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Exhibit 4.1  


 
 

NOTE EXCHANGE AGREEMENT    
  


January 30,
2003

Astoria Capital Partners, L.P.

6600 S.W. 92nd Avenue

Suite 370

Portland, Oregon 97223 


Ladies
and Gentlemen: 


        Reference
is hereby made to the Secured Promissory Note, dated November 20, 2000, in the original principal amount of $18,525,416.67 issued by Raining Data Corporation, a Delaware
corporation (the "Company"), to Astoria Capital Partners, L.P. (the "Purchaser"), as amended by that
certain Amendment to Secured Promissory Note entered into as of June 10, 2002 (as so amended, the "Existing Note"). 


        The
Company wishes to confirm its arrangement with you in connection with the issuance to you, in exchange for the cancellation of the Existing Note, of a convertible subordinated note
in the form attached hereto as Exhibit A (the "Convertible Note"), in a principal amount of
$22,179,705, and convertible into fully paid and non-assessable shares (each a "Share") of the Company's Common Stock, par value $0.10 (the
"Common Stock"), as set forth in the Convertible Note. 



        Reference
is hereby made to the Registration Rights Agreement, made as of September 27, 2001, by and between the Company and the Purchaser (as amended, the
"Registration Rights Agreement"). Simultaneously with the execution and delivery of this Agreement, you and the Company have entered into a Third
Amendment to Registration Rights Agreement, dated as of the date hereof (the "Registration Rights Amendment"), pursuant to which the Company has agreed
to register the Shares
under certain circumstances. All capitalized terms not defined herein shall have the meaning ascribed in the Convertible Note. 



        1.    Agreement to Issue and Accept. On the basis of the representations and warranties and subject to
the terms and conditions set forth herein, the Company agrees to issue to you, and you agree to exchange the Existing Note for, a Convertible Note in the principal amount of $22,179,705 and having a
Conversion Rate determined as set forth in Section 1(b) below. The closing of the issuance and exchange of the Convertible Note against such payment shall take place on the date hereof, or such
other date agreed by you and the Company in writing (the "Closing Date"), at which time the Company shall deliver to you the Convertible Note and the Existing Note shall
automatically be cancelled. Upon cancellation of the Existing Note, automatically and without any further action on the part of any person, (a) all liens securing the Existing Note shall be
released and (b) the Company shall be fully discharged from any and all obligations and liabilities that it has or might have thereunder.


        2.    Representations and Warranties of the Company. The Company hereby makes the following
representations and warranties to you as of the date hereof: 



        (a)  The
Company has been duly incorporated, is validly existing as a corporation in good standing under the laws of Delaware, has the corporate power and corporate authority
to own its property and to conduct its business as currently conducted and is duly qualified to transact business and is in good standing in each jurisdiction in which the conduct of its business or
its ownership or leasing of property requires such qualification, except to the extent that the failure to be so qualified or be in good standing would not be reasonably expected to have a material
adverse effect on the consolidated financial position, results of operations or business of the Company and its Subsidiaries (as defined), taken as a whole (a "Material Adverse
Effect"). For the purposes of this Agreement, Subsidiaries means the entities controlled by the Company which are 






 


required to be disclosed pursuant to Item 601(b)(21) of Regulation S-K (each a "Subsidiary," and collectively, the
"Subsidiaries"). 


        (b)  The
Company has the requisite corporate power and authority to enter into and to consummate the transactions contemplated by the Convertible Note, this Agreement and the
Registration Rights Amendment (each a "Transaction Document," and collectively, the "Transaction
Documents") and otherwise to carry out its obligations hereunder and thereunder. The execution and delivery of each of the Transaction Documents by the Company and the
consummation by it of the transactions contemplated hereby or thereby have been duly authorized by all necessary action on the part of the Company and no further action is required by the Company to
authorize the Transaction Documents. Each of the Transaction Documents has been duly executed by the Company and, when delivered in
accordance with the terms hereof, will constitute the valid and binding obligation of the Company enforceable against the Company in accordance with its terms, subject to bankruptcy, insolvency,
reorganization and other laws of general applicability relating to or affecting creditors' rights and general equity principles (regardless of whether enforcement is sought in equity or at law). The
Company is not in violation of any of the provisions of its certificate of incorporation, by-laws or other organizational or charter documents. 



        (c)  The
Company has on the date hereof and will, at all times while the Convertible Note is outstanding, maintain an adequate reserve of duly authorized shares of Common
Stock, reserved for issuance to the Purchaser or any permitted subsequent holder of the Convertible Note, to enable the Company to perform its conversion, exercise and other obligations under this
Agreement and the Convertible Note. The Shares reserved for issuance upon conversion of the Convertible Note have been duly authorized and reserved and, when issued upon conversion of the Convertible
Note in accordance with the terms of the Convertible Note will be validly issued, fully paid and non-assessable, and the issuance of the Shares will not be subject to any preemptive or
similar rights. 


        (d)  The
execution, delivery and performance of the Transaction Documents, compliance by the Company with all provisions hereof and thereof and the consummation of the
transactions contemplated hereby and thereby and the issuance and delivery of the Convertible Note, will not (i) violate or constitute a breach of any of the terms or provisions of, or a
default under (or an event which with notice or lapse of time or both would become a default under), the charter or by-laws of the Company or any material agreement to which the Company is
a party or by which its assets are bound, or (ii) to the Company's knowledge, violate or conflict with any laws, administrative regulations or rulings or court decrees applicable to the Company
or its respective properties; and, except (A) as required pursuant to the Registration Rights Agreement as amended by the Registration Rights Amendment, (B) as required by applicable
blue sky laws and any filing of Form D under Regulation D under the Securities Act of 1933, as amended (the "Act"), (C) as required
under the NASD rules, or (D) for the disclosure required to be included in the Company's next Quarterly Report on Form 10-Q, when filed, no consent, approval, authorization
or order of or filing or registration with, any such court or governmental agency or body or third party is required for the execution, delivery and performance of the Transaction Documents by the
Company and the consummation of the transactions contemplated hereby and thereby. 



        (e)  Except
as set forth in the filings made by the Company with the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended, there are no
legal or governmental proceedings pending to which the Company or any of its Subsidiaries is a party or of which any of their respective properties are subject which could (i) reasonably be
expected to have a Material Adverse Effect or (ii) adversely affect or challenge the legality, validity or enforceability of any of the Transaction Documents, and, to the Company's knowledge,
no such proceedings are threatened or contemplated. 



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        3.    Agreements, Representations and Warranties of Purchaser. You covenant and agree with (and in the case of Sections 3(c) through 3(g) represent and
warrant to) the Company that:



        (a)  You
will not offer, sell, assign, hypothecate or otherwise transfer the Convertible Note except in compliance with applicable state securities laws and
(i) pursuant to an effective registration statement under the Act, (ii) to a Person you reasonably believe to be an "accredited investor" within the meaning of Rule 501 under the
Act, pursuant to an available exemption under the Act, or (iii) to non-U.S. Persons in an offshore transaction within the meaning and meeting the requirements of Rule 903
under the Act. 


        (b)  You
will not offer, sell, assign, hypothecate or otherwise transfer any Shares issued upon conversion of the Convertible Note except in compliance with applicable state
securities laws and (i) pursuant to an effective registration statement under the Act; (ii) to a Person you reasonably believe to be an institutional "accredited investor" within the
meaning of Rule 501(a)(1), (2), (3) or (7) under the Act, pursuant to an available exemption under the Act; or (iii) to a "qualified institutional buyer" (as defined in
Rule 144A of the Act). 


        (c)  You
are an "accredited investor" within the meaning of Rule 501 under the Act. 


        (d)  You
understand that the purchase of the Convertible Note involves substantial risk. You acknowledge that you are able to fend for yourself in the transactions
contemplated by this Agreement and have the ability to bear the economic risks of your investment pursuant to this Agreement and have such knowledge and experience in financial or business matters
that you are capable of evaluating the merits and risks of this investment in the Convertible Note and the Shares into which it is convertible and protecting your own interests in connection with this
investment. 


        (e)  The
Convertible Note and the Shares that you may acquire upon conversion of the Convertible Note will be acquired for your own account, not as a nominee or agent, and
not with a view to or in connection with the sale or distribution of any part thereof. 


        (f)    You
understand that the sale of the Convertible Note and the issuance of the Shares upon conversion thereof will not be registered under the Act on the ground that the
sale provided for in this Agreement is exempt from registration under the Act, and that the reliance of the Company on such exemption is predicated in part on your representations set forth in this
Agreement. You understand that the Convertible Note and the Shares issuable upon conversion thereof are restricted securities within the meaning of Rule 144 under the Act, and must be held
indefinitely unless they are subsequently registered or an exemption from such registration is available. You understand that the Company is under no obligation to register any of the securities sold
hereunder except with respect to the Shares as provided in the Registration Rights Agreement. 


        (g)  You
agree that the Convertible Note and the Shares issuable upon conversion thereof will bear legends and be subject to the restrictions on transfer. In addition you
agree that the Company may place stop transfer orders with its transfer agents with respect to such instruments. The appropriate portion of the legend shall be removed in accordance with the
provisions of the Convertible Note and the stop transfer orders shall be removed promptly upon delivery to the Company of such satisfactory evidence as reasonably may be required by the Company that
such stop orders are not required to ensure compliance with the Act. 




        4.    Deliveries.


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        (a)  Concurrently
with its execution and delivery of this Agreement against delivery of the documents by the Purchaser pursuant to paragraph (b) below, the Company is
delivering the following: 



        (i)    an
officer's certificate, in form and substance satisfactory to the Purchaser, certifying as to the true, correct and complete nature of the attached charter, bylaws and
authorizing resolutions of the Company; 


        (ii)  a
duly executed copy of the Convertible Note; and 


        (iii)  a
duly executed copy of the Registration Rights Amendment. 




        (b)  Concurrently
with its execution and delivery of the Agreement against delivery of the documents by the Company pursuant to paragraph (a) above, the Purchaser is
delivering the following: 



        (i)    a
duly executed copy of the Registration Rights Amendment; 


        (ii)  the
Existing Note marked "cancelled". 





        5.    Miscellaneous.



        (a)  This
Agreement shall be binding upon, and inure solely to the benefit of, you and the Company and the respective executors, administrators, successors and assigns
thereof. 


        (b)  The
Purchaser hereby agrees to deliver duly executed copies of all releases, satisfactions, termination statements and other documents reasonably requested by the
Company, in form suitable for recording, further evidencing the release of the Purchaser's interest in the collateral securing the Existing Note. Upon the closing of the transactions contemplated by
this Agreement, the Purchaser hereby authorizes the Company to file a termination statement under the Uniform Commercial Code with respect to the collateral securing the Existing Note. 


        (c)  Any
notice or other communication required or permitted to be given hereunder shall be given in writing by certified mail, facsimile, or overnight courier service
addressed as follows (as applicable) and shall be effective upon receipt: 


If
to the Company, to: 


Raining
Data Corporation

17500 Cartwright Road

Irvine, California 92614

Attention: Chief Financial Officer

Telephone: (949) 442-4400

Facsimile Transmission Number: (949) 261-0801 


If
to the Purchaser, to: 


Astoria
Capital Partners, L.P.

6600 S.W. 92nd Avenue

Suite 370

Portland, Oregon 97223

Attention: Richard Koe

Telephone: (503) 244-1956

Facsimile Transmission Number: (503) 244-3801 




or
to such other address or number and to the attention of such other Person as either party may designate by written notice to the other party. Notice shall be effective upon actual receipt. 


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        (d)  This
Agreement shall be governed by and construed in accordance with the laws of the State of California, without regard to conflicts of laws principles. 


        (e)  Time
shall be of the essence in the performance of this Agreement. 


        (f)    This
Agreement may be executed by the parties hereto in any number of counterparts, each of which shall be deemed to be an original, but all such respective counterparts
shall together constitute one and the same instrument. 


        (g)  Each
party shall pay the fees and expenses of its advisers, counsel, accountants and other experts, if any, and all other expenses incurred by such party incident to the
negotiation, preparation, execution, delivery and performance of this Agreement; provided, however, that the Company shall reimburse the Purchaser for up to $10,000 in legal fees incurred by the
Purchaser in connection with the negotiation, preparation, execution and delivery of this Agreement. 


        (h)  The
Transaction Documents, together with the exhibits hereto and thereto, contain the entire understanding of the parties with respect to the subject matter hereof and
supersede all prior agreements and understandings, oral or written, with respect to such matters, which the parties acknowledge have been merged into such documents, exhibits and schedules. 



        (i)    No
provision of this Agreement may be waived or amended except in a written instrument signed, in the case of an amendment, by the Company and the Purchaser or, in the
case of a waiver, by the party against whom enforcement of any such waiver is sought. No waiver of any default with respect to any provision, condition or requirement of this Agreement shall be deemed
to be a continuing waiver in the future or a waiver of any other provision, condition or requirement hereof, nor shall any delay or omission of either party to exercise any right hereunder in any
manner impair the exercise of any such right accruing to it thereafter. 



        (j)    The
headings herein are for convenience only, do not constitute a part of this Agreement and shall not be deemed to limit or affect any of the provisions hereof. 


        (k)  The
representations, warranties, agreements and covenants contained herein shall survive the Closing and the delivery and conversion of the Convertible Note. 


        (l)    In
case any one or more of the provisions of this Agreement shall be invalid or unenforceable in any respect, the validity and enforceability of the remaining terms and
provisions of this Agreement shall
not in any way be affecting or impaired thereby and the parties will attempt to agree upon a valid and enforceable provision which shall be a reasonable substitute therefor, and upon so agreeing,
shall incorporate such substitute provision in this Agreement. 



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remainder of this page is intentionally left blank] 


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	 	 	Very truly yours,	 
	

 	
 	

RAINING DATA CORPORATION	

 
	

 	
 	

By:	

/s/  BRIAN C. BEZDEK      
	

 
	 	 	Name: Brian C. Bezdek

Title: Chief Financial Officer	 
	 	 	 	 	 





	Accepted as of the date hereof:	 	 
	

ASTORIA CAPITAL PARTNERS, L.P.

By: Astoria Capital Management, Inc.,

its general partner	
 	

 
	

By:	

/s/  RICHARD W. KOE      
	
 	

 
	Name: Richard W. Koe

Title: President	 	 




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EXHIBIT A  


FORM OF CONVERTIBLE SUBORDINATED NOTE  


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NOTE EXCHANGE AGREEMENT