets and sources and applications of funds statements for such months and, as soon as prepared, any other budgets or revised budgets prepared by the Company. (e) With respect to the financial statements called for in subsections (b) and (c) of this Section 2.2, an instrument executed by the Chief Financial Officer or President of the Company certifying that such financials were prepared in accordance with gaap consistently applied with prior practice for earlier periods (with the exception of footnotes that may be required by gaap) and fairly present the financial condition of the Company and its results of operation for the period specified, subject to year-end audit adjustment. 2.2 Additional Information. The Company shall permit each Significant Investor, at such Significant Investor's expense, to visit and inspect the Company's properties, to examine its books of account and records, to receive monthly executive summaries and to

discuss the Company's affairs, finances and accounts with its officers, all at such reasonable times as may be requested by the Significant Investor; provided, however, that the Company shall not be obligated pursuant to this Section 2.2 to provide access to any information which it reasonably considers to be a trade secret or similar confidential information. 2.3 Termination of Information and Inspection Covenants. The covenants set forth in subsections 2.1 and 2.2, shall terminate and be of no further force or effect when the sale of securities pursuant to a registration statement filed by the Company under the Act in connection with the firm commitment underwritten offering of its securities to the general public is consummated or when the Company first becomes subject to the periodic reporting requirements of the 1934 Act, whichever event shall first occur. 2.4 Right of First Refusal. Subject to the terms and conditions specified in this paragraph 2.4, the Company hereby grants to each Investor a right of first refusal with respect to future sales by the Company of its Shares (as hereinafter defined). For purposes of this Section 2.4, Investor includes any general partners and affiliates of an Investor. An Investor shall be entitled to apportion the right of first offer hereby granted it among itself and its partners and affiliates in such proportions as it deems appropriate. Each time the Company proposes to offer any shares of, or securities convertible into or exercisable for any shares of, any class of its capital stock ("Shares"), the Company shall first make an offering of such Shares to each Investor in accordance with the following provisions: (a) The Company shall deliver a notice by certified mail ("Notice") to the Investors stating (i) its bona fide intention to offer such Shares, (ii) the number of such Shares to be offered, and (iii) the price and terms, if any, upon which it proposes to offer such Shares. (b) By written notification received by the Company within 20 calendar days after giving of the Notice, the Investor may elect to purchase or obtain, at the price and on the terms specified in the Notice, up to that portion of such Shares which equals the proportion that the number of shares of common stock issued and held, or issuable upon conversion of the Preferred Stock then held, by such Investor bears to the total number of shares of common stock of the Company then outstanding (assuming full conversion and exercise of all convertible or exercisable securities). The Company shall promptly, in writing, inform each Investor which purchases all the shares available to it ("Fully- Exercising Investor") of any other Investor's failure to do likewise. During the ten-day period commencing after such information is given, each Fully-Exercising Investor shall be entitled to obtain that portion of the Shares for which Investors were entitled to subscribe but which were not subscribed for by the Investors which is equal to the proportion that the number of shares of common stock issued and held, or issuable upon conversion of Preferred Stock then held, by such Fully-Exercising Investor bears to the total number of shares of common stock issued and held, or issuable upon conversion of the Preferred Stock then held, by all Fully-Exercising Investors who wish to purchase some of the

unsubscribed shares. (c) If all Shares which Investors are entitled to obtain pursuant to subsection 2.4(b) are not elected to be obtained as provided in subsection 2.4(b) hereof, the Company may, during the 30-day period following the expiration of the period provided in subsection 2.4(b) hereof, offer the remaining unsubscribed portion of such Shares to any person or persons at a price not less than, and upon terms no more favorable to the offeree than those specified in the Notice. If the Company does not enter into an agreement for the sale of the Shares within such period, or if such agreement is not consummated within 90 days of the execution thereof, the right provided hereunder shall be deemed to be revived and such Shares shall not be offered unless first reoffered to the Investors in accordance herewith. (d) The right of first refusal in this paragraph 2.4 shall not be applicable (i) to the issuance or sale of shares of common stock (or options therefor) as approved by the Board of Directors of the Company to employees, directors or consultants for the primary purpose of soliciting or retaining their employment, (ii) to or after consummation of a bona fide, firmly underwritten public offering of shares of common stock, registered under the Act pursuant to a registration statement on Form S-1, at an offering price of at least $3.75 per share (appropriately adjusted for any stock split, dividend, combination or other recapitalization) and $15,000,000 in the aggregate gross proceeds to the Company, (iii) the issuance of securities pursuant to the conversion or exercise of convertible or exercisable securities, (iv) the issuance of securities in connection with a bona fide business acquisition of or by the Company, whether by merger, consolidation, sale of assets, sale or exchange of stock or otherwise or (v) the issuance of stock, warrants or other securities or rights to persons or entities with which the Company has business relationships provided such issuances primarily are for other than equity financing purposes. (e) The right of first refusal set forth in this Section 2.4 may not be assigned or transferred, except that (i) such right is assignable by each Holder to any wholly owned subsidiary or parent of, or to any corporation or entity that is, within the meaning of the Act, controlling, controlled by or under common control with, any such Holder, and (ii) such right is assignable between and among any of the Holders or to the spouse of any Holder who is a natural person. 2.5 Key-Executive Insurance. The Company has obtained, or applied for, from financially sound and reputable insurers term life insurance on the lives of each of Nancy Woodward and Ron Harris in the amount of $1,000,000. The Company will cause to be maintained the term life insurance required by this Section 2.5 hereof. Such policies shall name the Company as loss payee and shall not be cancelable by the Company. 2.6 Board of Directors. As of the effective date of this Agreement, the Bylaws of the Company shall provide that the Board of Directors consists of seven (7) members. At the Closing (as defined in the Series C Agreement), the directors of the Company shall be Nancy Woodward, Douglas Woodward, the Company's Chief Executive Officer, one director chosen by a

majority of the Series B Preferred Stock, one director chosen by Novell, Inc. and two directors chosen by AV Partners IV, L.P. (one of whom will not be a member or employee of AV Partners IV, L.P. or its affiliates). The authorized number of directors shall not be changed except in accordance with the Voting Agreement attached as Exhibit E to the Series C Agreement. 2.7 Additional Covenants. (a) Without the consent of the holders of at least a majority of the Series C Preferred Stock, the Company may not (i) issue to employees any capital stock, options, warrants or rights to purchase capital stock other than pursuant to the Company's First Amended and Restated 1994 Incentive Stock Option Plan; (ii) except as provided in the Company's First Amended and Restated 1994 Incentive Stock Option Plan, or in agreements granting rights thereunder, repurchase or redeem any equity security or pay any dividends or other distributions on common stock or other securities; or (iii) make any loans, investments or guaranties in an amount more than $10,000 to any person and $50,000 in the aggregate other than in the ordinary course of business. (b) Without the consent of eighty percent (80%) of the Board of Directors, the Company shall not: (i) take any action which would cause the indebtedness of the company for borrowed money to exceed $5,000,000; (ii) make any capital expenditures exceeding 10% of annual revenue in any fiscal year (software development costs capitalized under FASB 86 will not be considered to be capital expenditures for this purpose); (iii) enter into any transactions discussion with related persons unless approved by a majority of the disinterested directors; or (iv) make acquisitions involving an aggregate consideration greater than 10% of annual revenues in any fiscal year. (c) The Company shall form a compensation committee of the Board of Directors which shall consist of an Austin Ventures representative, Nancy Woodward and a third independent board member, the approval of which shall be required to determine compensation issues including (but not limited to) increases in the compensation of any employee whose annual compensation (salary plus bonus), exceeds $80,000.00 per year by more than 10% per year. 2.8 Termination of Certain Covenants. The covenants set forth in Section 2 shall terminate and be of no further force or effect upon the consummation of the sale of securities pursuant to a registration statement filed by the Company under the Act in connection with the firm commitment underwritten offering of its securities to the general public. 3. Miscellaneous. 3.1 Successors and Assigns. Except as otherwise provided herein, the terms and conditions of this Agreement shall inure to the benefit of and be binding upon the respective successors and assigns of the parties (including transferees of any shares of Registrable Securities). Nothing in this Agreement, express or implied, is intended to confer upon any party other than the parties hereto or their respective successors and assigns any rights, remedies, obligations, or

liabilities under or by reason of this Agreement, except as expressly provided in this Agreement. 3.2 Governing Law. This Agreement shall be governed by and construed under the laws of the State of Texas as applied to agreements among Texas residents entered into and to be performed entirely within Texas. 3.3 Counterparts. Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. 3.4 Titles and Subtitles. The titles and subtitles used in this Agreement are used for convenience only and are not to be considered in construing or interpreting this Agreement. 3.5 Notices. Unless otherwise provided, any notice required or permitted under this Agreement shall be given in writing and shall be deemed effectively given upon personal delivery to the party to be notified or upon deposit with the United States Post Office, by registered or certified mail, postage prepaid and addressed to the party to be notified at the address indicated for such party on Schedule A hereto or, as to the Company, at its principal executive office, or at such other address as such party may designate by ten (10) days' advance written notice to the other parties. 3.6 Expenses. If any action at law or in equity is necessary to enforce or interpret the terms of this Agreement, the prevailing party shall be entitled to reasonable attorneys' fees, costs and necessary disbursements in addition to any other relief to which such party may be entitled. 3.7 Amendments and Waivers. Any term of this Agreement may be amended and the observance of any term of this Agreement may be waived (either generally or in a particular instance and either retroactively or prospectively), only with the written consent of the Company and the holders of a majority of the Registrable Securities then outstanding. Any amendment or waiver effected in accordance with this paragraph shall be binding upon each holder of any Registrable Securities then outstanding, each future holder of all such Registrable Securities, and the Company. 3.8 Severability. If one or more provisions of this Agreement are held to be unenforceable under applicable law, such provision shall be excluded from this Agreement and the balance of the Agreement shall be interpreted as if such provision were so excluded and shall be enforceable in accordance with its terms. 3.9 Aggregation of Stock. All shares of Registrable Securities held or acquired by affiliated or associated entities or persons, including Registrable Securities distributed by an Investor which is a partnership to the partners of such partnership, shall be aggregated together for the purpose of determining the availability of any rights under this Agreement.

3.10 Entire Agreement; Amendment; Waiver. This Agreement (including the Exhibits hereto, if any) constitutes the full and entire understanding and agreement between the parties with regard to the subjects hereof and thereof. 3.11 Prior Agreement. The Prior Agreement is hereby terminated and superseded in its entirety by this Agreement.

IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written. BTRIEVE TECHNOLOGIES, INC. By: ______________________________ Ron Harris, President INVESTORS: NOVELL, INC. By:_______________________________ Name:_____________________________ Title:____________________________ AUSTIN VENTURES IV-A, L.P. By: AV Partners IV, L.P. Its General Partner By:_______________________________ Joseph C. Aragona General Partner AUSTIN VENTURES IV-B, L.P. By: AV Partners IV, L.P. Its General Partner By:_______________________________ Joseph C. Aragona General Partner

TECHNOLOGIES FOR INFORMATION AND PUBLISHING, L.P. By:_______________________________ David A. Boucher Managing General Partner TECHNOLOGIES FOR INFORMATION AND ENTERTAINMENT, L.P. By:_______________________________ David A. Boucher Managing General Partner TRIAD VENTURES LIMITED, II By:_______________________________ H.A. Abshier, Jr. General Partner

Nancy Woodward

Douglas Woodward

SCHEDULE A SCHEDULE OF INVESTORS NOVELL, INC. 122 East 1100 South Provo, Utah 84606 AUSTIN VENTURES IV-A, L.P. 114 West Seventh Street 1300 Norwood Tower Austin, Texas 78701 AUSTIN VENTURES IV-B, L.P. 114 West Seventh Street 1300 Norwood Tower Austin, Texas 78701 TECHNOLOGIES FOR INFORMATION AND PUBLISHING, L.P. 2111 Highgrove Terrace Austin, Texas 78703 TECHNOLOGIES FOR INFORMATION AND ENTERTAINMENT, L.P. 2111 Highgrove Terrace Austin, Texas 78703 TRIAD VENTURES LIMITED, II 4901 Spicewood Springs Road #200 Austin, Texas 78759 NANCY WOODWARD 8821 Bell Mountain Drive Austin, Texas 78730 DOUGLAS WOODWARD 8821 Bell Mountain Drive Austin, Texas 78730

EXHIBIT 10.1 INDEMNIFICATION AGREEMENT THIS AGREEMENT (the "Agreement") is made and entered into as of July __, 1997 between Pervasive Software Inc., a Delaware corporation ("the Company"), and _____________________ ("Indemnitee"). WITNESSETH THAT: WHEREAS, Indemnitee performs a valuable service for the Company; and WHEREAS, the Board of Directors of the Company has adopted Bylaws (the "Bylaws") providing for the indemnification of the officers and directors of the Company to the maximum extent authorized by Section 145 of the Delaware General Corporation Law, as amended ("Law"); and WHEREAS, the Bylaws and the Law, by their nonexclusive nature, permit contracts between the Company and the officers or directors of the Company with respect to indemnification of such officers or directors; and WHEREAS, in accordance with the authorization as provided by the Law, the Company may purchase and maintain a policy or policies of directors' and officers' liability insurance ("D & O Insurance"), covering certain liabilities which may be incurred by its officers or directors in the performance of their obligations to the Company; and WHEREAS, in order to induce Indemnitee to continue to serve as an officer or director of the Company, the Company has determined and agreed to enter into this contract with Indemnitee; NOW, THEREFORE, in consideration of Indemnitee's service as an officer or director after the date hereof, the parties hereto agree as follows: 1. Indemnity of Indemnitee. The Company hereby agrees to hold harmless and indemnify Indemnitee to the full extent authorized or permitted by the provisions of the Law, as such may be amended from time to time, and Article VII, Section 6 of the Bylaws, as such may be amended. In furtherance of the foregoing indemnification, and without limiting the generality thereof: (a) Proceedings Other Than Proceedings by or in the Right of the Company. Indemnitee shall be entitled to the rights of indemnification provided in this Section l(a) if, by reason of his Corporate Status (as hereinafter defined), he is, or is threatened to be made, a party to or participant in any Proceeding (as hereinafter defined) other than a Proceeding by or in the right of the Company. Pursuant to this Section 1(a), Indemnitee shall be indemnified against all Expenses (as hereinafter defined), judgments, penalties, fines and amounts paid in settlement actually and reasonably incurred by him or on his behalf in connection with such Proceeding or any claim, issue or matter therein, if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the

Company and, with respect to any criminal Proceeding, had no reasonable cause to believe his conduct was unlawful. (b) Proceedings by or in the Right of the Company. Indemnitee shall be entitled to the rights of indemnification provided in this Section 1(b) if, by reason of his Corporate Status, he is, or is threatened to be made, a party to or participant in any Proceeding brought by or in the right of the Company. Pursuant to this Section 1(b), Indemnitee shall be indemnified against all Expenses actually and reasonably incurred by him or on his behalf in connection with such Proceeding if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Company; provided, however, that, if applicable law so provides, no indemnification against such Expenses shall be made in respect of any claim, issue or matter in such Proceeding as to which Indemnitee shall have been adjudged to be liable to the Company unless and to the extent that the Court of Chancery of the State of Delaware shall determine that such indemnification may be made. (c) Indemnification for Expenses of a Party Who is Wholly or Partly Successful. Notwithstanding any other provision of this Agreement, to the extent that Indemnitee is, by reason of his Corporate Status, a party to and is successful, on the merits or otherwise, in any Proceeding, he shall be indemnified to the maximum extent permitted by law against all Expenses actually and reasonably incurred by him or on his behalf in connection therewith. If Indemnitee is not wholly successful in such Proceeding but is successful, on the merits or otherwise, as to one or more but less than all claims, issues or matters in such Proceeding, the Company shall indemnify Indemnitee against all Expenses actually and reasonably incurred by him or on his behalf in connection with each successfully resolved claim, issue or matter. For purposes of this Section and without limitation, the termination of any claim, issue or matter in such a Proceeding by dismissal, with or without prejudice, shall be deemed to be a successful result as to such claim, issue or matter. 2. Additional Indemnity. In addition to, and without regard to any limitations on, the indemnification provided for in Section 1, the Company shall and hereby does indemnify and hold harmless Indemnitee against all Expenses, judgments, penalties, fines and amounts paid in settlement actually and reasonably incurred by him or on his behalf if, by reason of his Corporate Status, he is, or is threatened to be made, a party to or participant in any Proceeding (including a Proceeding by or in the right of the Company), including, without limitation, all liability arising out of the negligence or active or passive wrongdoing of Indemnitee. The only limitation that shall exist upon the Company's obligations pursuant to this Agreement shall be that the Company shall not be obligated to make any payment to Indemnitee that is finally determined (under the procedures, and subject to the presumptions, set forth in Sections 6 and 7 hereof) to be unlawful under Delaware law. 3. Contribution in the Event of Joint Liability. (a) Whether or not the indemnification provided in Sections 1 and 2 hereof is available, in respect of any threatened, pending or completed action, suit or proceeding in which Company is jointly liable with Indemnitee (or would be if joined in such action, suit or proceeding), Company shall pay, in the first instance, the entire amount of any judgment or 2

settlement of such action, suit or proceeding without requiring Indemnitee to contribute to such payment and Company hereby waives and relinquishes any right of contribution it may have against Indemnitee. Company shall not enter into any settlement of any action, suit or proceeding in which Company is jointly liable with Indemnitee (or would be if joined in such action, suit or proceeding) unless such settlement provides for a full and final release of all claims asserted against Indemnitee. (b) Without diminishing or impairing the obligations of the Company set forth in the preceding subparagraph, if, for any reason, Indemnitee shall elect or be required to pay all or any portion of any judgment or settlement in any threatened, pending or completed action, suit or proceeding in which Company is jointly liable with Indemnitee (or would be if joined in such action, suit or proceeding), Company shall contribute to the amount of expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred and paid or payable by Indemnitee in proportion to the relative benefits received by the Company and all officers, directors or employees of the Company other than Indemnitee who are jointly liable with Indemnitee (or would be if joined in such action, suit or proceeding), on the one hand, and Indemnitee, on the other hand, from the transaction from which such action, suit or proceeding arose; provided, however, that the proportion determined on the basis of relative benefit may, to the extent necessary to conform to law, be further adjusted by reference to the relative fault of Company and all officers, directors or employees of the Company other than Indemnitee who are jointly liable with Indemnitee (or would be if joined in such action, suit or proceeding), on the one hand, and Indemnitee, on the other hand, in connection with the events that resulted in such expenses, judgments, fines or settlement amounts, as well as any other equitable considerations which the law may require to be considered. The relative fault of Company and all officers, directors or employees of the Company other than Indemnitee who are jointly liable with Indemnitee (or would be if joined in such action, suit or proceeding), on the one hand, and Indemnitee, on the other hand, shall be determined by reference to, among other things, the degree to which their actions were motivated by intent to gain personal profit or advantage, the degree to which their liability is primary or secondary, and the degree to which their conduct is active or passive. (c) Company hereby agrees to fully indemnify and hold Indemnitee harmless from any claims of contribution which may be brought by officers, directors or employees of the Company other than Indemnitee who may be jointly liable with Indemnitee. 4. Indemnification for Expenses of a Witness. Notwithstanding any other provision of this Agreement, to the extent that Indemnitee is, by reason of his Corporate Status, a witness in any Proceeding to which Indemnitee is not a party, he shall be indemnified against all Expenses actually and reasonably incurred by him or on his behalf in connection therewith. 5. Advancement of Expenses. Notwithstanding any other provision of this Agreement, the Company shall advance all Expenses incurred by or on behalf of Indemnitee in connection with any Proceeding by reason of Indemnitee's Corporate Status within ten (10) days after the receipt by the Company of a statement or statements from Indemnitee requesting such advance or advances from time to time, whether prior to or after final disposition of such Proceeding. Such statement or statements shall reasonably evidence the Expenses incurred by 3

Indemnitee and shall include or be preceded or accompanied by an undertaking by or on behalf of Indemnitee to repay any Expenses advanced if it shall ultimately be determined that Indemnitee is not entitled to be indemnified against such Expenses. Any advances and undertakings to repay pursuant to this Section 5 shall be unsecured and interest free. Notwithstanding the foregoing, the obligation of the Company to advance Expenses pursuant to this Section 5 shall be subject to the condition that, if, when and to the extent that the Company determines that Indemnitee would not be permitted to be indemnified under applicable law, the Company shall be entitled to be reimbursed, within thirty (30) days of such determination, by Indemnitee (who hereby agrees to reimburse the Company) for all such amounts theretofore paid; provided, however, that if Indemnitee has commenced or thereafter commences legal proceedings in a court of competent jurisdiction to secure a determination that Indemnitee should be indemnified under applicable law, any determination made by the Company that Indemnitee would not be permitted to be indemnified under applicable law shall not be binding and Indemnitee shall not be required to reimburse the Company for any advance of Expenses until a final judicial determination is made with respect thereto (as to which all rights of appeal therefrom have been exhausted or lapsed). 6. Procedures and Presumptions for Determination of Entitlement to Indemnification. It is the intent of this Agreement to secure for Indemnitee rights of indemnity that are as favorable as may be permitted under the law and public policy of the State of Delaware. Accordingly, the parties agree that the following procedures and presumptions shall apply in the event of any question as to whether Indemnitee is entitled to indemnification under this Agreement: (a) To obtain indemnification (including, but not limited to, the advancement of Expenses and contribution by the Company) under this Agreement, Indemnitee shall submit to the Company a written request, including therein or therewith such documentation and information as is reasonably available to Indemnitee and is reasonably necessary to determine whether and to what extent Indemnitee is entitled to indemnification. The Secretary of the Company shall, promptly upon receipt of such a request for indemnification, advise the Board of Directors in writing that Indemnitee has requested indemnification. (b) Upon written request by Indemnitee for indemnification pursuant to the first sentence of Section 6(a) hereof, a determination, if required by applicable law, with respect to Indemnitee's entitlement thereto shall be made in the specific case by one of the following three methods, which shall be at the election of Indemnitee: (1) by a majority vote of the disinterested directors, even though less than a quorum, or (2) by independent legal counsel in a written opinion, or (3) by the stockholders. (c) If the determination of entitlement to indemnification is to be made by Independent Counsel pursuant to Section 6(b) hereof, the Independent Counsel shall be selected as provided in this Section 6(c). The Independent Counsel shall be selected by Indemnitee (unless Indemnitee shall request that such selection be made by the Board of Directors). Indemnitee or the Company, as the case may be, may, within 10 days after such written notice of selection shall have been given, deliver to the Company or to Indemnitee, as the case may be, a written objection to such selection; provided, however, that such objection may be asserted only on the ground that the Independent Counsel so selected does not meet the 4

requirements of "Independent Counsel" as defined in Section 13 of this Agreement, and the objection shall set forth with particularity the factual basis of such assertion. Absent a proper and timely objection, the person so selected shall act as Independent Counsel. If a written objection is made and substantiated, the Independent Counsel selected may not serve as Independent Counsel unless and until such objection is withdrawn or a court has determined that such objection is without merit. If, within 20 days after submission by Indemnitee of a written request for indemnification pursuant to Section 6(a) hereof, no Independent Counsel shall have been selected and not objected to, either the Company or Indemnitee may petition the Court of Chancery of the State of Delaware or other court of competent jurisdiction for resolution of any objection which shall have been made by the Company or Indemnitee to the other's selection of Independent Counsel and/or for the appointment as Independent Counsel of a person selected by the court or by such other person as the court shall designate, and the person with respect to whom all objections are so resolved or the person so appointed shall act as Independent Counsel under Section 6(b) hereof. The Company shall pay any and all reasonable fees and expenses of Independent Counsel incurred by such Independent Counsel in connection with acting pursuant to Section 6(b) hereof, and the Company shall pay all reasonable fees and expenses incident to the procedures of this Section 6(c), regardless of the manner in which such Independent Counsel was selected or appointed. (d) In making a determination with respect to entitlement to indemnification hereunder, the person or persons or entity making such determination shall presume that Indemnitee is entitled to indemnification under this Agreement if Indemnitee has submitted a request for indemnification in accordance with Section 6(a) of this Agreement. Anyone seeking to overcome this presumption shall have the burden of proof and the burden of persuasion, by clear and convincing evidence. (e) Indemnitee shall be deemed to have acted in good faith if Indemnitee's action is based on the records or books of account of the Enterprise, including financial statements, or on information supplied to Indemnitee by the officers of the Enterprise in the course of their duties, or on the advice of legal counsel for the Enterprise or on information or records given or reports made to the Enterprise by an independent certified public accountant or by an appraiser or other expert selected with reasonable care by the Enterprise. In addition, the knowledge and/or actions, or failure to act, of any director, officer, agent or employee of the Enterprise shall not be imputed to Indemnitee for purposes of determining the right to indemnification under this Agreement. Whether or not the foregoing provisions of this Section 6(e) are satisfied, it shall in any event be presumed that Indemnitee has at all times acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Company. Anyone seeking to overcome this presumption shall have the burden of proof and the burden of persuasion, by clear and convincing evidence. (f) If the person, persons or entity empowered or selected under Section 6 to determine whether Indemnitee is entitled to indemnification shall not have made a determination within thirty (30) days after receipt by the Company of the request therefor, the requisite determination of entitlement to indemnification shall be deemed to have been made and Indemnitee shall be entitled to such indemnification, absent (i) a misstatement by Indemnitee of a material fact, or an omission of a material fact necessary to make Indemnitee's statement not 5

materially misleading, in connection with the request for indemnification, or (ii) a prohibition of such indemnification under applicable law; provided, however, that such 30 day period may be extended for a reasonable time, not to exceed an additional fifteen (15) days, if the person, persons or entity making the determination with respect to entitlement to indemnification in good faith requires such additional time for the obtaining or evaluating documentation and/or information relating thereto; and provided, further, that the foregoing provisions of this Section 6(g) shall not apply if the determination of entitlement to indemnification is to be made by the stockholders pursuant to Section 6(b) of this Agreement and if (A) within fifteen (15) days after receipt by the Company of the request for such determination the Board of Directors or the Disinterested Directors, if appropriate, resolve to submit such determination to the stockholders for their consideration at an annual meeting thereof to be held within seventy five (75) days after such receipt and such determination is made thereat, or (B) a special meeting of stockholders is called within fifteen (15) days after such receipt for the purpose of making such determination, such meeting is held for such purpose within sixty (60) days after having been so called and such determination is made thereat. (g) Indemnitee shall cooperate with the person, persons or entity making such determination with respect to Indemnitee's entitlement to indemnification, including providing to such person, persons or entity upon reasonable advance request any documentation or information which is not privileged or otherwise protected from disclosure and which is reasonably available to Indemnitee and reasonably necessary to such determination. Any Independent Counsel, member of the Board of Directors, or stockholder of the Company shall act reasonably and in good faith in making a determination under the Agreement of the Indemnitee's entitlement to indemnification. Any costs or expenses (including attorneys' fees and disbursements) incurred by Indemnitee in so cooperating with the person, persons or entity making such determination shall be borne by the Company (irrespective of the determination as to Indemnitee's entitlement to indemnification) and the Company hereby indemnifies and agrees to hold Indemnitee harmless therefrom. (h) The Company acknowledges that a settlement or other disposition short of final judgment may be successful if it permits a party to avoid expense, delay, distraction, disruption and uncertainty. In the event that any action, claim or proceeding to which Indemnitee is a party is resolved in any manner other than by adverse judgment against Indemnitee (including, without limitation, settlement of such action, claim or proceeding with or without payment of money or other consideration) it shall be presumed that Indemnitee has been successful on the merits or otherwise in such action, suit or proceeding. Anyone seeking to overcome this presumption shall have the burden of proof and the burden of persuasion, by clear and convincing evidence. 7. Remedies of Indemnitee. (a) In the event that (i) a determination is made pursuant to Section 6 of this Agreement that Indemnitee is not entitled to indemnification under this Agreement, (ii) advancement of Expenses is not timely made pursuant to Section 5 of this Agreement, (iii) no determination of entitlement to indemnification shall have been made pursuant to Section 6(b) of this Agreement within 90 days after receipt by the Company of the request for indemnification, 6

(iv) payment of indemnification is not made pursuant to this Agreement within ten (10) days after receipt by the Company of a written request therefor, or (v) payment of indemnification is not made within ten (10) days after a determination has been made that Indemnitee is entitled to indemnification or such determination is deemed to have been made pursuant to Section 6 of this Agreement, Indemnitee shall be entitled to an adjudication in an appropriate court of the State of Delaware, or in any other court of competent jurisdiction, of his entitlement to such indemnification. Indemnitee shall commence such proceeding seeking an adjudication within 180 days following the date on which Indemnitee first has the right to commence such proceeding pursuant to this Section 7(a). The Company shall not oppose Indemnitee's right to seek any such adjudication. (b) In the event that a determination shall have been made pursuant to Section 6(b) of this Agreement that Indemnitee is not entitled to indemnification, any judicial proceeding commenced pursuant to this Section 7 shall be conducted in all respects as a de novo trial, on the merits and Indemnitee shall not be prejudiced by reason of that adverse determination under Section 6(b). (c) If a determination shall have been made pursuant to Section 6(b) of this Agreement that Indemnitee is entitled to indemnification, the Company shall be bound by such determination in any judicial proceeding commenced pursuant to this Section 7, absent a prohibition of such indemnification under applicable law. (d) In the event that Indemnitee, pursuant to this Section 7, seeks a judicial adjudication of his rights under, or to recover damages for breach of, this Agreement, or to recover under any directors' and officers' liability insurance policies maintained by the Company the Company shall pay on his behalf, in advance, any and all expenses (of the types described in the definition of Expenses in Section 13 of this Agreement) actually and reasonably incurred by him in such judicial adjudication, regardless of whether Indemnitee ultimately is determined to be entitled to such indemnification, advancement of expenses or insurance recovery. (e) The Company shall be precluded from asserting in any judicial proceeding commenced pursuant to this Section 7 that the procedures and presumptions of this Agreement are not valid, binding and enforceable and shall stipulate in any such court that the Company is bound by all the provisions of this Agreement. 8. Non-Exclusivity; Survival of Rights; Insurance; Subrogation. (a) The rights of indemnification as provided by this Agreement shall not be deemed exclusive of any other rights to which Indemnitee may at any time be entitled under applicable law, the certificate of incorporation of the Company, the Bylaws, any agreement, a vote of stockholders or a resolution of directors, or otherwise. No amendment, alteration or repeal of this Agreement or of any provision hereof shall limit or restrict any right of Indemnitee under this Agreement in respect of any action taken or omitted by such Indemnitee in his Corporate Status prior to such amendment, alteration or repeal. To the extent that a change in the Law, whether by statute or judicial decision, permits greater indemnification than would be 7

afforded currently under the Bylaws and this Agreement, it is the intent of the parties hereto that Indemnitee shall enjoy by this Agreement the greater benefits so afforded by such change. No right or remedy herein conferred is intended to be exclusive of any other right or remedy, and every other right and remedy shall be cumulative and in addition to every other right and remedy given hereunder or now or hereafter existing at law or in equity or otherwise. The assertion or employment of any right or remedy hereunder, or otherwise, shall not prevent the concurrent assertion or employment of any other right or remedy. (b) To the extent that the Company maintains an insurance policy or policies providing liability insurance for directors, officers, employees, or agents or fiduciaries of the Company or of any other corporation, partnership, joint venture, trust, employee benefit plan or other enterprise which such person serves at the request of the Company, Indemnitee shall be covered by such policy or policies in accordance with its or their terms to the maximum extent of the coverage available for any such director, officer, employee or agent under such policy or policies. (c) In the event of any payment under this Agreement, the Company shall be subrogated to the extent of such payment to all of the rights of recovery of Indemnitee, who shall execute all papers required and take all action necessary to secure such rights, including execution of such documents as are necessary to enable the Company to bring suit to enforce such rights. (d) The Company shall not be liable under this Agreement to make any payment of amounts otherwise indemnifiable hereunder if and to the extent that Indemnitee has otherwise actually received such payment under any insurance policy, contract, agreement or otherwise. 9. Exception to Right of Indemnification. Notwithstanding any other provision of this Agreement, Indemnitee shall not be entitled to indemnification under this Agreement with respect to any Proceeding brought by Indemnitee, or any claim therein, unless (a) the bringing of such Proceeding or making of such claim shall have been approved by the Board of Directors of the Company or (b) such Proceeding is being brought by the Indemnitee to assert, interpret or enforce his rights under this Agreement. 10. Duration of Agreement. All agreements and obligations of the Company contained herein shall continue during the period Indemnitee is an officer or director of the Company (or is or was serving at the request of the Company as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise) and shall continue thereafter so long as Indemnitee shall be subject to any Proceeding (or any proceeding commenced under Section 7 hereof) by reason of his Corporate Status, whether or not he is acting or serving in any such capacity at the time any liability or expense is incurred for which indemnification can be provided under this Agreement. This Agreement shall be binding upon and inure to the benefit of and be enforceable by the parties hereto and their respective successors (including any direct or indirect successor by purchase, merger, consolidation or otherwise to all or substantially all of the business or assets of the Company), assigns, spouses, heirs, executors and personal and legal representatives. This Agreement shall continue in effect regardless of 8

whether Indemnitee continues to serve as an officer or director of the Company or any other Enterprise at the Company's request. 11. Security. To the extent requested by the Indemnitee and approved by the Board of Directors of the Company, the Company may at any time and from time to time provide security to the Indemnitee for the Company's obligations hereunder through an irrevocable bank line of credit, funded trust or other collateral. Any such security, once provided to the Indemnitee, may not be revoked or released without the prior written consent of the Indemnitee. 12. Enforcement. (a) The Company expressly confirms and agrees that it has entered into this Agreement and assumed the obligations imposed on it hereby in order to induce Indemnitee to serve as an officer or director of the Company, and the Company acknowledges that Indemnitee is relying upon this Agreement in serving as an officer or director of the Company. (b) This Agreement constitutes the entire agreement between the parties hereto with respect to the subject matter hereof and supersedes all prior agreements and understandings, oral, written and implied, between the parties hereto with respect to the subject matter hereof. 13. Definitions. For purposes of this Agreement: (a) "Corporate Status" describes the status of a person who is or was a director, officer, employee or agent or fiduciary of the Company or of any other corporation, partnership, joint venture, trust, employee benefit plan or other enterprise which such person is or was serving at the express written request of the Company. (b) "Disinterested Director" means a director of the Company who is not and was not a party to the Proceeding in respect of which indemnification is sought by Indemnitee. (c) "Enterprise" shall mean the Company and any other corporation, partnership, joint venture, trust, employee benefit plan or other enterprise of which Indemnitee is or was serving at the express written request of the Company as a director, officer, employee, agent or fiduciary. (d) "Expenses" shall include all reasonable attorneys' fees, retainers, court costs, transcript costs, fees of experts, witness fees, travel expenses, duplicating costs, printing and binding costs, telephone charges, postage, delivery service fees, and all other disbursements or expenses of the types customarily incurred in connection with prosecuting, defending, preparing to prosecute or defend, investigating, participating, or being or preparing to be a witness in a Proceeding. (e) "Independent Counsel" means a law firm, or a member of a law firm, that is experienced in matters of corporation law and neither presently is, nor in the past 9

five years has been, retained to represent: (i) the Company or Indemnitee in any matter material to either such party (other than with respect to matters concerning the Indemnitee under this Agreement, or of other indemnitees under similar indemnification agreements), or (ii) any other party to the Proceeding giving rise to a claim for indemnification hereunder. Notwithstanding the foregoing, the term "Independent Counsel" shall not include any person who, under the applicable standards of professional conduct then prevailing, would have a conflict of interest in representing either the Company or Indemnitee in an action to determine Indemnitee's rights under this Agreement. The Company agrees to pay the reasonable fees of the Independent Counsel referred to above and to fully indemnify such counsel against any and all Expenses, claims, liabilities and damages arising out of or relating to this Agreement or its engagement pursuant hereto. (f) "Proceeding" includes any threatened, pending or completed action, suit, arbitration, alternate dispute resolution mechanism, investigation, inquiry, administrative hearing or any other actual, threatened or completed proceeding, whether brought by or in the right of the Company or otherwise and whether civil, criminal, administrative or investigative, in which Indemnitee was, is or will be involved as a party or otherwise, by reason of the fact that Indemnitee is or was a director of the Company, by reason of any action taken by him or of any inaction on his part while acting as an officer or director of the Company, or by reason of the fact that he is or was serving at the request of the Company as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other Enterprise; in each case whether or not he is acting or serving in any such capacity at the time any liability or expense is incurred for which indemnification can be provided under this Agreement; including one pending on or before the date of this Agreement; and excluding one initiated by an Indemnitee pursuant to Section 7 of this Agreement to enforce his rights under this Agreement. 14. Severability. If any provision or provisions of this Agreement shall be held by a court of competent jurisdiction to be invalid, void, illegal or otherwise unenforceable for any reason whatsoever: (a) the validity, legality and enforceability of the remaining provisions of this Agreement (including without limitation, each portion of any section of this Agreement containing any such provision held to be invalid, illegal or unenforceable, that is not itself invalid, illegal or unenforceable) shall not in any way be affected or impaired thereby and shall remain enforceable to the fullest extent permitted by law; and (b) to the fullest extent possible, the provisions of this Agreement (including, without limitation, each portion of any section of this Agreement containing any such provision held to be invalid, illegal or unenforceable, that is not itself invalid, illegal or unenforceable) shall be construed so as to give effect to the intent manifested thereby. 15. Modification and Waiver. No supplement, modification, termination or amendment of this Agreement shall be binding unless executed in writing by both of the parties hereto. No waiver of any of the provisions of this Agreement shall be deemed or shall constitute a waiver of any other provisions hereof (whether or not similar) nor shall such waiver constitute a continuing waiver. 16. Notice By Indemnitee. Indemnitee agrees promptly to notify the Company in writing upon being served with any summons, citation, subpoena, complaint, indictment, 10

information or other document relating to any Proceeding or matter which may be subject to indemnification covered hereunder. The failure to so notify the Company shall not relieve the Company of any obligation which it may have to the Indemnitee under this Agreement or otherwise unless and only to the extent that such failure or delay materially prejudices the Company. 17. Notices. All notices, requests, demands and other communications hereunder shall be in writing and shall be deemed to have been duly given if (i) delivered by hand and receipted for by the party to whom said notice or other communication shall have been directed, or (ii) mailed by certified or registered mail with postage prepaid, on the third business day after the date on which it is so mailed: (a) If to Indemnitee, to the address set forth below Indemnitee signature hereto. (b) If to the Company, to: Pervasive Software Inc. 8834 Capital of Texas Highway Austin, Texas 78759 Attention: James R. Offerdahl or to such other address as may have been furnished to Indemnitee by the Company or to the Company by Indemnitee, as the case may be. 18. Identical Counterparts. This Agreement may be executed in one or more counterparts, each of which shall for all purposes be deemed to be an original but all of which together shall constitute one and the same Agreement. Only one such counterpart signed by the party against whom enforceability is sought needs to be produced to evidence the existence of this Agreement. 19. Headings. The headings of the paragraphs of this Agreement are inserted for convenience only and shall not be deemed to constitute part of this Agreement or to affect the construction thereof. 20. Governing Law. The parties agree that this Agreement shall be governed by, and construed and enforced in accordance with, the laws of the State of Delaware without application of the conflict of laws principles thereof. 21. Gender. Use of the masculine pronoun shall be deemed to include usage of the feminine pronoun where appropriate. 22. Termination of Prior Indemnification Agreements. Upon the effectiveness of this Agreement, any prior Indemnification Agreements between the parties hereto shall terminate and be of no further force and effect, and shall be superseded and replaced in its entirety by this Agreement. 11

IN WITNESS WHEREOF, the parties hereto have executed this Agreement on and as of the day and year first above written. COMPANY By: Name: Title:

Name: Address:

EXHIBIT 10.4 PERVASIVE SOFTWARE INC. First Amended and Restated 1994 INCENTIVE PLAN Pervasive Software Inc., a Delaware corporation ("Corporation") has adopted this First Amended and Restated 1994 Incentive Plan (the "Plan") to provide for the granting of: (a) Incentive Options (hereafter defined) to certain Key Employees (hereafter defined); (b) Nonstatutory Options (hereafter defined) to certain Key Employees, Non-Employee Directors (hereafter defined) and other Persons; (c) Restricted Stock Awards (hereafter defined) to certain Key Employees and other Persons; and (d) Stock Appreciation Rights (hereafter defined) to certain Key Employees and other Persons. The purpose of the Plan is to provide an incentive for Key Employees and directors of the Corporation or its Subsidiaries (hereafter defined) to aid the Corporation in attracting able persons to enter the service of the Corporation and its Subsidiaries, to extend to them the opportunity to acquire a proprietary interest in the Corporation so that they will apply their best efforts for the benefit of the Corporation, and to remain in the service of the Corporation or its Subsidiaries. This Plan has been adopted by the Board of Directors and stockholders of the Corporation prior to the registration of any of securities of the Corporation under the Exchange Act (hereafter defined) and accordingly amounts paid under the Plan are exempt from the provisions of Section 162(m) of the Code (hereafter defined). 1. DEFINITIONS 1.1 "Acquiring Person" means any Person (hereafter defined) other than, the Corporation, any Subsidiary of the Corporation, any employee benefit plan of the Corporation or of a Subsidiary of the Corporation or of a corporation owned directly or indirectly by the stockholders of the Corporation in substantially the same proportions as their ownership of Stock (hereafter defined) of the Corporation, or any trustee or other fiduciary holding securities under an employee benefit plan of the Corporation or of a Subsidiary of the Corporation or of a corporation owned directly or indirectly by the stockholders of the Corporation in substantially the same proportions as their ownership of Stock of the Corporation.

1.2 "Affiliate" means (a) any Person who is directly or indirectly the beneficial owner of at least 10% of the voting power of the Voting Securities (hereafter defined) or (b) any Person controlling, controlled by, or under common control with the Company or any Person contemplated in clause (a) of this Subsection 1.2. 1.3 "Award" means the grant of any form of Option (hereafter defined), Restricted Stock Award, or Stock Appreciation Right under the Plan, whether granted individually, in combination, or in tandem, to a Holder (hereafter defined) pursuant to the terms, conditions, and limitations that the Committee (hereafter defined) may establish in order to fulfill the objectives of the Plan. 1.4 "Award Agreement" means the written agreement between the Corporation and a Holder (hereafter defined) evidencing the terms, conditions, and limitations of the Award granted to that Holder. 1.5 "Board of Directors" means the board of directors of the Corporation. 1.6 Definition intentionally omitted. 1.7 "Change in Control" means the event that is deemed to have occurred if: (a) any Acquiring Person is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Corporation representing fifty percent or more of the combined voting power of the then outstanding Voting Securities of the Corporation; or (b) members of the Incumbent Board (hereafter defined) cease for any reason to constitute at least a majority of the Board of Directors; or (c) Paragraph intentionally omitted. -2-

(d) the stockholders of the Corporation approve a merger or consolidation of the Corporation with any other corporation or partnership (or, if no such approval is required, the consummation of such a merger or consolidation of the Corporation), other than a merger or consolidation that would result in the Voting Securities of the Corporation outstanding immediately before the consummation thereof continuing to represent (either by remaining outstanding or by being converted into Voting Securities of the surviving entity or of a parent of the surviving entity) a majority of the combined voting power of the Voting Securities of the surviving entity (or its parent) outstanding immediately after that merger or consolidation; or (e) the stockholders of the Corporation approve a plan of complete liquidation of the Corporation or an agreement for the sale or disposition by the Corporation of all or substantially all the Corporation's assets (or, if no such approval is required, the consummation of such a liquidation, sale, or disposition in one transaction or series of related transactions) other than a liquidation, sale, or disposition of all or substantially all the Corporation's assets in one transaction or a series of related transactions to a corporation owned directly or indirectly by the stockholders of the Corporation in substantially the same proportions as their ownership of Stock of the Corporation. 1.8 "Code" means the Internal Revenue Code of 1986, as amended. 1.9 "Committee" means the Committee which shall administer this Plan and is further described under Section 3. 1.10 "Convertible Securities" means evidences of indebtedness, shares of capital stock, or other securities that are convertible into or exchangeable for shares of Stock, either immediately or upon the arrival of a specified date or the happening of a specified event. 1.11 "Corporation" has the meaning given to it in the second paragraph under "Scope and Purpose of Plan."
1.12 1.13 1.14 "Date of Grant" has the meaning given it in Subsection 4.3. "Disability" has the meaning given it in Subsection 10.4. "Disinterested Person" means a person that meets the definition of both

a "disinterested person" under Rule 16b-3(c)(2)(i) and an "outside director" under Section 162(m). 1.15 "Effective Date" means December 23, 1994. -3-

1.16 "Eligible Individuals" means (a) Key Employees, (b) Non-Employee Directors, and (c) any other Person that the Committee designates as eligible for an Award (other than for Incentive Options) because the Person performs, or has performed, valuable services for the Corporation or any of its Subsidiaries (other than services in connection with the offer or sale of securities in a capital-raising transaction) and the Committee determines that the Person has a direct and significant effect on the financial development of the Corporation or any of its Subsidiaries. Notwithstanding the foregoing provisions of this Subsection 1.16, to ensure that the requirements of the fourth sentence of Subsection 3.1 are satisfied, the Board of Directors may from time to time specify individuals who shall not be eligible for the grant of Awards or equity securities under any plan of the Corporation or its Affiliates. Nevertheless, the Board of Directors may at any time determine that an individual who has been so excluded from eligibility shall become eligible for grants of Awards and grants of such other equity securities under any plans of the Corporation or its Affiliates so long as that eligibility will not impair the Plan's satisfaction of the conditions of Rule 16b-3. 1.17 "Employee" means any employee of the Corporation or of any of its Subsidiaries, including officers and directors of the Corporation who are also employees of the Corporation or of any of its Subsidiaries. 1.18 "Exchange Act" means the Securities Exchange Act of 1934 and the rules and regulations promulgated thereunder, or any successor law, as it may be amended from time to time.
1.19 1.20 1.21 (a) "Exercise Notice" has the meaning given it in Subsection 5.5. "Exercise Price" has the meaning given it in Subsection 5.4. "Fair Market Value" means, for a particular day: If shares of Stock of the same class are listed or admitted to unlisted

trading privileges on any national or regional securities exchange at the date of determining the Fair Market Value, then the last reported sale price, regular way, on the composite tape of that exchange on the last market trading day before the date in question or, if no such sale takes place on that market trading day, the average of the closing bid and asked prices, regular way, in either case as reported in the principal consolidated transaction reporting system with respect to securities listed or admitted to unlisted trading privileges on that securities exchange; or (b) If shares of Stock of the same class are not listed or admitted to unlisted trading privileges as provided in Subsection 1.21(a) and sales prices for shares of Stock of the same class in the over-the-counter market are reported by the National Association of Securities Dealers, Inc. Automated Quotations, Inc. ("NASDAQ") National Market System (or such other system then in use) at the date of determining the Fair Market Value, then the last -4-

reported sales price so reported on the last market trading day before the date in question or, if no such sale takes place on that market trading day, the average of the high bid and low asked prices so reported; or (c) If shares of Stock of the same class are not listed or admitted to unlisted trading privileges as provided in Subsection 1.21(a) and sales prices for shares of Stock of the same class are not reported by the NASDAQ National Market System (or a similar system then in use) as provided in Subsection 1.21(b), and if bid and asked prices for shares of Stock of the same class in the over-the-counter market are reported by NASDAQ (or, if not so reported, by the National Quotation Bureau Incorporated) at the date of determining the Fair Market Value, then the average of the high bid and low asked prices on the last market trading day before the date in question; or (d) If shares of Stock of the same class are not listed or admitted to unlisted trading privileges as provided in Subsection 1.21(a) and sales prices or bid and asked prices therefor are not reported by NASDAQ (or the National Quotation Bureau Incorporated) as provided in Subsection 1.21(b) or Subsection 1.21(c) at the date of determining the Fair Market Value, then the value determined in good faith by the Committee, which determination shall be conclusive for all purposes; or (e) If shares of Stock of the same class are listed or admitted to unlisted trading privileges as provided in Subsection 1.21(a) or sales prices or bid and asked prices therefor are reported by NASDAQ (or the National Quotation Bureau Incorporated) as provided in Subsection 1.21(b) or Subsection 1.21(c) at the date of determining the Fair Market Value, but the volume of trading is so low that the Board of Directors determines in good faith that such prices are not indicative of the fair value of the Stock, then the value determined in good faith by the Committee, which determination shall be conclusive for all purposes notwithstanding the provisions of Subsections 1.21(a), (b), or (c). For purposes of determining the exercise price of Options, the Fair Market Value of Stock shall be determined without regard to any restriction other than one that, by its terms, will never lapse. For purposes of the redemption provided for in Subsection 9.3(d)(v), Fair Market Value shall have the meaning and shall be determined as set forth above; provided, however, that the Committee, with respect to any such redemption, shall have the right to determine that the Fair Market Value for purposes of the redemption should be an amount measured by the value of the shares of Stock, other securities, cash, or property otherwise being received by holders of shares of Stock in connection with the Restructuring (hereafter defined) and upon that determination the Committee shall have the power and authority to determine Fair Market Value for purposes of the redemption based upon the value of such shares of stock, other securities, cash, or property. Any such determination by the Committee, as evidenced by a resolution of the Committee, shall be conclusive for all purposes. -5-

1.22 "Fiscal Year" means the fiscal year of the Corporation ending on June 30 of each year. 1.23 "Holder" means an Eligible Individual to whom an outstanding Award has been granted. 1.24 "Incumbent Board" means the individuals who, as of the Effective Date, constitute the Board of Directors and any other individual who becomes a director of the Corporation after that date and whose election or appointment by the Board of Directors or nomination for election by the Corporation's stockholders was approved by a vote of at least a majority of the directors then comprising the Incumbent Board. 1.25 "Incentive Option" means an incentive stock option as defined under Section 422 of the Code and regulations thereunder. 1.26 "Key Employee" means any Employee whom the Committee identifies as having a direct and significant effect on the performance of the Corporation or any of its Subsidiaries. 1.27 "Non-Employee Director" means a director of the Corporation who while a director is not an Employee. 1.28 "Nonstatutory Option" means a stock option that does not satisfy the requirements of Section 422 of the Code or that is designated at the Date of Grant or in the applicable Award Agreement to be an option other than an Incentive Option. 1.29 "Non-Surviving Event" means an event of Restructuring as described in either Subsection 1.35(b) or Subsection 1.35(c).
1.30 both. 1.31 "Option" means either an Incentive Option or a Nonstatutory Option, or "Person" means any person or entity of any nature whatsoever,

specifically including (but not limited to) an individual, a firm, a company, a corporation, a partnership, a trust, or other entity. A Person, together with that Person's affiliates and associates (as "affiliate" and "associate" are defined in Rule 12b-2 under the Exchange Act for purposes of this definition only), and any Persons acting as a partnership, limited partnership, joint venture, association, syndicate, or other group (whether or not formally organized), or otherwise acting jointly or in concert or in a coordinated or consciously parallel manner (whether or not pursuant to any express agreement), for the purpose of acquiring, holding, voting, or disposing of securities of the Corporation with that Person, shall be deemed a single "Person." -6-

1.32 "Plan" means the Corporation's First Amended and Restated 1994 Incentive Plan, as it may be amended from time to time. 1.33 "Restricted Stock" means Stock that is nontransferable or subject to a substantial risk of forfeiture until specific conditions are met. 1.34 "Restricted Stock Award" means the grant or purchase, on the terms and conditions of Section 7 or that the Committee otherwise determines, of Restricted Stock. 1.35 "Restructuring" means the occurrence of any one or more of the following: (a) The merger or consolidation of the Corporation with any Person, whether effected as a single transaction or a series of related transactions, with the Corporation remaining the continuing or surviving entity of that merger or consolidation and the Stock remaining outstanding and not changed into or exchanged for stock or other securities of any other Person or of the Corporation, cash, or other property; (b) The merger or consolidation of the Corporation with any Person, whether effected as a single transaction or a series of related transactions, with (i) the Corporation not being the continuing or surviving entity of that merger or consolidation or (ii) the Corporation remaining the continuing or surviving entity of that merger or consolidation but all or a part of the outstanding shares of Stock are changed into or exchanged for stock or other securities of any other Person or the Corporation, cash, or other property; or (c) The transfer, directly or indirectly, of all or substantially all of the assets of the Corporation (whether by sale, merger, consolidation, liquidation, or otherwise) to any Person, whether effected as a single transaction or a series of related transactions. 1.36 "Rule 16b-3" means Rule 16b-3 under Section 16(b) of the Exchange Act as adopted in Exchange Act Release No. 34-29131 (April 26, 1991), or any successor rule, as it may be amended from time to time. 1.37 "Securities Act" means the Securities Act of 1933 and the rules and regulations promulgated thereunder, or any successor law, as it may be amended from time to time. 1.38 "Stock" means the common stock, par value $0.001 per share, of Pervasive Software Inc. or any other securities that are substituted for the Stock as provided in Section 9. 1.39 "Stock Appreciation Right" means the right to receive an amount equal to the excess of the Fair Market Value of a share of Stock (as determined on the date of exercise) over, as appropriate, the Exercise Price of a related Option or the Fair Market Value of the Stock on the Date of Grant of the Stock Appreciation Right. -7-

1.40 "Subsidiary" means, with respect to any Person, any corporation, or other entity of which a majority of the Voting Securities is owned, directly or indirectly, by that Person. 1.41 "Total Shares" has the meaning given it in Subsection 9.2. 1.42 "Voting Securities" means any securities that are entitled to vote generally in the election of directors, or in the selection of any other similar governing body. 2. SHARES OF STOCK SUBJECT TO THE PLAN 2.1 Maximum Number of Shares. Subject to the provisions of Subsection 2.2 and Section 9, the aggregate number of shares of Stock that may be issued or transferred pursuant to Awards under the Plan shall be Three Million Five Hundred Thousand (3,500,000) shares. 2.2 Limitation of Shares. For purposes of the limitations specified in Subsection 2.1, the following principles shall apply: (a) the following transactions, if granted pursuant to this Plan, shall count against and decrease the number of shares of Stock that may be issued for purposes of Subsection 2.1: (i) shares of Stock subject to outstanding Options, outstanding shares of Restricted Stock, and shares subject to outstanding Stock Appreciation Rights granted independently of Options (based on a good faith estimate by the Corporation or the Committee of the maximum number of shares for which the Stock Appreciation Right may be settled (assuming payment in full in shares of Stock)), and (ii) in the case of Options granted in tandem with Stock Appreciation Rights, the greater of the number of shares of Stock that would be counted if one or the other alone was outstanding (determined as described in clause (i) above); (b) the following shall be added back to the number of shares of Stock that may be issued for purposes of Subsection 2.1: (i) shares of Stock with respect to which Options, Stock Appreciation Rights granted independent of Options, or Restricted Stock Awards expire, are cancelled, or otherwise terminate without being exercised, converted, or vested, as applicable, and (ii) in the case of Options granted in tandem with Stock Appreciation Rights, shares of Stock as to which an Option has been surrendered in connection with the exercise of a related ("tandem") Stock Appreciation Right, to the extent the number surrendered exceeds the number issued upon exercise of the Stock Appreciation Right; provided that, in any case, the Holder of such Awards did not receive any dividends or other benefits of ownership with respect to the underlying shares being added back, other than voting rights and the accumulation (but not payment) of dividends of Stock; -8-

(c) shares of Stock subject to Stock Appreciation Rights granted independently of Options (calculated as provided in clause (a) above) that are exercised and paid in cash shall be added back to the number of shares of Stock that may be issued for purposes of Subsection 2.1, provided that the Holder of such Stock Appreciation Right did not receive any dividends or other benefits of ownership, other than voting rights and the accumulation (but not payment) of dividends, relative to the shares of Stock subject to the Stock Appreciation Right; (d) shares of Stock that are transferred by a Holder of an Award (or withheld by the Corporation) as full or partial payment to the Corporation of the purchase price of shares of Stock subject to an Option or the Corporation's or any Subsidiary's tax withholding obligations shall not be added back to the number of shares of Stock that may be issued for purposes of Subsection 2.1 and shall not again be subject to Awards; and (e) if the number of shares of Stock counted against the number of shares that may be issued for purposes of Subsection 2.1 is based upon an estimate made by the Corporation or the Committee as provided in clause (a) above and the actual number of shares of Stock issued pursuant to the applicable Award is greater or less than the estimated number, then, upon such issuance, the number of shares of Stock that may be issued pursuant to Subsection 2.1 shall be further reduced by the excess issuance or increased by the shortfall, as applicable. Notwithstanding the provisions of this Subsection 2.2, no Stock shall be treated as issuable under the Plan to Eligible Individuals subject to Section 16 of the Exchange Act if otherwise prohibited from issuance under Rule 16b-3. 2.3 Description of Shares. The shares to be delivered under the Plan shall be made available from (a) authorized but unissued shares of Stock, (b) Stock held in the treasury of the Corporation, or (c) previously issued shares of Stock reacquired by the Corporation, including shares purchased on the open market, in each situation as the Board of Directors or the Committee may determine from time to time at its sole option. 2.4 Registration and Listing of Shares. From time to time, the Board of Directors and appropriate officers of the Corporation shall and are authorized to take whatever actions are necessary to file required documents with governmental authorities, stock exchanges, and other appropriate Persons to make shares of Stock available for issuance pursuant to the exercise of Awards. -9-

3. ADMINISTRATION OF THE PLAN 3.1 Committee. The Committee shall administer the Plan with respect to all Eligible Individuals who are subject to Section 16(b) of the Exchange Act, but shall not have the power to appoint members of the Committee or to terminate, modify, or amend the Plan. The Board of Directors may administer the Plan with respect to all other Eligible Individuals, or may delegate all or part of that duty to the Committee. Except for references in Subsections 3.1, 3.2 and 3.3, and unless the context otherwise requires, references herein to the Committee shall also refer to the Board of Directors as administrator of the Plan for Eligible Individuals who are not subject to Section 16(b) of the Exchange Act. The Committee shall be constituted so that, as long as Stock is registered under Section 12 of the Exchange Act, each member of the Committee shall be a Disinterested Person and so that the Plan in all other applicable respects will qualify transactions related to the Plan for the exemptions from Section 16(b) of the Exchange Act provided by Rule 16b-3, to the extent exemptions thereunder may be available. No discretion regarding Awards to Eligible Individuals who are subject to Section 16(b) of the Exchange Act shall be afforded to a person who is not a Disinterested Person. The number of Persons that shall constitute the Committee shall be determined from time to time by a majority of all the members of the Board of Directors and, unless that majority of the Board of Directors determines otherwise or Rule 16b-3 is amended to require otherwise, shall be no less than two Persons. Persons elected to serve on the Committee as Disinterested Persons shall not be eligible to receive Awards or equity securities under any plan of the Corporation or its affiliates while they are serving as members of the Committee; shall not have received Awards or such equity securities under any plan of the Corporation or its affiliates within one year before their appointment to the Committee becomes effective; and shall not be eligible to receive Awards or such equity securities under any plan of the Corporation or its affiliates for such period following service on the Committee as may be required by Rule 16b-3 for that person to remain a Disinterested Person, in each case except for Awards or equity securities granted as provided in paragraphs (c)(2)(i)(A), (B), (C), or (D) of Rule 16b-3. Notwithstanding the foregoing, the Board of Directors may designate a compensation or other committee (regardless of its composition) of the Board of Directors to serve as the Committee hereunder, provided that the Stock is not registered under Section 12 of the Exchange Act. 3.2 Duration, Removal, Etc. The members of the Committee shall serve at the discretion of the Board of Directors, which shall have the power, at any time and from time to time, to remove members from or add members to the Committee. Removal from the Committee may be with or without cause. Any individual serving as a member of the Committee shall have the right to resign from membership in the Committee by at least three days' written notice to the Board of Directors. The Board of Directors, and not the remaining members of the Committee, shall have the power and authority to fill all vacancies on the Committee. If the Stock is registered under Section 12 of the Exchange Act, the Board of Directors shall promptly fill any vacancy that causes the number of -10-

members of the Committee to be below two or any other number that Rule 16b-3 may require from time to time. 3.3 Meetings and Actions of Committee. The Board of Directors shall designate which of the Committee members shall be the chairman of the Committee. If the Board of Directors fails to designate a Committee chairman, the members of the Committee shall elect one of the Committee members as chairman, who shall act as chairman until he ceases to be a member of the Committee or until the Board of Directors elects a new chairman. The Committee shall hold its meetings at those times and places as the chairman of the Committee may determine. At all meetings of the Committee, a quorum for the transaction of business shall be required and a quorum shall be deemed present if at least a majority of the members of the Committee are present. At any meeting of the Committee, each member shall have one vote. All decisions and determinations of the Committee shall be made by the majority vote or majority decision of all of its members present at a meeting at which a quorum is present; provided, however, that any decision or determination reduced to writing and signed by all of the members of the Committee shall be as fully effective as if it had been made at a meeting that was duly called and held. The Committee may make any rules and regulations for the conduct of its business that are not inconsistent with the provisions of the Plan, the Articles or Certificate of Incorporation of the Corporation, the by-laws of the Corporation, and Rule 16b-3 so long as it is applicable, as the Committee may deem advisable. 3.4 Committee's Powers. Subject to the express provisions of the Plan and Rule 16b-3, the Committee shall have the authority, in its sole and absolute discretion, to (a) adopt, amend, and rescind administrative and interpretive rules and regulations relating to the Plan; (b) determine the Eligible Individuals to whom, and the time or times at which, Awards shall be granted; (c) determine the amount of cash and the number of shares of Stock, Stock Appreciation Rights, or Restricted Stock Awards, or any combination thereof, that shall be the subject of each Award; (d) determine the terms and provisions of each Award Agreement (which need not be identical), including provisions defining or otherwise relating to (i) the term and the period or periods and extent of exercisability of the Options, (ii) the extent to which the transferability of shares of Stock issued or transferred pursuant to any Award is restricted, (iii) the effect of termination of employment of the Holder on the Award, and (iv) the effect of approved leaves of absence (consistent with any applicable regulations of the Internal Revenue Service); (e) accelerate, pursuant to Section 9, the time of exercisability of any Option that has been granted; (f) construe the respective Award Agreements and the Plan; (g) make determinations of the Fair Market Value of the Stock pursuant to the Plan; (h) delegate its duties under the Plan to such agents as it may appoint from time to time, provided that the Committee may not delegate its duties with respect to making Awards to, or otherwise with respect to Awards granted to, Eligible Individuals who are subject to Section 16(b) of the Exchange Act; and (i) make all other determinations, perform all other acts, and exercise all other powers and authority necessary or advisable for administering the Plan, including the delegation of those ministerial acts -11-

and responsibilities as the Committee deems appropriate. Subject to Rule 16b-3, the Committee may correct any defect, supply any omission, or reconcile any inconsistency in the Plan, in any Award, or in any Award Agreement in the manner and to the extent it deems necessary or desirable to carry the Plan into effect, and the Committee shall be the sole and final judge of that necessity or desirability. The determinations of the Committee on the matters referred to in this Subsection 3.4 shall be final and conclusive. 4. ELIGIBILITY AND PARTICIPATION 4.1 Eligible Individuals. Awards may be granted pursuant to the Plan only to persons who are Eligible Individuals at the time of the grant thereof. 4.2 Grant of Awards. Subject to the express provisions of the Plan, the Committee shall determine which Eligible Individuals shall be granted Awards from time to time. In making grants, the Committee shall take into consideration the contribution the potential Holder has made or may make to the success of the Corporation or its Subsidiaries and such other considerations as the Board of Directors may from time to time specify. The Committee shall also determine the number of shares subject to each of the Awards and shall authorize and cause the Corporation to grant Awards in accordance with those determinations. 4.3 Date of Grant. The date on which the Committee completes all action resolving to offer an Award to an individual, including the specification of the number of shares of Stock to be subject to the Award, shall be the date on which the Award covered by an Award Agreement is granted (the "Date of Grant"), even though certain terms of the Award Agreement may not be determined at that time and even though the Award Agreement may not be executed until a later time. In no event shall a Holder gain any rights in addition to those specified by the Committee in its grant, regardless of the time that may pass between the grant of the Award and the actual execution of the Award Agreement by the Corporation and the Holder. 4.4 Award Agreements. Each Award granted under the Plan shall be evidenced by an Award Agreement that is executed by the Corporation and the Eligible Individual to whom the Award is granted and incorporating those terms that the Committee shall deem necessary or desirable. More than one Award may be granted under the Plan to the same Eligible Individual and be outstanding concurrently. In the event an Eligible Individual is granted both one or more Incentive Options and one or more Nonstatutory Options, those grants shall be evidenced by separate Award Agreements, one for each of the Incentive Option grants and one for each of the Nonstatutory Option grants. 4.5 Limitation for Incentive Options. Notwithstanding any provision contained herein to the contrary, (a) a person shall not be eligible to receive an Incentive Option unless he is an Employee of the Corporation or a corporate Subsidiary and (b) a person shall not be eligible to receive an Incentive Option if, immediately before the time the Option is granted, -12-

that person owns (within the meaning of Sections 422 and 424(d) of the Code) stock possessing more than ten percent of the total combined voting power or value of all classes of outstanding stock of the Corporation or a Subsidiary. Nevertheless, Subsection 4.5(b) shall not apply if, at the time the Incentive Option is granted, the Exercise Price of the Incentive Option is at least one hundred ten percent of Fair Market Value and the Incentive Option is not, by its terms, exercisable after the expiration of five years from the Date of Grant. 4.6 No Right to Award. The adoption of the Plan shall not be deemed to give any Person a right to be granted an Award. 5. TERMS AND CONDITIONS OF OPTIONS All Options granted under the Plan shall comply with, and the related Award Agreements shall be deemed to include and be subject to, the terms and conditions set forth in this Section 5 (to the extent each term and condition applies to the form of Option) and also to the terms and conditions set forth in Sections 9 and 10; provided, however, that the Committee may authorize an Award Agreement that expressly contains terms and provisions that differ from the terms and provisions set forth in Subsections 9.2, 9.3, and 9.4 and any of the terms and provisions of Section 10 (other than Subsections 10.9 and 10.10). 5.1 Number of Shares. Each Award Agreement shall state the total number of shares of Stock to which it relates. 5.2 Vesting. Each Award Agreement shall state the time or periods in which, or the conditions upon satisfaction of which, the right to exercise the Option or a portion thereof shall vest and the number of shares of Stock for which the right to exercise the Option shall vest at each such time, period, or fulfillment of condition. 5.3 Expiration of Options. No Option shall be exercised after the expiration of a period of ten years commencing on the Date of Grant of the Option; provided, however, that any portion of a Nonstatutory Option that pursuant to the terms of the Award Agreement under which such Nonstatutory Option is granted shall not become exercisable until the date which is the tenth anniversary of the Date of Grant of such Nonstatutory Option may be exercisable for a period of 30 days following the date on which such portion becomes exercisable. 5.4 Exercise Price. Each Award Agreement shall state the exercise price per share of Stock (the "Exercise Price"); provided, however, that the exercise price per share of Stock subject to an Incentive Option shall not be less than the greater of (a) the par value per share of the Stock or (b) 100% of the Fair Market Value (110% of the Fair Market Value in the case of a person owning stock possessing more than ten percent of the total combined -13-

voting power or value of all classes of outstanding stock of the Corporation or a Subsidiary) per share of the Stock on the Date of Grant of the Option. 5.5 Method of Exercise. The Option shall be exercisable only by written notice of exercise (the "Exercise Notice") delivered to the Corporation during the term of the Option, which notice shall (a) state the number of shares of Stock with respect to which the Option is being exercised, (b) be signed by the Holder of the Option or, if the Holder is dead or becomes affected by a Disability, by the person authorized to exercise the Option pursuant to Subsections 10.3 and 10.4, (c) be accompanied by the Exercise Price for all shares of Stock for which the Option is being exercised, and (d) include such other information, instruments, and documents as may be required to satisfy any other condition to exercise contained in the Award Agreement. The Option shall not be deemed to have been exercised unless all of the requirements of the preceding provisions of this Subsection 5.5 have been satisfied. 5.6 Incentive Option Exercises. Except as otherwise provided in Subsection 10.4, during the Holder's lifetime, only the Holder may exercise an Incentive Option. 5.7 Medium and Time of Payment. The Exercise Price of an Option shall be payable in full upon the exercise of the Option (a) in cash or by an equivalent means acceptable to the Committee, (b) on the Committee's prior consent, with shares of Stock owned by the Holder (including shares received upon exercise of the Option or restricted shares already held by the Holder) and having a Fair Market Value at least equal to the aggregate Exercise Price payable in connection with such exercise, or (c) by any combination of clauses (a) and (b). If the Committee elects to accept shares of Stock in payment of all or any portion of the Exercise Price, then (for purposes of payment of the Exercise Price) those shares of Stock shall be deemed to have a cash value equal to their aggregate Fair Market Value determined as of the date the certificate for such shares is delivered to the Corporation. If the Committee elects to accept shares of restricted Stock in payment of all or any portion of the Exercise Price, then an equal number of shares issued pursuant to the exercise shall be restricted on the same terms and for the restriction period remaining on the shares used for payment. 5.8 Payment with Sale Proceeds. In addition, at the request of the Holder and to the extent permitted by applicable law, the Committee may (but shall not be required to) approve arrangements with a brokerage firm under which that brokerage firm, on behalf of the Holder, shall pay to the Corporation the Exercise Price of the Option being exercised and the Corporation shall promptly deliver the exercised shares of Stock to the brokerage firm. To accomplish this transaction, the Holder must deliver to the Corporation an Exercise Notice containing irrevocable instructions from the Holder to the Corporation to deliver the Stock certificates representing the shares of Stock directly to the broker. Upon receiving a copy of the Exercise Notice acknowledged by the Corporation, the broker shall sell that number of shares of Stock or loan the Holder an amount sufficient to pay the -14-

Exercise Price and any withholding obligations due. The broker then shall deliver to the Corporation that portion of the sale or loan proceeds necessary to cover the Exercise Price and any withholding obligations due. The Committee shall not approve any transaction of this nature if the Committee believes that the transaction would give rise to the Holder's liability for short-swing profits under Section 16(b) of the Exchange Act. 5.9 Payment of Taxes. The Committee may, in its discretion, require a Holder to pay to the Corporation (or the Corporation's Subsidiary if the Holder is an employee of a Subsidiary of the Corporation), at the time of the exercise of an Option or thereafter, the amount that the Committee deems necessary to satisfy the Corporation's or its Subsidiary's current or future obligation to withhold federal, state, or local income or other taxes that the Holder incurs by exercising an Option. In connection with the exercise of an Option requiring tax withholding, a Holder may (a) direct the Corporation to withhold from the shares of Stock to be issued to the Holder the number of shares necessary to satisfy the Corporation's obligation to withhold taxes, that determination to be based on the shares' Fair Market Value as of the date of exercise; (b) deliver to the Corporation sufficient shares of Stock (based upon the Fair Market Value as of the date of such delivery) to satisfy the Corporation's tax withholding obligations, which tax withholding obligation is based on the shares' Fair Market Value as of the later of the date of exercise or the date as of which the shares of Stock issued in connection with such exercise become includible in the income of the Holder; or (c) deliver sufficient cash to the Corporation to satisfy its tax withholding obligations. Holders who elect to use such a stock withholding feature must make the election at the time and in the manner that the Committee prescribes. The Committee may, at its sole option, deny any Holder's request to satisfy withholding obligations through Stock instead of cash. In the event the Committee subsequently determines that the aggregate Fair Market Value (as determined above) of any shares of Stock withheld or delivered as payment of any tax withholding obligation is insufficient to discharge that tax withholding obligation, then the Holder shall pay to the Corporation, immediately upon the Committee's request, the amount of that deficiency in the form of payment requested by the Committee. 5.10 Limitation on Aggregate Value of Shares That May Become First Exercisable During Any Calendar Year Under an Incentive Option. Except as is otherwise provided in Subsection 9.3, with respect to any Incentive Option granted under this Plan, the aggregate Fair Market Value of shares of Stock subject to an Incentive Option and the aggregate Fair Market Value of shares of Stock or stock of any Subsidiary (or a predecessor of the Corporation or a Subsidiary) subject to any other incentive stock option (within the meaning of Section 422 of the Code) of the Corporation or its Subsidiaries (or a predecessor corporation of any such corporation) that first become purchasable by a Holder in any calendar year may not (with respect to that Holder) exceed $100,000, or such other amount as may be prescribed under Section 422 of the Code or applicable regulations or rulings from time to time. As used in the previous sentence, Fair Market Value shall be determined as of the Date of Grant of the Incentive Option. For purposes of this Subsection 5.10, "predecessor corporation" means (a) a corporation that was a party to a transaction -15-

described in Section 424(a) of the Code (or which would be so described if a substitution or assumption under that Section had been effected) with the Corporation, (b) a corporation which, at the time the new incentive stock option (within the meaning of Section 422 of the Code) is granted, is a Subsidiary of the Corporation or a predecessor corporation of any such corporations, or (c) a predecessor corporation of any such corporations. Failure to comply with this provision shall not impair the enforceability or exercisability of any Option, but shall cause the excess amount of shares to be reclassified in accordance with the Code. 5.11 No Fractional Shares. The Corporation shall not in any case be required to sell, issue, or deliver a fractional share with respect to any Option, nor shall the Corporation be required to compensate the Holder of any option in any way for the value of any such fractional share not sold, issued, or delivered by the Corporation. 5.12 Modification, Extension, and Renewal of Options. Subject to the terms and conditions of and within the limitations of the Plan, Rule 16b-3, and any consent required by the last sentence of this Subsection 5.12, the Committee may (a) modify, extend, or renew outstanding Options granted under the Plan, (b) accept the surrender of Options outstanding hereunder (to the extent not previously exercised) and authorize the granting of new Options in substitution for outstanding Options (to the extent not previously exercised), and (c) amend the terms of an Incentive Option at any time to include provisions that have the effect of changing the Incentive Option to a Nonstatutory Option. Nevertheless, without the consent of the Holder, the Committee may not modify any outstanding Options so as to specify a higher or lower Exercise Price or accept the surrender of outstanding Incentive Options and authorize the granting of new Options in substitution therefor specifying a higher or lower Exercise Price. In addition, no modification of an Option granted hereunder shall, without the consent of the Holder, alter or impair any rights or obligations under any Option theretofore granted to such Holder under the Plan except, with respect to Incentive Options, as may be necessary to satisfy the requirements of Section 422 of the Code or as permitted in clause (c) of this Subsection 5.12. 5.13 Other Agreement Provisions. The Award Agreements authorized under the Plan shall contain such provisions in addition to those required by the Plan (including without limitation restrictions or the removal of restrictions upon the exercise of the Option and the retention or transfer of shares thereby acquired) as the Committee may deem advisable. Each Award Agreement shall identify the Option evidenced thereby as an Incentive Option or Nonstatutory Option, as the case may be, and no Award Agreement shall cover both an Incentive Option and a Nonstatutory Option. Each Award Agreement relating to an Incentive Option granted hereunder shall contain such limitations and restrictions upon the exercise of the Incentive Option to which it relates as shall be necessary for the Incentive Option to which such Award Agreement relates to constitute an incentive stock option, as defined in Section 422 of the Code. -16-

6. STOCK APPRECIATION RIGHTS All Stock Appreciation Rights granted under the Plan shall comply with, and the related Award Agreements shall be deemed to include and be subject to, the terms and conditions set forth in this Section 6 (to the extent each term and condition applies to the form of Stock Appreciation Right) and also the terms and conditions set forth in Sections 9 and 10; provided, however, that the Committee may authorize an Award Agreement related to a Stock Appreciation Right that expressly contains terms and provisions that differ from the terms and provisions set forth in Subsections 9.2, 9.3, and 9.4 and any of the terms and provisions of Section 10 (other than Subsection 10.10). 6.1 Form of Right. A Stock Appreciation Right may be granted to an Eligible Individual (a) in connection with an Option, either at the time of grant or at any time during the term of the Option, or (b) independent of an Option. 6.2 Rights Related to Options. A Stock Appreciation Right granted pursuant to an Option shall entitle the Holder, upon exercise, to surrender that Option or any portion thereof, to the extent unexercised, and to receive payment of an amount computed pursuant to Subsection 6.2(b). That Option shall then cease to be exercisable to the extent surrendered. Stock Appreciation Rights granted in connection with an Option shall be subject to the terms of the Award Agreement governing the Option, which shall comply with the following provisions in addition to those applicable to Options: (a) Exercise and Transfer. Subject to Subsection 10.9, a Stock Appreciation Right granted in connection with an Option shall be exercisable only at such time or times and only to the extent that the related Option is exercisable and shall not be transferable except to the extent that the related Option is transferable. (b) Value of Right. Upon the exercise of a Stock Appreciation Right related to an Option, the Holder shall be entitled to receive payment from the Corporation of an amount determined by multiplying: (i) The difference obtained by subtracting the Exercise Price of a share of Stock specified in the related Option from the Fair Market Value of a share of Stock on the date of exercise of the Stock Appreciation Right, by (ii) The number of shares as to which that Stock Appreciation Right has been exercised. 6.3 Right Without Option. A Stock Appreciation Right granted independent of an Option shall be exercisable as determined by the Committee and set forth in the Award Agreement governing the Stock Appreciation Right, which Award Agreement shall comply with the following provisions: -17-

(a) Number of Shares. Each Award Agreement shall state the total number of shares of Stock to which the Stock Appreciation Right relates. (b) Vesting. Each Award Agreement shall state the time or periods in which the right to exercise the Stock Appreciation Right or a portion thereof shall vest and the number of shares of Stock for which the right to exercise the Stock Appreciation Right shall vest at each such time or period. (c) Expiration of Rights. Each Award Agreement shall state the date at which the Stock Appreciation Rights shall expire if not previously exercised. (d) Value of Right. Each Stock Appreciation Right shall entitle the Holder, upon exercise thereof, to receive payment of an amount determined by multiplying: (i) The difference obtained by subtracting the Fair Market Value of a share of Stock on the Date of Grant of the Stock Appreciation Right from the Fair Market Value of a share of Stock on the date of exercise of that Stock Appreciation Right, by (ii) The number of shares as to which the Stock Appreciation Right has been exercised. 6.4 Limitations on Rights. Notwithstanding Subsections 6.2(b) and 6.3(d), the Committee may limit the amount payable upon exercise of a Stock Appreciation Right. Any such limitation must be determined as of the Date of Grant and be noted on the Award Agreement evidencing the Holder's Stock Appreciation Right. 6.5 Payment of Rights. Payment of the amount determined under Subsection 6.2(b) or 6.3(d) and Subsection 6.4 may be made, in the sole discretion of the Committee unless specifically provided otherwise in the Award Agreement, solely in whole shares of Stock valued at Fair Market Value on the date of exercise of the Stock Appreciation Right, solely in cash, or in a combination of cash and whole shares of Stock. 6.6 Payment of Taxes. The Committee may, in its discretion, require a Holder to pay to the Corporation (or the Corporation's Subsidiary if the Holder is an employee of a Subsidiary of the Corporation), at the time of the exercise of a Stock Appreciation Right or thereafter, the amount that the Committee deems necessary to satisfy the Corporation's or its Subsidiary's current or future obligation to withhold federal, state, or local income or other taxes that the Holder incurs by exercising a Stock Appreciation Right. In connection with the exercise of a Stock Appreciation Right requiring tax withholding, a Holder may (a) direct the Corporation to withhold from the shares of Stock to be issued to the Holder the number of shares necessary to satisfy the Corporation's obligation to withhold taxes, that -18-

determination to be based on the shares' Fair Market Value as of the date of exercise; (b) deliver to the Corporation sufficient shares of Stock (based upon the Fair Market Value as of the date of such delivery) to satisfy the Corporation's tax withholding obligations, which tax withholding obligation is based on the shares' Fair Market Value as of the later of the date of exercise or the date of which the shares of Stock issued in connection with such exercise become includible in the income of the Holder; or (c) deliver sufficient cash to the Corporation to satisfy its tax withholding obligations. Holders who elect to have Stock withheld pursuant to (a) or (b) above must make the election at the time and in the manner that the Committee prescribes. The Committee may, in its sole discretion, deny any Holder's request to satisfy withholding obligations through Stock instead of cash. In the event the Committee subsequently determines that the aggregate Fair Market Value (as determined above) of any shares of Stock withheld or delivered as payment of any tax withholding obligation is insufficient to discharge that tax withholding obligation, then the Holder shall pay to the Corporation, immediately upon the Committee's request, the amount of that deficiency in the form of payment requested by the Commission. 6.7 Other Agreement Provisions. The Award Agreements authorized relating to Stock Appreciation Rights shall contain such provisions in addition to those required by the Plan (including without limitation restrictions or the removal of restrictions upon the exercise of the Stock Appreciation Right and the retention or transfer of shares thereby acquired) as the Committee may deem advisable. 7. RESTRICTED STOCK AWARDS All Restricted Stock Awards granted under the Plan shall comply with and be subject to, and the related Award Agreements shall be deemed to include, the terms and conditions set forth in this Section 7 and also to the terms and conditions set forth in Sections 9 and 10; provided, however, that the Committee may authorize an Award Agreement related to a Restricted Stock Award that expressly contains terms and provisions that differ from the terms and provisions set forth in Subsections 9.2, 9.3, and 9.4 and the terms and provisions set forth in Section 10 (other than Subsections 10.9 and 10.10). 7.1 Restrictions. All shares of Restricted Stock Awards granted or sold pursuant to the Plan shall be subject to the following conditions: (a) Transferability. The shares may not be sold, transferred, or otherwise alienated or hypothecated until the restrictions are removed or expire. (b) Conditions to Removal of Restrictions. Conditions to removal or expiration of the restrictions may include, but are not required to be limited to, continuing employment or service as a director, officer, or Key Employee or achievement of performance objectives described in the Award Agreement. -19-

(c) Legend. Each certificate representing Restricted Stock Awards granted pursuant to the Plan shall bear a legend making appropriate reference to the restrictions imposed. (d) Possession. The Committee may require the Corporation to retain physical custody of the certificates representing Restricted Stock Awards during the restriction period and may require the Holder of the Award to execute stock powers in blank for those certificates and deliver those stock powers to the Corporation, or the Committee may require the Holder to enter into an escrow agreement providing that the certificates representing Restricted Stock Awards granted or sold pursuant to the Plan shall remain in the physical custody of an escrow holder until all restrictions are removed or expire. (e) Other Conditions. The Committee may impose other conditions on any shares granted or sold as Restricted Stock Awards pursuant to the Plan as it may deem advisable, including without limitation (i) restrictions under the Securities Act or Exchange Act, (ii) the requirements of any securities exchange upon which the shares or shares of the same class are then listed, and (iii) any state securities law applicable to the shares. 7.2 Expiration of Restrictions. The restrictions imposed in Subsection 7.1 on Restricted Stock Awards shall lapse as determined by the Committee and set forth in the applicable Award Agreement, and the Corporation shall promptly deliver to the Holder of the Restricted Stock Award a certificate representing the number of shares for which restrictions have lapsed, free of any restrictive legend relating to the lapsed restrictions. Each Restricted Stock Award may have a different restriction period as determined by the Committee in its sole discretion. The Committee may, in its discretion, prospectively reduce the restriction period applicable to a particular Restricted Stock Award. 7.3 Rights as Stockholder. Subject to the provisions of Subsections 7.1 and 10.10, the Committee may, in its discretion, determine what rights, if any, the Holder shall have with respect to the Restricted Stock Awards granted or sold, including the right to vote the shares and receive all dividends and other distributions paid or made with respect thereto. 7.4 Payment of Taxes. The Committee may, in its discretion, require a Holder to pay to the Corporation (or the Corporation's Subsidiary if the Holder is an employee of a Subsidiary of the Corporation) the amount that the Committee deems necessary to satisfy the Corporation's or its Subsidiary's current or future obligation to withhold federal, state, or local income or other taxes that the Holder incurs by reason of the Restricted Stock Award. The Holder may (a) direct the Corporation to withhold from the shares of Stock to be issued to the Holder the number of shares necessary to satisfy the Corporation's obligation to withhold taxes, that determination to be based on the shares' Fair Market Value as of the date on which tax withholding is to be made; (b) deliver to the Corporation sufficient shares of Stock (based upon the Fair Market Value as of the date of such delivery) to satisfy the Corporation's tax withholding obligations, which tax withholding obligation is based on the shares' Fair Market Value as of the later of the date of issuance or the date as of which the -20-

shares of Stock issued become includible in the income of the Holder; or (c) deliver sufficient cash to the Corporation to satisfy its tax withholding obligations. Holders who elect to have Stock withheld pursuant to (a) or (b) above must make the election at the time and in the manner that the Committee prescribes. The Committee may, in its sole discretion, deny any Holder's request to satisfy withholding obligations through Stock instead of cash. In the event the Committee subsequently determines that the aggregate Fair Market Value (as determined above) of any shares of Stock withheld or delivered as payment of any tax withholding obligation is insufficient to discharge that tax withholding obligation, then the Holder shall pay to the Corporation, immediately upon the Committee's request, the amount of that deficiency. 7.5 Other Agreement Provisions. The Award Agreements relating to Restricted Stock Awards shall contain such provisions in addition to those required by the Plan as the Committee may deem advisable. 8. THIS SECTION INTENTIONALLY OMITTED. 9. ADJUSTMENT PROVISIONS 9.1 Adjustment of Awards and Authorized Stock. The terms of an Award and the number of shares of Stock authorized pursuant to Subsection 2.1 for issuance under the Plan shall be subject to adjustment from time to time, in accordance with the following provisions: (a) If at any time, or from time to time, the Corporation shall subdivide as a whole (by reclassification, by a Stock split, by the issuance of a distribution on Stock payable in Stock, or otherwise) the number of shares of Stock then outstanding into a greater number of shares of Stock, then (i) the maximum number of shares of Stock available for the Plan as provided in Subsection 2.1 shall be increased proportionately, and the kind of shares or other securities available for the Plan shall be appropriately adjusted, (ii) the number of shares of Stock (or other kind of shares or securities) that may be acquired under any Award shall be increased proportionately, and (iii) the price (including Exercise Price) for each share of Stock (or other kind of shares or securities) subject to then outstanding Awards shall be reduced proportionately, without changing the aggregate purchase price or value as to which outstanding Awards remain exercisable or subject to restrictions. (b) If at any time, or from time to time, the Corporation shall consolidate as a whole (by reclassification, reverse Stock split, or otherwise) the number of shares of Stock then outstanding into a lesser number of shares of Stock, then (i) the maximum number of shares of Stock available for the Plan as provided in Subsection 2.1 shall be decreased proportionately, and the kind of shares or other securities available for the Plan shall be appropriately adjusted, (ii) the number of shares of Stock (or other kind of shares or securities) that may be acquired under any Award shall be decreased proportionately, and -21-

(iii) the price (including Exercise Price) for each share of Stock (or other kind of shares or securities) subject to then outstanding Awards shall be increased proportionately, without changing the aggregate purchase price or value as to which outstanding Awards remain exercisable or subject to restrictions. (c) Whenever the number of shares of Stock subject to outstanding Awards and the price for each share of Stock subject to outstanding Awards are required to be adjusted as provided in this Subsection 9.1, the Committee shall promptly prepare a notice setting forth, in reasonable detail, the event requiring adjustment, the amount of the adjustment, the method by which such adjustment was calculated, and the change in price and the number of shares of Stock, other securities, cash, or property purchasable subject to each Award after giving effect to the adjustments. The Committee shall promptly give each Holder such a notice. (d) Adjustments under Subsections 9(a) and (b) shall be made by the Committee, and its determination as to what adjustments shall be made and the extent thereof shall be final, binding, and conclusive. No fractional interest shall be issued under the Plan on account of any such adjustments. 9.2 Changes in Control. Any Award Agreement may provide that, upon the occurrence of a Change in Control, one or more of the following apply: (a) each Holder of an Option shall immediately be granted corresponding Stock Appreciation Rights; (b) all or a portion of outstanding Stock Appreciation Rights and Options shall immediately become fully vested and exercisable in full, including that portion of any Stock Appreciation Right or Option that pursuant to the terms and provisions of the applicable Award Agreement had not yet become exercisable (the total number of shares of Stock as to which a Stock Appreciation Right or Option is exercisable upon the occurrence of a change in Control is referred to herein as the "Total Shares"); and (c) the restriction period of any Restricted Stock Award shall immediately be accelerated and the restrictions shall expire. An Award Agreement does not have to provide for any of the foregoing. If a Change in Control involves a Restructuring or occurs in connection with a series of related transactions involving a Restructuring and if such Restructuring is in the form of a Non-Surviving Event and as a part of such Restructuring shares of Stock, other securities, cash, or property shall be issuable or deliverable in exchange for Stock, then the Holder of an Award shall be entitled to purchase or receive (in lieu of the Total Shares that the Holder would otherwise be entitled to purchase or receive), as appropriate for the form of Award, the number of shares of Stock, other securities, cash, or property to which that number of Total Shares would have been entitled in connection with such Restructuring (and, for Options, at an aggregate exercise price equal to the Exercise Price that would have been payable if that number of Total Shares had been purchased on the exercise of the Option immediately before the consummation of the Restructuring). Nothing in this Subsection 9.2 shall impose on a Holder the obligation to exercise any Award immediately before or upon the Change of -22-

Control, or cause Holder to forfeit the right to exercise the Award during the remainder of the original term of the Award because of a Change in Control. 9.3 Restructuring Without Change in Control. In the event a Restructuring shall occur at any time while there is any outstanding Award hereunder and that Restructuring does not occur in connection with a Change in Control or a series of related transactions involving a Change in Control, then: (a) no outstanding Option or Stock Appreciation Right shall immediately become fully vested and exercisable in full merely because of the occurrence of the Restructuring; (b) no Holder of an Option shall automatically be granted corresponding Stock Appreciation Rights; (c) the restriction period of any Restricted Stock Award shall not immediately be accelerated and the restrictions expire merely because of the occurrence of the Restructuring; and (d) at the option of the Committee, the Committee may (but shall not be required to) cause the Corporation to take any one or more of the following actions: (i) accelerate in whole or in part the time of the vesting and exercisability of any one or more of the outstanding Stock Appreciation Rights and Options so as to provide that those Stock Appreciation Rights and Options shall be exercisable before, upon, or after the consummation of the Restructuring; (ii) grant each Holder of an Option corresponding Stock Appreciation Rights; (iii) accelerate in whole or in part the expiration of some or all of the restrictions on any Restricted Stock Award; (iv) if the Restructuring is in the form of a Non-Surviving Event, cause the surviving entity to assume in whole or in part any one or more of the outstanding Awards upon such terms and provisions as the Committee deems desirable; or (v) redeem in whole or in part any one or more of the outstanding Awards (whether or not then exercisable) in consideration of a cash payment, as such payment may be reduced for tax withholding obligations as contemplated in Subsections 5.9, 6.6, or 7.4, as applicable, in an amount equal to: (A) for Options and Stock Appreciation Rights granted in connection with Options, the excess of (1) the Fair Market Value, determined as of the date immediately preceding the consummation of the Restructuring, of the -23-

aggregate number of shares of Stock subject to the Award and as to which the Award is being redeemed over (2) the Exercise Price for that number of shares of Stock; (B) for Stock Appreciation Rights not granted in connection with an Option, the excess of (1) the Fair Market Value, determined as of the date immediately preceding the consummation of the Restructuring, of the aggregate number of shares of Stock subject to the Award and as to which the Award is being redeemed over (2) the Fair Market Value of that number of shares of Stock on the Date of Grant; and (C) for Restricted Stock Awards, the Fair Market Value, determined as of the date immediately preceding the consummation of the Restructuring, of the aggregate number of shares of Stock subject to the Award and as to which the Award is being redeemed. The Corporation shall promptly notify each Holder of any election or action taken by the Corporation under this Subsection 9.3. In the event of any election or action taken by the Corporation pursuant to this Subsection 9.3 that requires the amendment or cancellation of any Award Agreement as may be specified in any notice to the Holder thereof, that Holder shall promptly deliver that Award Agreement to the Corporation in order for that amendment or cancellation to be implemented by the Corporation and the Committee. The failure of the Holder to deliver any such Award Agreement to the Corporation as provided in the preceding sentence shall not in any manner affect the validity or enforceability of any action taken by the Corporation and the Committee under this Subsection 9.3, including without limitation any redemption of an Award as of the consummation of a Restructuring. Any cash payment to be made by the Corporation pursuant to this Subsection 9.3 in connection with the redemption of any outstanding Awards shall be paid to the Holder thereof currently with the delivery to the Corporation of the Award Agreement evidencing that Award; provided, however, that any such redemption shall be effective upon the consummation of the Restructuring notwithstanding that the payment of the redemption price may occur subsequent to the consummation. If all or any portion of an outstanding Award is to be exercised or accelerated upon or after the consummation of a Restructuring that does not occur in connection with a Change in Control and is in the form of a Non-Surviving Event, and as a part of that Restructuring shares of stock, other securities, cash, or property shall be issuable or deliverable in exchange for Stock, then the Holder of the Award shall thereafter be entitled to purchase or receive (in lieu of the number of shares of Stock that the Holder would otherwise be entitled to purchase or receive) the number of shares of Stock, other securities, cash, or property to which such number of shares of Stock would have been entitled in connection with the Restructuring (and, for Options, upon payment of the aggregate exercise price equal to the Exercise Price that would have been payable if that number of Total Shares had been purchased on the exercise of the Option immediately before the consummation of the Restructuring) and such Award shall be -24-

subject to adjustments that shall be as nearly equivalent as may be practical to the adjustments provided for in this Section 9. 9.4 Notice of Restructuring. The Corporation shall attempt to keep all Holders informed with respect to any Restructuring or of any potential Restructuring to the same extent that the Corporation's stockholders are informed by the Corporation of any such event or potential event. 10. ADDITIONAL PROVISIONS 10.1 Termination of Employment. If a Holder is an Eligible Individual because the Holder is an Employee and if that employment relationship is terminated for any reason other than (a) that Holder's death or (b) that Holder's Disability (hereafter defined), then any and all Awards held by such Holder in such Holder's capacity as an Employee as of the date of the termination that are not yet exercisable (or for which restrictions have not lapsed) shall become null and void as of the date of such termination; provided, however, that the portion, if any, of such Awards that are exercisable as of the date of termination shall be exercisable for a period of the lesser of (a) the remainder of the term of the Award or (b) the date which is 180 days after the later of (i) date of termination or (ii) the first date after termination upon which a Holder can legally exercise such exercisable Award (e.g. lapse of Rule 16b-3 limitations on the Holder). For Incentive Options, the 180 day period referred to above shall be reduced to 30 days to comply with the applicable requirements of Section 422 of the Code for Incentive Options. Any portion of an Award not exercised upon the expiration of the lesser of the period specified above shall be null and void unless the Holder dies during such period, in which case the provisions of Subsection 10.3 shall govern. 10.2 Other Loss of Eligibility - Non Employees. If a Holder is an Eligible Individual because the Holder is serving in a capacity other than as an Employee and if that capacity is terminated for any reason other than the Holder's death or Disability, then that portion, if any, of any and all Awards held by the Holder that were granted because of that capacity which are not yet exercisable (or for which restrictions have not lapsed) as of the date of the termination shall become null and void as of the date of the termination; provided, however, that the portion, if any, of any and all Awards held by the Holder that are then exercisable as of the date of the termination shall be exercisable for a period of the lesser of (a) the remainder of the term of the Award or (b) 180 days following the later of (i) date such capacity is terminated or (ii) the first date after such capacity is terminated upon which a Holder can legally exercise such exercisable Award. If a Holder is an Eligible Individual because the Holder is serving in a capacity other than as an Employee and if that capacity is terminated by reason of the Holder's death or Disability, then the portion, if any, of any and all Awards held by the Holder that are not yet exercisable (or for which restrictions have not lapsed) as of the date of that termination for death or Disability shall become null and void -25-

as of the date of such termination unless specifically provided otherwise in the Award Agreement related to such Award. All Awards held by the Holder as of the date of termination that are exercisable as of the date of termination shall be exercisable for a period of the lesser of (a) the remainder of the term of the Award or (b) the date which is 180 days after the later of (i) date of termination or (ii) the first date after termination upon which a Holder can legally exercise such exercisable Award. Any portion of an Award not exercised upon the expiration of the periods specified in (a) or (b) of the preceding sentence shall be null and void upon the expiration of such period, as applicable. 10.3 Death. Upon the death of a Holder, any and all Awards held by the Holder that are not yet exercisable (or for which restrictions have not lapsed) as of the date of the Holder's death shall become null and void as of the date of the Holder's death unless specifically provided otherwise in the Award Agreement related to such Award. The Awards held by the Holder as of the date of death that are exercisable as of the date of death shall be exercisable by that Holder's legal representatives, heirs, legatees, or distributees for a period of the lesser of (a) the remainder of the term of the Award or (b) the date which is 180 days following the later of (i) date of the Holder's death or (ii) the first date after the Holder's death upon which a legal representative, heir, legatee or distributee of the Holder can legally exercise such exercisable Award. Any portion of an Award not exercised upon the expiration of such period shall be null and void. Except as expressly provided in this Subsection 10.3, no Award held by a Holder shall be exercisable after the death of that Holder. 10.4 Disability. If a Holder is an Eligible Individual because the Holder is an Employee and if that employment relationship is terminated by reason of the Holder's Disability, then the portion, if any, of any and all Awards held by the Holder that are not yet exercisable (or for which restrictions have not lapsed) as of the date of that termination for Disability shall become null and void as of the date of such termination unless specifically provided otherwise in the Award Agreement related to such Award. The Awards held by the Holder as of the date of termination that are exercisable as of the date of termination shall be exercisable by the Holder, his guardian or his legal representative for a period of the lesser of (a) the remainder of the term of the Award or (b) the date which is 180 days following the later of (i) date of such termination or (ii) the first date after termination upon which a Holder can legally exercise such exercisable Award. Any portion of an Award not exercised upon the expiration of such period shall be null and void unless the Holder dies during such period, in which event the provisions of Subsection 10.3 shall govern. "Disability" shall have the the meaning given it within Section 22(e)(3) of the Code. 10.5 Leave of Absence. With respect to an Award, the Committee may, in its sole discretion, determine that any Holder who is on leave of absence for any reason will be considered to still be in the employ of the Corporation for any or all purposes of the Plan and the Award Agreement of such Holder; provided, however, that, unless specifically waived by the Committee, such Holder's vesting schedule, if any, shall be tolled during any -26-

such leave of absence; provided further, that, unless specifically waived by the Committee, in the case of Incentive Options, the Holder's employment with the Corporation shall be deemed terminated, in any event, on the 91st day of any leave of absence. 10.6 Transferability of Awards. In addition to such other terms and conditions as may be included in a particular Award Agreement, an Award requiring exercise shall be exercisable during a Holder's lifetime only by that Holder or by that Holder's guardian or legal representative. An Award requiring exercise shall not be transferrable other than by will or the laws of descent and distribution. 10.7 Forfeiture and Restrictions on Transfer. Each Award Agreement may contain or otherwise provide for conditions giving rise to the forfeiture of the Stock acquired pursuant to an Award or otherwise and may also provide for those restrictions on the transferability of shares of the Stock acquired pursuant to an Award or otherwise that the Committee in its sole and absolute discretion may deem proper or advisable. The conditions giving rise to forfeiture may include, but need not be limited to, the requirement that the Holder render substantial services to the Corporation or its Subsidiaries for a specified period of time. The restrictions on transferability may include, but need not be limited to, options and rights of first refusal in favor of the Corporation and stockholders of the Corporation other than the Holder of such shares of Stock who is a party to the particular Award Agreement or a subsequent holder of the shares of Stock who is bound by that Award Agreement. 10.8 Delivery of Certificates of Stock. Subject to Subsection 10.9, the Corporation shall promptly issue and deliver a certificate representing the number of shares of Stock as to which (a) an Option has been exercised after the Corporation receives an Exercise Notice and upon receipt by the Corporation of the Exercise Price and any tax withholding as may be requested, (b) a Stock Appreciation Right has been exercised (to the extent the Committee determines to pay such Stock Appreciation Right in shares of Stock pursuant to Subsection 6.5) and upon receipt by the Corporation of any tax withholding as may be requested, and (c) restrictions have lapsed with respect to a Restricted Stock Award and upon receipt by the Corporation of any tax withholding as may be requested. The value of the shares of Stock or cash transferable because of an Award under the Plan shall not bear any interest owing to the passage of time, except as may be otherwise provided in an Award Agreement. If a Holder is entitled to receive certificates representing Stock received for more than one form of Award under the Plan, separate Stock certificates shall be issued with respect to Incentive Options and Nonstatutory Options. -27-

10.9 Conditions to Delivery of Stock. Nothing herein or in any Award granted hereunder or any Award Agreement shall require the Corporation to issue any shares with respect to any Award if that issuance would, in the opinion of counsel for the Corporation, constitute a violation of the Securities Act or any similar or superseding statute or statutes, any other applicable statute or regulation, or the rules of any applicable securities exchange or securities association, as then in effect. At the time of any exercise of an Option or Stock Appreciation Right, or at the time of any grant of a Restricted Stock Award, the Corporation may, as a condition precedent to the exercise of such Option or Stock Appreciation Right or vesting of any Restricted Stock Award, require from the Holder of the Award (or in the event of his death, his legal representatives, heirs, legatees, or distributees) such written representations, if any, concerning the Holder's intentions with regard to the retention or disposition of the shares of Stock being acquired pursuant to the Award and such written covenants and agreements, if any, as to the manner of disposal of such shares as, in the opinion of counsel to the Corporation, may be necessary to ensure that any disposition by that Holder (or in the event of the Holder's death, his legal representatives, heirs, legatees, or distributees) will not involve a violation of the Securities Act or any similar or superseding statute or statutes, any other applicable state or federal statute or regulation, or any rule of any applicable securities exchange or securities association, as then in effect. 10.10 Certain Directors and Officers. If the Stock is registered under Section 12 of the Exchange Act, then, with respect to Holders who are directors or officers of the Corporation or any of its Subsidiaries and who are subject to Section 16(b) of the Exchange Act, Awards and all rights under the Plan shall be exercisable during the Holder's lifetime only by the Holder or the Holder's guardian or legal representative, but not for at least six months after grant, unless (a) the Board of Directors expressly authorizes that an Award shall be exercisable before the expiration of the six-month period or (b) the death or disability of the Holder occurs before the expiration of the six-month period. In addition, no such officer or director shall exercise any Stock Appreciation Right or have shares of Stock withheld to pay tax withholding obligations within the first six months of the term of an Award. Any election by any such officer or director to have tax withholding obligations satisfied by the withholding of shares of Stock shall be irrevocable and shall be communicated to the Committee during the period beginning on the third day following the date of release of quarterly or annual summary statements of sales and earnings and ending on the twelfth business day following such date (the "Window Period") or by an irrevocable election communicated to the Committee at least six months before the date of exercise of the Award for which such withholding is desired. Any election by such an officer or director to receive cash in full or partial settlement of a Stock Appreciation Right, as well as any exercise by such individual of a Stock Appreciation Right for such cash, in either case to the extent permitted under the applicable Award Agreement or otherwise permitted by the Committee, shall be made during the Window Period or within any other periods that the Committee shall specify from time to time. -28-

10.11 Securities Act Legend. Certificates for shares of Stock, when issued, may have the following legend, or statements of other applicable restrictions (including, without limitation, restrictions required under any Federal, state or foreign law), endorsed thereon and may not be immediately transferable: THE SHARES OF STOCK REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS. THE SHARES MAY NOT BE OFFERED FOR SALE, SOLD, PLEDGED, TRANSFERRED, OR OTHERWISE DISPOSED OF UNTIL THE HOLDER HEREOF PROVIDES EVIDENCE SATISFACTORY TO THE ISSUER (WHICH, IN THE DISCRETION OF THE ISSUER, MAY INCLUDE AN OPINION OF COUNSEL SATISFACTORY TO THE ISSUER) THAT SUCH OFFER, SALE, PLEDGE, TRANSFER, OR OTHER DISPOSITION WILL NOT VIOLATE APPLICABLE FEDERAL OR STATE LAWS. This legend shall not be required for shares of Stock issued pursuant to an effective registration statement under the Securities Act. 10.12 Legend for Restrictions on Transfer. Each certificate representing shares issued to a Holder pursuant to an Award granted under the Plan shall, if such shares are subject to any transfer restriction, including a right of first refusal, provided for under this Plan or an Award Agreement, bear a legend that complies with applicable law with respect to the restrictions on transferability contained in this Subsection 10.12, such as: THE SHARES OF STOCK REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY IMPOSED BY THAT CERTAIN INSTRUMENT ENTITLED "PERVASIVE SOFTWARE INC. FIRST AMENDED AND RESTATED 1994 INCENTIVE PLAN" AS ADOPTED BY PERVASIVE SOFTWARE INC. (THE "CORPORATION"), ON ________________, 1995, AND AN AGREEMENT THEREUNDER BETWEEN THE CORPORATION AND THE INITIAL HOLDER THEREOF DATED ________________, 199_, AND MAY NOT BE TRANSFERRED, SOLD, OR OTHERWISE DISPOSED OF EXCEPT AS THEREIN PROVIDED. THE CORPORATION WILL FURNISH A COPY OF SUCH INSTRUMENT AND AGREEMENT TO THE RECORD HOLDER OF THIS CERTIFICATE WITHOUT CHARGE ON REQUEST TO THE CORPORATION AT ITS PRINCIPAL PLACE OF BUSINESS OR REGISTERED OFFICE. -29-

10.13 Rights as a Stockholder. A Holder shall have no right as a stockholder with respect to any shares covered by his Award until a certificate representing those shares is issued in his name. No adjustment shall be made for dividends (ordinary or extraordinary, whether in cash or other property) or distributions or other rights for which the record date is before the date that certificate is issued, except as contemplated by Section 9 hereof. Nevertheless, dividends, dividend equivalent rights and voting rights may be extended to and made part of any Award denominated in Stock or units of Stock, subject to such terms, conditions and restrictions as the Committee may establish. The Committee may also establish rules and procedures for the crediting of interest on deferred cash payments and dividend equivalents for deferred payment denominated in Stock or units of Stock. 10.14 Furnish Information. Each Holder shall furnish to the Corporation all information requested by the Corporation to enable it to comply with any reporting or other requirement imposed upon the Corporation by or under any applicable statute or regulation. 10.15 Obligation to Exercise. The granting of an Award hereunder shall impose no obligation upon the Holder to exercise the same or any part thereof. 10.16 Adjustments to Awards. Subject to the general limitations set forth in Sections 5, 6, and 9, the Committee may make any adjustment in the Exercise Price of, the number of shares subject to, or the terms of a Nonstatutory Option or Stock Appreciation Right by cancelling an outstanding Nonstatutory Option or Stock Appreciation Right and regranting a Nonstatutory Option or Stock Appreciation Right. Such adjustment shall be made by amending, substituting, or regranting an outstanding Nonstatutory Option or Stock Appreciation Right. Such amendment, substitution, or regrant may result in terms and conditions that differ from the terms and conditions of the original Nonstatutory Option or Stock Appreciation Right. The Committee may not, however, impair the rights of any Holder of previously granted Nonstatutory Options or Stock Appreciation Rights without that Holder's consent. If such action is effected by amendment, such amendment shall be deemed effective as of the Date of Grant of the amended Award. 10.17 Remedies. The Corporation shall be entitled to recover from a Holder reasonable attorneys' fees incurred in connection with the enforcement of the terms and provisions of the Plan and any Award Agreement whether by an action to enforce specific performance or for damages for its breach or otherwise. 10.18 Information Confidential. As partial consideration for the granting of each Award hereunder, the Holder shall agree with the Corporation that he will keep confidential all information and knowledge that he has relating to the manner and amount of his participation in the Plan; provided, however, that such information may be disclosed as required by law and may be given in confidence to the Holder's spouse, tax or financial advisors, or to a financial institution to the extent that such information is necessary to -30-

secure a loan. In the event any breach of this promise comes to the attention of the Committee, it shall take into consideration that breach in determining whether to recommend the grant of any future Award to that Holder, as a factor mitigating against the advisability of granting any such future Award to that Person. 10.19 Consideration. No Option or Stock Appreciation Right shall be exercisable and no restriction on any Restricted Stock Award shall lapse with respect to a Holder unless and until the Holder thereof shall have paid cash or property to, or performed services for, the Corporation or any of its Subsidiaries that the Committee believes is equal to or greater in value than the par value of the Stock subject to such Award. 11. DURATION AND AMENDMENT OF PLAN 11.1 Duration. No Awards may be granted hereunder after the date that is ten years from the earlier of (a) the date the Plan is adopted by the Board of Directors and (b) the date the Plan is approved by the stockholders of the Corporation. 11.2 Amendment. The Board of Directors may, insofar as permitted by law, with respect to any shares which, at the time, are not subject to Awards, suspend or discontinue the Plan or revise or amend it in any respect whatsoever and may amend any provision of the Plan or any Award Agreement to make the Plan or the Award Agreement, or both, comply with Section 16(b) of the Exchange Act and the exemptions from that Section in the regulations thereunder. The Board of Directors may also amend, modify, suspend, or terminate the Plan for the purpose of meeting or addressing any changes in other legal requirements applicable to the Corporation or the Plan or for any other purpose permitted by law. The Plan may not be amended without the consent of the holders of a majority of the shares of Stock then outstanding to (a) increase materially the aggregate number of shares of Stock that may be issued under the Plan (except for adjustments pursuant to Section 9 hereof), (b) increase materially the benefits accruing to Eligible Individuals under the Plan, or (c) modify materially the requirements about eligibility for participation in the Plan; provided, however, that such amendments may be made without the consent of stockholders of the Corporation if changes occur in law or other legal requirements (including Rule 16b-3 or Section 162(m) of the Code) that would permit such changes. In connection with any amendment of the Plan, the Board of Directors shall be authorized to incorporate such provisions as shall be necessary for amounts paid under the Plan to be exempt from Section 162(m) of the Code. -31-

12. GENERAL 12.1 Application of Funds. The proceeds received by the Corporation from the sale of shares pursuant to Awards may be used for any general corporate purpose. 12.2 Right of the Corporation and Subsidiaries to Terminate Employment. Nothing contained in the Plan, or in any Award Agreement, shall confer upon any Holder the right to continue in the employ of the Corporation or any Subsidiary or interfere in any way with the rights of the Corporation or any Subsidiary to terminate the Holder's employment at any time. 12.3 No Liability for Good Faith Determinations. Neither the members of the Board of Directors nor any member of the Committee shall be liable for any act, omission or determination taken or made in good faith with respect to the Plan or any Award granted under it; and members of the Board of Directors and the Committee shall be entitled to indemnification and reimbursement by the Corporation in respect of any claim, loss, damage, or expense (including attorneys' fees, the costs of settling any suit, provided such settlement is approved by independent legal counsel selected by the Corporation, and amounts paid in satisfaction of a judgment, except a judgment based on a finding of bad faith) arising therefrom to the full extent permitted by law and under any directors' and officers' liability or similar insurance coverage that may from time to time be in effect. This right to indemnification shall be in addition to, and not a limitation on, any other indemnification rights any member of the Board of Directors or the Committee may have. 12.4 Other Benefits. Participation in the Plan shall not preclude the Holder from eligibility in any other stock or stock option plan of the Corporation or any Subsidiary or any old age benefit, insurance, pension, profit sharing retirement, bonus, or other extra compensation plans that the Corporation or any Subsidiary has adopted, or may, at any time, adopt for the benefit of its Employees. Neither the adoption of the Plan by the Board of Directors nor the submission of the Plan to the stockholders of the Corporation for approval shall be construed as creating any limitations on the power of the Board of Directors to adopt such other incentive arrangements as it may deem desirable, including, without limitation, the granting of stock options and the awarding of stock and cash otherwise than under the Plan and such arrangements may be either generally applicable or applicable only in specific cases. 12.5 Exclusion From Pension and Profit-Sharing Compensation. By acceptance of an Award (regardless of form), as applicable, each Holder shall be deemed to have agreed that the Award is special incentive compensation that will not be taken into account in any manner as salary, compensation, or bonus in determining the amount of any payment under any pension, retirement, or other employee benefit plan of the Corporation or any Subsidiary, unless any pension, retirement, or other employee benefit plan of the -32-

Corporation or Subsidiary expressly provides that such Award shall be so considered for purposes of determining the amount of any payment under any such plan. In addition, each beneficiary of a deceased Holder shall be deemed to have agreed that the Award will not affect the amount of any life insurance coverage, if any, provided by the Corporation or a Subsidiary on the life of the Holder that is payable to the beneficiary under any life insurance plan covering employees of the Corporation or any Subsidiary. 12.6 Execution of Receipts and Releases. Any payment of cash or any issuance or transfer of shares of Stock to the Holder, or to his legal representative, heir, legatee, or distributee, in accordance with the provisions hereof, shall, to the extent thereof, be in full satisfaction of all claims of such persons hereunder. The Committee may require any Holder, legal representative, heir, legatee, or distributee, as a condition precedent to such payment, to execute a release and receipt therefor in such form as it shall determine. 12.7 Unfunded Plan. Insofar as it provides for Awards of cash and Stock, the Plan shall be unfunded. Although bookkeeping accounts may be established with respect to Holders who are entitled to cash, Stock, or rights thereto under the Plan, any such accounts shall be used merely as a bookkeeping convenience. The Corporation shall not be required to segregate any assets that may at any time be represented by cash, Stock, or rights thereto, nor shall the Plan be construed as providing for such segregation, nor shall the Corporation nor the Board of Directors nor the Committee be deemed to be a trustee of any cash, Stock, or rights thereto to be granted under the Plan. Any liability of the Corporation to any Holder with respect to a grant of cash, Stock, or rights thereto under the Plan shall be based solely upon any contractual obligations that may be created by the Plan and any Award Agreement; no such obligation of the Corporation shall be deemed to be secured by any pledge or other encumbrance on any property of the Corporation. Neither the Corporation nor the Board of Directors nor the Committee shall be required to give any security or bond for the performance of any obligation that may be created by the Plan. 12.8 No Guarantee of Interests. Neither the Committee nor the Corporation guarantees the Stock of the Corporation from loss or depreciation. 12.9 Payment of Expenses. All expenses incident to the administration, termination, or protection of the Plan, including, but not limited to, legal and accounting fees, shall be paid by the Corporation or its Subsidiaries; provided, however, the Corporation or a Subsidiary may recover any and all damages, fees, expenses, and costs arising out of any actions taken by the Corporation to enforce its right to purchase Stock under this Plan. 12.10 Corporation Records. Records of the Corporation or its Subsidiaries regarding the Holder's period of employment, termination of employment and the reason therefor, leaves of absence, re-employment, and other matters shall be conclusive for all purposes hereunder, unless determined by the Committee to be incorrect. -33-

12.11 Information. The Corporation and its Subsidiaries shall, upon request or as may be specifically required hereunder, furnish or cause to be furnished all of the information or documentation which is necessary or required by the Committee to perform its duties and functions under the Plan.
12.12 12.13 This Paragraph intentionally omitted. Corporation Action. -----------------Any action required of the Corporation shall be by

resolution of its Board of Directors or by a person authorized to act by resolution of the Board of Directors. 12.14 Severability. In the event that any provision of this Plan, or the application hereof to any Person or circumstance, is held by a court of competent jurisdiction to be invalid, illegal, or unenforceable in any respect under present or future laws effective during the effective term of any such provision, such invalid, illegal, or unenforceable provision shall be fully severable; and this Plan shall then be construed and enforced as if such invalid, illegal, or unenforceable provision had not been contained in this Plan; and the remaining provisions of this Plan shall remain in full force and effect and shall not be affected by the illegal, invalid, or unenforceable provision or by its severance from this Plan. Furthermore, in lieu of each such illegal, invalid, or unenforceable provision, there shall be added automatically as part of this Plan a provision as similar in terms to such illegal, invalid, or unenforceable provision as may be possible and be legal, valid, and enforceable. If any of the terms or provisions of this Plan conflict with the requirements of Rule 16b-3 (as those terms or provisions are applied to Eligible Individuals who are subject to Section 16(b) of the Exchange Act), then those conflicting terms or provisions shall be deemed inoperative to the extent they so conflict with the requirements of Rule 16b-3 and, in lieu of such conflicting provision, there shall be added automatically as part of this Plan a provision as similar in terms to such conflicting provision as may be possible and not conflict with the requirements of Rule 16b-3. If any of the terms or provisions of this Plan conflict with the requirements of Section 422 of the Code (with respect to Incentive Options), then those conflicting terms or provisions shall be deemed inoperative to the extent they so conflict with the requirements of Section 422 of the Code and, in lieu of such conflicting provision, there shall be added automatically as part of this Plan a provision as similar in terms to such conflicting provision as may be possible and not conflict with the requirements of Section 422 of the Code. With respect to Incentive Options, if this Plan does not contain any provision required to be included herein under Section 422 of the Code, that provision shall be deemed to be incorporated herein with the same force and effect as if that provision had been set out at length herein; provided, however, that, to the extent any Option that is intended to qualify as an Incentive Option cannot so qualify, that Option (to that extent) shall be deemed a Nonstatutory Option for all purposes of the Plan. -34-

12.15 Notices. Whenever any notice is required or permitted hereunder, such notice must be in writing and personally delivered or sent by mail. Any notice required or permitted to be delivered hereunder shall be deemed to be delivered on the date on which it is actually received by the Corporation addressed to the attention of the Corporate Secretary at the Corporation's office as specified in the applicable Award Agreement. The Corporation or a Holder may change, at any time and from time to time, by written notice to the other, the address which it or he had previously specified for receiving notices. Until changed in accordance herewith, the Corporation and each Holder shall specify as its and his address for receiving notices the address set forth in the Award Agreement pertaining to the shares to which such notice relates. Any person entitled to notice hereunder may waive such notice. 12.16 Successors. The Plan shall be binding upon the Holder, his legal representatives, heirs, legatees, and distributees, upon the Corporation, its successors and assigns and upon the Committee and its successors. 12.17 Headings. The titles and headings of Sections and Subsections are included for convenience of reference only and are not to be considered in construction of the provisions hereof. 12.18 Governing Law. All questions arising with respect to the provisions of the Plan shall be determined by application of the laws of the State of Delaware, without giving effect to any conflict of law provisions thereof, except to the extent Delaware law is preempted by federal law. Questions arising with respect to the provisions of an Award Agreement that are matters of contract law shall be governed by the laws of the state specified in the Award Agreement, except to the extent that Delaware corporate law subconflicts with the contract law of such state, in which event Delaware corporate law shall govern irrespective of any conflict of laws. The obligation of the Corporation to sell and deliver Stock hereunder is subject to applicable federal, state and foreign laws and to the approval of any governmental authority required in connection with the authorization, issuance, sale, or delivery of such Stock. 12.19 Stockholder Approval. The Plan and any options granted pursuant to the Plan shall become effective only upon approval by the holders of a majority of the Company's shares voting (in person or by proxy) at a stockholder's meeting held within 12 months of the Board's adoption of the Plan. The Committee may grant stock options under the Plan prior to the stockholders' meeting, but until stockholder approval of the Plan is obtained, no such option shall be exercisable. In the event that stockholder approval is not obtained within the period provided above, all options described in this Section 12.19 previously granted above, shall terminate. -35-

12.20 Word Usage. Words used in the masculine shall apply to the feminine where applicable, and wherever the context of this Plan dictates, the plural shall be read as the singular and the singular as the plural. IN WITNESS WHEREOF, Pervasive Software Inc., acting by and through its respective officers hereunto duly authorized, have executed this instrument this ____ day of ______________, 1995. PERVASIVE SOFTWARE INC. a Delaware corporation By: Name:

Title: -36-

EXHIBIT 10.5 AMENDMENT AND RESTATEMENT OF CREDIT AGREEMENT (WITH BORROWING BASE) ("AGREEMENT") THIS AMENDMENT AND RESTATEMENT OF CREDIT AGREEMENT WITH LETTER OF CREDIT SUBLIMIT as amended, modified and supplemented from time to time, (the "Agreement") dated as of March 31, 1997 (the "Effective Date"), is by and between PERVASIVE SOFTWARE INC. ("Borrower"), and TEXAS COMMERCE BANK NATIONAL ASSOCIATION, a national banking association (the "Bank") and is effective as of the Effective Date. PRELIMINARY STATEMENT The Bank and Borrower have entered into an Agreement dated as of September 18, 1996 (the "Credit Agreement"). The Bank and the Borrower have agreed to amend and restate and replace the Credit Agreement to the extent set forth herein, in order to among other things, renew and extend a $2,000,000.00 revolving line of credit to Borrower. NOW THEREFORE, in consideration of the premises and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged by the parties hereto, the Bank and the Borrower hereby agree to amend, restate and replace the Credit Agreement to read and be as follows: 1. THE LOANS. REVOLVING CREDIT NOTE 1.1.A Subject to the terms and conditions hereof, Bank agrees to make loans ("Revolving Loan" or "Revolving Loans") to Borrower from time to time before the Termination Date, not to exceed at any one time outstanding the lesser of the Borrowing Base or $2,000,000.00 (the "Commitment"). Borrower has the right to borrow, repay and reborrow. The Loans may only be used for financing timing differences in cash flow. Chapter 15 of the Texas Credit Code will not apply to this Agreement, the Revolving Note or any Revolving Loan. Revolving Loans shall take the form of advances under the Revolving Note (as hereinafter defined) (each and all advances hereinafter referred to as "Revolving Loan" or "Revolving Loans"), or issuances of standby letters of credit ("Standby L/Cs") by Bank. Standby L/Cs issued by Bank hereunder are hereafter referred to as "Letter of Credit" ("L/C"). The Revolving Loans will be evidenced by, and will bear interest and be payable as provided in, the promissory note of Borrower dated the Effective Date (together with any and all renewals, extensions, modifications and replacements thereof and substitutions therefor, the "Revolving Note"). "Termination Date" means the earlier of: (a) March 31, 1998; or (b) the date specified by Bank pursuant to Section 6.1 hereof. ADVANCE TERM NOTE 1.1.B Bank agrees to extend an advance converting to a term loan in the amount of $2,000,000.00 (the "Term Loan") to Borrower to be evidenced by a promissory note in the original principal amount of $2,000,000.00 dated on or before March 31, 1997 and maturing December 31, 1999 (together with any and all renewals, extensions, modifications and replacements thereof and substitutions therefor, the "Term Note"). The purpose of the Term Note is to finance 80% of the costs associated with purchasing new equipment (from January 1, 1997 to December 31, 1997) and 50% of the costs associated with purchasing used equipment (from January 1, 1997 to December 31, 1997). LETTERS OF CREDIT 1.1.C. (i) Subject to the approval of the Bank, Letters of Credit may be issued from time to time on and after the Effective Date, but not including the Termination Date for the account of any of the Borrowers and in favor of such Person or Persons as may be designated by any Borrower. Each Letter of Credit shall have an expiration date of no later than the Termination Date in the case of Standby L/C's; (ii) As a condition precedent to the issuance of any Letter of Credit, Bank shall have received an application ("Application" or "Applications") substantially in the form of, in the case of Standby L/C's, Exhibit A attached hereto, duly completed and executed by the Borrower in Proper Form not less than two (2) Business Day(s) prior to the date on which the Letter of Credit is to be issued; (iii) The Commitment shall be reduced by an amount equal to the sum of: (a) the face amount of all outstanding Letters of Credit; and (b) the amount of any unreimbursed drawings or other amounts owing to the Bank under or in respect of any Letter of Credit or Application (items (a) and (b) are hereinafter collectively referred to as the "L/C Obligations") such that, on any date, the sum of (x) all Loans outstanding on such date and (y) all L/C Obligations on such date does not exceed the Commitment; (iv) The total aggregate amount of "L/C Obligations" shall never exceed $100,000.00; (v) The issuance of each Letter of Credit shall be subject to the following conditions precedent: (a) no Event of Default has occurred and is continuing; and (b) each request by Borrower for the issuance of a Letter of Credit shall be deemed to be a representation to that effect and to the further effect that the representations and warranties contained in Section 3 of the Agreement are true and correct as of the date of such request as if made on and as of such date; and (c) Bank receives an

Application in Proper Form and any and all other such agreements and documents reasonably required by the Bank in connection with such Letter of Credit; (vi) Each and all of any of the Borrower's liabilities and obligations under or in connection with any Letter of Credit is secured by the Collateral securing the Note and the Bank is entitled to all rights, powers, benefits, privileges and remedies granted under any provision of the Security Documents and all other Loan Documents or by law or in equity; (vii) In consideration for the issuance of each Letter of Credit, the Borrower agrees to pay to the Bank a letter of credit issuance fee ("Fee") in respect of such Letter of Credit in an amount equal to the greater of: (a) in the case of Standby L/C's one and one-half percent (1 1/2%) per annum on the face amount of such Letter of Credit; and (b) the minimum fee for such Letter of Credit established by the Bank from time to time and in effect as of the date on which such Letter of Credit is to be issued. The Fee shall be paid to the Bank at its main offices to the attention of the Manager, Documentary Services Division in advance of issuance of the Letter of Credit; (viii) Bank may, but is not required to do so, make advances under the Note without notice to any Borrower to make payment on any Letter of Credit; and Page 1 of 9

Credit Agreement (With Borrowing Base) March 31, 1997 Pervasive Software Inc. (ix) Letters of Credit shall be for business purposes. 1.1.D. Bank has issued a L/C (not under the Commitment, "Stand-alone L/C") in the amount of $126,000.00, issued October 3, 1996 with an expiry date of November 30, 1999, No. I-465222, with Colina West Limited as the beneficiary. LOANS AND NOTES 1.1.E. "Loans" or "Loans" shall refer to each and all Revolving Loans and the Term Loan. "Note" or "Notes" shall refer to each and both of the Revolving Note and the Term Note. BORROWING BASE 1.2 The Borrowing Base will be the amount shown as the BORROWING BASE on the most recent Borrowing Base Report, subject to verification by Bank and calculated using the eligibility criteria, borrowing base factors, deduction for letter of credit drawings and dollar ceilings for various components specified in the attached Exhibit B, incorporated herein by reference. REQUIRED PAYMENT 1.3 If the unpaid amount of the Revolving Loan at any time exceeds the Borrowing Base then in effect, Borrower must make a payment on the Note in an amount sufficient to reduce the unpaid principal balance of the Note to an amount no greater than the Borrowing Base. Such payment shall be accompanied by any prepayment charge required by the Note and shall be due concurrently with the Borrowing Base Report. COMMITMENT FEE 1.4 Borrower will pay a commitment fee (computed on the basis of the actual number of days elapsed in a year comprised of 360 days of 1/8% per annum on the daily average difference between the Commitment and the principal balance of the Revolving Note, from the date hereof to the Termination Date. The Commitment fee is due and payable quarterly, on the last day of each third month after the Effective Date, in arrears. If Borrower elects to delay advancing under the Term Note until the end of the Advance period, an upfront commitment fee of $8,500 will be charged at the execution of this Agreement. If the Borrower elects to utilize the Term Note as equipment purchases are made during the advance period the following fees will be accessed: 1) no fee will be charged as long as the outstanding balance under the Term Loan is $1,250,000.00 at September 30, 1997, 2) a fee of $5,175 will be charged if the outstanding balance as of September 30, 1997 is $500,000, 3) a fee of $3,500 will be charged if the outstanding balance as of September 30, 1997 is $750,000, and 4) a fee of $1,850 will be charged if the outstanding balance as of September 30, 1997 is $1,000,000. If the minimum advance amount of $500,000 is not met by September 30, 1997, a fee of $8,500 will be accessed. These fees will be due and payable on September 30, 1997. PAST DUE AMOUNTS 1.5 Each past due amount due to Bank in connection with the Loan Documents will bear interest from its due date until paid at the Highest Lawful Rate unless the applicable Loan Document provides otherwise. 2. CONDITIONS PRECEDENT. ALL LOANS 2.1 Bank is not obligated to make any Loan or to issue any Letter of Credit unless: (a) Bank has received the following, duly executed and in Proper Form: (1) a Request for Revolving Loan, substantially in the form of Exhibit C, not later than one (1) Business Day before the date (which shall also be a Business Day) of the proposed Revolving Loan; provided however, Bank may accept and act upon verbal advance requests received from a Borrower's representative reasonably believed by Bank to be authorized to make such requests; (2) a Borrowing Base Report within the time required by this Agreement; (3) for the issuance of any Letter of Credit, a duly executed Application in Proper Form by Borrowers within the time set forth in Section 1.1.C.(ii); and (4) such other documents as Bank reasonably may require; (b) no Event of Default exists; and (c) the making of the Loan is not prohibited by, or subjects Bank to any penalty or onerous condition under any Legal Requirement. FIRST LOAN 2.2 In addition to the matters described in the preceding section, Bank will not be obligated to make the first Loan unless (i) Bank has received all of the Loan Documents specified on Annex I in Proper Form; and (ii) Borrower shall have provided all notices to Account debtors provided for in Section 3.11. 3. REPRESENTATIONS AND WARRANTIES. To induce Bank to enter into this Agreement and to make the Loans, Borrower represents and warrants as of the Effective Date and the date of each request for a Loan that each of the following statements is and shall remain true and correct throughout the term of this Agreement: ORGANIZATION AND STATUS 3.1 Borrower and each Subsidiary of Borrower is duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization; has all power and authority to conduct its business as presently conducted, and is duly qualified to do business and in good standing in each jurisdiction in which the nature of the business conducted by it makes such qualification desirable. Borrower has no Subsidiary other than those listed on Annex II and each Subsidiary is owned by Borrower in the percentage set forth on Annex II. If Borrower is subject to the Texas Revised Partnership Act ("TRPA"), Borrower agrees that Bank is not required to comply with Section 3.05(d) of TRPA and agrees that Bank may proceed directly against one or more partners or their property without first seeking satisfaction from partnership property. FINANCIAL STATEMENTS 3.2 All financial statements delivered to Bank are complete and correct and fairly present, in accordance with generally accepted accounting principles, consistently applied ("GAAP"), the financial condition

and the results of operations of Borrower and each Subsidiary of Borrower as at the dates and for the periods indicated. No material adverse change has occurred in the assets, liabilities, financial condition, business or affairs of Borrower or any Subsidiary of Borrower since the dates of such financial statements. To the extent that financial information provided by Borrower or a Subsidiary of Borrower consists of pro-forma or projected data for future periods, Bank acknowledges that such data shall be based on good faith estimates and assumptions which may vary from actual results actually achieved for such periods. Neither Borrower nor any Subsidiary of Borrower is subject to any instrument or agreement materially and adversely affecting its financial condition, business or affairs. ENFORCEABILITY 3.3 The Loan Documents are legal, valid and binding obligations of the Parties enforceable in accordance with their respective terms, except as may be limited by bankruptcy, insolvency and other similar laws affecting creditors' rights generally. The execution, delivery and performance of the Loan Documents have all been duly authorized by all necessary action; are within the power and authority of the Parties; do not and will not violate any Legal Requirement, the Organizational Documents of the Parties or any agreement or instrument binding or affecting the Parties or any of their respective Property. COMPLIANCE 3.4 Borrower and each Subsidiary of Borrower has filed all applicable tax returns and paid all taxes shown thereon to be due, except those for which extensions have been obtained and those which are being contested in good faith and for which adequate Page 2 of 9

Credit Agreement (With Borrowing Base) March 31, 1997 Pervasive Software Inc. reserves have been established. Borrower and each Subsidiary of Borrower is in compliance with all applicable Legal Requirements and manages and operates (and will continue to manage and operate) its business in accordance with good industry practices. Neither Borrower nor any Subsidiary of Borrower is in default in the payment of any other indebtedness or under any agreement to which it is a party. The Parties have obtained all consents of and registered with all Governmental Authorities or other Persons required to execute, deliver and perform the Loan Documents. LITIGATION 3.5 Except as previously disclosed to Bank in writing, there is no litigation or administrative proceeding pending or, to the knowledge of Borrower, threatened against, nor any outstanding judgment, order or decree affecting Borrower or any Subsidiary of Borrower before or by any Governmental Authority. TITLE AND RIGHTS 3.6 Borrower and each Subsidiary of Borrower has good and marketable title to its Property, free and clear of any Lien except for Liens permitted by this Agreement and the other Loan Documents. Except as otherwise expressly stated in the Loan Documents or permitted by this Agreement, the Liens of the Loan Documents will constitute valid and perfected first and prior Liens on the Property described therein, subject to no other Liens whatsoever. Borrower and each Subsidiary of Borrower possesses all permits, licenses, patents, trademarks and copyrights required to conduct its business. All easements, rights-of-way and other rights necessary to maintain and operate Borrower's Property have been obtained and are in full force and effect. REGULATION U; BUSINESS PURPOSE 3.7 None of the proceeds of any Loan will be used to purchase or carry, directly or indirectly, any margin stock or for any other purpose which would make this credit a "purpose credit" within the meaning of Regulation U of the Board of Governors of the Federal Reserve System. All Loans will be used for business, commercial, investment or other similar purpose and not primarily for personal, family, or household use or primarily for agricultural purposes as such terms are used in Chapter One of the Texas Credit Code. ENVIRONMENT 3.8 Borrower and each Subsidiary of Borrower have complied with applicable Legal Requirements in each instance in which any of them have generated, handled, used, stored or disposed of any hazardous or toxic waste or substance, on or off its premises (whether or not owned by any of them). Neither Borrower nor any Subsidiary of Borrower has any material contingent liability for non-compliance with environmental or hazardous waste laws. Neither Borrower nor any Subsidiary of Borrower has received any notice that it or any of its Property or operations does not comply with, or that any Governmental Authority is investigating its compliance with, any environmental or hazardous waste laws. INVESTMENT COMPANY ACT/PUBLIC UTILITY HOLDING COMPANY ACT 3.9 Neither Borrower nor any Subsidiary of Borrower is an "investment company" within the meaning of the Investment Company Act of 1940 or a "holding company" or an "affiliate" of a "holding company" or a "public utility" within the meaning of the Public Utility Holding Company Act of 1935, as amended. STATEMENTS BY OTHERS 3.10 All statements made by or on behalf of Borrower, any Subsidiary of Borrower or any other of the Parties by any officer, or other person authorized by Borrower or acting on Borrower's behalf with Borrower's knowledge, in connection with any Loan Document constitute the joint and several representations and warranties of Borrower hereunder. NOTICE OF ACCOUNT DEBTORS 3.11 Except as expressly disclosed to and agreed with Bank in writing, Borrower has sent to each Account Debtor written instructions in the form previously delivered and approved by Bank to remit all payments and remittances in respect to the Accounts directly to the Lockbox (or shall have done so as a condition precedent to Bank's obligations hereunder as provided in Section 2.2). 4A. AFFIRMATIVE COVENANTS -- BORROWER AND SUBSIDIARIES. Borrower agrees to do, and if necessary cause to be done, and cause its Subsidiaries to do, each of the following: CORPORATE FUNDAMENTALS 4.1 (a) Pay when due all taxes and governmental charges of every kind upon it or against its income, profits or Property, unless and only to the extent that the same shall be contested in good faith and adequate reserves have been established therefor; (b) Renew and keep in full force and effect all of its licenses, permits and franchises; (c) Do all things necessary to preserve its corporate existence and its qualifications and rights in all jurisdictions where such qualification is necessary or desirable; (d) Comply with all applicable Legal Requirements; and (e) Protect, maintain and keep in good repair its Property and make all replacements and additions to its Property as may be reasonably necessary to conduct its business properly and efficiently. INSURANCE 4.2 Maintain insurance with such reputable financially sound insurers, on such of its Property and personnel, in such amounts and against such risks as is customary with similar Persons or as may be reasonably required by Bank, and furnish Bank satisfactory evidence thereof promptly upon request. These insurance provisions are cumulative of the insurance provisions of the other Loan Documents. Bank must be named as a beneficiary, loss payee or additional insured of such insurance as its interest may appear and Borrower must provide Bank with copies of the policies of insurance and a certificate of the insurer that the insurance required by this section may not be canceled, reduced or affected in any manner without 30 days' prior written notice to Bank. Provided, however, that in the case of any inventory Collateral that is maintained at a location permitted under the Loan Documents which is not owned or leased premises of Borrower, Borrower shall not be required to insure such inventory.

MATTERS REQUIRING NOTICE 4.3 Notify Bank immediately, upon acquiring knowledge of (a) the institution or threatened institution of any lawsuit or administrative proceeding which, if adversely determined, might materially adversely affect Borrower; (b) any material adverse change in the assets, liabilities, financial condition, business or affairs of Borrower; (c) any Event of Default; or (d) any reportable event or any prohibited transaction involving potentially material adverse effect in connection with any employee benefit plan. INSPECTION 4.4 Permit Bank and its affiliates to inspect and photograph its Property, to examine and copy its files, books and records, and to discuss its affairs with its officers and accountants, at such times and intervals and to such extent as Bank reasonably requests. ASSURANCES 4.5 Promptly execute and deliver any and all further agreements, documents, instruments, and other writings that Bank may request to cure any defect in the execution and delivery of any Loan Document or more fully to describe particular aspects of the agreements set forth or intended to be set forth in the Loan Documents. Page 3 of 9

Credit Agreement (With Borrowing Base) March 31, 1997 Pervasive Software Inc. CERTAIN CHANGES 4.6 Notify Bank at least 30 days prior to the date that any of the Parties changes its name or the location of its chief executive office or principal place of business or the place where it keeps its books and records or the location of any of the Collateral. EXHIBIT D 4.7 Comply with each of the other affirmative covenants set forth in Exhibit D. 4A. AFFIRMATIVE COVENANTS. Borrower agrees to do, and if necessary cause to be done, each of the following: FINANCIAL INFORMATION/BORROWING BASE REPORT 4A.1 Furnish to Bank in Proper Form (i) the financial statements prepared in conformity with GAAP on consolidated and consolidating bases and the other information described in, and within the times required by, Exhibit D, Reporting Requirements, Financial Covenants and Compliance Certificate attached hereto and incorporated herein by reference; (ii) the Borrowing Base Report substantially in the form of, and within the time required by, Exhibit B along with the other information required by Exhibit B to be submitted; (iii) within the time required by Exhibit D, Exhibit D signed and certified by the controller, director of finance, president or chief financial officer of Borrower; (iv) promptly after such request is submitted to the appropriate Governmental Authority, any request for waiver of funding standards or extension of amortization periods with respect to any employee benefit plan; (v) copies of special audits, studies, reports and analyses prepared for the management of Borrower by outside parties and (vi) such other information relating to the financial condition and affairs of the Borrower and guarantors and their Subsidiaries as Bank may request from time to time in its reasonable discretion. LOCKBOX PROCESSING AGREEMENT/COLLECTION ACCOUNT 4A.2 A. (i) Execute and deliver to Bank a Lockbox Processing Agreement in Proper Form, provided however that should there be a conflict between the terms of this Agreement and the Lockbox Processing Agreement or the Terms and Conditions of the Collection Account, the terms of this Agreement shall govern. (ii) Establish a deposit account styled Pervasive Software Inc. Borrowing Base Accounts Receivable ("Collection Account") with Texas Commerce Bank National Association at Borrower's sole expense into which all revenues (excluding interest income on permitted portfolio investments), money checks and income, howsoever evidenced, received by Borrower will be deposited. (iii) Deliver, or cause to be delivered, directly to the Bank for deposit to the Collection Account, all revenues (excluding interest income on permitted portfolio investments), monies, checks, drafts income and proceeds of Accounts received by Borrower or by others on behalf of Borrower with such collections on the Accounts accompanied by sufficient information to identify the invoice to which such collections relate; (iv) Cause each Account Debtor to make all payments due to Borrower by check, wire transfer or credit card draft payable to Borrower and to mail or deliver such payments to the Lockbox and Collection account (or credit card merchant account which is automatically transferred to the Collection Account), except that Borrower shall be permitted to receive directly payments made by express delivery to Borrower in accordance with any standing arrangement with any Account Debtor which is approved in advance by Bank in writing, (such payments agreed to be fully subject to Borrower's agreement in the next subsection B to be delivered immediately to Bank) ; (v) Take all action as Bank may request to permit Bank to have at all times the benefit of all rights and agreements with respect to the Lockbox and Collection Account granted in this Agreement and the other Loan Documents. B. Collection Account: Bank shall have full right and authority at any time to notify and direct any Account Debtor to deliver all payments directly to Bank for deposit into the Collection Account. Bank shall have the sole right to make withdrawals from, and to administer the Collection Account. Any collections on account of any Accounts owed to Borrower received directly by Borrower shall be received in trust for the benefit of Bank, segregated from other funds of Borrower and immediately paid over to Bank in same form as received with any endorsement to be held in the Collection Account. Bank shall be entitled in its sole discretion, but not required, to daily apply all collected deposits in the Collection Account first to the principal amount of the Revolving Loans then to interest on the Revolving Loans then to fees and expenses and other amounts owing to Bank and any excess after such application shall be maintained in the Collection Account; it being understood that Borrower shall be responsible for making all payments required under this Agreement and the Notes. C. Power of Attorney. Borrower hereby appoints Bank as Borrower's attorney-in-fact and grants Bank full right and authority to supply any necessary endorsement on checks and drafts received, including endorsing Borrower's name thereon as appropriate and to forward such items for collection in normal course and deposit the proceeds thereof. This power of attorney is irrevocable, shall survive the dissolution or liquidation of Borrower, and is deemed coupled with an interest. This power of attorney shall terminate only at such times as all Obligations have been paid in full. Termination of the power of attorney shall not affect the validity of any acts performed by the Bank pursuant to the power of attorney prior to termination. D. Grant of Security Interest. Borrower assigns and pledges to Bank, and grants to Bank a security interest in, all of Borrower's right, title and interest in and to the Collection Account, and all certificates and instruments, if any, from time to time representing or evidencing the Collection Account; and all proceeds of any and all of the foregoing. 5. NEGATIVE COVENANTS. The Borrower will not, and no Subsidiary of Borrower will: INDEBTEDNESS 5.1 Create, incur, or permit to exist, or assume or guarantee, directly or indirectly, or become or remain liable with respect to, any Indebtedness, contingent or otherwise unless there is a permitted amount set forth in Exhibit D, except: (a) Indebtedness to Bank, or secured by Liens permitted by this Agreement, or otherwise approved in writing by Bank, and renewals and extensions (but not increases) thereof; and (b) current accounts payable and unsecured current liabilities, not the result of borrowing, to vendors, suppliers and Persons providing services, for expenditures for goods and services normally required by it in the ordinary course of business and on ordinary trade terms. LIENS 5.2 Create or permit to exist any Lien upon any of its Property now owned or hereafter acquired, or acquire any Property upon any conditional sale or other title retention device or arrangement or any purchase money security agreement; or in any manner directly or

indirectly sell, assign, pledge or otherwise transfer any of its accounts or other Property, except: (a) Liens, not for borrowed money, arising in the ordinary course of business; (b) Liens for taxes not delinquent or being contested in good faith by appropriate proceedings; (c) Liens in effect on the date hereof and disclosed to Bank in writing, so long as neither the indebtedness secured thereby nor the Property covered thereby increases; and (d) Liens in favor of Bank, or otherwise approved in writing by Bank (which shall be deemed to include any lien specifically permitted by this Agreement). Notwithstanding anything to the contrary herein, Borrower will not, and no Subsidiary of Borrower will permit any Lien on any inventory that secures the Loans unless Bank shall provide Borrower with Bank's prior written consent. FINANCIAL AND OTHER COVENANTS 5.3 Fail to comply with the required financial covenants and other covenants described, and calculated as set forth, in Exhibit D. Unless otherwise provided on Exhibit D, all such amounts and ratios will be calculated: (a) on the basis of GAAP; and (b) on a consolidated basis. Compliance with the requirements of Exhibit D will be determined as of the dates of the financial statements to be provided to Bank. Page 4 of 9

Credit Agreement (With Borrowing Base) March 31, 1997
Pervasive Software Inc. CORPORATE CHANGES 5.4 In any single transaction or series of transactions, directly or indirectly: (a) liquidate or dissolve; (b) be a party to any merger

or consolidation; (c) sell or dispose of any interest in any of its Subsidiaries, or permit any of its Subsidiaries to issue any additional equity other than to Borrower; (d) sell, convey or lease all or any substantial part of its assets, except for sale of inventory in the ordinary course of business; or (e) permit any change in ownership of Borrower, unless (i) approved in writing by Bank, or (ii) occurring in the ordinary course of the First Amended and Restated 1994 PERVASIVE SOFTWARE INC. Incentive Plan. The Bank is aware of (a) Borrower's intent to increase the number of shares issuable under the Incentive Plan and (b) Borrower's intent to amend or replace the Incentive Plan in its entirety prior to a possible initial public offering. Additionally, the Bank is fully aware of the possibility that the Borrower may do an initial public offering during the terms of this Agreement. RESTRICTED PAYMENTS 5.5 Unless otherwise permitted on Exhibit D, at any time: (a) redeem, retire or otherwise acquire, directly or indirectly, any shares of its capital stock or other equity interest (except as occurring in the ordinary course of the First Amended and Restated 1994 PERVASIVE SOFTWARE INC. Incentive Plan); (b) declare or pay any dividend (except stock dividends and dividends paid to Borrower); or (c) make any other distribution or contribution of any Property or cash or obligation to owners of an equity interest or to a Subsidiary in their capacity as such. NATURE OF BUSINESS; MANAGEMENT 5.6 Change the nature of its business or enter into any business which is substantially different from the business in which it is presently engaged, or permit any material change in its management, unless approved in writing by Bank. AFFILIATE TRANSACTIONS 5.7 Enter into any transaction or agreement with any Affiliate except upon terms substantially similar to those obtainable from wholly unrelated sources. SUBSIDIARIES 5.8 Form, create or acquire any Subsidiary (other than as disclosed in Annex II). LOANS AND INVESTMENTS 5.9 Unless otherwise provided on Exhibit D, make any advance, loan, extension of credit, or capital contribution to or investment in, or purchase, any stock, bonds, notes, debentures, or other securities of, any Person, except: (a) readily marketable direct obligations of the United States of America or any agency thereof with maturities of one year or less from the date of acquisition; (b) fully insured certificates of deposit with maturities of one year or less from the date of acquisition issued by any commercial bank operating in the United States of America having capital and surplus in excess of $50,000,000.00; (c) commercial paper of a domestic issuer if at the time of purchase such paper is rated in one of the two highest rating categories of Standard and Poor's Corporation or Moody's Investors Service; or (d) a mutual fund predominantly invested in investments described in (a), (b), and (c). CHANGE IN LOCKBOX 5.10 Instruct or otherwise permit any Account Debtor of Borrower to remit payments to any account, lockbox or other location other than the Lockbox, except for payments on account received by Btrieve Technologies Japan, Ltd. related to receivables owned by Btrieve Technologies Japan Ltd. 6. EVENTS OF DEFAULT AND REMEDIES. REMEDIES 6.1 If any Event of Default occurs, then Bank may do any or all of the following: (1) declare the Obligations to be immediately due and payable without notice of acceleration or of intention to accelerate, presentment and demand or protest, all of which are hereby expressly waived; (2) without notice to any Obligor, terminate the Commitment and accelerate the Termination Date; (3) set off, in any order, against the indebtedness of Borrower under the Loan Documents any debt owing by Bank to Borrower (whether such debt is owed individually or jointly), including, but not limited to, any deposit account, which right is hereby granted by Borrower to Bank; and (4) exercise any and all other rights pursuant to the Loan Documents, at law, in equity or otherwise; provided, however, that Borrower shall have a period of 10 days to cure ("Cure Period") any default that consists of delay in delivery of financial statements or reports, or curable failure to maintain a financial covenant set out in Exhibit D. During the Cure Period, and Event of Default shall be deemed to have occurred and be continuing until cured, but Bank shall not exercise any of the remedies set out in this section except that Bank shall not be obligated to fund any Loan under the Commitment. If an Event of Default subject to a Cure Period is not fully cured during such Cure Period, then Bank shall have all the rights and remedies provided for in this Note, the Loan Documents and otherwise as if such Cure Period had in no way existed, and Borrower expressly agrees that all actions taken by Bank thereafter shall relate back to the first date of the Event of Default for all purposes. EVENTS OF DEFAULT 6.2 Each of the following is an "Event of Default": (a) Any Obligor fails to pay any principal of or interest on the Note or under any application or any other obligation under any Loan Document as and when due; or (b) Any Obligor or any Subsidiary of Borrower fails to pay at maturity, or within any applicable period of grace, any principal of or interest on any other borrowed money obligation or fails to observe or perform within any applicable period of grace any term, covenant or agreement contained in any agreement or obligation by which it is bound; or

(c) Any representation or warranty made in connection with any Loan Document was incorrect, false or misleading when made; or (d) Any Obligor violates any covenant contained in any Loan Document; or (e) An event of default occurs under any other Loan Document; or (f) Final judgment for the payment of money is rendered against Obligor or any Subsidiary of Borrower and remains undischarged for a period of 30 days during which execution is not effectively stayed; or (g) The sale, encumbrance or material abandonment (except as otherwise expressly permitted by this Agreement ) of any of the Collateral or the making of any levy, seizure, garnishment, sequestration or attachment thereof or thereon; or the loss, theft, substantial damage, or destruction of any material portion of such Property; or (h) Any order is entered in any proceeding against Borrower or any Subsidiary of Borrower decreeing the dissolution, liquidation or split-up thereof, and such order shall remain in effect for 30 days; or (i) Any Obligor or any subsidiary of Borrower makes a general assignment for the benefit of creditors or shall petition or apply to any tribunal for the appointment of a trustee, custodian, receiver or liquidator of all or any substantial part of its business, estate or assets or shall commence any proceeding under any bankruptcy, insolvency, dissolution or liquidation law of any jurisdiction, whether now or hereafter in effect; or any such petition or application shall be filed or any such proceeding shall be commenced against any Obligor or any subsidiary of Borrower and the Obligor or such subsidiary by any act or omission shall indicate approval thereof, consent thereto or acquiescence therein, or an order shall be entered appointing a trustee, custodian, receiver or liquidator of all or any substantial part of the Page 5 of 9

Credit Agreement (With Borrowing Base) March 31, 1997 Pervasive Software Inc. assets of any Obligor or any subsidiary of Borrower or granting relief to any Obligor or any subsidiary of Borrower or approving the petition in any such proceeding, and such order shall remain in effect for more than 30 days; or any Obligor or any subsidiary of Borrower shall fail generally to pay its debts as they become due or suffer any writ of attachment or execution or any similar process to be issued or levied against it or any substantial part of its property which is not released, stayed, bonded or vacated within 30 days after its issue or levy; or (j) Any Obligor or any Subsidiary of Borrower conceals or removes any part of its Property, with intent to hinder, delay or defraud any of its creditors, makes or permits a transfer of any of its Property which may be fraudulent under any bankruptcy, fraudulent conveyance or similar law; or makes any transfer of its Property to or for the benefit of a creditor at a time when other creditors similarly situated have not been paid; or (k) A material adverse change occurs in the assets, liabilities, financial condition, business or affairs of any Obligor (determined on a consolidated basis); or (l) Any change occurs in the ownership of Borrower except as permitted in section 5.4 or 5.6; or (m) Any individual Obligor dies or any Obligor that is not an individual dissolves. REMEDIES CUMULATIVE 6.3 No remedy, right or power of Bank is exclusive of any other remedy, right or power now or hereafter existing by contract, at law, in equity, or otherwise, and all remedies, rights and powers are cumulative. 7. MISCELLANEOUS. NO WAIVER 7.1 No waiver of any default or Event of Default will be a waiver of any other default or Event of Default. No failure to exercise or delay in exercising any right or power under any Loan Document will be a waiver thereof, nor shall any single or partial exercise of any such right or power preclude any further or other exercise thereof or the exercise of any other right or power. The making of any Loan during either the existence of any default or Event of Default, or subsequent to the occurrence of an Event of Default will not be a waiver of any such default or Event of Default. No amendment, modification or waiver of any Loan Document will be effective unless the same is in writing and signed by the Person against whom such amendment, modification or waiver is sought to be enforced. No notice to or demand on any Person shall entitle any Person to any other or further notice or demand in similar or other circumstances. NOTICES 7.2 All notices required under the Loan Documents shall be in writing and either delivered against receipt therefor, or mailed by registered or certified mail, return receipt requested, in each case addressed to the address shown on the signature page hereof or to such other address as a party may designate. Except for the notices required by Section 2.1, which shall be given only upon actual receipt by Bank, notices shall be deemed to have been given (whether actually received or not) when delivered (or, if mailed, on the next Business Day). GOVERNING LAW/ARBITRATION 7.3 (a) UNLESS OTHERWISE SPECIFIED THEREIN, EACH LOAN DOCUMENT IS GOVERNED BY TEXAS LAWS AND THE APPLICABLE LAWS OF THE UNITED STATES OF AMERICA. To the maximum extent permitted by law, any controversy or claim arising out of or relating to the Loans or any Loan Document, including but not limited to any claim based on or arising from an alleged tort or an alleged breach of any agreement contained in any of the Loan Documents, shall, at the request of any party to the Loan or Loan Documents (either before or after the commencement of judicial proceedings), be settled by mandatory and binding arbitration in accordance with the Commercial Arbitration Rules of the American Arbitration Association (the "AAA Rules") and pursuant to Title 9 of the United States Code, or if Title 9 does not apply, the Texas General Arbitration Act. In any arbitration proceeding: (i) all statutes of limitations which would otherwise be applicable shall apply; and (ii) the proceeding shall be conducted in the city in which the office of Bank originating the Loans is located (i.e., Austin, Texas), by a single arbitrator if the amount in controversy is $1 million or less, or by a panel of three arbitrators if the amount in controversy (including but not limited to all charges, principal, interest fees and expenses) is over $1 million. Arbitrators are empowered to resolve any controversy by summary rulings substantially similar to summary judgments and motions to dismiss. Arbitrators may order discovery conducted in accordance with the Federal Rules of Civil Procedures. All arbitrators will be selected by the process of appointment from a panel, pursuant to the AAA Rules. Any award rendered in the arbitration proceeding will be final and binding, and judgment upon any such award may be entered in any court having jurisdiction. (b) If any party to the Loan Documents files a proceeding in any court to resolve any controversy or claim, such action will not constitute a waiver of right of such party or a bar to right of any other party to seek arbitration under the provisions of this Section or that of any other claim or controversy, and the court shall, upon motion of any party to the proceeding, direct that the controversy or claim be arbitrated in accordance with this Section. (c) No provision of, or the exercise of any rights under, this Section shall limit or impair the right of any party to the Loan Documents before, during or after any arbitration proceeding to: (i) exercise self-help remedies including but not limited to setoff or repossession; (ii) foreclose any Lien on or security interest in any Collateral; or (iii) obtain relief from a court of competent jurisdiction to prevent the dissipation, damage, destruction, transfer, hypothecation, pledging or concealment of assets or Collateral including, but not limited to attachments, garnishments, sequestrations, appointments of receivers, injunctions or other relief to preserve the status quo. (d) To the maximum extent permitted by applicable law and the AAA Rules, neither Bank nor any Obligor or any Affiliate, officer, director, employee, attorney, or agent of either shall have any liability with respect to, and Bank and each Obligor waives, releases, and agrees not to sue any of them upon, any claim for any special, indirect, incidental and consequential damages suffered or incurred by such Person in connection with, arising out of, or in any way related to, this Agreement or any of the other Loan Documents. Each of Bank and each Obligor waives, releases, and agrees not to sue each other or any of their Affiliates, officers, directors, employees, attorneys, or agents for punitive damages in respect of any claim in connection with, arising out of, or in any way related to, this Agreement or any of the other Loan Documents, or any of the transactions contemplated by this Agreement or any of the other Loan Documents. Nothing contained herein, however, shall be construed as a waiver of any Obligor's or the Bank's right to compel arbitration of disputes pursuant to subparagraphs (a) and (b), above.

(e) Nothing herein shall be considered a waiver of the right or protections afforded Bank by 12 U.S.C. 91, Texas Banking Code Art. 342-609 or any similar statute. (f) Each party agrees that any other party may proceed against any other liable Person, jointly or severally, or against one or more of them, less than all, without impairing rights against any other liable Persons. A party shall not be required to join the principal Obligor or any other liable Persons (e.g., sureties or guarantors) in any proceeding against any Person. A party may release or settle with one or more liable Persons as the party deems fit without releasing or impairing right to proceed against any Persons not so released. SURVIVAL; PARTIES BOUND; TERM OF AGREEMENT 7.4 All representations, warranties, covenants and agreements made by or on behalf of Borrower in connection with the Loan Documents will survive the execution and delivery of the Loan Documents; will not be affected by any investigation made by any Person, and will bind Borrower and the successors, trustees, receivers and assigns of Page 6 of 9

Credit Agreement (With Borrowing Base) March 31, 1997 Pervasive Software Inc. Borrower and will benefit the successors and assigns of Bank; provided that Bank's agreement to make Loans to Borrower or issue Letters of Credit will not inure to the benefit of any successor or assign of Borrower. Except as otherwise provided herein, the term of this Agreement will be until the later of the final maturity of the Term Note and the Revolving Note or the last expiry date of any Letter of Credit, whichever is later, and the full and final payment of all amounts due under the Loan Documents. DOCUMENTARY MATTERS 7.5 This Agreement may be executed in several identical counterparts, on separate counterparts; each counterpart will constitute an original instrument, and all separate counterparts will constitute but one and the same instrument. The headings and captions in the Loan Documents have been included solely for convenience and should not be considered in construing the Loan Documents. If any provision of any Loan Document is invalid, illegal or unenforceable in any respect under any applicable law, the remaining provisions will remain effective. The Loans and all other obligations and indebtedness of Borrower to Bank are entitled to the benefit of the Loan Documents. EXPENSES 7.6 Any provision to the contrary notwithstanding, and whether or not the transactions contemplated by this Agreement are consummated, Borrower agrees to pay on demand all reasonable out-of-pocket expenses (including, without limitation, reasonable fees and expenses of counsel for Bank) in connection with the negotiation, preparation, execution, filing, recording, modification, supplementing and waiver of the Loan Documents and the making, servicing and collection of the Loans. Borrower agrees to pay Bank's (i) standard Documentation Preparation and Processing Fee for preparation, negotiation and handling of this Agreement; (ii) lockbox processing fees; (iii) account maintenance fees for the Collection Account; and (iv) any expenses of collection or other expenses incurred by Bank in connection with the maintenance of the Collection Account, at customary rates charged by the Bank for the services. Bank may obtain reimbursement by causing other depository accounts of Borrower at Bank to be charged from time to time therefor. The obligations of Borrower under this and the following section will survive the termination of this Agreement. INDEMNIFICATION 7.7 The Borrower agrees to indemnify, defend and hold Bank harmless from and against any and all loss, liability, obligation, damage, penalty, judgment, claim, deficiency and expense (including interest, penalties, attorneys' fees and amounts paid in settlement) to which the Bank may become subject arising out of or based upon the Loan Documents, any Loan or the receipt, handling, payment and application of the monies received in connection with the Collection Account, including that resulting from Bank's own negligence, except and to the extent caused by Bank's gross negligence or willful misconduct. NATURE OF OBLIGATIONS 7.8 If more than one Borrower executes this Agreement, all of the representations, warranties, covenants and agreements of Borrower shall be joint and several obligations of all Borrowers. USURY NOT INTENDED 7.9 Borrower and Bank intend to conform strictly to applicable usury laws. Therefore, the total amount of interest (as defined under applicable law) contracted for, charged or collected under this Agreement or any other Loan Document will never exceed the Highest Lawful Rate. If Bank contracts for, charges or receives any excess interest, it will be deemed a mistake. Bank will automatically reform the Loan Document or charge to conform to applicable law, and if excess interest has been received, Bank will either refund the excess to Borrower or credit the excess on any unpaid principal amount of the Note or any other Loan Document. All amounts constituting interest will be spread throughout the full term of the Loan Document or applicable Note in determining whether interest exceeds lawful amounts. RIGHTS OF BORROWER AND BANK 7.10 Bank has not exercised any control, and Bank shall not exercise any control, over Borrower in the determination of which of Borrower's creditors Borrower will pay or which payments Borrower will make in the ordinary course of Borrower's business. Borrower, alone, shall exercise such judgment and determination. Nothing contained herein, however, shall, in any manner, affect, limit or impair the rights or remedies of Bank under this Agreement or any other Loan Documents as otherwise provided by applicable law, whether with regard to realization on the Collateral, rights of set off, compensation or otherwise. SECURITY INTEREST IN ACCOUNTS RECEIVABLES OF NON-U.S. SUBSIDIARIES 7.11 The Bank, does not have, nor does any other party, a Security Interest in Accounts Receivables invoiced by non-U.S. subsidiaries of the Borrower. NO COURSE OF DEALING 7.12 NO COURSE OF DEALING BY BORROWER WITH BANK, NO COURSE OF PERFORMANCE AND NO TRADE PRACTICES OR OTHER EXTRINSIC EVIDENCE OF ANY NATURE MAY BE USED TO CONTRADICT, VARY, SUPPLEMENT OR MODIFY ANY TERM OF THIS AGREEMENT. 8. DEFINITIONS. Unless the context otherwise requires, capitalized terms used in Loan Documents and not defined elsewhere shall have the meanings provided by GAAP, except as follows: Affiliate means, as to any Person, any other Person (a) that directly or indirectly, through one or more intermediaries, controls or is controlled by, or is under common control with, such Person; (b) that directly or indirectly beneficially owns or holds five percent (5%) or more of any class of voting stock of such Person; or (c) five percent (5%) or more of the voting stock of which is directly or indirectly beneficially owned or held by the Person in question. The term "control" means to possess, directly or indirectly, the power to direct the management and policies of a Person, whether through the ownership of voting securities, by contract, or otherwise. Bank is not under any circumstances an Affiliate of Borrower or any of its Subsidiaries. Accounts means all accounts as such term is defined in the Texas Business and Commerce Code, which represent amounts payable for goods and services provided to Account Debtors by Borrower. Account Debtor means any person in any way obligated on or in connection with any Account.

Authority Documents means certificates of authority to transact business, certificates of good standing, borrowing resolutions (with secretary's certificate), secretary's certificates of incumbency, and other documents which empower and enable Borrower or its representatives to enter into agreements evidenced by Loan Documents or evidence such authority. Business Day means a day when the main office of Bank is open for the conduct of commercial lending business. Collateral means all Property, tangible or intangible, real, personal or mixed, now or hereafter subject to Security Documents, or intended so to be. Corporation means corporations, partnerships, limited liability companies, joint ventures, joint stock associations, associations, banks, business trusts and other business entities. Government Accounts means receivables owed by the U.S. government or by government of any state, county, municipality, or other political subdivision as to which Bank's security interest or ability to obtain direct payment of proceeds is governed by any federal or state statutory requirements other than those of the UCC, including, without limitation, the Federal Assignment of Claims Act of 1940, as amended. Page 7 of 9

Credit Agreement (With Borrowing Base) March 31, 1997 Pervasive Software Inc. Governmental Authority means any foreign governmental authority, the United States of America, any state of the United States and any political subdivision of any of the foregoing, and any agency, department, commission, board, bureau, court or other tribunal having jurisdiction over Bank or any Obligor, or any Subsidiary of Borrower or their respective Property. Highest Lawful Rate means the maximum nonusurious rate of interest permitted to be charged by applicable Federal or Texas law (whichever permits the higher lawful rate) from time to time in effect. If Chapter One of the Texas Credit Code establishes the Highest Lawful Rate, the Highest Lawful Rate is the "indicated rate ceiling" as defined in that Chapter. Indebtedness means and includes (a) all items which in accordance with GAAP would be included on the liability side of a balance sheet on the date as of which Indebtedness is to be determined (excluding capital stock, surplus, surplus reserves and deferred credits); (b) all guaranties, endorsements and other contingent obligations in respect of, or any obligations to purchase or otherwise acquire, Indebtedness of others, and (c) all Indebtedness secured by any Lien existing on any interest of the Person with respect to which indebtedness is being determined, in Property owned subject to such Lien, whether or not the Indebtedness secured thereby has been assumed. Legal Requirement means any law, ordinance, decree, requirement, order, judgment, rule, regulation (or interpretation of any of the foregoing) of, and the terms of any license or permit issued by, any Governmental Authority. Lien shall mean any mortgage, pledge, charge, encumbrance, security interest, collateral assignment or other lien or restriction of any kind, whether based on common law, constitutional provision, statute or contract. Loan Documents means this Agreement, the Notes, the agreements, documents, instruments and other writings contemplated by this Agreement or listed on Annex I, all other assignments, deeds, guaranties, pledges, instruments, certificates and agreements now or hereafter executed or delivered to the Bank pursuant to any of the foregoing, and all amendments, modifications, renewals, extensions, increases and rearrangements of, and substitutions for, any of the foregoing. Lockbox means the postal lockbox maintained by Bank into which Borrower directs Account Debtors to make payment and remittance in respect to Accounts. "Lockbox Processing Agreement" shall mean the Bank's standard form of agreement for Lockbox arrangements, either as a separate agreement or as an addendum to the Bank's treasury management services agreement, as circumstances warrant. Obligations means all principal, interest and other amounts which are or become owing under this Agreement, the Note or any other Loan Document. Obligor means each Borrower and any guarantor, surety, co-signer, general partner or other person who may now or hereafter be obligated to pay all or any part of the Obligations. Organizational Documents means, with respect to a corporation, the certificate of incorporation, articles of incorporation and bylaws of such corporation; with respect to a limited liability company, the articles of organization, regulations and other documents establishing such entity, with respect to a partnership, joint venture, or trust, the agreement, certificate or instrument establishing such entity; in each case including all modifications and supplements thereof as of the date of the Loan Document referring to such Organizational Document and any and all future modifications thereof which are consented to by Bank. Parties means all Persons other than Bank executing any Loan Document. Person means any individual, Corporation, trust, unincorporated organization, Governmental Authority or any other form of entity. Proper Form means in form and substance satisfactory to the Bank. Property means any interest in any kind of property or asset, whether real, personal or mixed, tangible or intangible. Security Documents means those Security Agreements listed on Annex I and all supplements, modifications, amendment, extensions thereof and all other agreements hereafter executed and delivered to Bank to secure the Loans. Subordinated Debt means any Indebtedness subordinated to Indebtedness due Bank pursuant to a written subordination agreement in Proper Form by and among Bank, subordinated creditor and Borrower which at a minimum must prohibit: (a) any action by subordinated creditor which will result in an occurrence of an Event of Default or default under this Agreement, the subordination agreement or the subordinated Indebtedness; and (b) upon the happening of any Event of Default or default under any Loan Document, the subordination agreement, or any instrument evidencing the subordinated Indebtedness (i) any payment of principal and interest on the subordinated Indebtedness; (ii) any act to compel payment of principal or interest on subordinated Indebtedness; and (iii) any action to realize upon any Property securing the subordinated Indebtedness . Subsidiary means, as to a particular parent Corporation, any Corporation of which 50% or more of indicia of equity rights is directly or indirectly owned by such parent Corporation or by one or more Persons controlled by, controlling or under common control with such parent Corporation. THIS WRITTEN LOAN AGREEMENT REPRESENTS THE FINAL AGREEMENT BETWEEN BANK AND THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF BANK AND THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN BANK AND THE PARTIES. Page 8 of 9

Credit Agreement (With Borrowing Base) March 31, 1997 Pervasive Software Inc. IN WITNESS WHEREOF, the parties have executed this Agreement as of the Effective Date. BORROWER: PERVASIVE SOFTWARE INC. By:____________________________________________________________________________ Name:__________________________________________________________________________ Title:_________________________________________________________________________ Address:_______________________________________________________________________ BANK: TEXAS COMMERCE BANK NATIONAL ASSOCIATION By:____________________________________________________________________________ Name:__________________________________________________________________________ Title:_________________________________________________________________________ Address:_______________________________________________________________________
EXHIBITS: A B C D Application for Standby Letter of Credit Borrowing Base Report Request for Loan Reporting Requirements, Financial Covenants, and Compliance Certificate ANNEXES: I Loan Documents II Subsidiaries

Page 9 of 9

Exhibit B Borrowing Base Report Accounts Receivable Borrowing Base Report for Period Beginning:_____________and Ending ("Current Period") required by the Credit Agreement dated the Effective Date (as amended, restated, and supplemented from time to time, the "agreement") by and between PERVASIVE SOFTWARE INC. and Texas Commerce Bank National Association.

THE BORROWING BASE REPORT MUST BE SUBMITTED TO BANK WITHIN THE PERIOD SPECIFIED IN EXHIBIT E, AND WITH THE SUPPORTING SCHEDULES AND INFORMATION SPECIFIED IN EXHIBIT E.
Total for Reconciliation ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------Total for Borrowing Base --------------

Total Accounts Receivable: Btrieve Technologies Japan, Ltd. Trade A/R (all from AG-Tech) OEM and other Contract A/R PERVASIVE SOFTWARE INC.. Trade A/R per Detail Report, net of Prepaid Orders Reclassify Prepaid Orders to Deferred Revenue OEM and other contract A/R IBM Jostens Solomon Magic Cheyenne Enterprise Systems IPG (Germany) ------------------------------------------------------------------------------------Total Accounts per Consolidated Financial Statements Total Deferred Revenue: SSQL 4.0 Coupon Prepaid Orders Fee based Support Upgrade protection ----------------------Deferred Revenue associated with OEM and other Contract A/R --------------------------------------------------------------------------------------------------------------------------------Total Deferred Revenue per Consolidated Financial Statements 1 Total Accounts as defined in Agreement as of the end of the Current Period Ineligible Accounts as of the end of the Current Period: 2 That portion (e.g., invoice) of all the Accounts of any Account Debtor where all the Account is more than 90 days from invoice date Add unapplied payments and credits in over 90 day column 3 All of the Accounts, not already included in Line 2, of any Account Debtor if 20% of the dollar amount of all of the Accounts of such Account Debtor are more than 90 days from invoice date 4 That portion of all of the Accounts of any Account Debtor which exceeds 10% of the dollar amount of the total of all Accounts for all Account Debtors for

$ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $

$

$ N/A -------------$ N/A -------------$ $ $ $ $ $ $ $ $ $ $ $ $ --------------------------------------------------------------------------------------------------------------------------------------------------------------------------

$ $ $ $ $ $ $ $ $ $

-----------------------------------------------------------------------------------------------------------------------------------

$ $ $ $ $ $ $ $ $ $ $

------------------------------------------------------------------------------------------------------------------------------------------------

$ $

---------------------------

$

--------------

EXHIBIT B Page 1 of 2

the Current Period (Line 1) (except for (i) all OEM contracts and (ii) Tech Data) -----5 Intercompany and Affiliate Accounts Receivable 6 Federal Government Accounts 7 Foreign Accounts (unless secured by a letter of -----credit issued by a bank satisfactory to the Bank OR insured) 8 Accounts subject to dispute or setoff or contra account 9 Other Ineligible Accounts 10 Total Ineligible Accounts for the Current Period (Add Lines 2 through 9) 11 Total Eligible Accounts (Line 1 - Line 10) 12 Multiplied by: -------------Borrowing Base Factor as of

$ $ $ ----------------------------------------

$ $ $

---------------------------------------$ $ --------------------------80% -------------$

13 Equals: BORROWING BASE (not to exceed $2,000,000) ------the end of the Current Period 14

Less: Unreimbursed drawings, if any, under $126,000.00 letter of credit ----issued for Borrower's account to secure lease obligations: Less: Aggregate principal amount outstanding under the Revolving Note ----as of the end of the Current Period:

--------------

$

15

--------------

$

16 Equals: Amount available for borrowing subject to the terms of ------the Agreement, if positive; or if amount due, if negative: --

--------------

$ --------------

The following definitions shall be controlling over the presentation of Borrowing Base factors and calculations above. "Accounts" shall have the meaning set forth in the Texas Business and Commerce Code in effect as of the date of the Agreement, and shall include only such amounts owed to Borrower which are entitled to be recognized by Borrower as revenue under GAAP. "Other Ineligible Accounts" shall mean all such Accounts of Borrower that are not subject to a first and prior Lien in favor of Bank; all Accounts that are subject to any Lien not in favor of Bank; and such other Accounts of Borrower as Bank in its sole good faith discretion shall deem from time to time to be ineligible for purposes of] determining the Borrowing Base. All other terms not defined herein shall have the respective meanings as in the Agreement. Borrower certifies that the above information and computations are true, correct, complete and not misleading as of the date hereof. Borrower: PERVASIVE SOFTWARE INC. By: Name: Title: Address: Date: EXHIBIT B Page 2 of 2

EXHIBIT A Application for Standby Letter of Credit (Insert Application for Standby Letter of Credit Here...) EXHIBIT A Page 1 of 1

EXHIBIT C REQUEST FOR LOAN Letterhead of PERVASIVE SOFTWARE INC. Texas Commerce Bank National Association 700 Lavaca Austin, TX 78701 Re: Request for Loan under Agreement Attention: Donna Tanner-Day Gentlemen: This letter confirms our oral or telephonic request of ______________, 19___ , for a Revolving Loan in accordance with that certain Amendment and Restatement of Credit Agreement with Letter of Credit Sublimit as amended, restated and supplemented from time to time, the "Agreement") dated as of the Effective Date between you and us. Any term defined in the Agreement and used in this letter has the same meaning as in the Agreement. The proposed Revolving Loan is to be in the amount of $___________ and is to be made on _____________ , 19____ , which is a Business Day at least ____ Business Days after the date of this letter. The proceeds of the proposed Revolving Loan should be (check one): . deposited into account number __________________ with the Bank. . ___________________________________________________________. The undersigned hereby certifies that: (1) The representations and warranties made by the Borrower or by any other Person in the Agreement and the other Loan Documents are true and correct on and as of this date as though made on this date. (2) The proposed Loan complies with all applicable provisions of the Agreement. (3) No Event of Default has occurred and is continuing. Sincerely, PERVASIVE SOFTWARE INC. By: Name: Title: EXHIBIT C Page 1 of 1

ANNEX I Loan Documents "Loan Documents" includes, but is not limited to, the following: 1. Agreement 2. Applications 3. Revolving Note; Advance/Term Note 4. Lockbox Processing Agreement, Treasury Services Management Agreement, related account documents 5. Borrowing Base Report 6. Financial Statements of Borrower as required by Exhibit D 7. Compliance Certificate 8. Security Agreements, in Proper Form, covering: Accounts and General Intangibles, Inventory, Equipment 9. Financing Statements 10. UCC search 11. Certified Copies of Organizational and Authority Documents 12. Insurance policies and certificates

Loan Documents - ANNEX I Page 1 of 1 ANNEX II Subsidiaries
Subsidiary Name and Address -------------% Owned -------Pervasive Software European Service and Support Center 4th Floor 18-19 College Green Dublin 2 Ireland Pervasive Software GmbH Hessenring 1221 D-61348 Bad homburg Germany Pervasive Software FSC Inc. 8834 Capital of Texas Hwy. N., Suite 300 Austin, Texas 78759 Btrieve Technologies Japan, Ltd. Mas. Mita Building 2-15-8 Inamoto-Cho Chiyoda-Ku Tokyo, Japan 101 Where Incorporated -----------100.0%

Ireland

Germany

100.0%

Barbados

100.0%

Japan

65.5%

Note: Bank is aware that Borrower is presently attempting to restructure its operations in Japan. Such restructuring may involve the acquisition of the remaining 34.5% interest in Btrieve Technologies Japan, Ltd. OR the winding down of the affairs of Btrieve Technologies Japan, Ltd. and the creation of a new wholly-owned subsidiary to serve as the Borrower's operating entity in Japan. Bank is further aware that the restructuring may involve the acquisition of assets of AG-Tech Corporation in exchange for consideration which may include shares of approximately 100,000 shares of common stock of the Borrower (not as part of the Stock Option Plan). Bank hereby consents to the above without further notice from the Borrower.
Subsidiary planned to be formed as of Agreement Effective Date and -----------------------------------------------------------------permitted under Agreement (Names are subject to change) ------------------------------------------------------Pervasive Software Southern Europe Rue des Trois Fontanots 20 espalanade Charles De Gaulle 92000 Nanterre France

Where Incorporated -----------France

% Owned -------100.0%

Note: Will be incorporated in France as a S.A.R.L. Currently operating as a branch of the Borrower. Pervasive Software (U.K.) Pervasive Software N.V. Airport Blvd. Office Park Bessenveldstraat 25A B-1831 Diegem Belgium U.K. Belgium 100.0% 100.0%

Pervasive Software International Inc. Note: A U.S. holding company which will own all foreign subsidiaries and branch operations).

ANNEX II Page 1 of 1

EXHIBIT D to Agreement between PERVASIVE SOFTWARE INC, ("Borrower") and Texas Commerce Bank National Association ("Bank") dated the Effective Date as same may be amended, restated and supplemented in writing. REPORTING REQUIREMENTS, FINANCIAL COVENANTS AND COMPLIANCE CERTIFICATE FOR CURRENT REPORTING PERIOD ENDING ______, 199__

("END DATE") A. Reporting Period. Borrower will provide this Exhibit completed in Proper Form with each financial statement delivered under the Agreement. THIS REPORT IS FOR THE MONTH ("REPORTING PERIOD") ENDING _________, 199__ ("END DATE"). BORROWER'S FISCAL YEAR ENDS ON ______________________ , 19___.
=================================================================================================================================== B. Financial Reporting. Borrower will provide the following financial information within the times indicated: Compliance ------------------===============================================================================================================-------------------WHO WHEN DUE WHAT (Circle): ----------------------------------------------------------------------------------------------------------------------------------------------BORROWER (i) Within 90 days of Borrower's fiscal GAAP financial statements (balance sheet, Yes No year end income, cash flow) audited with unqualified opinion by independent CPAs satisfactory to Bank, with Compliance Certificate ------------------------------------------------------------------------------------------------------------(ii) Within 30 days of each month End Date Unaudited financial statements Yes No including FYE month accompanied by Compliance Certificate of Borrower only ------------------------------------------------------------------------------------------------------------(iii) Within 45 days of each month End Unaudited consolidated financial Yes No Date including FYE month statements accompanied by Compliance Certificate ------------------------------------------------------------------------------------------------------------(iv) Within 20 days of each month Borrowing Base Report (Exhibit A), with Yes No End Date including FYE month if accounts receivable aging and listing; any outstandings under the accounts payable aging Revolving Loan, otherwise within 30 days of each month End Date including FYE month ----------------------------------------------------------------------------------------------------------------------------------(v) Within 30 days of each month End Date Deferred Revenue schedule Yes No =================================================================================================================================== C. FINANCIAL COVENANTS. Borrower will comply with the following financial covenants, applying GAAP, XXXXXXXXXXX ------------------the definitions in Section 8, and the calculations and adjustments from the Actual Reported --------------------------------------------------------column below: --------------------------------------------------------------------------------------------------------------------------REQUIRED. Each applies at all times and is ACTUAL REPORTED. As of End Date or for reporting (Circle) ---------------------reported as indicated: period specified for financial test, as appropriate: =================================================================================================================================== 1. Maintain a ratio of total Indebtedness as adjusted to Tangible Net Worth as adjusted no greater than the following: 2.50 : 1.00 for each fiscal quarter until and including December 31, 1997 2.35 : 1.00 for the fiscal quarter ending March 31, 1998 2.15 : 1.00 for the fiscal quarter ending June 30, 1998 2.00 : 1.00 for the fiscal quarters ending September 30, 1998 and December 31, 1998 1.75 to 1.00 for the fiscal quarter ending March 31, 1999 and each fiscal quarter thereafter Liabilities (GAAP) $_______________ Plus: Min. Int. in Subs. $_______________ Minus: Deferred Revenue where no future performance is required or future performance is limited to delivery of upgrades on a "when and if available basis" and where cash has been received and is non-refundable. $_______________ Equals: as adjusted Indebtedness $ ========= Yes No

Stockholders' Equity Minus: Goodwill ------------Other Intangible Assets $ ----= Tangible Net Worth as adjusted $

$

---------

$

=========

$ / $ -------------------------------------- = ------Indebtedness (adjusted) TNW(adjusted) Ratio -----------------------------------------------------------------------------------------------------------------------------------2. Maintain a minimum EBITDA no less than the following: $300,000 for the fiscal quarter ending September 30, 1997 $500,000 for the fiscal quarters ending December 31, Income $ __________ Plus: Interest $ Yes No

1997 and March 31, 1998 $700,000 for the fiscal quarter ending June 30, 1998 and each fiscal quarter thereafter.

$

__________ Taxes

__________ Depreciation $ __________ Amortization $ __________

Equals: EBITDA $ __________ ====================================================================================================================================

==================================================================================================================================== 3. Capital Expenditures shall not exceed the following without prior written consent from the Bank: Capital Expenditures will exclude any Capital Expenditures associated with any merger or acquisition that has been approved by the Bank. Yes No

$3,600,000 for the Fiscal Year Ending June 30, 1998 10% of Gross Revenues for the prior four (4) fiscal quarters beginning with the fiscal quarter ending September 30, 1998 and each fiscal quarter thereafter. ==========================================================================================================================----------

EXHIBIT D Page 1 of 2

=================================================================================================================================== D. Other Required Covenants to be maintained and to be certified. COMPLIANCE Compliance ------------------------------------------------------------CERTIFICATE =================================================================================================================================== REQUIRED ACTUAL REPORTED ---------------------(Circle) ----------------------------------------------------------------------------------------------------------------------------------(i) No significant change in management/ownership. Yes No ----------------------------------------------------------------------------------------------------------------------------------(ii) No additional debt other than normal trade debt; financing Yes No insurance premiums for ordinary coverages; or debt consented to in advance by Bank, which consent shall be given unless Bank believes in its good faith discretion that Borrower, giving effect to such consent, shall be subject to a lower credit grade under its normal standards than such grade as it was of the Effective Date. ----------------------------------------------------------------------------------------------------------------------------------(iii) The Borrower shall not have over $1,500,000 in Yes No unencumbered foreign accounts receivable at any time without written consent from the Bank. ===================================================================================================================================

THE ABOVE SUMMARY REPRESENTS SOME OF THE COVENANTS AND AGREEMENTS CONTAINED IN THE AGREEMENT AND DOES NOT IN ANY WAY RESTRICT OR MODIFY THE TERMS AND CONDITIONS OF THE AGREEMENT. IN CASE OF CONFLICT BETWEEN THIS EXHIBIT AND THE AGREEMENT, THE AGREEMENT SHALL CONTROL. The undersigned certifies that the above information and computations are true and correct and not misleading as of the date hereof, and that since the date of the Borrower's most recent Compliance Certificate (if any): No default or Event of Default has occurred under the Agreement during the current Reporting Period, or been discovered from a prior period, and not reported. A default or Event of Default (as described below) has occurred during the current Reporting Period or has been discovered from a prior period and is being reported for the first time and: was cured on ___________________________________. was waived by Bank in writing on ______________________________. is continuing. Description of Event of Default: ____________________________________

Executed ________________________________________ , 19____________. BORROWER: PERVASIVE SOFTWARE INC. SIGNATURE: _____________________________________________________________________
NAME:_______________________________ TITLE: _____________________________ (CFO, Director of Finance, Controller or President)

ADDRESS: ____________________________

EXHIBIT D Page 2 of 2

SECURITY AGREEMENT -- INVENTORY (this "Agreement") PERVASIVE SOFTWARE INC., 8834 Capital Of Texas Highway North, Suite 300, Austin, Travis County, Texas 78759 ("Debtor"), and TEXAS COMMERCE BANK NATIONAL ASSOCIATION ("Secured Party"), agree as follows: 1. DEFINITIONS. (a) "Collateral" means all Inventory, all Accounts and all Proceeds, together with all books and records of Debtor, whether in paper or electronic form, relating to the Collateral. "Inventory" means all inventory, including without limitation materials, supplies, returned or repossessed goods, goods in transit and goods held by others under lease, consignment or other arrangements, and all documents or certificates of title relating to the foregoing. If, but only if, this box " is checked by Secured Party, the Inventory is limited to Inventory described on the schedule or schedules attached to this Agreement. "Accounts" means all accounts, general intangibles, instruments, negotiable documents, chattel paper and deposit accounts arising in connection with the Inventory. (b) "Obligations" means all debts, obligations and liabilities of every kind and character of Debtor, whether joint or several, contingent or otherwise, now or hereafter existing in favor of Secured Party, including without limitation all liabilities arising under or from any note, open account, overdraft, letter of credit application, endorsement, surety agreement, guaranty, interest rate swap or other derivative product, acceptance, foreign exchange contract or depository service contract, whether payable to Secured Party or to a third party and subsequently acquired by Secured Party. Debtor and Secured Party specifically contemplate that Debtor may hereafter become further indebted to Secured Party. (c) "Past Due Rate" means the highest nonusurious rate of interest that Secured Party may contract for, charge or receive under applicable law, or 18% if applicable law does not specify such a rate. (d) "Proceeds" means all products and proceeds, in cash or otherwise, of all other Collateral. (e) "Security Interest" means the security interests created by this Agreement. (f) "UCC" means the Texas Uniform Commercial Code, as amended from time to time. All terms defined in the UCC are used in this Agreement as defined in the UCC unless otherwise defined in this Agreement. 2. CREATION OF SECURITY INTEREST. To secure the payment and performance of the Obligations, Debtor grants to Secured Party a security interest in and assigns to Secured Party all Collateral which Debtor owns or later acquires. 3. DEBTOR'S REPRESENTATIONS AND WARRANTIES. (a) Debtor is the sole lawful owner of the Collateral, free and clear of all encumbrances, and has the right and power to transfer the Collateral to Secured Party. No financing statement covering the Collateral, other than in favor of Secured Party, is on file in any public office. (b) This Agreement constitutes the legal, valid and binding obligation of Debtor, enforceable in accordance with its terms. (c) The Collateral and the Debtor's production, sale and use thereof comply with all applicable laws, rules and regulations (including without limitation the Fair Labor Standards Act), and Debtor has obtained any consents necessary to execute, deliver and perform its obligations under this Agreement. (d) The address set forth above is Debtor's place of business, if Debtor has only one place of business, Debtor's chief executive office, if Debtor has more than one place of business, or Debtor's residence, if Debtor has no place of business. (e) The Collateral is free from damage caused by fire or other casualty. (f) Except as disclosed on attached schedules, no Collateral is covered by a certificate of title or subject to a certificate of title law. 4. DEBTOR'S AGREEMENTS. (a) Debtor will warrant and defend its title to and Secured Party's interest in the Collateral against any adverse claimant. Debtor will promptly take all reasonable and appropriate steps to collect the Accounts. Debtor will not agree to a material modification of the terms of any Account without the written consent of Secured Party, other than in connection with the Debtor's standard sales programs as existing on the date of this Agreement, if in any such case such amendment, modification or waiver would be reasonably likely to impair the collectability of any receivable or materially adversely affect the rights of Bank with respect thereto or hereunder.. (b) Notwithstanding the security interest in Proceeds granted herein, Debtor will not sell, transfer, assign or otherwise dispose of any interest in the Collateral, except as authorized in this Agreement or in writing by Secured Party, and Debtor will keep the Collateral (including Proceeds) free from unpaid charges, including taxes and assessments, and from all encumbrances other than those in favor of Secured Party. Debtor may sell or lease Inventory in the ordinary course of business. Sale in the ordinary course of business does not include a transfer in total or partial satisfaction of a debt. (c) Secured Party may require that Debtor (i) deposit all payments on the Accounts in a special bank account over which Secured Party alone has power of withdrawal, and (ii) direct each account debtor to send remittances to an address designated by Secured Party. Secured Party may hold the funds in the account as security, or apply the funds to pay the Obligations. (d) Debtor will furnish Secured Party all information Secured Party may request with respect to the Collateral. Debtor will notify Secured Party promptly of any event that could have a material adverse effect on the aggregate value of the Collateral or on the Security Interest, or any change in Debtor's location, name, identity or organizational structure. (e) Debtor will keep accurate books and records regarding the Collateral and will allow Secured Party to inspect the Collateral and to inspect and make copies (including electronic copies) of its books and records as provided in Credit Agreement executed by Debtor and Secured Party of even date herewith.. Secured Party may make test verifications of the Collateral. 5. FURTHER ASSURANCES. Secured Party may file this Agreement or any financing statements wherever Secured Party believes necessary to perfect the Security Interest. A photographic or other reproduction of this Agreement or any financing statement relating to this Agreement will be sufficient as a financing statement. Debtor authorizes Secured Party and irrevocably appoints Secured Party as Debtor's attorney-in-fact to file any financing statement (including any amendments) relating to this Agreement electronically, and Secured Party's transmission of Debtor's name as part of any filing relating to this Agreement will constitute Debtor's signature on the financing statement. Debtor will take such action as Secured Party may at any time require to protect, assure or enforce the Security Interest. If any Collateral is located on or in leased property, Debtor will furnish Secured Party an executed landlord's waiver satisfactory to Secured Party. Debtor will promptly deliver to Secured Party any part of the Collateral that constitutes instruments, and will make a designation on all of its chattel paper, instruments and negotiable documents to reflect the Security Interest.

6. DEBTOR'S USE OF COLLATERAL; INSURANCE. (a) Debtor will keep the Inventory at its address listed above or at MagRabbit, Inc. 3815 Jarrett Way Building B220, Austin, Travis County, Texas 78728. (b) Debtor will properly maintain the Inventory and will comply with all applicable laws, rules and regulations in the use, sale and production of the Inventory (including without limitation the Fair Labor Standards Act). (c) DEBTOR WILL MAINTAIN INSURANCE ON THE COLLATERAL against all customary risks for goods of the same type and use, including without limitation fire and theft, and any other risks designated by Secured Party. DEBTOR MAY FURNISH INSURANCE THROUGH EXISTING POLICIES DEBTOR OWNS OR CONTROLS OR THROUGH NEW POLICIES ISSUED BY ANY COMPANY AUTHORIZED TO TRANSACT BUSINESS IN TEXAS. Secured Party will be named on a customary loss payee endorsement to all such insurance, providing for payment to Secured Party and Debtor (and no other person) as their interests appear, and providing for at least 30 days written notice

to Secured Party before cancellation. Secured Party is irrevocably appointed attorney in fact for Debtor to obtain, adjust, settle and cancel such insurance. Secured Party may apply all proceeds of insurance to repayment of the Obligations, whether Debtor is in default or not. 7. COSTS AND EXPENSES. Secured Party shall have the rights of reimbursement for all costs, expenses and the like with respect to this Agreement which are provided for in the Credit Agreement executed by Debtor and Secured Party of even date herewith. If any part of the Obligations is governed by Chapter 3, 4, 5 or 15 of the Texas Credit Code, this Section is limited to the extent required by those chapters. 8. DEFAULT. "Event of Default" shall have the same meaning as in the Credit Agreement executed by Debtor and Secured Party of even date herewith. After an Event of Default occurs, Secured Party may, without notice to any person, declare the Obligations to be immediately due and payable. Debtor WAIVES demand, presentment and all notices, including without limitation notice of dishonor and default, notice of intent to accelerate and notice of acceleration. 9. SECURED PARTY'S RIGHTS AND REMEDIES. After an Event of Default occurs, Secured Party will have all rights and remedies of a secured party after default under the UCC and other applicable law. Secured Party may, without waiving any default, do anything Debtor is required to do by this Agreement but fails to do. Secured Party may require Debtor to assemble the Collateral and make it available at a reasonably convenient place Secured Party designates. Except for the safe custody of any Collateral in its possession and accounting for moneys actually received by it, Secured Party will have no duty as to any Collateral, including any duty to preserve rights against prior parties. Debtor irrevocably appoints Secured Party Debtor's attorney-in-fact to endorse any checks or other instruments included in the Collateral, or to take other action to enforce, collect or compromise the Collateral. Secured Party is not required to take possession of any Collateral prior to any sale, nor to have any Collateral present at any sale. Secured Party may sell part of the Collateral without waiving its right to proceed against the remaining Collateral. If any sale is not completed or is defective in the opinion of Secured Party, Secured Party may make a subsequent sale of the same Collateral. Any bill of sale or other instrument evidencing any foreclosure sale will be prima facie evidence of factual matters stated or recited therein. If a sale of Collateral is conducted in conformity with customary practices of banks disposing of similar property, the sale will be deemed commercially reasonable, but Secured Party will have no obligation to advertise or to sell Collateral on credit. Written notice to Debtor mailed 10 days prior to public or private sale is reasonable notice. By exercising its rights, Secured Party will not become liable for, and Debtor will not be released from, any of Debtor's duties or obligations under the contracts and agreements included in the Collateral. Secured Party may purchase Collateral at any public sale, and may credit the purchase price against the Obligations. All remedies in this Agreement are cumulative of any and all other legal, equitable or contractual remedies available to Secured Party. Debtor WAIVES any rights to a marshalling of assets or sale in inverse order of alienation, and any rights to notice except as provided in the UCC. 10. ADDITIONAL AGREEMENTS. (a) This Agreement will remain in effect until the Secured Party executes and delivers to Debtor a written termination statement. (b) No modification or waiver of the terms of this Agreement will be effective unless in writing and signed by Secured Party. Secured Party may waive any default without waiving any other prior or subsequent default. Secured Party's failure to exercise or delay in exercising any right under this Agreement will not operate as a waiver of such right. No single or partial exercise of any right under this Agreement will preclude any other or further exercise of that right or any other right. (c) Any notice required or permitted under this Agreement will be given in writing by United States mail, by hand delivery or delivery service, or by telegraphic, telex, telecopy or cable communication, sent to the intended addressee at the address shown in this Agreement, or to such different address as the addressee designates by 10 days notice. Notice by United States mail will be effective when mailed. All other notices will be effective when received. Written confirmation of receipt will be conclusive. (d) If any provision of this Agreement is unenforceable or invalid, that provision will not affect the enforceability or validity of any other provision. If the application of any provision of this Agreement to any person or circumstance is illegal or unenforceable, that application will not affect the legality or enforceability of the provision as to any other person or circumstance. (e) The section headings in this Agreement are for convenience only and shall not be considered in construing this Agreement. (f) This Agreement may be executed in any number of counterparts and by different parties in separate counterparts, each of which will constitute one and the same agreement. (g) This Agreement benefits the Secured Party and its successors and assigns and is binding on Debtor and its heirs, legal representatives, successors and assigns. (h) If any of the Obligations are subject to Chapter 3, 4, 5 or 15 of the Texas Credit Code or Regulation AA of the Board of Governors of the Federal Reserve System (collectively, the "Consumer Restrictions"), (1) nothing in this Agreement waives any rights which cannot be legally waived under the Consumer Restrictions, and (2) the Collateral does not include any assignment of wages or any non-possessory, non-purchase money security interest in household goods. (i) This Agreement is governed by the laws of the State of Texas. (j) Secured Party is executing this Agreement for the purpose of acknowledging the following notice, and Secured Party's failure to execute this Agreement will not invalidate this Agreement. This written loan agreement represents final agreement between the parties and may not be contradicted by evidence of prior, contemporaneous or subsequent oral agreements of the parties. There are no unwritten oral agreements between the parties. Executed to be effective as of September 18, 1996 DEBTOR: PERVASIVE SOFTWARE INC. By: Typed Name:

Title: SECURED PARTY: TEXAS COMMERCE BANK NATIONAL ASSOCIATION By: Typed Name: Title:

SECURITY AGREEMENT -- ACCOUNTS AND GENERAL INTANGIBLES (this "Agreement") PERVASIVE SOFTWARE INC., 8834 Capital Of Texas Highway North, Suite 300, Austin, Travis County, Texas 78759 ("Debtor"), and TEXAS COMMERCE BANK NATIONAL ASSOCIATION ("Secured Party"), agree as follows: 1 .DEFINITIONS. (a) "Collateral" means all Accounts and all Proceeds, together with all books and records of Debtor, whether in paper or electronic form, relating to the Collateral. "Accounts" means all accounts, general intangibles, instruments, negotiable documents, chattel paper, and deposit accounts. (b) "Obligations" means all debts, obligations and liabilities of every kind and character, whether joint or several, contingent or otherwise, of Debtor now or hereafter existing in favor of Secured Party, including without limitation all liabilities arising under or from any note, open account, overdraft, letter of credit, endorsement, surety agreement, guaranty, interest rate swap, or other derivative produce, acceptance, foreign exchange contract or depository service contract, whether payable to Secured Party or to a third party and subsequently acquired by Secured Party. Debtor and Secured Party specifically contemplate that Debtor may hereafter become further indebted to Secured Party. (c) "Past Due Rate" means the highest nonusurious rate of interest that Secured Party may contract for, charge or receive under applicable law, or 18% if applicable law does not specify such a rate. (d) "Proceeds" means the rights and interests of Debtor in goods, the sale and delivery of which give rise to any Account, including all returned or repossessed goods, and all products and proceeds, in cash or otherwise, of all Collateral. (e) "Security Interest" means the security interests created by this Agreement. (f) "UCC" means the Texas Uniform Commercial Code, as amended from time to time. All terms defined in the UCC are used in this Agreement as defined in the UCC unless otherwise defined in this Agreement. 2 .CREATION OF SECURITY INTEREST. To secure the payment and performance of the Obligations, Debtor grants to Secured Party a security interest in and assigns to Secured Party all Collateral which Debtor owns or later acquires. 3 .DEBTOR'S REPRESENTATIONS AND WARRANTIES. (a) Debtor is the sole lawful owner of the Collateral, free and clear of all encumbrances, and has the right and power to transfer the Collateral to Secured Party. No financing statement covering the Collateral, other than in favor of Secured Party, is on file in any public office. (b) This Agreement constitutes the legal, valid and binding obligation of Debtor, enforceable in accordance with its terms. (c) The Collateral and the Debtor's use thereof comply with all applicable laws, rules and regulations, and Debtor has obtained any consents necessary to execute, deliver and perform its obligations under this Agreement. (d) The address set forth above is Debtor's place of business, if Debtor has only one place of business, Debtor's chief executive office, if Debtor has more than one place of business, or Debtor's residence, if Debtor has no place of business. 4 .DEBTOR'S AGREEMENTS. (a) Debtor will warrant and defend its title to and Secured Party's interest in the Collateral against any adverse claimant. Debtor will promptly take all reasonable and appropriate steps to collect the Collateral. Debtor will not agree to a material modification of the terms of any Account without the written consent of Secured Party, other than in connection with the Debtor's standard sales programs as existing on the date of this Agreement, if in any such case such amendment, modification or waiver would be reasonably likely to impair the collectability of any receivable or materially adversely affect the rights of Bank with respect thereto or hereunder. (b) Notwithstanding the security interest in Proceeds granted herein, Debtor will not sell, transfer, assign or otherwise dispose of any interest in the Collateral, except as authorized in this Agreement or in writing by Secured Party, and Debtor will keep the Collateral (including Proceeds) free from unpaid charges, including taxes and assessments, and from all encumbrances other than those in favor of Secured Party. (c) Secured Party may require that Debtor (i) deposit all payments on the Accounts in a special bank account over which Secured Party alone has power of withdrawal, and (ii) direct each account debtor to send remittances to an address designated by Secured Party. Secured Party may hold the funds in the account as security, or apply the funds to pay the Obligations. (d) Debtor will furnish Secured Party all information Secured Party may request with respect to the Collateral. Debtor will notify Secured Party promptly of any event that could have a material adverse effect on the aggregate value of the Collateral or on the Security Interest, or any change in Debtor's location, name, identity or organizational structure. (e) Debtor will keep accurate books and records regarding the Collateral and will allow Secured Party to inspect and make copies (including electronic copies) of its books and records as provided in Credit Agreement executed by Debtor and Secured Party of even date herewith. Secured Party may make test verifications of the Collateral. 5 .FURTHER ASSURANCES. Secured Party may file this Agreement or any financing statements wherever Secured Party believes necessary to perfect the Security Interest. A photographic or other reproduction of this Agreement or any financing statement relating to this Agreement will be sufficient as a financing statement. Debtor authorizes Secured Party and irrevocably appoints Secured Party as Debtor's attorney-in-fact to file any financing statement (including any amendments) relating to this Agreement electronically, and Secured Party's transmission of Debtor's name as part of any filing relating to this Agreement will constitute Debtor's signature on the financing statement.Debtor will take such action as Secured Party may at any time require to protect, assure or enforce the Security Interest. Debtor will promptly deliver to Secured Party any part of the Collateral that constitutes instruments, and will make a designation on all of its chattel paper, instruments and negotiable documents to reflect the Security Interest. 6 .COSTS AND EXPENSES. Secured Party shall have the rights of reimbursement for all costs, expenses and the like with respect to this Agreement which are provided for in the Credit Agreement executed by Debtor and Secured Party of even date herewith. If any part of the Obligations is governed by Chapter 3, 4, 5 or 15 of the Texas Credit Code, this Section is limited to the extent required by those chapters. 7 .DEFAULT. "Event of Default" shall have the same meaning as in the Credit Agreement executed by Debtor and Secured Party of even date herewith. After an Event of Default occurs, Secured Party may, without notice to any person, declare the Obligations to be immediately due

and payable. Debtor WAIVES demand, presentment and all notices, including without limitation notice of dishonor and default, notice of intent to accelerate and notice of acceleration. 8 .SECURED PARTY'S RIGHTS AND REMEDIES. After an Event of Default occurs, Secured Party will have all rights and remedies of a secured party after default under the UCC and other applicable law. Secured Party may, without waiving any default, do anything Debtor is required to do by this Agreement and fails to do. Secured Party may require Debtor to assemble the Collateral and make it available at a reasonably convenient place Secured Party designates. Except for the safe custody of any Collateral in its possession and accounting for moneys actually received by it, Secured Party will have no duty as to any Collateral, including any duty to preserve rights against prior parties. Debtor irrevocably appoints Secured Party Debtor's attorney-in-fact to endorse any checks or other instruments included in the Collateral, or to take any other action to enforce, collect or compromise the Collateral. Secured Party is not required to take possession of any Collateral prior to any sale, nor to have any Collateral present at any sale. Secured Party may

sell part of the Collateral without waiving its right to proceed against the remaining Collateral. If any sale is not completed or is defective in the opinion of Secured Party, Secured Party may make a subsequent sale of the same Collateral. Any bill of sale or other instrument evidencing any foreclosure sale will be prima facie evidence of factual matters stated or recited therein. If a sale of Collateral is conducted in conformity with customary practices of banks disposing of similar property, the sale will be deemed commercially reasonable, but Secured Party will have no obligation to advertise or to sell Collateral on credit. Written notice to Debtor mailed 10 days prior to public or private sale is reasonable notice. By exercising its rights, Secured Party will not become liable for, and Debtor will not be released from, any of Debtor's duties or obligations under the contracts and agreements included in the Collateral. Secured Party may purchase Collateral at any public sale, and may credit the purchase price against the Obligations. All remedies in this Agreement are cumulative of any and all other legal, equitable or contractual remedies available to Secured Party. Debtor WAIVES any rights to a marshalling of assets or sale in inverse order of alienation, and any rights to notice except as provided in the UCC. 9 .ADDITIONAL AGREEMENTS. (a) This Agreement will remain in effect until the Secured Party executes and delivers to Debtor a written termination statement. (b) No modification or waiver of the terms of this Agreement will be effective unless in writing and signed by Secured Party. Secured Party may waive any default without waiving any other prior or subsequent default. Secured Party's failure to exercise or delay in exercising any right under this Agreement will not operate as a waiver of such right. No single or partial exercise of any right under this Agreement will preclude any other or further exercise of that right or any other right. (c) Any notice required or permitted under this Agreement will be given in writing by United States mail, by hand delivery or delivery service, or by telegraphic, telex, telecopy or cable communication, sent to the intended addressee at the address shown in this Agreement, or to such different address as the addressee designates by 10 days notice. Notice by United States mail will be effective when mailed. All other notices will be effective when received. Written confirmation of receipt will be conclusive. (d) If any provision of this Agreement is unenforceable or invalid, that provision will not affect the enforceability or validity of any other provision. If the application of any provision of this Agreement to any person or circumstance is illegal or unenforceable, that application will not affect the legality or enforceability of the provision as to any other person or circumstance. (e) If more than one person executes this Agreement as Debtor, their obligations under this Agreement are joint and several, and the term Collateral includes any property described in Section 1 that is owned by any Debtor individually or jointly with any other Debtor and the term "Obligations" includes both several and joint obligations of each Debtor. (f) The section headings in this Agreement are for convenience only and shall not be considered in construing this Agreement. (g) This Agreement may be executed in any number of counterparts and by different parties in separate counterparts, each of which will constitute one and the same agreement. (h) This Agreement benefits the Secured Party and its successors and assigns and is binding on Debtor and its heirs, legal representatives, successors and assigns. (i) If any of the Obligations are subject to Chapter 3, 4, 5 or 15 of the Texas Credit Code or Regulation AA of the Board of Governors of the Federal Reserve System (collectively, the "Consumer Restrictions"), (1) nothing in this Agreement waives any rights which cannot be legally waived under the Consumer Restrictions, and (2) the Collateral does not include any assignment of wages or any non-possessory, non-purchase money security interest in household goods. (j) This Agreement is governed by the laws of the State of Texas. (k) Secured Party is executing this Agreement for the purpose of acknowledging the following notice, and Secured Party's failure to execute this Agreement will not invalidate this Agreement. This written loan agreement represents the final agreement between the parties and may not be contradicted by evidence of prior, contemporaneous or subsequent oral agreements of the parties. There are no unwritten oral agreements between the parties. Executed to be effective as of September 18, 1996 DEBTOR: PERVASIVE SOFTWARE INC. By: Typed Name: Title: SECURED PARTY: TEXAS COMMERCE BANK NATIONAL ASSOCIATION By: Typed Name: Title:

AMENDMENT AND RESTATEMENT OF REVOLVING CREDIT NOTE (this "Note") FOR VALUE RECEIVED, ON OR BEFORE the Termination Date, PERVASIVE SOFTWARE INC. ("Borrower," jointly and severally if more than one), promises to pay to the order of Texas Commerce Bank National Association ("Bank") at its office at 712 Main Street, Houston, Harris County, Texas 77002, or at such other location as Bank may designate, in immediately available funds and lawful money of the United States of America, the sum of TWO MILLION AND 00/100THS UNITED STATES DOLLARS (U.S. $2,000,000.00) or the aggregate unpaid amount of all advances hereunder, whichever is lesser, plus interest on the unpaid principal balance outstanding from time to time at a rate per annum equal to the lesser of (i) the Prime Rate (as hereinafter defined) from time to time in effect plus zero percent (0%), (the "Stated Rate") or (ii) the Highest Lawful Rate. If the Stated Rate at any time exceeds the Highest Lawful Rate, the actual rate of interest to accrue on the unpaid principal amount of this Note will be limited to the Highest Lawful Rate, but any subsequent reductions in the Stated Rate due to reductions in the Prime Rate will not reduce the interest rate payable upon the unpaid principal amount of this Note below the Highest Lawful Rate until the total amount of interest accrued on this Note equals the amount of interest which would have accrued if the Stated Rate had at all times been in effect. "Prime Rate" means the rate of interest per annum publicly announced from time to time by Chase Manhattan Bank as its prime rate in effect at its principal office in New York City. Without notice to Borrower or any other Person, the Prime Rate shall change automatically from time to time as and in the amount by which said prime rate shall fluctuate with each such change to be effective as of the date of each change in such prime rate. THE PRIME RATE IS A REFERENCE RATE AND DOES NOT NECESSARILY REPRESENT THE LOWEST OR BEST RATE. BANK AND CHASE MANHATTAN MAY MAKE LOANS AT RATES OF INTEREST AT, ABOVE OR BELOW THE PRIME RATE.. This Note is the Revolving Credit Note described in Section 1.1 of the Credit Agreement (Borrowing Base) between Borrower and Bank dated as of March 31, 1997 (as amended, restated and supplemented from time to time, the "Agreement") and sometimes referred to therein as the Note. Capitalized terms used in this Note have the meanings used in the Agreement. Accrued and unpaid interest shall be due and payable monthly, beginning on April 30, 1997, and continuing on the last day of each calendar month thereafter and at Termination Date when all unpaid principal and accrued and unpaid interest shall be finally due and payable. Borrower must make the payments required by Sections 1.3 and 1.4 of the Agreement. Interest shall be computed on the basis of the actual number of days elapsed and a year comprised of 360 days, unless such calculation would result in a usurious interest rate, in which case interest will be calculated on the basis of a 365 or 366 day year, as applicable. All past-due principal and, to the extent permitted by applicable law, interest on this Note, shall, at Bank's option, bear interest at the Highest Lawful Rate, or if applicable law shall not provide for a maximum nonusurious rate of interest, at a rate per annum equal to eighteen percent (18%). The unpaid principal balance of this Note at any time shall be the total amounts advanced by Bank, less the amount of all payments of principal. Absent manifest error, the records of Bank shall be conclusive as to amounts owed. Subject to the terms and conditions of the Agreement, Borrower may use all or any part of the credit provided for herein at any time before the Termination Date. Time is of the essence. Borrower may at any time pay the full amount or any part of this Note without the payment of any premium or fee. At Bank's sole option, all payments may be applied to accrued interest, to principal, or to both. If any Event of Default occurs, then Bank may exercise any and all rights and remedies under the Loan Documents, at law, in equity or otherwise. Each and all Obligors severally waive notice, demand, presentment for payment, notice of nonpayment, notice of intent to accelerate, notice of acceleration, protest, notice of protest, and the filing of suit and diligence in collecting this Note and all other demands and notices, and consent and agree that their liabilities and obligations shall not be released or discharged by any or all of the following, whether with or without notice to them or any of them, and whether before or after the stated maturity hereof: (i) extensions of the time of payment; (ii) renewals; (iii) acceptances of partial payments; (iv) releases or substitutions of any collateral or any Obligor; and (v) failure, if any, to perfect or maintain perfection of any security interest in any collateral. Each Obligor agrees that acceptance of any partial payment shall not constitute a waiver. Bank and any subsequent owner or holder hereof reserves the right, in its sole discretion, without notice to Borrower, to sell participations or assign its interest or both, in all or any part of this Note. For purposes of this Note, any assignee or subsequent holder of this Note will be considered the "Bank," and each successor to Borrower will be considered the "Borrower." IN WITNESS WHEREOF, Borrower has executed this Note effective as of the Effective Date.
BORROWER: PERVASIVE SOFTWARE INC.

By: --------------------------------------------------------------Typed Name:

------------------------------------------------------Title: BANK: -----------------------------------------------------------TEXAS COMMERCE BANK NATIONAL ASSOCIATION

By: --------------------------------------------------------------Typed Name: ------------------------------------------------------Title: ------------------------------------------------------------

SECURITY AGREEMENT -- EQUIPMENT AND FIXTURES (this "Agreement") PERVASIVE SOFTWARE INC., 8834 Capital of Texas Highway North, Suite 300, Austin, Travis County, Texas 78759 ("Debtor"), and TEXAS COMMERCE BANK NATIONAL ASSOCIATION ("Secured Party"), agree as follows: 1 .DEFINITIONS. (a) "Collateral" means all Equipment and all Proceeds located in the United States, together with all books and records of Debtor, whether in paper or electronic form, relating to the Collateral. "Equipment" means all equipment, furniture, furnishings and fixtures. If, but only if, this box " is checked by Secured Party, the Equipment is limited to Equipment described following the signature lines of this Agreement. Whether or not the preceding box is checked, Equipment includes all accessions and appurtenances to, renewals or replacements of or substitutions for all Equipment, and all documents or certificates of title relating to all Equipment. (b) "Obligations" means all debts, obligations and liabilities of every kind and character of Debtor, whether joint or several, contingent or otherwise, now or hereafter existing in favor of Secured Party, including without limitation all liabilities arising under or from any note, open account, overdraft, letter of credit, endorsement, surety agreement, guaranty, interest rate swap or other derivative product, acceptance, foreign exchange contract or depository service contract, whether payable to Secured Party or to a third party and subsequently acquired by Secured Party. Debtor and Secured Party specifically contemplate that Debtor may hereafter become further indebted to Secured Party. (c) "Past Due Rate" means the highest nonusurious rate of interest that Secured Party may contract for, charge or receive under applicable law, or 18% if applicable law does not specify such a rate. (d) "Proceeds" means all products and proceeds, in cash or otherwise, of all Collateral. (e) "Security Interest" means the security interests created by this Agreement. (f) "UCC" means the Texas Uniform Commercial Code, as amended from time to time. All terms defined in the UCC are used in this Agreement as defined in the UCC unless otherwise defined in this Agreement. 2 .CREATION OF SECURITY INTEREST. To secure the payment and performance of the Obligations, Debtor grants to Secured Party a security interest in and assigns to Secured Party all Collateral which Debtor owns or later acquires. 3 .DEBTOR'S REPRESENTATIONS AND WARRANTIES. (a) Debtor is the sole lawful owner of the Collateral, free and clear of all encumbrances, and has the right and power to transfer the Collateral to Secured Party. No financing statement covering the Collateral, other than in favor of Secured Party, is on file in any public office. (b) This Agreement constitutes the legal, valid and binding obligation of Debtor, enforceable in accordance with its terms. (c) The Collateral and the Debtor's use thereof comply with all applicable laws, rules and regulations, and Debtor has obtained any consents necessary to execute, deliver and perform its obligations under this Agreement. (d) The address set forth above is Debtor's place of business, if Debtor has only one place of business, Debtor's chief executive office, if Debtor has more than one place of business, or Debtor's residence, if Debtor has no place of business. (e) The Collateral is free from damage caused by fire or other casualty. (f) Except as disclosed on attached schedules or unless the box in Section 1 is checked, no Collateral is covered by a certificate of title or subject to a certificate of title law, or subject to registration with the Federal Aviation Administration, Coast Guard or Interstate Commerce Commission. 4 .DEBTOR'S AGREEMENTS. (a) Debtor will warrant and defend its title to and Secured Party's interest in the Collateral against any adverse claimant. (b) Notwithstanding the security interest in Proceeds granted herein, Debtor will not sell, transfer, assign or otherwise dispose of any interest in the Collateral, except as authorized in this Agreement or in writing by Secured Party, and Debtor will keep the Collateral (including Proceeds) free from unpaid charges, including taxes and assessments, and from all encumbrances other than those in favor of Secured Party. (c) Debtor will furnish Secured Party all information Secured Party may request with respect to the Collateral. Debtor will notify Secured Party promptly of any event that could have a material adverse effect on the aggregate value of the Collateral or on the Security Interest, or any change in Debtor's location, name, identity or organizational structure. (d) Debtor will keep accurate books and records regarding the Collateral and will allow Secured Party to inspect and make copies (including electronic copies) of its books and records during regular business hours. Secured Party may make test verifications of the Collateral. 5 .DEBTOR'S USE OF COLLATERAL; INSURANCE. (a) Debtor will keep the Equipment at the address set forth above or other locations of which Debtor notifies Secured Party in writing from time to time, except for temporary removal in connection with ordinary use. (b) Debtor will properly maintain the Equipment and will comply with all applicable laws, rules and regulations in the use, sale and production of the Equipment. Debtor will replace obsolete or worn- out Equipment with comparable new Equipment, and may sell obsolete or worn-out Equipment which has been replaced with comparable new Equipment. (c) DEBTOR WILL MAINTAIN INSURANCE ON THE COLLATERAL against all customary risks for goods of the same type and use, including without limitation fire and theft, and any other risks designated by Secured Party. DEBTOR MAY FURNISH INSURANCE THROUGH EXISTING POLICIES DEBTOR OWNS OR CONTROLS OR THROUGH NEW POLICIES ISSUED BY ANY COMPANY AUTHORIZED TO TRANSACT BUSINESS IN TEXAS. Secured Party will be named on a customary loss payee endorsement to all such insurance, providing for payment to Secured Party and Debtor (and no other person) as their interests appear, and providing for at least 30 days written notice to Secured Party before cancellation. Secured Party is irrevocably appointed attorney-in-fact for Debtor to obtain, adjust, settle and cancel such insurance. Secured Party may apply all proceeds of insurance to repayment of the Obligations, whether Debtor is in default or not. 6 .FIXTURES AND APPURTENANCES. If any part of the Collateral is or will be affixed to real estate or other goods, a description of the real estate or other goods and the record owner of the real estate or other goods is listed below: N/A

None of the real estate is subject to a construction mortgage. Debtor will furnish Secured Party on demand one or more instruments signed by all persons having an interest in the real estate or other goods, subordinating any interest in any Collateral to Secured Party's interest. 7 .FURTHER ASSURANCES. Secured Party may file this Agreement or any financing statements wherever Secured Party believes necessary to perfect the Security Interest. A photographic or other reproduction of this Agreement or any financing statement relating to this Agreement will be sufficient as a financing statement. Debtor authorizes Secured Party and irrevocably appoints Secured Party as Debtor's attorney-in-fact to file any financing statement (including any amendments) relating to this Agreement electronically, and Secured Party's transmission of Debtor's name as part of any filing relating to this Agreement will constitute Debtor's signature on the financing statement. Debtor will take such action as Secured Party may at any time require to protect, assure or enforce the Security Interest. Debtor will promptly deliver to Secured Party any part of the Collateral that constitutes instruments, and will make a designation on all of its chattel paper, instruments and negotiable documents to reflect the Security Interest.

8 .COSTS AND EXPENSES. Debtor will pay, or reimburse Secured Party for, all costs and expenses of every character incurred from time to time in connection with this Agreement (including all modifications and renewals) and the Obligations, including costs and expenses incurred (a) for mortgage or recording taxes, (b) to satisfy any obligation of Debtor under this Agreement or to protect the Collateral, (c) in connection with the evaluation, monitoring or administration of the Obligations or the Collateral (whether or not an Event of Default has occurred), and (d) in connection with the exercise of Secured Party's rights and remedies. Costs and expenses include reasonable fees and expenses of outside counsel and other outside professionals and charges imposed for the services of attorneys and other professionals employed by Secured Party or its affiliates. Any amount owing under this Section will be due and payable on demand and will bear interest from the date of expenditure by Secured Party until paid at the Past Due Rate. If any part of the Obligations is governed by Chapter 3, 4, 5 or 15 of the Texas Credit Code, this Section is limited to the extent required by those chapters. 9 .DEFAULT. Each of the following events or conditions is an "Event of Default:" (a) Debtor fails to pay when due (or within any contractually agreed grace period) any of the Obligations; (b) any event occurs that gives Secured Party the immediate right to declare any of the Obligations due and payable in full prior to final maturity; (c) any warranty, representation or statement contained in this Agreement or made in connection with this Agreement or any of the Obligations was false or misleading in any respect when made; (d) Debtor violates any covenant, condition or agreement contained in this Agreement or any other document relating to the Obligations; (e) any Collateral is lost, stolen, substantially damaged, destroyed, abandoned, levied upon, seized or attached; or (f) Debtor conceals or removes any part of the Collateral with intent to hinder, delay or defraud the Secured Party. After an Event of Default occurs, Secured Party may, without notice to any person, declare the Obligations to be immediately due and payable. Debtor WAIVES demand, presentment and all notices, including without limitation notice of dishonor and default, notice of intent to accelerate and notice of acceleration. 10 .SECURED PARTY'S RIGHTS AND REMEDIES. After an Event of Default occurs, Secured Party will have all rights and remedies of a secured party after default under the UCC and other applicable law. Secured Party may, without waiving any default, do anything Debtor is required to do by this Agreement and fails to do. Secured Party may require Debtor to assemble the Collateral and make it available at a reasonably convenient place Secured Party designates. Except for the safe custody of any Collateral in its possession and accounting for moneys actually received by it, Secured Party will have no duty as to any Collateral, including any duty to preserve rights against prior parties. Debtor irrevocably appoints Secured Party Debtor's attorney-in-fact to endorse any checks or other instruments included in the Collateral, or to take any other action to enforce, collect or compromise the Collateral. Secured Party is not required to take possession of any Collateral prior to any sale, nor to have any Collateral present at any sale. Secured Party may sell part of the Collateral without waiving its right to proceed against the remaining Collateral. If any sale is not completed or is defective in the opinion of Secured Party, Secured Party may make a subsequent sale of the same Collateral. Any bill of sale or other instrument evidencing any foreclosure sale will be prima facie evidence of factual matters stated or recited therein. If a sale of Collateral is conducted in conformity with customary practices of banks disposing of similar property, the sale will be deemed commercially reasonable, but Secured Party will have no obligation to advertise or to sell Collateral on credit. Written notice to Debtor mailed 10 days prior to public or private sale is reasonable notice. By exercising its rights, Secured Party will not become liable for, and Debtor will not be released from, any of Debtor's duties or obligations under the contracts and agreements included in the Collateral. Secured Party may purchase Collateral at any public sale, and may credit the purchase price against the Obligations. All remedies in this Agreement are cumulative of any and all other legal, equitable or contractual remedies available to Secured Party. Debtor WAIVES any rights to a marshaling of assets or sale in inverse order of alienation, and any rights to notice except as provided in the UCC. 11 .ADDITIONAL AGREEMENTS. (a) This Agreement will remain in effect until the Secured Party executes and delivers to Debtor a written termination statement. (b) No modification or waiver of the terms of this Agreement will be effective unless in writing and signed by Secured Party. Secured Party may waive any default without waiving any other prior or subsequent default. Secured Party's failure to exercise or delay in exercising any right under this Agreement will not operate as a waiver of such right. No single or partial exercise of any right under this Agreement will preclude any other or further exercise of that right or any other right. (c) Any notice required or permitted under this Agreement will be given in writing by United States mail, by hand delivery or delivery service, or by telegraphic, telex, telecopy or cable communication, sent to the intended addressee at the address shown in this Agreement, or to such different address as the addressee designates by 10 days notice. Notice by United States mail will be effective when mailed. All other notices will be effective when received. Written confirmation of receipt will be conclusive. (d) If any provision of this Agreement is unenforceable or invalid, that provision will not affect the enforceability or validity of any other provision. If the application of any provision of this Agreement to any person or circumstance is illegal or unenforceable, that application will not affect the legality or enforceability of the provision as to any other person or circumstance. (e) If more than one person executes this Agreement as Debtor, their obligations under this Agreement are joint and several, and the term Collateral includes any property described in Section 1 that is owned by any Debtor individually or jointly with any other Debtor and the term "Obligations" includes both several and joint obligations of each Debtor. (f) The section headings in this Agreement are for convenience only and shall not be considered in construing this Agreement. (g) This Agreement may be executed in any number of counterparts and by different parties in separate counterparts, each of which will constitute one and the same agreement. (h) This Agreement benefits the Secured Party and its successors and assigns and is binding on Debtor and its heirs, legal representatives, successors and assigns. (i) If any of the Obligations are subject to Chapter 3, 4, 5 or 15 of the Texas Credit Code or Regulation AA of the Board of Governors of the Federal Reserve System (collectively, the "Consumer Restrictions"), (1) nothing in this Agreement waives any rights which cannot be legally waived under the Consumer Restrictions, and (2) the Collateral does not include any assignment of wages or any non-possessory, non-purchase money security interest in household goods. (j) This Agreement is governed by the laws of the State of Texas. (k) Secured Party is executing this Agreement for the purpose of acknowledging the following notice, and Secured Party's failure to execute this Agreement will not invalidate this Agreement.

This written loan agreement represents the final agreement between the parties and may not be contradicted by evidence of prior, contemporaneous or subsequent oral agreements of the parties. There are no unwritten oral agreements between the parties. Executed to be effective as of March 31, 1997. DEBTOR: PERVASIVE SOFTWARE INC.

By: -------------------------------------------------

Date:

-----------

Name: Title: SECURED PARTY: TEXAS COMMERCE BANK NATIONAL ASSOCIATION
By: ------------------------------------------------Date: -----------

Name: Title:

ADVANCING PROMISSORY NOTE CONVERTING TO A TERM NOTE (this "Note")
================================================================================ U.S. $2,000,000.00 March 31, 1997 (the "DATE") -------------------------------------------------------------------------------ACCOUNT NUMBER: NOTE NUMBER: RENEWAL CODE: TELLER: OFFICER: --------------------------------------================================================================================

ON OR BEFORE December 31, 1999 ("Stated Maturity Date"), FOR VALUE RECEIVED, PERVASIVE SOFTWARE INC. (the "Borrower", jointly and severally if more than one), promises to pay to the order of TEXAS COMMERCE BANK NATIONAL ASSOCIATION ("Bank") at its banking house at 712 Main Street, Houston, Harris County, Texas 77002 or at such other location as Bank may designate, in lawful money of the United States of America, the sum of TWO MILLION AND NO/100THS UNITED STATES DOLLARS (U.S. $2,000,000.00) (the "Maximum Amount of Note") or the aggregate unpaid amount of all advances hereunder, whichever is the less. Borrower will also pay interest on the unpaid principal balance outstanding from time to time at a rate per annum equal to a fluctuating rate of interest equal to the sum of the Prime Rate (as hereinafter defined) from time to time in effect plus zero percent (0%) (the "Stated Rate"); provided, however, in no event shall interest hereon ever be charged, paid, collected or received at a rate in excess of the maximum nonusurious rate of interest from time to time allowed by applicable federal or Texas law, whichever shall permit the higher lawful rate (the "Highest Lawful Rate"). If the Stated Rate at any time exceeds the Highest Lawful Rate, the actual rate of interest to accrue on the unpaid principal amount of this Note will be limited to the Highest Lawful Rate, but any subsequent reductions in the Stated Rate due to reductions in the Prime Rate will not reduce the interest rate payable upon the unpaid principal amount of this Note below the Highest Lawful Rate until the total amount of interest accrued on this Note equals the amount of interest which would have accrued if the Stated Rate had at all times been in effect. "Prime Rate" means the rate determined from time to time by Chase Manhattan Bank as its prime rate. The Prime Rate will change automatically from time to time without notice to Borrower or any other person. THE PRIME RATE IS A REFERENCE RATE AND MAY NOT BE BANK'S LOWEST RATE. If Texas law determines the Highest Lawful Rate, Bank has elected the "indicated" (weekly) ceiling as defined in the Texas Credit Code (Texas Revised Civil Statutes Article 5069-1.04) or any successor statute. Bank may from time to time, as to current and future balances, elect and implement any other ceiling under such Code and/or revise the index, formula or provisions of law used to compute the rate on this open-end account by notice to Borrower, if and to the extent permitted by, and in the manner provided in such Code. Interest will be computed on the basis of the actual number of days elapsed and a year comprised of: o 365 (or 366 as the case may be) days [x] 360 days, unless such calculation would result in a usurious interest rate, in which case such interest will be calculated on the basis of a 365 or 366 day year, as the case may be. All past-due principal and interest on this Note, shall, at Bank's option, bear interest at the Highest Lawful Rate, or if applicable law does not provide for a maximum nonusurious rate of interest, at a rate per annum equal to the Prime Rate plus five percent (5%). In addition to all principal and accrued interest on this Note, Borrower agrees to pay: (a) all reasonable costs and expenses incurred by Bank and all owners and holders of this Note in collecting this Note through probate, reorganization, bankruptcy or any other proceeding; and (b) reasonable attorney's fees if and when this Note is placed in the hands of an attorney for collection. Borrower and Bank intend to conform strictly to applicable usury laws. Therefore, the total amount of interest (as defined under applicable law) contracted for, charged or collected under this Note will never exceed the Highest Lawful Rate. If Bank contracts for, charges or receives any excess interest, it will be deemed a mistake. Bank will automatically reform the contract or charge to conform to applicable law, and if excess interest has been received, Bank will either refund the excess to Borrower or credit the excess on the unpaid principal amount of this Note. All amounts constituting interest will be spread throughout the full term of this Note in determining whether interest exceeds lawful amounts. The unpaid principal balance of this Note at any time shall be the total amounts advanced by Bank, less the amount of all payments of principal. Absent manifest error, the records of Bank shall be conclusive as to amounts owed. Subject to the terms and conditions of this Note, and provided that no Event of Default has occurred, Borrower may use all or any part of the credit provided for herein at any time before December 31, 1997 (the "Advance Termination Date") and may borrow and repay but not reborrow hereunder prior to the Advance Termination Date. There is no limitation on the number of advances made hereunder so long as the total amount advanced prior to the Advance Termination Date does not exceed the Maximum Amount of Note. Each advance must be at least FIFTY THOUSAND AND 00/100THS UNITED STATES DOLLARS (U.S.$50,000.00).

Accrued interest shall be due and payable monthly, beginning on May 31, 1997, and continuing on the last day of each month thereafter and at the maturity when all unpaid principal and accrued and unpaid interest shall be finally due and payable. The principal advanced and outstanding shall be due in twenty-four (24) substantially equal monthly principal installments determined by dividing the amount of principal outstanding on the Advance Termination Date by twenty-four (24), each such payment to be due on the last day of each month beginning on January 31, 1998 and continuing on the same day of each month thereafter until the Stated Maturity Date. In addition to principal installments due hereunder, accrued and unpaid interest is due on the same dates as and when principal payments are due. All remaining unpaid principal and accrued and unpaid interest are finally due on the Stated Maturity Date. All payments and prepayments hereon may, at the Bank's sole option, be applied to accrued interest, to principal, or to both. "Loan Document" means this Note, and any document or instrument evidencing, securing, guaranteeing or given in connection with this Note. "Obligations" means all principal, interest and other amounts which are or become owing under this Note or any other Loan Document. "Obligor" means Borrower and any guarantor, surety, co-signer, general partner or other person who may now or hereafter be obligated to pay all or any part of the Obligations. Where appropriate, the masculine gender includes the feminine and the neuter and the singular number includes the plural number. Each of the following events or conditions is an "Event of Default:" (1) any Obligor fails to pay any of the Obligations when due; (2) any warranty, representation or statement now or hereafter contained in or made in connection with any Loan Document was false or misleading in any respect when made; (3) any Obligor violates any covenant, condition or agreement contained in any Loan Document; (4) any Obligor fails or refuses to submit financial information requested by Bank or to permit Bank to inspect its books and records on request; (5) any event of default occurs under any other Loan Document; (6) any individual Obligor dies, or any Obligor that is an entity dissolves; (7) a receiver, conservator or similar official is appointed for any Obligor or any Obligor's assets; (8) any petition is filed by or against any Obligor under any bankruptcy, insolvency or similar law; (9) any Obligor makes an assignment for the benefit of creditors; (10) a final judgment is entered against any Obligor and remains unsatisfied for 30 days after entry, or any property of any Obligor is attached, garnished or otherwise made subject to legal process; (11) any material adverse change occurs in the business, assets, affairs or financial condition of any Obligor; and (12) Borrower is in default of any other obligation to or any other agreement with Bank. If any Event of Default occurs, then Bank may do any or all of the following: (i) cease making advances hereunder; (ii) declare the Obligations to be immediately due and payable, without notice of acceleration or of intention to accelerate, presentment and demand or protest or notice of any kind, all of which are hereby expressly waived; (iii) set off, in any order, against the Obligations any debt owing by Bank to any

Borrower, including, but not limited to, any deposit account, which right is hereby granted by Borrower to Bank; and (iv) exercise any and all other rights under the Loan Documents, at law, in equity or otherwise. No waiver of any default is a waiver of any other default. Bank's delay in exercising any right or power under any Loan Document is not a waiver of such right or power. Each Obligor severally waives notice, demand, presentment for payment, notice of nonpayment, notice of intent to accelerate, notice of acceleration, protest, notice of protest, and the filing of suit and diligence in collecting this Note and all other demands and notices, and consents and agrees that its liabilities and obligations shall not be released or discharged by any or all of the following, whether with or without notice to it or any other Obligor, and whether before or after the stated maturity hereof: (i) extensions of the time of payment; (ii) renewals; (iii) acceptances of partial payments; (iv) releases or substitutions of any collateral or any Obligor; and (v) failure, if any, to perfect or maintain perfection of any security interest in any collateral. Each Obligor agrees that acceptance of any partial payment will not constitute a waiver and that waiver of any default will not constitute waiver of any prior or subsequent default. Borrower represents and agrees that: all advances evidenced by this Note are and shall be for business, commercial, investment or other similar purpose and not primarily for personal, family, or household use as such terms are used in Chapter One of the Texas Credit Code. Borrower represents and agrees that each of the following statements is true unless the box preceding that statement is checked and initialed by Borrower and Bank: (i) o __________ ____________ No advances will be used primarily for agricultural purposes as such term is used in the Texas Credit Code. (ii) o __________ ____________ No advances will be used for the purpose of purchasing or carrying any margin stock as that term is defined in Regulation U of the Board of Governors of the Federal Reserve System (the "Board"). Notwithstanding anything contained herein or in any other Loan Document, if this is a consumer credit obligation (as defined or described in 12 C.F.R. 227, Regulation AA, promulgated by the Board), the security for this credit obligation will not extend to any non-possessory security interest in household goods (as defined in Regulation AA) other than a purchase money security interest, and no waiver of any notice contained herein or therein will extend to any waiver of notice prohibited by Regulation AA. Chapter 15 of the Texas Credit Code shall not apply to this Note or to any advance evidenced by this Note. This Note is governed by Texas law. If any provision of this Note is illegal or unenforceable, that illegality or unenforceability will not affect the remaining provisions of this Note. THE BORROWER(S) AND THE BANK AGREE THAT THE COUNTY IN WHICH BANK'S PRINCIPAL OFFICE IS LOCATED IN TEXAS IS PROPER VENUE FOR ANY ACTION OR PROCEEDING BROUGHT BY THE BORROWER(S) OR BANK, WHETHER IN CONTRACT, TORT, OR OTHERWISE. ANY ACTION OR PROCEEDING AGAINST BORROWER(S) MAY BE BROUGHT IN ANY STATE OR FEDERAL COURT IN SUCH COUNTY TO THE EXTENT NOT PROHIBITED BY APPLICABLE LAW. TO THE EXTENT PERMITTED BY APPLICABLE LAW BORROWER(S) HEREBY IRREVOCABLY (A) SUBMITS TO THE NONEXCLUSIVE JURISDICTION OF SUCH COURTS, AND (B) WAIVES ANY OBJECTION IT MAY NOW OR HEREAFTER HAVE AS TO THE VENUE OF ANY SUCH ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT OR THAT ANY SUCH COURT IS AN INCONVENIENT FORUM. BORROWER(S) AGREES THAT SERVICE OF PROCESS UPON IT MAY BE MADE BY CERTIFIED OR REGISTERED MAIL, RETURN RECEIPT REQUESTED, AT ITS ADDRESS SPECIFIED ABOVE. BANK MAY SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW AND MAY BRING ANY ACTION OR PROCEEDING AGAINST BORROWER(S) OR WITH RESPECT TO ANY OF ITS PROPERTY IN COURTS IN OTHER PROPER JURISDICTIONS OR VENUES. Bank and any subsequent owner or holder hereof reserves the right, in its sole discretion, without notice to Borrower, to sell participations or assign its interest or both, in all or any part of this Note. For purposes of this Note, any assignee or subsequent holder of this Note will be considered the "Bank," and any successor to Borrower will be considered the "Borrower." Each Borrower and cosigner represents that if it is not a natural person, it is duly organized and validly existing and in good standing under the laws of the state of its incorporation or organization; has full power to own its properties and to carry on its business as now conducted; is duly qualified to do business and is in good standing in each jurisdiction in which the nature of the business conducted by it makes such qualification desirable; and has not commenced any dissolution proceedings. Each Borrower and cosigner that is subject to the Texas Revised Partnership Act ("TRPA") agrees that Bank is not required to comply with Section 3.05(d) of the TRPA and agrees that Bank may proceed directly against one or more partners or their property without first seeking satisfaction from partnership property. Each Borrower and cosigner represents that if it conducts business under an assumed business or professional name it has properly filed Assumed Name Certificate(s) in the office(s) required by Chapter 36 of the Texas Business and Commerce Code. Each of the persons signing below as Borrower or cosigner represents that he/she has full requisite power and authority to execute and deliver this Note to Bank on behalf of the party for whom he/she signs and to bind such party to the terms and conditions of this Note and that this Note is enforceable against such party. NO COURSE OF DEALING BETWEEN BORROWER AND BANK, NO COURSE OF PERFORMANCE, NO TRADE PRACTICES, AND NO EXTRINSIC EVIDENCE OF ANY NATURE MAY BE USED TO CONTRADICT OR MODIFY ANY TERM OF THIS NOTE OR ANY OTHER LOAN DOCUMENT.

THIS NOTE AND THE OTHER WRITTEN LOAN DOCUMENTS CONSTITUTE A "LOAN AGREEMENT" AS DEFINED IN SECTION 26.02(a) OF THE TEXAS BUSINESS AND COMMERCE CODE AND REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES. IN WITNESS WHEREOF, the Borrower has executed this Note effective as of the Date. BORROWER: PERVASIVE SOFTWARE INC.
By: ----------------------------------------------------Date: ----------

Name: Title: ADDRESS OF Borrower: 8834 Capital of Texas Hwy., Suite #300 Austin, Texas 78759 (The Bank's signature is provided as its acknowledgment of the above as the final written agreement between the parties.)

BANK: TEXAS COMMERCE BANK NATIONAL ASSOCIATION By: Typed Name: Title:

EXHIBIT 10.6 LEASE AGREEMENT THIS LEASE AGREEMENT is entered into as of the 5th day of October, 1994, by and between Colina West Limited (hereinafter called "Landlord"), whose address for purposes hereof is 200 East Sixth Street, Suite 220, Austin, Texas, 78701 and Btrieve Technologies, Inc., A Delaware Corp. (hereinafter called "Tenant"), whose address for purposes hereof is 8834 Capital of Texas Highway North, Suite 300, Austin, Texas, 78759. 1. DEFINITIONS (a) "Building": The office building has been (or which has been) constructed on land described as Great Hills, Section XVI, a subdivision in Travis County, Texas, and known as Colina West Office Building. (b) "Premises": Suite No. 300 in the Building, generally outlined on Exhibit 'A' hereto, and measuring approximately 24,463 net rentable square feet. (c) "Commencement Date": December 15, 1994 (or on such date as Landlord tenders, in writing, the Premises to Tenant). (d) "Lease Term": The period commencing on the Commencement Date and continuing for, sixty (60) calendar months thereafter; provided, however, if the term of this lease commences on a date other than the first day of a calendar month, the Lease Term shall consist of 60 calendar months in addition to the remainder of the calendar month during which this lease is deemed to have commenced. (e) "Basic Rental": See Also Section 40.1
$22,302.00 to $31,499.00 to $33,503.00 to $33,563.00 to $35,066.00 to per month for the period of 11/30/95 per month for the period of 11/30/96 per month for the period of 11/30/97 per month for the period of 11/30/98 per month for the period of 11/30/99 12/15/94 12/01/95 12/01/96 12/01/97 12/01/98

(f) "Basic Reserved Parking Charge": $None (0.00) per month, per space. Landlord's initials /s/ Tenant's Initials /s/ 1

(g) "Basic Cost": Any and all ad valorem taxes, costs, expenses and disbursement of every kind and character which Landlord shall incur, pay or become obligated to pay in connection with the ownership of any estate or interest in, and the operation, maintenance, repair, replacement and security of, the Building determined in accordance with accepted cash basis accounting principles. SEE ALSO SECTION 40.8 (h) "Security Deposit": See Section 40.5 (i) "Tenant's proportionate share" 37.48% (the percentage expressing the ratio between the number of rentable square feet comprising the Premises [24,463] and the number of rentable square feet of the Building [65,264], which percentage shall be subject to adjustment if the number of rentable square feet comprising the Premises changes). (j) "permitted use": General office for the development and marketing of computer software products and related uses incidental thereto 2. LEASE GRANT. Landlord does hereby lease, demise and let unto Tenant the Premises, commencing on the Commencement Date and ending on the last day of the Lease Term, unless sooner terminated as herein provided. If the lease is executed before the Premises become vacant or are otherwise available and ready for occupancy, or if any present tenant or occupant of the premise holds over and Landlord cannot acquire possession of the Premises prior to the Commencement Date of this lease, Landlord shall not be deemed to be in default hereunder, and Tenant agrees to accept possession of the Premises on such date as Landlord is able to tender the same, which date shall be deemed to be the Commencement Date of this lease for all purposes, and this lease shall continue for the Lease Term specified in Paragraph 1. By occupying the Premises, Tenant shall be deemed to have accepted the same as suitable for the purpose herein intended except for latent defects and to have acknowledged that the same comply fully with Landlord's obligations. 3. RENT. In consideration of this lease, Tenant promises and agrees to pay landlord the Basic Rental without deduction or setoff except as herein provided for each month of the entire Lease Term. Rent due for the period beginning 12/15/94 11/30/95 shall be payable by Tenant to Landlord one half upon lease execution and one half upon commencement of the Lease Term. See also Section 40.1. and a monthly installment as outlined in Section 1(e) shall be due and payable without demand beginning on the first day of the calendar month following the expiration of the first full calendar month of the Lease Term and continuing thereafter on or before the first day of each succeeding calendar month during the term hereof. Rent for any fractional month at the beginning of the Lease Term shall be prorated based on one three hundred sixtieth (1/360) of the current annual basic rent for Landlord's initials /s/ Tenant's Initials /s/ 2

each day of the partial month this lease is in effect and shall be due and payable upon written notice from Landlord to Tenant. In the event any installment of the Basic Rental, or any other sums which become owning by Tenant to Landlord under the provisions hereof are not received within five (5) days after the due date thereof (without in any way implying Landlord's consent to such late payment). Tenant, to the extent permitted by law, agrees to pay, in addition to said installment of the basic rental or such other sums owed, a late payment charge equal to ten percent (10%) of the installment of the Basic Rental or such other sums owed. Notwithstanding the foregoing, the foregoing late charges shall not apply to any sums which may have been advanced by Landlord to or for the benefit of Tenant pursuant to the provisions of this lease, it being understood that such sums shall bear interest, which Tenant hereby agrees to pay to Landlord, at the maximum rate of interest permitted by law to be charged Tenant for the use or forbearance of such money. 4. SECURITY DEPOSIT. SECTION 40.5 SHALL BE SUBSTITUTED FOR THIS SECTION 5. LANDLORD'S OBLIGATIONS. (a) Subject to the limitations hereinafter set forth, Landlord agrees, while Tenant is occupying the Premises and while Tenant is not in default after any applicable cure period, under this lease, to furnish Tenant facilities to provide water (hot, cold and refrigerated) at those points of supply provided for general use of tenants of the Building, heated and refrigerated air conditioning in season, and elevator and janitorial service to the Premises, all such services to be provided at such times as Landlord normally furnishes these services to all tenants of the Building and in the manner and to the extent deemed by Landlord to be standard. SEE ALSO SECTION 40.6. In addition, Landlord agrees to maintain the public and common areas of the Building, such as lobbies, stairs, corridors and restrooms, in reasonably good order and condition, except for damage occasioned by Tenant, or its employees, agents or invitees. Landlord reserves the right exercisable without notice and without liability to Tenant for damage or injury to property, persons or business and without effecting an eviction, constructive or actual, or disturbance of Tenant's use or possession, or giving rise to any claim for setoff or abatement of rent, to decorate and to make repairs, alterations, additions, changes or improvements, whether structural or otherwise, in and about the Building, or any part thereof, and for such purposes to enter upon the leased Premises and, during the continuance of any such work, to temporarily close doors, entryways, public space and corridors in the Building and to interrupt or temporarily suspend Building services and facilities. SEE ALSO SECTION 40.9 (b) In the event Tenant's use of electrical current (1) exceeds 110 volt power, or (2) exceeds that required for routine lighting and operation of desk top office Landlord's initials /s/ Tenant's Initials /s/ 3

machines which use 110 volt electrical power, or Tenant's use of any service furnished by Landlord exceeds that deemed by Landlord to be standard, then Tenant shall pay on demand such charges as Landlord may reasonably prescribe for any such excess. All such charges shall be deemed as so much additional rent due from Tenant to Landlord. Without Landlord's prior written consent, Tenant shall not install any equipment in the Premises which shall require for its use other than the normal electrical current or other utility service or which affects the temperature otherwise maintained by the air conditioning system or which otherwise overloads any utility serving the Premises. (c) Landlord, subject to payment by Tenant, shall make available to Tenant facilities to provide all electrical current required by Tenant in its use and occupancy of the Premises and further shall make available electric lighting and current for the common areas of the Building in the manner and to the extent deemed by Landlord to be standard. Tenant shall pay Tenant's proportionate share of all such electrical current used by, and all other utility charges for utility services to, the Building, Landlord may require separate metering for any utility service required by Tenant if such service is deemed by Landlord to be in excess of Building standard usage, in which event Tenant shall pay for all such utility service. (d) Failure to any extent to make available; or any slow-down, stoppage or interruption of; or any change in the quantity, character or availability of; these defined services, resulting from any cause, shall not render Landlord liable in any respect for damages to either person, property or business, nor be construed as an eviction of Tenant or work an abatement of rent, nor relieve Tenant for fulfillment of any covenant or agreement hereof. Should any equipment or machinery furnished by Landlord break down or for any cause cease to function properly, Landlord shall use reasonable diligence to repair same promptly, but Tenant shall have no claim for abatement of rent or damages on account of any interruptions in service occasioned thereby or resulting therefrom. SEE ALSO SECTION 40.9 6. PARKING. Landlord agrees to make available to Tenant 18 reserved covered parking spaces and uncovered unreserved surface parking spaces at a ratio of 1:300 RSF. Tenant covenants and agrees to pay Landlord during the Term of this Lease and any renewal periods, in addition to the Base Rental, a sum equal to the Basic Reserved Parking Charge for each of the covered reserved parking spaces times the number of permits assigned by Landlord to Tenant for the Term of the Lease. Landlord at its discretion may designate the specific space or area where each vehicle shall be parked, and may change such designated areas from time to time. Landlord may make, modify, or enforce rules and regulations relating to the parking of vehicles in the Project, and Tenant shall abide by such rules and regulations. Landlord shall not be liable for any property damage or bodily injury arising from the use of the garage by tenant of the Building, their agents, employees, or invitees. Landlord's initials /s/ Tenant's Initials /s/ 4

7. OPERATING EXPENSE INCREASES. (a) Tenant shall during the term of this lease pay as additional rent an amount (per each square foot of rentable area within the leased premises) equal to the excess ("Excess") from time to time of actual Basic Cost per rentable square foot in the Building over $the operating expenses from the period of January 1, 1995 through December 31, 1995 Landlord, at its option, may collect such additional rent in a lump sum, to be due and payable within thirty (30) days after Landlord furnishes to Tenant a statement of actual Basic Cost for the previous year, or beginning with January 1, 1996, and on each January 1 thereafter. Landlord shall also have the option to make a good faith estimate of the Excess for each upcoming calendar year and upon thirty (30) days' written notice to Tenant may require the monthly payment of such additional rent equal to one- twelfth (1/12) of such estimate. SEE ALSO SECTION 40.10 (b) By April 30th of each calendar year during Tenant's occupancy, or as soon thereafter as practical, Landlord shall furnish to Tenant a statement of Landlord's actual Basic Cost for the previous year. If for any calendar year additional rent collected for the prior year as a result of Landlord's estimate of Basic Costs is in excess of the additional rent actually due during such prior year, then Landlord shall refund to Tenant within 10 days of written notice any overpayment. Likewise, Tenant shall pay to Landlord, within 10 days of written notice, any underpayment with respect to the prior year. 8. USE. Tenant shall use the Premises only for the permitted use. Tenant will not occupy or use the Premises, or permit any portion of the Premises to be occupied or used, for any business or purpose other than the permitted use or for any use or purpose which is unlawful, in part or in whole, disreputable in any manner, or extra hazardous on account of fire, nor permit anything to be done which will in any way increases the rate of insurance on the Building or contents; and in the event that, by reasons of acts of Tenant, there shall be any increase in the rate of insurance on the Building or contents created by Tenant's acts or conduct of business, Tenant hereby agrees to pay to Landlord the amount of such increase within 10 days of written notice. Acceptance of any such payment shall not constitute a waiver of any of Landlord's other rights provided herein. Tenant will conduct its business and control its agents, employees and invitees in such a manner as not to create any nuisance, nor interfere with, annoy or disturb other tenants or Landlord in the management of the Building. Tenant will maintain the Premises in a clean, healthful and safe condition and will comply with all laws, ordinances, orders, rules and regulations (state, federal, municipal and other agencies or bodies having jurisdiction thereof) with reference to the use, condition or occupancy of the Premises. Tenant will not, without the prior written consent of Landlord, paint, install lighting or decorations, or install any signs, window or Landlord's initials /s/ Tenant's Initials /s/ 5

door lettering or advertising media of any type on or about the Premises or any part thereof. 9. TENANT'S REPAIRS AND ALTERATIONS. Tenant will not in any manner deface or injure the Building and will pay the cost of repairing any damage or injury done to the Building or any part thereof by Tenant or Tenant's agents, employees or invitees. Tenant shall throughout the Lease Term take good care of the Premises and keep them free from waste and nuisance of any kind. Tenant agrees to keep the Premises, including all fixtures installed by Tenant and any plate glass and special store fronts, in good condition and make all necessary non- structural repairs except those caused by fire, casualty or acts of God covered by Landlord's fire insurance policy covering the Building. If Tenant fails to make such repairs within fifteen (15) days after the occurrence of the damage or injury, Landlord may at its option make such repair, and tenant shall, upon demand therefore, pay Landlord for the cost thereof. Tenant will not make or allow to be made any alterations or physical additions in or to the Premises without the prior written consent of Landlord which consent shall not be unreasonably withheld. All maintenance, repairs, alterations, additions or improvements shall be conducted only by contractors and subcontractors approved in writing by Landlord, it being understood that Tenant shall procure and maintain, and shall cause such contractors and subcontractors engaged by or on behalf of Tenant to procure and maintain, insurance coverage against such risks, in such amounts and with such companies as Landlord may require in connection with any such maintenance, repair, alteration, addition or improvement. Subject to Sections 15 and 16 below, at the end or other termination of this lease, Tenant shall deliver up the Premises with all improvements located thereon (except as otherwise herein provided) in good repair and condition, reasonable wear and tear excepted, and shall deliver to Landlord all keys to the Premises. All alterations, additions or improvements (whether temporary or permanent in character) made in or upon the Premises, either by Landlord or Tenant, shall be Landlord's property on termination of this lease and shall remain on the Premises without compensation to Tenant. All furniture, movable trade fixtures and equipment installed by Tenant may be removed by Tenant at the termination of this lease if Tenant so elects, and shall be so removed if required by Landlord, or if not so removed shall, at the option of Landlord, become the property of Landlord. All such maintenance, repairs, alterations, additions, improvements, removals and restoration shall be accomplished in a good workmanlike manner so as not to damage the Premises or the primary structure or structural qualities of the Building or the plumbing, electrical lines or other utilities. 10. ASSIGNMENT AND SUBLETTING. Tenant shall not assign or in any manner transfer this lease or any estate or interest therein, or sublet the leased Premises or any part thereof, or grant any license, concession or other right of occupancy of any portion of the leased Premises, or permit the use of the leased Premises by any Landlord's initials /s/ Tenant's Initials /s/ 6

parties other than Tenant, its agents and employees; and any such acts without Landlord's prior written consent shall be void and of no effect, which consent shall not be unreasonably withheld. Landlord acknowledges Tenant's intent to sublet part of the Leased Premises at various times throughout the Lease Term, so long as Tenant shall remain completely liable for all of the terms, conditions and obligations of this Lease. Landlord must approve such subtenant, which approval will not be unreasonably withheld. 11. INDEMNITY. Landlord shall not be liable for and Tenant will indemnify and save harmless Landlord against and from all fines, claims, demands, losses and actions (including attorney's fees) for any injury to person or damage to or loss of property on or about the Premises caused by Tenant, its employees, contractors, subtenants, invitees or by an other person entering the Premises or the Building under express or implied invitation of Tenant, or arising out of Tenant's use of the Premises. Landlord shall not be liable or responsible for any loss or damage to any property or death or injury to any person occasioned by theft, fire, act of God, public enemy, criminal conduct or third parties, injunction, riot, strike, insurrection, war, court order, requisition or other governmental body or authority, by other tenants of the Building or any other matter beyond the control of Landlord, or for any injury or damage or inconvenience which may arise through repair of alteration of any part of the Building, or failure to make repairs, or from any cause whatever except Landlord's gross negligence or willful wrong. SEE ALSO SECTION 40.11 12. SUBORDINATION. This lease and all rights of Tenants hereunder are subject and subordinate to any deeds of trust, mortgages or other instruments of security, as well as to any ground leases or primary leases, that now or hereafter cover all or any part of the Building, the land situated beneath the Building or any interest of Landlord therein, and to any and all advances made on the security thereof, and to any and all increases, renewals, modifications, consolidations, replacements and extensions of any of such deeds of trust, mortgages, instruments of security or leases. Tenant shall, however, upon demand at any time or times execute, acknowledge and deliver to Landlord any and all instruments and certificates that in the judgment of Landlord may be necessary or proper to confirm or evidence such subordination. Tenant further covenants and agrees to attorn to any purchaser and to recognize such purchaser as Landlord under this lease. Tenant shall upon demand at any time execute, acknowledge and deliver to Landlord's mortgage any and all instruments and certificates that in the judgment of Landlord's mortgagee may be necessary or proper to confirm or evidence such attornment, and all instruments and certificates that in the judgment of Landlord's mortgagee may be necessary or proper to confirm or evidence such attornment, and Tenant hereby irrevocably authorizes Landlord's mortgagee to execute, acknowledge and deliver any such instruments and certificates on Tenant's behalf. Landlord agrees to obtain a non disturbance agreement from Landlord's current Landlord's initials /s/ Tenant's Initials /s/ 7

first lien mortgagee in favor of Tenant within 60 days of Lease execution. Additionally, Landlord shall use reasonable effort to provide a non disturbance agreement from any future Mortgagee having an interest in the Building. 13. RULES AND REGULATIONS. Tenant and Tenant's agents, employees and invitees will comply fully with all requirements of the rules and regulations of the Building and related facilities. Landlord shall at all times have the right to change such rules and regulations or to promulgate other rules and regulations in such manner as may be deemed advisable for safety, care or cleanliness of the Building and related facilities or the Premises, and for preservation of good order therein, all of which rules and regulations, changes and amendments will be forwarded to Tenant in writing and shall be carried out and observed by Tenant. Tenant shall be responsible for compliance therewith by the agents, employees and invitees of Tenant. 14. INSPECTION. Landlord or its officers, agents and representatives shall have the right to enter into and upon any and all parts of the Premises at all reasonable hours giving reasonable notice when possible, (or, in any emergency, to any hour) to (a) inspect same or clean or make repairs or alterations or additions as Landlord may deem necessary (but without any obligation to do so, except as expressly provided for herein), or (b) show the Premises to prospective tenants only in the last 120 days of the Lease Term, purchasers or lenders; and Tenants shall not be entitled to any abatement or reduction of rent by reason thereof, nor shall such be deemed to be an actual or constructive eviction. 15. CONDEMNATION. If the Premises, or any part thereof, or if the Building or any portion of the Building leaving the remainder of the Building unsuitable for use as an office building comparable to its use on the Commencement Date of this lease, shall be taken or condemned in whole or in part for public purposes, or sold in lieu of condemnation, then the Lease Term shall, at the sole option of Landlord, forthwith cease and terminate; all compensation awarded for any taking (or sale of proceeds in lieu thereof) shall be the property of Landlord, and Tenant shall have no claim thereto, the same being hereby expressly waived by Tenant. 16. FIRE OR OTHER CASUALTY. In the event that the Building should be totally destroyed by fire, tornado or other casualty or in the event the Premises or the Building should be so damaged that rebuilding or repairs cannot be completed within one hundred twenty (120) days after the date of such damage, Landlord or Tenant may at its option terminate this lease, in which event the rent shall be abated during the unexpired portion of this lease effective with the date of such damage. In the event the Building or the Premises should be damaged by fire, tornado, or other casualty covered by Landlord's insurance, but only to such extent that rebuilding or repairs can be completed within one hundred twenty (120) days after the date of such damage, or if the damage should be more Landlord's initials /s/ Tenant's Initials /s/ 8

serious but Landlord does not elect to terminate this lease, in either such event Landlord shall within thirty (30) days after the date of such damage commence to rebuild or repair the Building and/or the Premises and shall proceed with reasonable diligence to restore the Building and/or Premises to substantially the same condition in which it was immediately prior to the happening of the casualty, except that Landlord shall not be required to rebuild, repair, or replace any part of the furniture, equipment, fixtures, and other improvements which may have been placed by Tenant or other Tenants within the Building or the Premises. Landlord shall allow tenant a fair diminution of rent during the time the Premises are unfit for occupancy. In the event any mortgagee under a deed of trust, security agreement or mortgage on the Building should require that the insurance proceeds be used to retire the mortgage debt, Landlord shall have no obligation to rebuild and this lease shall terminate upon notice to Tenant. Except as hereinafter provided, any insurance which may be carried by Landlord or Tenant against loss or damage to the Building or to the Premises shall be for the sole benefit of the party carrying such insurance and under its sole control. 17. HOLDING OVER. Should Tenant, or any of its successors in interest, hold over the Premises, or any part thereof, after the expiration of the Lease Term, unless otherwise agreed in writing by Landlord, such holding over shall constitute and be construed as a tenancy at will only, at a daily rental equal to 150% of the daily rent payable for the last month of the lease. 18. TAXES. Tenant shall be liable for all taxes levied or assessed against personal property, furniture or fixtures placed by Tenant in the Premises, and if any such taxes for which Tenant is liable are in any way levied or assessed against Landlord, Tenant shall pay to Landlord upon demand that part of such taxes for which Tenant is primarily liable hereunder. 19. EVENTS OF DEFAULT. The following events shall be events of default by Tenant under this lease: (a) Tenant shall fail to pay when due any rental or other sums payable by Tenant hereunder and such failure continues for 10 days following written notice from Landlord to Tenant. (b) Tenant shall fail to comply with or observe any other provision of this lease. SEE ALSO SECTION 40.1 (c) Tenant or any guarantor of Tenant's obligations hereunder shall make an assignment for the benefit of creditors. (d) Any petition shall be filed by or against Tenant or any guarantor of Tenant's obligations hereunder under any section or chapter of the National Bankruptcy Act, as amended, or under any similar law or statute of the United States or any Landlord's initials /s/ Tenant's Initials /s/ 9

State thereof; or Tenant or any guarantor of Tenant's obligations hereunder shall be adjudged bankrupt or insolvent in proceedings filed thereunder. (e) A receiver or trustee shall be appointed for all or substantially all of the assets of Tenant or any guarantor of Tenant's obligations hereunder. (f) Tenant shall desert or vacate any portion of the Premises, without the payment of rent when due. (20) REMEDIES. Upon the occurrence of any event of default specified in this lease, Landlord shall have the option to pursue any one or more of the following remedies without any notice of demand whatsoever; (a) Terminate this lease in which event Tenant shall immediately surrender the Premises to Landlord, and if Tenant fails to do so, Landlord may, without prejudice to any other remedy which it may have for possession or arrearages in rent, enter upon and take possession of the Premises and expel or remove Tenant and any other person who may be occupying said Premises or any part thereof, by force if necessary, without being liable for prosecution or any claim for damages therefore; and Tenant agrees to pay to Landlord on demand the amount of all loss and damage which Landlord may suffer by reason of such termination, whether through inability to relet the Premises on satisfactory terms or otherwise, including the loss of rental for the remainder of the Lease Term. (b) Enter upon and take possession of the Premises and expel or remove tenant and any other person who may be occupying the Premises or any part thereof, by force if necessary, without being liable for prosecution or any claim for damages therefore, and if Landlord so elects, relet the Premises on such terms as Landlord shall deem advisable and receive the rent therefore; and Tenant agrees to pay to Landlord on demand any deficiency that may arise by reason of such reletting for the remainder of the Lease Term. (c) Enter upon the Premises, by force if necessary, without being liable for prosecution or any claim for damages therefore, and do whatever Tenant is obligated to do under the terms of this lease; and Tenant agrees to reimburse Landlord on demand for any expenses which Landlord may incur in thus effecting compliance with Tenant's obligations under this lease, and Tenant further agrees that Landlord shall not be liable for any damages resulting to the Tenant from such action. No re-entry or taking possession of the Premises by Landlord shall be construed as an election on its part to terminate this lease, unless a written notice of such intention be given to Tenant. Pursuit of any of the foregoing remedies shall not preclude pursuit of any of the other remedies herein provided by law, nor shall pursuit of any remedy herein provided constitute a forfeiture or waiver of any rent due to Landlord hereunder or of any damages accruing to landlord by reason of the violation of any of the terms, provisions and covenants herein contained. Landlord's initials /s/ Tenant's Initials /s/ 10

Landlord's acceptance of rent following an event of default hereunder shall not be construed as Landlord's waiver of such event of default. No wavier by Landlord of any violation or breach of any of the terms, provisions and covenants herein contained shall be deemed or construed to constitute a waiver of any other violation or default. The loss or damage that Landlord may suffer by reason of termination of this lease or the deficiency from any reletting as provided for above shall include the expense of repossession and any repairs or remodeling undertaken by Landlord following possession. Should Landlord at any time terminate this lease for any default, in addition to any other remedy Landlord may have, Landlord may recover from Tenant all damages Landlord may incur by reason of such default, including the cost of recovering the Premises and the loss of rental for the remainder of the Lease Term. Landlord agrees to use its best efforts to mitigate its damages with respect to Tenant's default. 21. SURRENDER OF PREMISES. No act or thing done by Landlord or its agents during the term hereby granted shall be deemed an acceptance of a surrender of the Premises, and no agreement to accept a surrender of the Premises shall be valid unless the same be made in writing and signed by Landlord. 22. ATTORNEY'S FEES. In the case it should be necessary or proper for either party to bring any action under this lease or to consult or place said lease, or any amount payable by either party, hereunder, with an attorney concerning or for the enforcement of any of Landlord's rights hereunder, then the party defaulting agrees in each and any such case to pay the prevailing party's reasonable attorney's fee. 23. LANDLORD'S LIEN. Deleted. 24. MECHANICS' LIENS. Tenant will not permit any mechanic's lien or liens to be placed upon the Premises or the Building or improvements thereon during the lease Term caused by or resulting from any work performed, materials furnished or obligation incurred by or at the request of Tenant, and in the case of the filing of any such lien Tenant will promptly pay same, or bond around in a form acceptable to Landlord and Tenant. 25. NO SUBROGATION; LIABILITY INSURANCE. (a) Each party hereto hereby waives any cause of action it might have against the other party on account of any loss or damage that is insured against under any insurance policy (to the extent that any such loss or damage is recoverable under such insurance policy) that covers the Building, the Premises, or Landlord's or Tenant's fixtures, personal property, leasehold improvements or business and which names Landlord or Tenant, as the case may be, as a party insured. Each party hereto agrees that it will request its insurance carrier to endorse all Landlord's initials /s/ Tenant's Initials /s/ 11

applicable policies waiving the carrier's rights of recovery under subrogation or otherwise against the other party. (b) Tenant shall procure and maintain throughout the Lease Term a policy or policies of insurance at its sole cost and expense and in amounts on not less than a combined single limit of $1,000,000 or such other amounts as Landlord may from time to time require, insuring Tenant and Landlord against any and all liability to the extent obtainable for injury to or death of a person or persons or damage to property occasioned by or arising out of or in connection with the use, operation and occupancy of the Premises. Tenant shall furnish a certificate of insurance and such other evidence satisfactory to Landlord of the maintenance of all insurance coverages required hereunder, and Tenant shall obtain a written obligation on the part of each insurance company to notify Landlord at least thirty (30) days prior to cancellation or material change of any such insurance. Landlord shall procure and maintain throughout the Lease Term a policy or policies of insurance in amounts which shall be required by Landlord's mortgagee or as Landlord may deem reasonable whichever is greater. 26. BROKERAGE. Tenant warrants that it has had no dealing with any broker or agent in connection with the negotiation or execution of this lease other than MBH & Associates (Brian Hickey) & Charter Management Company (Jeff Greenberg) and Tenant agrees to indemnify Landlord against all costs, expenses, attorney's fees or other liability for commissions or other compensation or charges claimed by any broker or agent claiming the same by, through or under Tenant. See Also Section 40.7. 27. ESTOPPEL CERTIFICATES. Tenant agrees to furnish from time to time when requested by Landlord a certificate signed by Tenant confirming and containing such factual certifications and accurate representations deemed appropriate by Landlord, and Tenant shall, within twenty (20) days following receipt of said proposed certificate from Landlord, return a fully-executed copy of said certificate to Landlord. In the event Tenant shall fail to return a fully-executed copy of such certificate to Landlord within the foregoing twenty (20) day period, then Tenant shall be deemed to have approved and confirmed all of the terms, certifications and representations contained in such certificate. 28. NOTICES. Each provision of this agreement, or of any applicable governmental laws, ordinances, regulations and other requirements with reference to the sending, mailing or delivery of any notice, or with reference to the making of any payment by Tenant to Landlord, shall be deemed to be complied with when and if the following steps are taken: (a) All rent and other payments required to be made by Tenant to Landlord hereunder shall be payable to Landlord in Travis County, Texas, at the address set forth in Landlord's initials /s/ Tenant's Initials /s/ 12

Paragraph 1 or at such other address as Landlord may specify from time to time by written notice delivered in accordance herewith. (b) Any notice or document required to be delivered hereunder shall be deemed to be delivered if actually received and whether or not received when deposited in the United States mail, postage prepaid, certified or registered mail (with or without return receipt requested) addressed to the parties hereto at their respective addresses set forth in Paragraph 1 or at such other address as either of said parties have theretofore specified by written notice delivered in accordance herewith. 29. FORCE MAJEURE. Whenever a period of time is herein prescribed for action to be taken by either party, either party shall not be liable or responsible for, and there shall be excluded from the computation for any such period of time, any delays due to strikes, riots, acts of God, shortages of labor or materials, war, governmental laws, regulations or restrictions or any other causes of any kind whatsoever which are beyond the control of either party. 30. SEPARABILITY. If any clause or provision of this lease is illegal, invalid or unenforceable under present or future laws effective during the Lease Term, then and in that event, the remainder of this lease shall not be affected thereby, and in lieu of each clause or provision of this lease that is illegal, invalid or unenforceable, there shall be added as a part of this lease a clause or provision as similar in terms to such illegal, invalid or unenforceable clause or provision as may be possible and be legal, valid and enforceable. 31. AMENDMENTS; WAIVER; BINDING EFFECT. The provisions of this lease may not be waived, altered, changed or amended, except by instrument in writing signed by both parties hereto. The terms and conditions contained in this lease shall apply to, inure to the benefit of, and be binding upon the parties hereto, and upon their respective successors in interest and legal representatives, except as otherwise herein expressly provided. 32. QUIET ENJOYMENT. Provided Tenant has performed all of the terms and conditions of this lease, including the payment of rent, to be performed by Tenant, Tenant shall peaceably quietly hold and enjoy the Premises for the Lease Term, without hindrance from Landlord, subject to the terms and conditions of this lease. 33. INTERPRETATION. Words of any gender used in this lease shall be held and construed to include any other gender, and words in the singular number shall be held to include the plural, unless the context otherwise requires. The captions contained in this lease are for convenience of reference only, and in no way limit or enlarge the terms and conditions of this lease. 34. JOINT AND SEVERAL LIABILITY. If there be more than one Tenant, the obligations hereunder imposed upon Tenant shall be joint and several. If there be Landlord's initials /s/ Tenant's Initials /s/ 13

a guarantor of Tenant's obligations hereunder, the obligations hereunder imposed upon Tenant shall be the joint and several obligations of Tenant and such guarantor and Landlord need not first proceed against Tenant before proceeding against such guarantor nor shall any such guarantor be released from its guaranty for any reason whatsoever, including without limitation, in case of any amendments hereto, waivers hereof or failure to give such guarantor any notices hereunder. 35. PERSONAL LIABILITY. The liability of Landlord to Tenant for any default by Landlord under the terms of this lease shall be limited to the interest of Landlord in the Building and the land, and any proceeds of sale, insurance claim, or condemnation proceeds, and Landlord shall not be personally liable for any deficiency. 36. LANDLORD'S FAILURE TO PERFORM. If Landlord fails to perform any of its obligations under this Lease, Landlord shall not be in default hereunder and Tenant shall not have any rights or remedies growing out of such failure unless Tenant gives Landlord written notice thereof setting forth in reasonable detail the nature and extent of such failure and such failure by Landlord is not cured within the thirty (30) day period following delivery of such notice or such longer period therefore provided elsewhere in this Lease. If such failure cannot reasonably be cured within such thirty (30) day period, the length of such period shall be extended for the period reasonably required therefore, if Landlord commences curing such failure within such thirty (30) day period and continues the curing thereof with reasonable diligence and continuity. 37. NOTICE TO LENDER. If the Premises or the Building or any part thereof are at any time subject to a first mortgage or a first deed of trust or other similar instrument and this lease or the rentals are assigned to such mortgagee, trustee or beneficiary and the Tenant is given written notice thereof, including the post office address of such assignee, then Tenant shall not terminate this lease or abate rentals for any default on the part of Landlord without first giving written notice by certified or registered mail, return receipt requested, to such assignee, specifying the default in reasonable detail, and affording such assignee a reasonable opportunity to make performance, at its election, for and on behalf of the Landlord. 38. REPRESENTATIONS. Neither Landlord nor Landlord's agents or brokers have made any representations or promises with respect to the Premises, the Building or the land except a herein expressly set forth and no rights, easements or licenses are acquired by Tenant by implication or otherwise except as expressly set forth in the provisions of this lease. Landlord's initials /s/ Tenant's Initials /s/ 14

39. EXHIBITS AND ATTACHMENTS. All exhibits, attachments, riders and addenda referred to in the lease are incorporated into this lease and made a part thereof for all intents and purposes. 40. SPECIAL PROVISIONS. Landlord's initials /s/ Tenant's Initials /s/ 15

SPECIAL SECTION 40.1 RIDER TO SECTION 3, RENT ------------------------

CONDITIONS

Upon lease execution, Tenant agrees to pay Landlord $128,236.50 which represents prepayment of one half of the total rent due for the period beginning December 15, 1994 through November 30, 1995. Upon Tenant's occupancy of the Leased Premises, Tenant shall prepay the final one half of the total rent due for the period beginning December 15, 1994 through November 30, 1995 also in the amount of $128,236.50. During the period beginning December 1, 1995 through November 30, 1999, Tenant shall pay Basic Rental as described in Section 1(e). SECTION 40.2 IMPROVEMENT ALLOWANCE Landlord agrees to give Tenant up to a $10.48/RSF maximum dollar allowance totaling $256,473.00 to construct capital improvements to Tenant's space. All out of pocket costs of the construction, including but not limited to, architectural fees, engineering fees and City of Austin building permitting fees shall be deducted from the allowance. Any expense in excess of the improvement allowance shall be paid by Tenant. The payment of the allowance to Tenant by Landlord shall be conditioned upon delivery to Landlord by Tenant of a valid certificate of occupancy from the City of Austin, a valid building permit from the City of Austin and the occupancy by Tenant of the Leased Premises. In addition and prior to commencement of the construction, Tenant shall deliver one complete set of construction drawings to Landlord for Landlord's approval of the modifications and improvements to the Leased Premises. Landlord's approval of the construction drawings will not be unreasonably withheld. SECTION 40.3 RENEWAL OPTION Landlord hereby grants to Tenant the option ("Renewal Option") to renew and extend the term of this Lease, provided that at the time the Renewal Option is exercised, this Lease shall be in full force and effect and Tenant shall not be in default beyond any applicable cure period hereunder. The renewal term ("Renewal Term") shall be sixty (60) months commencing upon the expiration of the original term of the Lease. The Renewal Option shall be null and void if Tenant fails to deliver written notice ("Renewal Option Deadline Date") of exercise to Landlord not later than Two Hundred Seventy (270) days prior to the expiration of the original term of the Lease. Any renewal and extension of the Lease for the Renewal Term shall be at 95% of the then current market terms and conditions. Tenant shall not have the right to assign its renewal rights to a subtenant under this Lease. "Then current market terms and conditions" shall mean those terms and conditions prevailing on the Renewal Option Deadline Date for comparable space in the Loop 360 corridor project (the "Project") to tenants or prospective tenants of comparable creditworthiness. If on or before thirty (30) days after the delivery of the renewal Notice Landlord and Tenant cannot agree in writing to the "current market terms and conditions" to be applicable during a Renewal Term, then the question of what the "then current market terms and conditions" is shall be settled by arbitration. Such arbitration shall be before one disinterested MIA appraiser if one can be agreed upon, otherwise before three (3) disinterested MIA appraisers, one named by the Landlord, one by the Tenant, and one by the two thus chosen. The MIA appraiser or appraisers shall determine the controversy in accordance with the arbitration rules and laws 16

of the State of Texas as applied to the facts found by him, her or them. The cost of the appraisers shall be paid 50% by Tenant and 50% by Landlord. If on or before thirty (30) days after the Renewal Option Deadline Date, if Landlord and Tenant cannot agree in writing to the "current market terms and conditions" to be applicable during the Renewal Term, Tenant may terminate the Renewal Option (notwithstanding its earlier exercise) by delivering written notice of such termination to Landlord not later than the original termination date of this Lease. In the event of termination of the Renewal Option, the Renewal Option shall thereafter be null and void and of no further force and effect, and the Lease shall expire at the expiration of its original term. Any termination of the Lease shall also terminate the Renewal Option. SECTION 40.4 RIGHT OF FIRST REFUSAL Provided Tenant is not in default of this Lease Agreement, beyond any applicable cure period, Landlord hereby agrees to grant Tenant the right of first refusal to lease any or all space in the Building which becomes available excluding any space where the existing Tenants have RENEWED THEIR LEASE over the term of Tenant's Lease. However, if Landlord shall have a bona fide third party prospect, to lease space, as stated in a Letter of Intent, or a portion thereof, Landlord shall notify Tenant in writing of said bona fide third party prospect with a summary of material terms and conditions and Tenant shall have five (5) business days ("Exercise Period") from receipt of notification from Landlord to respond to Landlord in writing either exercising or not exercising this option. If Tenant exercises this option then Tenant shall execute a lease with Landlord at the same terms and conditions as offered by the bona fide third party prospect within fifteen (15) business days from Landlord's receipt of Tenant's notification to exercise this option. If Tenant chooses not to exercise its right of first refusal, or if Tenant does not respond to Landlord within the five (5) business day period, then Landlord shall be free to lease such space to a third party under the same terms and conditions or better than those in the bona fide offer, however, Tenant's Right of First Refusal shall continue for future periods. SECTION 40.5 RIDER TO SECTION 4. SECURITY DEPOSIT Tenant agrees to deliver to Landlord on or before December 1, 1995 an irrevocable Letter of Credit in the amount of $126,000.00 issued by Bank One in favor of Landlord having an expiration date no earlier than November 30, 1999, or the expiration of the Lease, whichever is later, and instructions for the release of such funds to Landlord in the event of Tenant's default. The Letter of Credit shall be substantially in the form of the document attached hereto as Exhibit "B" and shall be posted with Landlord to secure performance by Tenant of Tenant's obligations under this Lease. Landlord shall be entitled to draw on the Letter of Credit in accordance with its terms in the event of default by Tenant, provided the cure period established in the Lease has expired. If Landlord's damages due to Tenant's default are estimated by Landlord to be less than $126,000.00, then Landlord shall draw on the Letter of Credit only the amount estimated, and after Landlord's receipt of such amount, the default will be deemed to have been cured. If Landlord's damages are estimated by Landlord to be greater than $126,000.00, then Landlord shall be entitled to draw on the entire Letter of Credit to cover all or part of its estimated damages, and such action shall not be deemed to limit Tenant's liability nor shall it limit Landlord's damages or any other remedies available to Landlord. 17

Upon Tenant's vacancy of the premises, if there is no uncured event of default by Tenant, Landlord shall return the Letter of Credit to Tenant. If Tenant fails to deliver the irrevocable Letter of Credit to Tenant on or before December 1, 1995, Tenant shall pay Landlord $2,097.00 per month as a penalty and not a default until such time as Tenant secures and delivers the irrevocable Letter of Credit to Landlord. However, if Tenant does not deliver such Letter of Credit by June 1, 1996, Tenant will be considered to be in default and Landlord shall have any and all of its rights as stated in Section 20. SECTION 40.6 RIDER TO SECTION 5(A) Landlord agrees to maintain the Building in good condition and repair, and to operate the Building and maintain the landscaping of all common areas in conformance with standards generally maintained in other Class A office buildings in the Loop 360 corridor, Austin, Texas. Without limitation on the generality of the foregoing, Landlord specifically agrees to use and maintain the Building in a clean, careful, safe and proper manner and to comply with all applicable laws, ordinances, orders rules and regulations of all governmental bodies (state, federal and municipal). SECTION 40.7 RIDER TO SECTION 26, BROKERAGE Tenant will pay MBH a leasing commission and Landlord shall have no obligation whatsoever to pay brokerage commissions to Tenant's broker MBH & Associates in connection with this Primary Lease with Tenant. However, if Tenant expands into additional space at said Building or renews this Lease for an additional term or terms, and MBH & Associates is involved in the negotiations and Colina West Limited owns the Building, then MBH & Associates will be paid a commission according to a separate SECTION 40.8 RIDER TO SECTION 1(G), BASIC COST The term "Operating Expenses" shall not include the following: (a) any capital improvement (in accordance with generally accepted accounting principals) to the Premises and/or the Building except as may be required by a governmental authority; (b) repairs, restoration or other work occasioned by casualty; (c) taxes of Landlord or on Landlord's business, including, without limitation, income, excess profits, capital stock, estate, inheritance, gift, personal property and franchise taxes; (d) expenses (including legal fees) incurred in leasing to or procuring of tenants; (e) leasing commission; (f) advertising expenses; (g) expenses for the renovating of space for new tenant; (h) interest or principal payments on indebtedness of Landlord; (i) costs to correct original construction defects including asbestos abatement or environmental compliance; (j) expenses paid directly by a tenant for any reason, such as excessive utility use; (k) costs exceeding those obtainable through competitive bidding; (1) services or benefits or both provided to some tenants but not to tenant; (m) any suits, fines and the like due to Landlord's violation of any governmental rule or authority; (n) depreciation allowance or expense (unless related to allowable capital items); (o) costs related to a foreclosure of the Building or the Property by a purchaser, mortgagee or seller; (p) executive salaries; (q) any items, costs, or expenses described in this Lease as not being passed through to Tenant; or (r) costs incurred to renovate the Building to comply with the Americans with Disabilities Act. Tenant shall not be responsible for amounts arising out of interest or late charges due to Landlord's failure to make prompt payment of real estate taxes. If during any tax year, including the Base Year, the assessed value of the Property and the Building shall be lower due to the fact that any part of the Building is not occupied or is not completed, the real estate taxes payable or paid shad be deemed to be the amount calculated as though such Building was assessed at completion and 100% occupied. If Landlord contests the assessments and achieves a 18

refund, Tenant's proportionate share of each refund of any tax shall be reimbursed to Tenant by Landlord's separate check. SECTION 40.9 RIDER TO SECTION 5(A) AND 5(D). LANDLORD'S OBLIGATIONS "Notwithstanding the foregoing, if any service to be provided is interrupted or curtailed for a period of five (5) business days after written notice from Tenant to Landlord notifying Landlord of such interruption and the interruption is caused by Landlord, in addition to other remedies available to Tenant, the Rent (inclusive of an payments) for the Premises shall equitably abate for the portion of the Leased Premises which become untenantable by such interruption of services, from five (5) business day period after receipt by Landlord of written notice from Tenant notifying Landlord of such interruption and continue until such services are fully restored. If interruption continues for more than 60 days and Tenant is not in default, then Tenant may terminate this Lease by giving Landlord written notice of such intent and neither party shall have any further liability hereunder. SECTION 40.10 RIDER TO SECTION 7. OPERATING EXPENSES In the event of any dispute regarding the amount due as Tenant's Proportionate Share of costs of operation and maintenance or property taxes, Tenant shall have the right, after at least five(5) days prior written notice during Landlord's managing agent's regular business hours at the office of the Building, to inspect Landlord's accounting records for the Building relating to the immediately preceding two (2) Lease Years. If, after such inspection Tenant continues to dispute such amounts, Tenant may retain a national independent, certified public accountant to audit Landlord's records to determine the proper amount of Tenant's Share. If such audit reveals that Landlord has overcharged Tenant, then within five (5) days after the results of such audit are made available to Landlord, Landlord shall credit Tenant with the amount of such overcharge. If the audit reveals that Tenant was undercharged, then within five (5) days after the results of the audit are made available to Tenant, Tenant shall reimburse Landlord the amount of such undercharge. Tenant agrees to pay the cost of such audit, provided that, if the audit reveals that Landlord's determination of Tenant's share of Actual Costs was in error in Landlord's favor by more than five percent (5%), Landlord shall pay the costs of such audit. Landlord shall maintain records of all Operating Costs for the entirety of the two-year period ("Review Period") following Landlord's delivery to Tenant of each Statement setting forth Tenant's Share of Actual Costs. The payment by Tenant of any portion of Operating Costs shall not preclude Tenant from questioning the correctness of same at any time during the Review Period, but the failure of Tenant to object thereto prior to the expiration of the Review Period shall be conclusively deemed Tenant's approval of same. SECTION 40.11 RIDER TO SECTION 11. INDEMNITY Tenant shall not be liable for and Landlord will indemnify and save harmless Tenant against and from all fines, suits, claims, demands, losses, and action (including attorney's fees) for any injury to person or damage to or loss of property on or about the Building caused by Landlord, its employees, contractors, other tenants, invitees or by any other person entering in the Building under express or implied invitation of Landlord, or arising out of Landlord's use of the Building. Tenant shall not be liable or responsible for any loss or damage to any property or death or injury to any person occasioned by theft, fire, act of God, public enemy, criminal conduct or third parties, injunction, riot, strike, insurrection, war, court order, requisition or other governmental body or authority, by other tenants of the Building or any other matter beyond the control of Tenant or for any injury or damage except as caused by Tenant's negligence or wrong." 19

SECTION 40.12 RIDER TO SECTION 19 (B). EVENTS OF DEFAULT Except for events deemed to be Events of Force Majeure, if the failure to perform is not cured within thirty (30) days after the receipt of Landlord's written notice thereof; provided, however, if the default cannot reasonably be cured within thirty (30) days. Tenant shall not be in default if Tenant commences to cure the default within the said thirty (30) day period and diligently and in good faith continues to cure said default. SECTION 40.13 SIGNAGE Tenant shall have the right to install a sign on the exterior of the Building in accordance with any and all City of Austin ordinances. Landlord must approve the size, color, style and location of such sign prior to installation. All costs associated with the signage, including but not limited to, permitting, construction and installation, shall be paid by Tenant. Upon lease termination, Tenant at Tenant's expense, shall within thirty (30) days remove such sign and repair any damage incurred to the Building from the removal of such sign.
LANDLORD Colina West Limited ------------------TENANT Btrieve Technologies, Inc., ---------------------------A Delaware Corporation ----------------------

By: /s/ David Kahn ------------------------------Name: David Kahn ----------------------------Title: Managing Partner ----------------------------

By:

/s/ Ron R. Harris ------------------------------Ron R. Harris ----------------------------President & CEO ----------------------------

Name:

Title:

Its duly authorized agent Date: Nov. 1994 -----------------------------

Its duly authorized agent Date: 11/7/94 -----------------------------

20

BUILDING RULES AND REGULATIONS The following rules and regulations shall apply, where applicable, to the Premises, the Building, the parking garage associated therewith, the land situated beneath the Building and the appurtenances thereto: 1. Sidewalks, doorways, vestibules, halls, stairways and similar areas shall not be obstructed by tenants or used for any purpose other than ingress and egress to and from the Premises and for going from one to another part of the Building. 2. Plumbing fixtures and appliances shall be used only for purposes for which constructed and no sweepings, rubbish, rags or other unsuitable material shall be thrown or placed therein. Damage resulting to any such fixtures or appliances from misuse by a tenant shall be paid by him and Landlord shall not in any case be responsible therefore. 3. No signs, advertisements or notices shall be painted or affixed on or to any windows or doors or other part of the Building except of such color, size and style and in such places as shall be first approved in writing by Landlord. No nails, hooks or screws shall be driven or inserted in any part of the Building which compromise the integrity of the Building, except by the Building maintenance personnel nor shall any part of the Building be defaced by tenants. No curtains or other window treatments shall be placed between the glass and the Building standard window treatments. 4. Landlord will provide and maintain an alphabetical directory board for all tenants in the first floor (main lobby) of the Building and no other directory shall be permitted unless previously consented to by Landlord in writing. 5. Landlord shall provide all locks for doors in each tenant's Premises, at the cost of such tenant, and no tenant shall place any additional lock or locks on any door in its Premises without Landlord's prior written consent. A reasonable number of keys to the locks on the doors in each tenant's Premises shall be furnished by Landlord to each tenant, at the cost of such tenant, and the tenants shall not have any duplicate keys made. 6. With respect to work being performed by tenants in any Premises with the approval of Landlord, all tenants will refer all contractors, contractor's representatives and installation technicians rendering any service to them to Landlord for Landlord's supervision, approval and control before performance of any contractual service. This provision shall apply to all work performed in the Building, including installations of telephones, telegraph equipment, electrical devices and attachments, doors, entryways, and any and all installations of every nature affecting floors, walls, woodwork, trim, windows, ceilings, equipment or any other physical portion of the Building. 21

7. Movement in or out of the Building of furniture or office equipment, or dispatch or receipt by tenants of any merchandise or materials that requires use of elevators or stairways, or movement through the Building entrances or lobby, shall be restricted to hours designated by Landlord. All such movement shall be under the supervision of Landlord and in the manner agreed between the tenants and Landlord by prearrangement before performance. Such prearrangement initiated by a tenant shall be determined by Landlord and shall be subject to its decision and control of the time, method and routing of movement; limitations imposed by safety; and other concerns that may prohibit any article, equipment or other item from being brought into the Building. The tenants are to assume all risk as to damage to articles moved and injury to persons or public engaged or not engaged in such movement, including equipment, property and personnel of Landlord if damaged or injured as a result of acts in connection with carrying out this service for a tenant from the time of entering the property to completion of work; and Landlord shall not be liable for acts of any person engaged in, or any damage or loss to any of said property or persons resulting from any act in connection with such service performed for a tenant. 8. Landlord shall have the power to prescribe the weight and position of iron safes or other heavy equipment, which shall in all cases stand on supporting devices approved by Landlord in order to distribute the weight thereof. All damage done to the Building by the installation or removal of any property of a tenant, or done by a tenant's property while in the Building, shall be repaired at the expense of such tenant. 9. A tenant shall notify the Building manager when safes or other heavy equipment are to be taken in or out of the Building, and the moving shall be done under the supervision of the Building manager, after written permission from Landlord. Persons employed to move such property shall be acceptable to Landlord. 10. Corridor doors, when not in use, shall be kept closed. 11. Each tenant shall cooperate with Landlord's employees in keeping its Premises neat and clean. Tenants shall not employ any person for the purpose of such cleaning other than the Building's cleaning and maintenance personnel. 12. Landlord shall be in no way responsible to the tenants or their agents, employees or invitees for any loss of property from the Premises or the public areas or for any damages to any property thereon from any cause whatsoever. 13. To ensure orderly operation of the Building, no ice, mineral or other water, towels, newspapers, etc. shall be delivered to any premises except by persons appointed or approved by Landlord in writing. 22

14. Should a tenant require telegraphic, telephonic, annunciator or other communication service, Landlord will direct the electricians where and how wires are to be introduced and placed, and none shall be introduced and placed except as Landlord shall direct. Electric current shall not be used for power or heating without Landlord's prior written permission. 15. Tenants shall not make or permit any improper, objectionable or unpleasant noises or odors in the Building or otherwise interfere in any way with other tenants or persons having business with them. 16. Nothing shall be swept or thrown into or store din the corridors, halls, elevator shafts or stairways. No birds or animals shall be brought into or kept in or about the Building. 17. No machinery of any kind shall be operated by any tenant in its premises without the prior written consent of Landlord, nor shall any tenant use or keep in the Building any inflammable or explosive fluid or substance. 18. No portion of any tenant's premises shall at any time be used or occupied as sleeping or lodging quarters. 19. Landlord reserves the right to rescind any of these rules and regulations and make such other and further rules and regulations as in its judgment shall from time to time be needful for the safety, protection, care and cleanliness of the Building, the operation thereof, the preservation of good order therein, and the protection and comfort of its tenants and their agents, employees and invitees, which rules and regulations, when made and notice thereof given to a tenant, shall be binding upon him in like manner as if originally herein prescribed. 20. Landlord will not be responsible for lost or stolen personal property, equipment, money or jewelry from the tenant's Premises or the public areas regardless of whether such loss occurs when the Premises or the public areas are locked against entry or not.
LANDLORD Colina West Limited ------------------TENANT Btrieve Technologies, Inc. A Delaware Corporation By: /s/ Ron R. Harris ------------------------Name: Ron R. Harris ----------------------Title: President ----------------------

By: /s/ David Kahn ------------------------Name: David Kahn ----------------------Title: Managing Partner ----------------------

Its duly authorized agent Its duly authorized agent 23

Date: Nov 9, 94 Date: 11/7/94 24

EXHIBIT 10.7 FIRST AMENDMENT TO LEASE AGREEMENT STATE OF TEXAS KNOW ALL PERSONS BY THESE PRESENTS COUNTY OF TRAVIS That this Amendment #1 to the Lease Agreement is made as of the 8th day of September, 1995 between Colina West Limited, as Landlord, and Btrieve Technologies, Inc., A Texas Corporation, as Tenant; WITNESSETH WHEREAS, Landlord and Tenant have executed that certain Lease Agreement on October 5, 1994, covering approximately 24,463 net rentable square feet of office space on the third floor of the Colina West Office Building (known as the Primary Space) in Austin, TX, Travis County; and WHEREAS, Landlord and Tenant desire to amend the Lease Agreement to provide for an increase in the size of the Leased Premises and an increase in the Basic Rental payable; NOW THEREFORE, for and in consideration of the mutual promises and covenants set forth herein, the Landlord and Tenant agree that the Lease shall be amended as follows effective October 1, 1995: 1. PREMISES Effective October 1, 1995, the Leased Premises shall be expanded to include the Primary Space totaling approximately 24,463 net rentable square feet and the Expansion Space #1, Suite 255-260, totaling approximately 5,551 net rentable square feet as shown on the attached Exhibit "A-1". After this expansion, Tenant will occupy a total of 30,014 net rentable square feet. 2. BASIC RENTAL With respect to Section 1 (e) of the Lease, effective October 1, 1995, Tenant shall pay Landlord Basic Rental according to the following rent schedule:
PRIMARY EXPANSION TOTAL SPACE SPACE #1 SPACE (24,243RSF) (5,551RSF) (30,014RSF) --------------------------------------------------------------------------------------10/01/95-11/30/95 2mths $22,302.00 $8,787.50 $31,089.50 12/1/95-11/30/96 12mths $31,499.00 $8,787.50 $40,286.50 DATE

1

12/1/96-11/30/97 12mths 12/1/97-11/30/98 12mths 12/1/98-11/30/99 12mths

$33,503.00 $33,563.00 $35,066.00

$8,787.50 $9,250.00 $9,712.50

$42,290.50 $42,813.00 $44,778.50

3. TENANT'S PROPORTIONATE SHARE With respect to Section 1 (i) of the Lease, effective October 1, 1995, Tenant's Proportionate Share of the Building shall be 45.99%. 4. TENANT IMPROVEMENTS Tenant agrees to accept the Expansion Space #1, Suite 255-260, in "as-is" condition subject to Landlord repainting the space and paying one half of the cost to recarpet Suite 255 (2,989rsf) only using building standard material. All other cost for improvement to the Leased Premises shall be the sole cost of Tenant. 5. PARKING With this expansion, Tenant will have use of four (4) additional reserved covered parking spaces; two (2) under the Building and two (2) in the detached parking area. After this expansion, Tenant shall have a total of 22 reserved covered parking spaces. Except as modified in this Agreement #1, Landlord and Tenant both ratify all other terms and provisions of the Lease Agreement dated October 5, 1994. Executed this 13 day of September, 1995.
-LANDLORD: Colina West Limited By: /s/ David Kahn ---------------------------David Kahn Title: Managing Partner --------------------------------TENANT: Btrieve Technologies, Inc. By: /s/ Ron R. Harris -------------------------------Ron R. Harris President -----------------------------

Title: Date:

Date: /s/ September 13, 1995 --------------------------

/s/ 9-12-95 ------------------------------

2

LEASE AGREEMENT THIS LEASE AGREEMENT is entered into as of the 5th day of October , 1994, by and between Colina West Limited (hereinafter called "Landlord"), whose address for purposes hereof is 200 East Sixth Street, Suite 220, Austin, Texas, 78701 and Btrieve Technologies, Inc., A Delaware Corp. (hereinafter called "Tenant"), whose address for purposes hereof is 8834 Capital of Texas Highway North, Suite 300, Austin, Texas, 78759. 1. DEFINITIONS (a) "Building": The office building has been (or which has been) constructed on land described as Great Hills, Section XVI, a subdivision in Travis County, Texas, and known as Colina West Office Building. (b) "Premises": Suite No. 300 in the Building, generally outlined on Exhibit 'A' hereto, and measuring approximately 24,463 net rentable square feet. (c) "Commencement Date": December 15, 1994 (or on such date as Landlord tenders, in writing, the Premises to Tenant). (d) "Lease Term": The period commencing on the Commencement Date and continuing for, sixty (60) calendar months thereafter; provided, however, if the term of this lease commences on a date other than the first day of a calendar month, the Lease Term shall consist of 60 calendar months in addition to the remainder of the calendar month during which this lease is deemed to have commenced. (e) "Basic Rental": See Also Section 40.1
$22,302.00 $31,499.00 $33,503.00 $33,563.00 $35,066.00 per per per per per month month month month month for for for for for the the the the the period period period period period of of of of of 12/15/94 12/01/95 12/01/96 12/01/97 12/01/98 to to to to to 11/30/95 11/30/96 11/30/97 11/30/98 11/30/99

(f) "Basic Reserved Parking Charge": $None (0.00) per month, per space. Landlord's initials /s/ Tenant's initials /s/ 3

(g) "Basic Cost": Any and all ad valorem taxes, costs, expenses and disbursement of every kind and character which Landlord shall incur, pay or become obligated to pay in connection with the ownership of any estate or interest in, and the operation, maintenance, repair, replacement and security of, the Building determined in accordance with accepted cash basis accounting principles. SEE ALSO SECTION 40.8 (h) "Security Deposit": See Section 40.5 (i) "Tenant's proportionate share" 37.48% (the percentage expressing the ratio between the number of rentable square feet comprising the Premises [24,463] and the number of rentable square feet of the Building [65,264], which percentage shall be subject to adjustment if the number of rentable square feet comprising the Premises changes). (j) "permitted use": General office for the development and marketing of computer software products and related uses incidental thereto 2. LEASE GRANT. Landlord does hereby lease, demise and let unto Tenant the Premises, commencing on the Commencement Date and ending on the last day of the Lease Term, unless sooner terminated as herein provided. If the lease is executed before the Premises become vacant or are otherwise available and ready for occupancy, or if any present tenant or occupant of the premise holds over and Landlord cannot acquire possession of the Premises prior to the Commencement Date of this lease, Landlord shall not be deemed to be in default hereunder, and Tenant agrees to accept possession of the Premises on such date as Landlord is able to tender the same, which date shall be deemed to be the Commencement Date of this lease for all purposes, and this lease shall continue for the Lease Term specified in Paragraph 1. By occupying the Premises, Tenant shall be deemed to have accepted the same as suitable for the purpose herein intended except for latent defects and to have acknowledged that the same comply fully with Landlord's obligations. 3. RENT. In consideration of this lease, Tenant promises and agrees to pay landlord the Basic Rental without deduction or setoff except as herein provided for each month of the entire Lease Term. Rent due for the period beginning 12/15/94 11/30/95 shall be payable by Tenant to Landlord one half upon lease execution and one half upon commencement of the Lease Term. See also Section 40.1. and a monthly installment as outlined in Section 1(e) shall be due and payable without demand beginning on the first day of the calendar month following the expiration of the first full calendar month of the Lease Term and continuing thereafter on or before the first day of each succeeding calendar month during the term hereof. Rent for any fractional month at the beginning of the Lease Term shall be prorated based on one three hundred sixtieth (1/360) of the current annual basic rent for Landlord's initials /s/ Tenant's initials /s/ 4

each day of the partial month this lease is in effect and shall be due and payable upon written notice from Landlord to Tenant. In the event any installment of the Basic Rental, or any other sums which become owning by Tenant to Landlord under the provisions hereof are not received within five (5) days after the due date thereof (without in any way implying Landlord's consent to such late payment). Tenant, to the extent permitted by law, agrees to pay, in addition to said installment of the basic rental or such other sums owed, a late payment charge equal to ten percent (10%) of the installment of the Basic Rental or such other sums owed. Notwithstanding the foregoing, the foregoing late charges shall not apply to any sums which may have been advanced by Landlord to or for the benefit of Tenant pursuant to the provisions of this lease, it being understood that such sums shall bear interest, which Tenant hereby agrees to pay to Landlord, at the maximum rate of interest permitted by law to be charged Tenant for the use or forbearance of such money. 4. SECURITY DEPOSIT. SECTION 40.5 SHALL BE SUBSTITUTED FOR THIS SECTION 5. LANDLORD'S OBLIGATIONS. (a) Subject to the limitations hereinafter set forth, Landlord agrees, while Tenant is occupying the Premises and while Tenant is not in default after any applicable cure period, under this lease, to furnish Tenant facilities to provide water (hot, cold and refrigerated) at those points of supply provided for general use of tenants of the Building, heated and refrigerated air conditioning in season, and elevator and janitorial service to the Premises, all such services to be provided at such times as Landlord normally furnishes these services to all tenants of the Building and in the manner and to the extent deemed by Landlord to be standard. SEE ALSO SECTION 40.6. In addition, Landlord agrees to maintain the public and common areas of the Building, such as lobbies, stairs, corridors and restrooms, in reasonably good order and condition, except for damage occasioned by Tenant, or its employees, agents or invitees. Landlord reserves the right exercisable without notice and without liability to Tenant for damage or injury to property, persons or business and without effecting an eviction, constructive or actual, or disturbance of Tenant's use or possession, or giving rise to any claim for setoff or abatement of rent, to decorate and to make repairs, alterations, additions, changes or improvements, whether structural or otherwise, in and about the Building, or any part thereof, and for such purposes to enter upon the leased Premises and, during the continuance of any such work, to temporarily close doors, entryways, public space and corridors in the Building and to interrupt or temporarily suspend Building services and facilities. SEE ALSO SECTION 40.9 (b) In the event Tenant's use of electrical current (1) exceeds 110 volt power, or (2) exceeds that required for routine lighting and operation of desk top office Landlord's initials /s/ Tenant's initials /s/ 5

machines which use 110 volt electrical power, or Tenant's use of any service furnished by Landlord exceeds that deemed by Landlord to be standard, then Tenant shall pay on demand such charges as Landlord may reasonably prescribe for any such excess. All such charges shall be deemed as so much additional rent due from Tenant to Landlord. Without Landlord's prior written consent, Tenant shall not install any equipment in the Premises which shall require for its use other than the normal electrical current or other utility service or which affects the temperature otherwise maintained by the air conditioning system or which otherwise overloads any utility serving the Premises. (c) Landlord, subject to payment by Tenant, shall make available to Tenant facilities to provide all electrical current required by Tenant in its use and occupancy of the Premises and further shall make available electric lighting and current for the common areas of the Building in the manner and to the extent deemed by Landlord to be standard. Tenant shall pay Tenant's proportionate share of all such electrical current used by, and all other utility charges for utility services to, the Building, Landlord may require separate metering for any utility service required by Tenant if such service is deemed by Landlord to be in excess of Building standard usage, in which event Tenant shall pay for all such utility service. (d) Failure to any extent to make available; or any slow-down, stoppage or interruption of; or any change in the quantity, character or availability of; these defined services, resulting from any cause, shall not render Landlord liable in any respect for damages to either person, property or business, nor be construed as an eviction of Tenant or work an abatement of rent, nor relieve Tenant for fulfillment of any covenant or agreement hereof. Should any equipment or machinery furnished by Landlord break down or for any cause cease to function properly, Landlord shall use reasonable diligence to repair same promptly, but Tenant shall have no claim for abatement of rent or damages on account of any interruptions in service occasioned thereby or resulting therefrom. SEE ALSO SECTION 40.9 6. PARKING. Landlord agrees to make available to Tenant 18 reserved covered parking spaces and uncovered unreserved surface parking spaces at a ratio of 1:300 RSF. Tenant covenants and agrees to pay Landlord during the Term of this Lease and any renewal periods, in addition to the Base Rental, a sum equal to the Basic Reserved Parking Charge for each of the covered reserved parking spaces times the number of permits assigned by Landlord to Tenant for the Term of the Lease. Landlord at its discretion may designate the specific space or area where each vehicle shall be parked, and may change such designated areas from time to time. Landlord may make, modify, or enforce rules and regulations relating to the parking of vehicles in the Project, and Tenant shall abide by such rules and regulations. Landlord shall not be liable for any property damage or bodily injury arising from the use of the garage by tenant of the Building, their agents, employees, or invitees. Landlord's initials /s/ Tenant's initials /s/ 6

7. OPERATING EXPENSE INCREASES. (a) Tenant shall during the term of this lease pay as additional rent an amount (per each square foot of rentable area within the leased premises) equal to the excess ("Excess") from time to time of actual Basic Cost per rentable square foot in the Building over $the operating expenses from the period of January 1, 1995 through December 31, 1995 Landlord, at its option, may collect such additional rent in a lump sum, to be due and payable within thirty (30) days after Landlord furnishes to Tenant a statement of actual Basic Cost for the previous year, or beginning with January 1, 1996, and on each January 1 thereafter. Landlord shall also have the option to make a good faith estimate of the Excess for each upcoming calendar year and upon thirty (30) days' written notice to Tenant may require the monthly payment of such additional rent equal to one-twelfth (1/12) of such estimate. SEE ALSO SECTION 40.10 (b) By April 30th of each calendar year during Tenant's occupancy, or as soon thereafter as practical, Landlord shall furnish to Tenant a statement of Landlord's actual Basic Cost for the previous year. If for any calendar year additional rent collected for the prior year as a result of Landlord's estimate of Basic Costs is in excess of the additional rent actually due during such prior year, then Landlord shall refund to Tenant within 10 days of written notice any overpayment. Likewise, Tenant shall pay to Landlord, within 10 days of written notice, any underpayment with respect to the prior year. 8. USE. Tenant shall use the Premises only for the permitted use. Tenant will not occupy or use the Premises, or permit any portion of the Premises to be occupied or used, for any business or purpose other than the permitted use or for any use or purpose which is unlawful, in part or in whole, disreputable in any manner, or extra hazardous on account of fire, nor permit anything to be done which will in any way increases the rate of insurance on the Building or contents; and in the event that, by reasons of acts of Tenant, there shall be any increase in the rate of insurance on the Building or contents created by Tenant's acts or conduct of business, Tenant hereby agrees to pay to Landlord the amount of such increase within 10 days of written notice. Acceptance of any such payment shall not constitute a waiver of any of Landlord's other rights provided herein. Tenant will conduct its business and control its agents, employees and invitees in such a manner as not to create any nuisance, nor interfere with, annoy or disturb other tenants or Landlord in the management of the Building. Tenant will maintain the Premises in a clean, healthful and safe condition and will comply with all laws, ordinances, orders, rules and regulations (state, federal, municipal and other agencies or bodies having jurisdiction thereof) with reference to the use, condition or occupancy of the Premises. Tenant will not, without the prior written consent of Landlord, paint, install lighting or decorations, or install any signs, window or Landlord's initials /s/ Tenant's Initials /s/ 7

door lettering or advertising media of any type on or about the Premises or any part thereof. 9. TENANT'S REPAIRS AND ALTERATIONS. Tenant will not in any manner deface or injure the Building and will pay the cost of repairing any damage or injury done to the Building or any part thereof by Tenant or Tenant's agents, employees or invitees. Tenant shall throughout the Lease Term take good care of the Premises and keep them free from waste and nuisance of any kind. Tenant agrees to keep the Premises, including all fixtures installed by Tenant and any plate glass and special store fronts, in good condition and make all necessary non- structural repairs except those caused by fire, casualty or acts of God covered by Landlord's fire insurance policy covering the Building. If Tenant fails to make such repairs within fifteen (15) days after the occurrence of the damage or injury, Landlord may at its option make such repair, and tenant shall, upon demand therefore, pay Landlord for the cost thereof. Tenant will not make or allow to be made any alterations or physical additions in or to the Premises without the prior written consent of Landlord which consent shall not be unreasonably withheld. All maintenance, repairs, alterations, additions or improvements shall be conducted only by contractors and subcontractors approved in writing by Landlord, it being understood that Tenant shall procure and maintain, and shall cause such contractors and subcontractors engaged by or on behalf of Tenant to procure and maintain, insurance coverage against such risks, in such amounts and with such companies as Landlord may require in connection with any such maintenance, repair, alteration, addition or improvement. Subject to Sections 15 and 16 below, at the end or other termination of this lease, Tenant shall deliver up the Premises with all improvements located thereon (except as otherwise herein provided) in good repair and condition, reasonable wear and tear excepted, and shall deliver to Landlord all keys to the Premises. All alterations, additions or improvements (whether temporary or permanent in character) made in or upon the Premises, either by Landlord or Tenant, shall be Landlord's property on termination of this lease and shall remain on the Premises without compensation to Tenant. All furniture, movable trade fixtures and equipment installed by Tenant may be removed by Tenant at the termination of this lease if Tenant so elects, and shall be so removed if required by Landlord, or if not so removed shall, at the option of Landlord, become the property of Landlord. All such maintenance, repairs, alterations, additions, improvements, removals and restoration shall be accomplished in a good workmanlike manner so as not to damage the Premises or the primary structure or structural qualities of the Building or the plumbing, electrical lines or other utilities. 10. ASSIGNMENT AND SUBLETTING. Tenant shall not assign or in any manner transfer this lease or any estate or interest therein, or sublet the leased Premises or any part thereof, or grant any license, concession or other right of occupancy of any portion of the leased Premises, or permit the use of the leased Premises by any Landlord's initials /s/ Tenant's Initials /s/ 8

parties other than Tenant, its agents and employees; and any such acts without Landlord's prior written consent shall be void and of no effect, which consent shall not be unreasonably withheld. Landlord acknowledges Tenant's intent to sublet part of the Leased Premises at various times throughout the Lease Term, so long as Tenant shall remain completely liable for all of the terms, conditions and obligations of this Lease. Landlord must approve such subtenant, which approval will not be unreasonably withheld. 11. INDEMNITY. Landlord shall not be liable for and Tenant will indemnify and save harmless Landlord against and from all fines, claims, demands, losses and actions (including attorney's fees) for any injury to person or damage to or loss of property on or about the Premises caused by Tenant, its employees, contractors, subtenants, invitees or by an other person entering the Premises or the Building under express or implied invitation of Tenant, or arising out of Tenant's use of the Premises. Landlord shall not be liable or responsible for any loss or damage to any property or death or injury to any person occasioned by theft, fire, act of God, public enemy, criminal conduct or third parties, injunction, riot, strike, insurrection, war, court order, requisition or other governmental body or authority, by other tenants of the Building or any other matter beyond the control of Landlord, or for any injury or damage or inconvenience which may arise through repair of alteration of any part of the Building, or failure to make repairs, or from any cause whatever except Landlord's gross negligence or willful wrong. SEE ALSO SECTION 40.11 12. SUBORDINATION. This lease and all rights of Tenants hereunder are subject and subordinate to any deeds of trust, mortgages or other instruments of security, as well as to any ground leases or primary leases, that now or hereafter cover all or any part of the Building, the land situated beneath the Building or any interest of Landlord therein, and to any and all advances made on the security thereof, and to any and all increases, renewals, modifications, consolidations, replacements and extensions of any of such deeds of trust, mortgages, instruments of security or leases. Tenant shall, however, upon demand at any time or times execute, acknowledge and deliver to Landlord any and all instruments and certificates that in the judgment of Landlord may be necessary or proper to confirm or evidence such subordination. Tenant further covenants and agrees to attorn to any purchaser and to recognize such purchaser as Landlord under this lease. Tenant shall upon demand at any time execute, acknowledge and deliver to Landlord's mortgage any and all instruments and certificates that in the judgment of Landlord's mortgagee may be necessary or proper to confirm or evidence such attornment, and all instruments and certificates that in the judgment of Landlord's mortgagee may be necessary or proper to confirm or evidence such attornment, and Tenant hereby irrevocably authorizes Landlord's mortgagee to execute, acknowledge and deliver any such instruments and certificates on Tenant's behalf. Landlord agrees to obtain a non disturbance agreement from Landlord's current Landlord's initials /s/ Tenant's Initials /s/ 9

first lien mortgagee in favor of Tenant within 60 days of Lease execution. Additionally, Landlord shall use reasonable effort to provide a non disturbance agreement from any future Mortgagee having an interest in the Building. 13. RULES AND REGULATIONS. Tenant and Tenant's agents, employees and invitees will comply fully with all requirements of the rules and regulations of the Building and related facilities. Landlord shall at all times have the right to change such rules and regulations or to promulgate other rules and regulations in such manner as may be deemed advisable for safety, care or cleanliness of the Building and related facilities or the Premises, and for preservation of good order therein, all of which rules and regulations, changes and amendments will be forwarded to Tenant in writing and shall be carried out and observed by Tenant. Tenant shall be responsible for compliance therewith by the agents, employees and invitees of Tenant. 14. INSPECTION. Landlord or its officers, agents and representatives shall have the right to enter into and upon any and all parts of the Premises at all reasonable hours giving reasonable notice when possible, (or, in any emergency, to any hour) to (a) inspect same or clean or make repairs or alterations or additions as Landlord may deem necessary (but without any obligation to do so, except as expressly provided for herein), or (b) show the Premises to prospective tenants only in the last 120 days of the Lease Term, purchasers or lenders; and Tenants shall not be entitled to any abatement or reduction of rent by reason thereof, nor shall such be deemed to be an actual or constructive eviction. 15. CONDEMNATION. If the Premises, or any part thereof, or if the Building or any portion of the Building leaving the remainder of the Building unsuitable for use as an office building comparable to its use on the Commencement Date of this lease, shall be taken or condemned in whole or in part for public purposes, or sold in lieu of condemnation, then the Lease Term shall, at the sole option of Landlord, forthwith cease and terminate; all compensation awarded for any taking (or sale of proceeds in lieu thereof) shall be the property of Landlord, and Tenant shall have no claim thereto, the same being hereby expressly waived by Tenant. 16. FIRE OR OTHER CASUALTY. In the event that the Building should be totally destroyed by fire, tornado or other casualty or in the event the Premises or the Building should be so damaged that rebuilding or repairs cannot be completed within one hundred twenty (120) days after the date of such damage, Landlord or Tenant may at its option terminate this lease, in which event the rent shall be abated during the unexpired portion of this lease effective with the date of such damage. In the event the Building or the Premises should be damaged by fire, tornado, or other casualty covered by Landlord's insurance, but only to such extent that rebuilding or repairs can be completed within one hundred twenty (120) days after the date of such damage, or if the damage should be more Landlord's initials /s/ Tenant's Initials /s/ 10

serious but Landlord does not elect to terminate this lease, in either such event Landlord shall within thirty (30) days after the date of such damage commence to rebuild or repair the Building and/or the Premises and shall proceed with reasonable diligence to restore the Building and/or Premises to substantially the same condition in which it was immediately prior to the happening of the casualty, except that Landlord shall not be required to rebuild, repair, or replace any part of the furniture, equipment, fixtures, and other improvements which may have been placed by Tenant or other Tenants within the Building or the Premises. Landlord shall allow tenant a fair diminution of rent during the time the Premises are unfit for occupancy. In the event any mortgagee under a deed of trust, security agreement or mortgage on the Building should require that the insurance proceeds be used to retire the mortgage debt, Landlord shall have no obligation to rebuild and this lease shall terminate upon notice to Tenant. Except as hereinafter provided, any insurance which may be carried by Landlord or Tenant against loss or damage to the Building or to the Premises shall be for the sole benefit of the party carrying such insurance and under its sole control. 17. HOLDING OVER. Should Tenant, or any of its successors in interest, hold over the Premises, or any part thereof, after the expiration of the Lease Term, unless otherwise agreed in writing by Landlord, such holding over shall constitute and be construed as a tenancy at will only, at a daily rental equal to 150% of the daily rent payable for the last month of the lease. 18. TAXES. Tenant shall be liable for all taxes levied or assessed against personal property, furniture or fixtures placed by Tenant in the Premises, and if any such taxes for which Tenant is liable are in any way levied or assessed against Landlord, Tenant shall pay to Landlord upon demand that part of such taxes for which Tenant is primarily liable hereunder. 19. EVENTS OF DEFAULT. The following events shall be events of default by Tenant under this lease: (a) Tenant shall fail to pay when due any rental or other sums payable by Tenant hereunder and such failure continues for 10 days following written notice from Landlord to Tenant. (b) Tenant shall fail to comply with or observe any other provision of this lease. SEE ALSO SECTION 40.1 (c) Tenant or any guarantor of Tenant's obligations hereunder shall make an assignment for the benefit of creditors. (d) Any petition shall be filed by or against Tenant or any guarantor of Tenant's obligations hereunder under any section or chapter of the National Bankruptcy Act, as amended, or under any similar law or statute of the United States or any Landlord's initials /s/ Tenant's Initials /s/ 11

State thereof; or Tenant or any guarantor of Tenant's obligations hereunder shall be adjudged bankrupt or insolvent in proceedings filed thereunder. (e) A receiver or trustee shall be appointed for all or substantially all of the assets of Tenant or any guarantor of Tenant's obligations hereunder. (f) Tenant shall desert or vacate any portion of the Premises, without the payment of rent when due. (20) REMEDIES. Upon the occurrence of any event of default specified in this lease, Landlord shall have the option to pursue any one or more of the following remedies without any notice of demand whatsoever; (a) Terminate this lease in which event Tenant shall immediately surrender the Premises to Landlord, and if Tenant fails to do so, Landlord may, without prejudice to any other remedy which it may have for possession or arrearages in rent, enter upon and take possession of the Premises and expel or remove Tenant and any other person who may be occupying said Premises or any part thereof, by force if necessary, without being liable for prosecution or any claim for damages therefore; and Tenant agrees to pay to Landlord on demand the amount of all loss and damage which Landlord may suffer by reason of such termination, whether through inability to relet the Premises on satisfactory terms or otherwise, including the loss of rental for the remainder of the Lease Term. (b) Enter upon and take possession of the Premises and expel or remove tenant and any other person who may be occupying the Premises or any part thereof, by force if necessary, without being liable for prosecution or any claim for damages therefore, and if Landlord so elects, relet the Premises on such terms as Landlord shall deem advisable and receive the rent therefore; and Tenant agrees to pay to Landlord on demand any deficiency that may arise by reason of such reletting for the remainder of the Lease Term. (c) Enter upon the Premises, by force if necessary, without being liable for prosecution or any claim for damages therefore, and do whatever Tenant is obligated to do under the terms of this lease; and Tenant agrees to reimburse Landlord on demand for any expenses which Landlord may incur in thus effecting compliance with Tenant's obligations under this lease, and Tenant further agrees that Landlord shall not be liable for any damages resulting to the Tenant from such action. No re-entry or taking possession of the Premises by Landlord shall be construed as an election on its part to terminate this lease, unless a written notice of such intention be given to Tenant. Pursuit of any of the foregoing remedies shall not preclude pursuit of any of the other remedies herein provided by law, nor shall pursuit of any remedy herein provided constitute a forfeiture or waiver of any rent due to Landlord hereunder or of any damages accruing to landlord by reason of the violation of any of the terms, provisions and covenants herein contained. Landlord's initials /s/ Tenant's Initials /s/ 12

Landlord's acceptance of rent following an event of default hereunder shall not be construed as Landlord's waiver of such event of default. No wavier by Landlord of any violation or breach of any of the terms, provisions and covenants herein contained shall be deemed or construed to constitute a waiver of any other violation or default. The loss or damage that Landlord may suffer by reason of termination of this lease or the deficiency from any reletting as provided for above shall include the expense of repossession and any repairs or remodeling undertaken by Landlord following possession. Should Landlord at any time terminate this lease for any default, in addition to any other remedy Landlord may have, Landlord may recover from Tenant all damages Landlord may incur by reason of such default, including the cost of recovering the Premises and the loss of rental for the remainder of the Lease Term. Landlord agrees to use its best efforts to mitigate its damages with respect to Tenant's default. 21. SURRENDER OF PREMISES. No act or thing done by Landlord or its agents during the term hereby granted shall be deemed an acceptance of a surrender of the Premises, and no agreement to accept a surrender of the Premises shall be valid unless the same be made in writing and signed by Landlord. 22. ATTORNEY'S FEES. In the case it should be necessary or proper for either party to bring any action under this lease or to consult or place said lease, or any amount payable by either party, hereunder, with an attorney concerning or for the enforcement of any of Landlord's rights hereunder, then the party defaulting agrees in each and any such case to pay the prevailing party's reasonable attorney's fee. 23. LANDLORD'S LIEN. Deleted. 24. MECHANICS' LIENS. Tenant will not permit any mechanic's lien or liens to be placed upon the Premises or the Building or improvements thereon during the lease Term caused by or resulting from any work performed, materials furnished or obligation incurred by or at the request of Tenant, and in the case of the filing of any such lien Tenant will promptly pay same, or bond around in a form acceptable to Landlord and Tenant. 25. NO SUBROGATION; LIABILITY INSURANCE. (a) Each party hereto hereby waives any cause of action it might have against the other party on account of any loss or damage that is insured against under any insurance policy (to the extent that any such loss or damage is recoverable under such insurance policy) that covers the Building, the Premises, or Landlord's or Tenant's fixtures, personal property, leasehold improvements or business and which names Landlord or Tenant, as the case may be, as a party insured. Each party hereto agrees that it will request its insurance carrier to endorse all Landlord's initials /s/ Tenant's Initials /s/ 13

applicable policies waiving the carrier's rights of recovery under subrogation or otherwise against the other party. (b) Tenant shall procure and maintain throughout the Lease Term a policy or policies of insurance at its sole cost and expense and in amounts on not less than a combined single limit of $1,000,000 or such other amounts as Landlord may from time to time require, insuring Tenant and Landlord against any and all liability to the extent obtainable for injury to or death of a person or persons or damage to property occasioned by or arising out of or in connection with the use, operation and occupancy of the Premises. Tenant shall furnish a certificate of insurance and such other evidence satisfactory to Landlord of the maintenance of all insurance coverages required hereunder, and Tenant shall obtain a written obligation on the part of each insurance company to notify Landlord at least thirty (30) days prior to cancellation or material change of any such insurance. Landlord shall procure and maintain throughout the Lease Term a policy or policies of insurance in amounts which shall be required by Landlord's mortgagee or as Landlord may deem reasonable whichever is greater. 26. BROKERAGE. Tenant warrants that it has had no dealing with any broker or agent in connection with the negotiation or execution of this lease other than MBH & Associates (Brian Hickey) & Charter Management Company (Jeff Greenberg) and Tenant agrees to indemnify Landlord against all costs, expenses, attorney's fees or other liability for commissions or other compensation or charges claimed by any broker or agent claiming the same by, through or under Tenant. See Also Section 40.7. 27. ESTOPPEL CERTIFICATES. Tenant agrees to furnish from time to time when requested by Landlord a certificate signed by Tenant confirming and containing such factual certifications and accurate representations deemed appropriate by Landlord, and Tenant shall, within twenty (20) days following receipt of said proposed certificate from Landlord, return a fully-executed copy of said certificate to Landlord. In the event Tenant shall fail to return a fully-executed copy of such certificate to Landlord within the foregoing twenty (20) day period, then Tenant shall be deemed to have approved and confirmed all of the terms, certifications and representations contained in such certificate. 28. NOTICES. Each provision of this agreement, or of any applicable governmental laws, ordinances, regulations and other requirements with reference to the sending, mailing or delivery of any notice, or with reference to the making of any payment by Tenant to Landlord, shall be deemed to be complied with when and if the following steps are taken: (a) All rent and other payments required to be made by Tenant to Landlord hereunder shall be payable to Landlord in Travis County, Texas, at the address set forth in Landlord's initials /s/ Tenant's Initials /s/ 14

Paragraph 1 or at such other address as Landlord may specify from time to time by written notice delivered in accordance herewith. (b) Any notice or document required to be delivered hereunder shall be deemed to be delivered if actually received and whether or not received when deposited in the United States mail, postage prepaid, certified or registered mail (with or without return receipt requested) addressed to the parties hereto at their respective addresses set forth in Paragraph 1 or at such other address as either of said parties have theretofore specified by written notice delivered in accordance herewith. 29. FORCE MAJEURE. Whenever a period of time is herein prescribed for action to be taken by either party, either party shall not be liable or responsible for, and there shall be excluded from the computation for any such period of time, any delays due to strikes, riots, acts of God, shortages of labor or materials, war, governmental laws, regulations or restrictions or any other causes of any kind whatsoever which are beyond the control of either party. 30. SEPARABILITY. If any clause or provision of this lease is illegal, invalid or unenforceable under present or future laws effective during the Lease Term, then and in that event, the remainder of this lease shall not be affected thereby, and in lieu of each clause or provision of this lease that is illegal, invalid or unenforceable, there shall be added as a part of this lease a clause or provision as similar in terms to such illegal, invalid or unenforceable clause or provision as may be possible and be legal, valid and enforceable. 31. AMENDMENTS; WAIVER; BINDING EFFECT. The provisions of this lease may not be waived, altered, changed or amended, except by instrument in writing signed by both parties hereto. The terms and conditions contained in this lease shall apply to, inure to the benefit of, and be binding upon the parties hereto, and upon their respective successors in interest and legal representatives, except as otherwise herein expressly provided. 32. QUIET ENJOYMENT. Provided Tenant has performed all of the terms and conditions of this lease, including the payment of rent, to be performed by Tenant, Tenant shall peaceably quietly hold and enjoy the Premises for the Lease Term, without hindrance from Landlord, subject to the terms and conditions of this lease. 33. INTERPRETATION. Words of any gender used in this lease shall be held and construed to include any other gender, and words in the singular number shall be held to include the plural, unless the context otherwise requires. The captions contained in this lease are for convenience of reference only, and in no way limit or enlarge the terms and conditions of this lease. 34. JOINT AND SEVERAL LIABILITY. If there be more than one Tenant, the obligations hereunder imposed upon Tenant shall be joint and several. If there be Landlord's initials /s/ Tenant's Initials /s/ 15

a guarantor of Tenant's obligations hereunder, the obligations hereunder imposed upon Tenant shall be the joint and several obligations of Tenant and such guarantor and Landlord need not first proceed against Tenant before proceeding against such guarantor nor shall any such guarantor be released from its guaranty for any reason whatsoever, including without limitation, in case of any amendments hereto, waivers hereof or failure to give such guarantor any notices hereunder. 35. PERSONAL LIABILITY. The liability of Landlord to Tenant for any default by Landlord under the terms of this lease shall be limited to the interest of Landlord in the Building and the land, and any proceeds of sale, insurance claim, or condemnation proceeds, and Landlord shall not be personally liable for any deficiency. 36. LANDLORD'S FAILURE TO PERFORM. If Landlord fails to perform any of its obligations under this Lease, Landlord shall not be in default hereunder and Tenant shall not have any rights or remedies growing out of such failure unless Tenant gives Landlord written notice thereof setting forth in reasonable detail the nature and extent of such failure and such failure by Landlord is not cured within the thirty (30) day period following delivery of such notice or such longer period therefore provided elsewhere in this Lease. If such failure cannot reasonably be cured within such thirty (30) day period, the length of such period shall be extended for the period reasonably required therefore, if Landlord commences curing such failure within such thirty (30) day period and continues the curing thereof with reasonable diligence and continuity. 37. NOTICE TO LENDER. If the Premises or the Building or any part thereof are at any time subject to a first mortgage or a first deed of trust or other similar instrument and this lease or the rentals are assigned to such mortgagee, trustee or beneficiary and the Tenant is given written notice thereof, including the post office address of such assignee, then Tenant shall not terminate this lease or abate rentals for any default on the part of Landlord without first giving written notice by certified or registered mail, return receipt requested, to such assignee, specifying the default in reasonable detail, and affording such assignee a reasonable opportunity to make performance, at its election, for and on behalf of the Landlord. 38. REPRESENTATIONS. Neither Landlord nor Landlord's agents or brokers have made any representations or promises with respect to the Premises, the Building or the land except a herein expressly set forth and no rights, easements or licenses are acquired by Tenant by implication or otherwise except as expressly set forth in the provisions of this lease. Landlord's initials /s/ Tenant's Initials /s/ 16

39. EXHIBITS AND ATTACHMENTS. All exhibits, attachments, riders and addenda referred to in the lease are incorporated into this lease and made a part thereof for all intents and purposes. 40. SPECIAL PROVISIONS. Landlord's initials /s/ Tenant's Initials /s/ 17

SPECIAL SECTION 40.1 RIDER TO SECTION 3, RENT ------------------------

CONDITIONS

Upon lease execution, Tenant agrees to pay Landlord $128,236.50 which represents prepayment of one half of the total rent due for the period beginning December 15, 1994 through November 30, 1995. Upon Tenant's occupancy of the Leased Premises, Tenant shall prepay the final one half of the total rent due for the period beginning December 15, 1994 through November 30, 1995 also in the amount of $128,236.50. During the period beginning December 1, 1995 through November 30, 1999, Tenant shall pay Basic Rental as described in Section 1(e). SECTION 40.2 IMPROVEMENT ALLOWANCE Landlord agrees to give Tenant up to a $10.48/RSF maximum dollar allowance totaling $256,473.00 to construct capital improvements to Tenant's space. All out of pocket costs of the construction, including but not limited to, architectural fees, engineering fees and City of Austin building permitting fees shall be deducted from the allowance. Any expense in excess of the improvement allowance shall be paid by Tenant. The payment of the allowance to Tenant by Landlord shall be conditioned upon delivery to Landlord by Tenant of a valid certificate of occupancy from the City of Austin, a valid building permit from the City of Austin and the occupancy by Tenant of the Leased Premises. In addition and prior to commencement of the construction, Tenant shall deliver one complete set of construction drawings to Landlord for Landlord's approval of the modifications and improvements to the Leased Premises. Landlord's approval of the construction drawings will not be unreasonably withheld. SECTION 40.3 RENEWAL OPTION Landlord hereby grants to Tenant the option ("Renewal Option") to renew and extend the term of this Lease, provided that at the time the Renewal Option is exercised, this Lease shall be in full force and effect and Tenant shall not be in default beyond any applicable cure period hereunder. The renewal term ("Renewal Term") shall be sixty (60) months commencing upon the expiration of the original term of the Lease. The Renewal Option shall be null and void if Tenant fails to deliver written notice ("Renewal Option Deadline Date") of exercise to Landlord not later than Two Hundred Seventy (270) days prior to the expiration of the original term of the Lease. Any renewal and extension of the Lease for the Renewal Term shall be at 95% of the then current market terms and conditions. Tenant shall not have the right to assign its renewal rights to a subtenant under this Lease. "Then current market terms and conditions" shall mean those terms and conditions prevailing on the Renewal Option Deadline Date for comparable space in the Loop 360 corridor project (the "Project") to tenants or prospective tenants of comparable creditworthiness. If on or before thirty (30) days after the delivery of the renewal Notice Landlord and Tenant cannot agree in writing to the "current market terms and conditions" to be applicable during a Renewal Term, then the question of what the "then current market terms and conditions" is shall be settled by arbitration. Such arbitration shall be before one disinterested MIA appraiser if one can be agreed upon, otherwise before three (3) disinterested MIA appraisers, one named by the Landlord, one by the Tenant, and one by the two thus chosen. The MIA appraiser or appraisers shall determine the controversy in accordance with the arbitration rules and laws 18

of the State of Texas as applied to the facts found by him, her or them. The cost of the appraisers shall be paid 50% by Tenant and 50% by Landlord. If on or before thirty (30) days after the Renewal Option Deadline Date, if Landlord and Tenant cannot agree in writing to the "current market terms and conditions" to be applicable during the Renewal Term, Tenant may terminate the Renewal Option (notwithstanding its earlier exercise) by delivering written notice of such termination to Landlord not later than the original termination date of this Lease. In the event of termination of the Renewal Option, the Renewal Option shall thereafter be null and void and of no further force and effect, and the Lease shall expire at the expiration of its original term. Any termination of the Lease shall also terminate the Renewal Option. SECTION 40.4 RIGHT OF FIRST REFUSAL Provided Tenant is not in default of this Lease Agreement, beyond any applicable cure period, Landlord hereby agrees to grant Tenant the righ