<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE , 1996
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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AWARD SOFTWARE INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
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CALIFORNIA 5098 94-2893462
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of Classification Code Number) Identification Number)
incorporation or organization)
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777 EAST MIDDLEFIELD ROAD
MOUNTAIN VIEW, CALIFORNIA 94043
(415) 968-4433
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
GEORGE C. HUANG
CHAIRMAN OF THE BOARD, PRESIDENT AND CHIEF EXECUTIVE OFFICER
AWARD SOFTWARE INTERNATIONAL, INC.
777 EAST MIDDLEFIELD ROAD
MOUNTAIN VIEW, CALIFORNIA 94043
(415) 968-4433
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
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Copies to:
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JAMES C. KITCH, ESQ. ROBERT T. CLARKSON, ESQ.
MATTHEW P. FISHER, ESQ. ADELE C. FREEDMAN, ESQ.
COOLEY GODWARD CASTRO WILSON SONSINI GOODRICH & ROSATI, P.C.
HUDDLESON & TATUM 650 PAGE MILL ROAD
FIVE PALO ALTO SQUARE PALO ALTO, CALIFORNIA 94304-1050
3000 EL CAMINO REAL (415) 493-9300
PALO ALTO, CALIFORNIA 94306-2155
(415) 843-5000
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the Registration Statement becomes effective.
If any of the securities being registered on this form are to be offered on a
delayed or continuous bases pursuant to Rule 415 under the Securities Act of
1933, 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, check the following box and list the
Securities Act registration statement number of 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. / /
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CALCULATION OF REGISTRATION FEE
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PROPOSED MAXIMUM
PROPOSED MAXIMUM AGGREGATE
TITLE OF SECURITIES OFFERING PRICE OFFERING AMOUNT OF
TO BE REGISTERED PER SHARE(1) PRICE(1) REGISTRATION FEE
Common Stock................................. $11,897
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(1) Estimated solely for the purpose of calculating the amount of the
registration fee in accordance with Rule 457 under the Securities Act of
1933.
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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 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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AWARD SOFTWARE INTERNATIONAL, INC.
CROSS-REFERENCE SHEET
PURSUANT TO ITEM 501(B) OF REGULATION S-K
SHOWING LOCATION IN PROSPECTUS OF INFORMATION
REQUIRED BY ITEMS OF FORM S-1
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ITEM NUMBER AND HEADING IN FORM S-1
REGISTRATION STATEMENT LOCATION IN PROSPECTUS
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1. Forepart of the Registration Statement and
Outside Front Cover Page of Prospectus..... Facing Page of Registration Statement;
Outside Front Cover Page
2. Inside Front and Outside Back Cover Pages of
Prospectus................................. Inside Front and Outside Back Cover Pages
3. Summary Information, Risk Factors, and Ratio
of Earnings to Fixed Charges............... Prospectus Summary; Risk Factors
4. Use of Proceeds.............................. Use of Proceeds
5. Determination of Offering Price.............. Outside Front Cover Page; Underwriting
6. Dilution..................................... Dilution
7. Selling Shareholders......................... Principal and Selling Shareholders;
Certain Transactions
8. Plan of Distribution......................... Outside Front and Inside Front Cover
Pages; Underwriting
9. Description of Securities to be Registered... Prospectus Summary; Capitalization;
Description of Capital Stock
10. Interests of Named Experts and Counsel....... Legal Matters; Experts
11. Information with Respect to the Registrant... Outside Front and Inside Front Cover
Pages; Prospectus Summary; Risk Factors;
Dividend Policy; Capitalization;
Selected Consolidated Financial
Information; Management's Discussion and
Analysis of Financial Condition and
Results of Operations; Business;
Management; Certain Transactions;
Principal and Selling Shareholders;
Description of Capital Stock; Shares
Eligible for Future Sale; Additional
Information; Consolidated Financial
Statements
12. Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities................................ Not Applicable
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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.
PROSPECTUS Subject to Completion
Dated June , 1996
2,000,000 Shares
LOGO
Common Stock
Of the 2,000,000 shares of common stock ("Common Stock") offered hereby,
1,250,000 are being sold by Award Software International, Inc., a California
Corporation (the "Company" or "Award"), and 750,000 shares are being sold by
Selling Shareholders. See "Principal and Selling Shareholders." The Company will
not receive any proceeds from the sale of the Common Stock by the Selling
Shareholders.
Prior to the Offering, there has been no public market for the Common Stock. It
is currently anticipated that the initial public offering price will be between
$ and $ per share. See "Underwriting" for information relating
to the factors to be considered in determining the initial public offering
price.
Application has been made for the Common Stock to be approved for quotation on
the Nasdaq National Market under the symbol "AWRD."
SEE "RISK FACTORS" BEGINNING ON PAGE 6 FOR CERTAIN INFORMATION THAT SHOULD BE
CONSIDERED BY PROSPECTIVE INVESTORS.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
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PROCEEDS TO
PRICE TO UNDERWRITING PROCEEDS TO SELLING
PUBLIC DISCOUNT(1) COMPANY(2) SHAREHOLDERS
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Per Share $ $ $ $
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Total(3) $ $ $ $
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(1) The Company and certain of the Selling Shareholders have agreed to indemnify
the Underwriters against certain liabilities, including liabilities under
the Securities Act of 1933, as amended. See "Underwriting."
(2) Before deducting expenses of the Offering payable by the Company estimated
at $ .
(3) The Company has granted the Underwriters an option to purchase up to an
additional 300,000 shares of Common Stock, on the same terms as set forth
above, solely to cover over-allotments, if any. If such option is exercised
in full, the total Price to Public, Underwriting Discount and Proceeds to
Company will be $ , $ and $ , respectively. See
"Underwriting."
The shares of Common Stock being offered by this Prospectus are being offered by
the Underwriters, subject to prior sale, when, as and if delivered to and
accepted by the Underwriters, and subject to approval of certain legal matters
by Wilson Sonsini Goodrich & Rosati, P.C., counsel for the Underwriters. It is
expected that delivery of the shares of Common Stock will be made against
payment therefor on or about , 1996 at the offices of J.P. Morgan
Securities Inc., 60 Wall Street, New York, New York.
J.P. MORGAN & CO.
PRUDENTIAL SECURITIES INCORPORATED
NEEDHAM & COMPANY, INC.
, 1996
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(COLOR ART WORK)
2
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No person has been authorized to give any information or to make any
representations not 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 or any Underwriters. This Prospectus does not constitute an offer
to sell, or a solicitation of an offer to buy, the Common Stock in any
jurisdiction to any person to whom it is unlawful to make such offer or
solicitation.
No action has been or will be taken in any jurisdiction by the Company, the
Selling Shareholders or by any Underwriter that would permit a public offering
of the Common Stock or possession or distribution of this Prospectus in any
jurisdiction where action for that purpose is required, other than in the United
States. Persons into whose possession this Prospectus comes are required by the
Company, the Selling Shareholders and the Underwriters to inform themselves
about and to observe any restrictions as to the offering of the Common Stock and
the distribution of this Prospectus.
TABLE OF CONTENTS
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Page
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Prospectus Summary....................... 4
Risk Factors............................. 6
Use of Proceeds.......................... 12
Dividend Policy.......................... 12
Capitalization........................... 12
Dilution................................. 13
Selected Consolidated Financial
Information............................ 14
Management's Discussion and Analysis of
Financial Condition and Results of
Operations............................. 15
Business................................. 22
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Management............................... 29
Certain Transactions..................... 33
Principal and Selling Shareholders....... 36
Description of Capital Stock............. 39
Shares Eligible for Future Sale.......... 41
Underwriting............................. 43
Legal Matters............................ 43
Experts.................................. 43
Additional Information................... 44
Index to Consolidated Financial
Statements............................. F-1
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UNTIL , 1996 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL
DEALERS EFFECTING TRANSACTIONS IN THE COMMON STOCK, WHETHER OR NOT PARTICIPATING
IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN
ADDITION TO THE OBLIGATIONS OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS
UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK AT
A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
TRANSACTIONS MAY BE EFFECTED ON THE NASDAQ NATIONAL MARKET OR OTHERWISE. SUCH
STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
The Company intends to furnish its shareholders annual reports containing
consolidated financial statements audited by its independent auditors and
quarterly reports containing consolidated unaudited financial statements for
each of the first three quarters of each year.
The Company's logo, SMSAccess, USBAccess, RPBAccess, APMAccess, DMIAccess,
WWWAccess and BIOSAccess are trademarks of the Company. This Prospectus also
includes trademarks of companies other than the Company.
3
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PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and consolidated financial statements, including notes thereto,
appearing elsewhere in this Prospectus. For a discussion of certain factors to
be considered in evaluating an investment in the shares of Common Stock offered
hereby, see "Risk Factors." Except as otherwise noted, all information in this
Prospectus (i) assumes no exercise of the Underwriters' over-allotment option;
and (ii) reflects a 1-for-2 reverse stock split of the currently outstanding
Common Stock. See "Description of Capital Stock" and "Underwriting."
THE COMPANY
Award designs, develops and markets system management software for the global
computing market. System management software is one of the fundamental layers in
personal computer ("PC") architecture and provides an essential interface
between a PC's operating system software and hardware. The Company's principal
system management software products include a suite of Basic Input/Output System
software ("BIOS"). Award's customers include designers and manufacturers of
motherboards, PC systems and other microprocessor-based (or "embedded") devices.
The Company believes that its products and engineering services enable customers
to rapidly develop new motherboard designs for state-of-the-art computer
systems. The Company markets and licenses its products and services worldwide
and has established itself as a leading provider of desktop system management
software in Asia, which accounts for approximately 40% of worldwide desktop
motherboard production.
The BIOS, which is the software initially executed after the system is turned
on, tests and initializes hardware components, initiates the operating system
and then provides advanced interface functions. Award's desktop BIOS products
enable a PC to support a number of key advanced technologies, including Plug and
Play, Peripheral Component Interconnect ("PCI"), Desktop Management Interface
("DMI") and Advanced Power Management ("APM"). The Company is currently
developing further enhancements to its BIOS, including support for Universal
Serial Bus ("USB"). The Company's embedded device BIOS provides customized
features to address the specialized needs of its customers in this market. In
addition to the Company's proprietary suite of system management software
products, Award offers PC Card software that enables PCs and other electronic
devices to recognize, install, configure and operate peripheral devices, such as
a network or modem card.
The Company currently services more than 100 customers worldwide, including many
of the world's leading original equipment and embedded device manufacturers. In
response to its customers' need to develop and integrate new technologies
rapidly, the Company has developed its business with a particular emphasis on
providing local engineering service and support in each of its major target
regions: Asia (especially Taiwan), North America and Europe. The Company is
increasing its presence in Europe through a strategic relationship with Vobis
Microcomputer AG ("Vobis"), pursuant to which the Company and Vobis are jointly
developing BIOS and utilities for the desktop PC and embedded device markets. As
part of this relationship, Vobis has purchased approximately 12% of the
Company's Common Stock.
The Company is leveraging its existing customer relationships and desktop
expertise to develop system management software for the mobile and network
computing markets. The Company anticipates that leading Taiwanese desktop system
and motherboard manufacturers, many of which are Award customers, will enter the
mobile PC market and, in response, the Company is developing enhanced system
management software for mobile PCs. In addition, the Company is developing a
suite of applications called SMSAccess, which will enable remote access,
diagnosis and repair of disabled systems.
The Company was incorporated in California in 1983. The Company's executive
officers are located at 777 East Middlefield Road, Mountain View, California
94043, and its telephone number is (415) 968-4433. Award's home page can be
located on the World Wide Web at http://www.award.com. Information contained in
the Company's web site shall not be deemed to be a part of this Prospectus.
4
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THE OFFERING
The 2,000,000 shares of Common Stock initially being offered is referred to
herein as the "Offering."
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COMMON STOCK OFFERED:
By the Company(1)................................... 1,250,000 shares
By the Selling Shareholders......................... 750,000 shares
TOTAL OFFERING(1)................................... 2,000,000 shares
COMMON STOCK TO BE OUTSTANDING AFTER THE
OFFERING(1)......................................... 6,207,127 shares
USE OF PROCEEDS BY THE COMPANY........................ Product development, working capital and
other general corporate purposes,
including possible acquisitions of
complementary products and technologies.
See "Use of Proceeds."
PROPOSED NASDAQ NATIONAL MARKET SYMBOL................ "AWRD"
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SUMMARY CONSOLIDATED FINANCIAL INFORMATION
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PREDECESSOR PREDECESSOR THE COMPANY
---------------- AND THE -----------------------------------
COMPANY THREE MONTHS
----------- ENDED
YEARS ENDED DECEMBER 31,
------------------------------------------------
1991 MARCH 31,
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Dollars in thousands, except per
share data 1992 1993(2) 1994 1995 1995 1996
------- ----------- ------ ------ ------ ------
(UNAUDITED)
(UNAUDITED)
CONSOLIDATED STATEMENT OF
OPERATIONS DATA:
Revenues:
Software and engineering services $6,487 $ 5,698 $ 3,820 $5,746 $7,228 $1,601 $2,306
Related parties -- -- 50 972 1,902 455 506
------ ------- ----------- ------ ------ ------ ------
Total revenues 6,487 5,698 3,870 6,718 9,130 2,056 2,812
Gross profit 5,673 5,182 3,662 6,127 8,494 1,971 2,524
Net income (loss) $ (72) $ (296) $(1,833) $1,258 $1,165 $ 316 $ 386
Net income per share(3) $ 0.20 $ 0.18 $ 0.05 $ 0.06
Weighted average common and common
equivalent shares in thousands(3) 6,307 6,500 6,622 6,047
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THE COMPANY
-----------------------------
MARCH 31, 1996
-----------------------------
Dollars in thousands ACTUAL AS ADJUSTED(4)
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(UNAUDITED)
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CONSOLIDATED BALANCE SHEET DATA:
Cash and cash equivalents $10,591 $
Working capital 11,315
Total assets 14,238
Total shareholders' equity 12,068
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(1) Assumes no exercise of the underwriters' over-allotment option. Excludes an
aggregate of 1,250,000 shares reserved for issuance under the Company's 1995
Stock Option Plan, of which 951,113 shares were subject to outstanding options
as of May 31, 1996, and 595,727 shares of Common Stock issuable upon exercise of
outstanding warrants. See "Capitalization," "Management-Stock Option Plan,"
"Certain Transactions" and Note 7 of Notes to Consolidated Financial Statements.
(2) Includes the combined results of operations for the Company and its
predecessor, Award Software, Inc. (the "Predecessor"). The Company was acquired
in July 1993, which resulted in a new historical accounting basis for the
Company. The results of operations for the Predecessor for the period January 1,
1993 through July 1, 1993 and the Company for the period July 2, 1993 through
December 31, 1993 have been combined to facilitate presentation of the results
of operations on a calendar year basis. See Consolidated Financial Statements.
(3) For an explanation of the determination of the weighted average number of
shares used in computing net income per share, see Note 2 of Notes to
Consolidated Financial Statements.
(4) As adjusted to reflect the sale of 1,250,000 shares of Common Stock offered
by the Company hereby, assuming an initial public offering price of $ per
share, after deducting underwriting discounts and estimated offering expenses
payable by the Company.
5
<PAGE> 8
RISK FACTORS
In addition to the other information in this Prospectus, the following risk
factors should be considered carefully by potential investors in evaluating an
investment in the Common Stock offered hereby. This Prospectus contains
forward-looking statements within the meaning of Section 27A of the Securities
Act of 1933, as amended, and Section 21A of the Securities Exchange Act of 1934,
as amended, 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 below.
FLUCTUATIONS IN QUARTERLY OPERATING RESULTS; SEASONALITY
The Company has experienced and expects to continue to experience fluctuations
in its quarterly results of operations. The Company's revenues are affected by a
number of factors, including the demand for PCs and embedded devices, timing of
new product introductions, product mix, volume and timing of customer orders,
activities of competitors and the ability of the Company to penetrate new
markets. The Company's business is seasonal with revenues generally increasing
in the fourth quarter as the result of increased PC shipments during the holiday
season. Consequently, during the three quarters ending in March, June and
September, the Company has historically not been as profitable as in the quarter
ending in December. In addition, the Company's revenues and profits have
historically decreased in the first quarter of each year as compared with the
fourth quarter of the previous year. The Company generally ships orders as they
are received and, as a result, has little or no backlog. Quarterly revenues and
results of operations therefore depend on the volume and timing of orders
received during the quarter, which are difficult to forecast. Because the
Company's staffing and other operating expenses are based on anticipated
revenues, delays in the receipt of orders can cause significant variations in
results of operations from quarter to quarter. The Company also may choose to
reduce prices or to increase spending in response to competition or to pursue
new market opportunities, which may adversely affect the Company's results of
operations. Therefore, the Company believes that period-to-period comparisons of
its revenues and operating results are not necessarily meaningful and should not
be relied upon as indicators of future performance. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations."
Due to all of the foregoing factors, it is likely that in some future quarters
the Company's operating results will be below the expectations of public market
analysts and investors. Regardless of the general outlook for the Company's
business, the announcement of quarterly results of operations below analyst and
investor expectations is likely to result in a decline in the trading price of
the Company's Common Stock.
DEPENDENCE UPON THE UNDERLYING PC INDUSTRY; DEPENDENCE ON CURRENT PC INDUSTRY
STANDARDS
The demand for the Company's system management software depends principally on
(i) PC manufacturers and other customers licensing the Company's software rather
than developing their own system management software, (ii) the market acceptance
of the products, which incorporate the Company's software, sold by the Company's
original equipment manufacturer ("OEM") customers, (iii) the emergence of new PC
technologies that require system management software solutions to provide
functionality, user value and performance, and (iv) the technological competence
of the Company's core products. Sales of PCs fluctuate substantially from time
to time based on numerous factors, including general economic conditions in the
markets for the Company's customers' products, new hardware and software product
introductions, demand for new applications and shortages of key components.
Further, the markets in the PC industry are extremely competitive and
characterized by rapid and frequent price reductions.
The introduction of new hardware architectures, microprocessors, peripheral
equipment and operating systems within the PC industry has increased the
complexity, time to market and cost to develop PCs. A number of computer
manufacturers, including IBM Corporation ("IBM") and Compaq Computer Corporation
("Compaq"), develop their own BIOS products to achieve compatibility with and
integrate new technologies into their products. While the Company believes that
price and time-to-market pressures will continue to foster a trend among its
customers and potential customers to outsource system management software
requirements to third parties, there can be no assurance that this trend will
continue or will not reverse itself, which would have a material adverse effect
on the business and results of operations of the Company. See
"Business -- Industry Background" and "-- Award Strategy."
The Company's software to date has been primarily based on central processing
units ("CPUs") designed by or compatible with those of Intel Corporation
("Intel") and operating system software designed by Microsoft Corp.
("Microsoft"). If the market for Intel and Intel-compatible CPUs with x86
architecture is materially diminished or if another CPU, such as the Motorola,
Inc.'s "PowerPC," achieves a high degree of success, demand for the Company's
current software would be reduced. In addition, most of the Company's software
has been installed on computers using Microsoft's MS/DOS or Windows operating
systems. If Microsoft's operating systems, cease to be the dominant operating
system for the PC industry, or if PC manufacturers use other operating systems,
which are not compatible with MS/DOS or Windows, the Company could experience
increased product development costs and/or diminished revenues.
6
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CONCENTRATION OF REVENUES FROM DESKTOP BIOS
The Company depends on sales of desktop BIOS for a substantial majority of its
revenues. The Company has not generated substantial revenues from the sale of
other products to date, including sales of mobile PC products. If sales of the
Company's desktop BIOS decline for any reason, the Company's financial condition
and results of operations would be adversely affected, unless the Company is
able to replace those sales with increased sales of other products. Sales of
desktop BIOS could decline for a number of reasons, including a shift in the
market for PCs away from desktop PCs in favor of mobile PCs. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
COMPETITION
The markets for the Company's software are highly competitive. The Company faces
competition primarily from other system management software companies, including
American Megatrends, Inc., Phoenix Technologies Ltd. and SystemSoft Corporation,
as well as in-house software development staffs of current and prospective
customers. Certain of the companies with which the Company competes or may in
the future compete have substantially greater financial, marketing, sales and
support resources and greater brand-name and technology leadership recognition
than the Company. There can be no assurance that the Company will be able to
develop software comparable or superior to software offered by its competitors.
In addition, the PC market experiences intense price competition and the Company
expects that, in order to remain competitive, it may have to decrease unit
prices on some or all of its software products. Any such decrease would have a
material adverse effect on the Company's business and results of operations.
The Company believes that interdependencies may develop between system
management software companies and their customers, which would need to be
overcome in order to replace an entrenched competitor. While the Company
believes that such entrenchment may benefit the Company in its existing
relationships with key participants in the desktop PC market, customer
entrenchment may make it more difficult for the Company to displace or increase
market presence, particularly in the mobile PC market, where competitors may
already have strong relationships with certain mobile PC manufacturers. Intel
has entered into formal agreements with, and become a significant shareholder
in, Phoenix Technologies Ltd. and SystemSoft Corporation. In addition,
SystemSoft Corporation has entered into agreements with Microsoft, IBM and
Compaq to license its PC Card software.
Operating system software vendors may in the future enter the Company's primary
markets as direct competitors or incorporate enough features into their products
so as to reduce the need for the Company's products. For example, Microsoft's
Windows 95 operating system incorporates certain basic PC Card and Plug and Play
software; the primary customer of the Company's PC Card software has indicated
that it will rely on this operating system rather than continue to license the
Company's PC Card software. As software developers provide greater functionality
and features, user value and performance in their products that eliminate or
reduce the need for the Company's system management software, the market for the
Company's products could be materially diminished. In addition, chipset
manufacturers, including Intel, may increase their presence in the motherboard
manufacturing market, which may have an adverse effect on the Company's OEM
customers. There can be no assurance that other participants in the PC industry
will not develop products and solutions that reduce the demand or obviate the
need for the Company's products. See "Business -- Competition."
ABILITY TO RESPOND TO RAPID TECHNOLOGICAL CHANGE
The market for system management software is characterized by rapidly changing
technology, evolving industry standards and frequent new product introductions.
The general trend in the PC industry is toward shorter product life cycles,
resulting in rapid product and technology obsolescence. The life cycle of the
Company's products is highly dependent on the life cycles of the products sold
by its customers, who are primarily in the desktop PC industry. Although the
Company's core products, specifically, the desktop and embedded device BIOS and
PC Card software, may have a life cycle as long as several years, specific
customized adaptations of the Company's core products are generally expected to
have a life cycle of six months to one year. The Company's future success will
depend upon its ability to enhance its core software and to develop and
introduce new software which keeps pace with technological developments and
evolving industry standards as well as to respond to its customers' and
end-users' demand for greater features and functionality. The Company is
currently developing certain technologies that it will need to remain
competitive, particularly system management software that supports USB. If the
Company fails to introduce such products by the time USB becomes an industry
standard, the Company's business and results of operations will be adversely
affected. There can be no assurance that the Company will be successful in
developing such enhancements and new software, or, if successful, that it will
not experience delays in achieving such developments. Any failure or delay by
the Company to develop such enhancements or new software or the failure of its
software to achieve market acceptance, would adversely affect the Company's
business, financial condition and results of operations. In addition, there can
be no assurance that products or technologies developed by others will not
render the Company's software or technologies non-competitive or obsolete. See
"Business -- Industry Background" and "-- Product Development."
7
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UNCERTAIN ACCEPTANCE IN NEW AND DEVELOPING MARKETS
The Company's future success is dependent on customer acceptance of new products
and penetration of markets outside the desktop PC market. There can be no
assurance that the Company will be able to expand its products and technologies
into the mobile PC, embedded device and network computing and Internet markets
or that the Company will be able to increase its market presence in the desktop
PC market. Expansion of the Company's software and technology into the mobile PC
market will depend primarily on the Company's ability to replace entrenched
competitors. Penetration of markets outside the desktop PC market, such as the
embedded device market, will depend upon the development and availability of
system management software providing the necessary functionality and customer
acceptance for such new technology. There can be no assurance that the Company
will be able to develop or obtain from third parties the necessary software and
technology to penetrate these markets, or that such products will not be
developed by others rendering the Company's products obsolete or noncompetitive.
Any increase in the demand for the Company's embedded device products is
dependent upon the increasing use and complexity of embedded computer systems in
new and traditional products. No assurance can be given that this trend will
continue or that if it does, the Company will be able to design system
management software that will address the unique requirements of the embedded
device market. Further, since the Company's experience and expertise are based
on Intel x86 architecture, the Company's success in the embedded device market
is significantly dependent on Intel's continued commitment to, and the increased
presence of x86 architecture in, this market. No assurance can be given that
Intel will not de-emphasize or withdraw its support of the embedded device
market or that the trend toward x86 architecture in the embedded device market
will continue, any of which could result in a material adverse effect on the
Company's growth strategies, financial condition and results of operations.
Certain of the markets for the Company's existing and future products, such as
the Internet and private internet protocol networks ("Intranet"), have only
recently begun to develop and are rapidly evolving. Demand and market acceptance
for recently introduced or developing products are subject to a high level of
uncertainty and risk. Critical issues concerning the commercial use of the
Internet remain unresolved and could adversely affect the growth of Internet
use. There can be no assurance that commerce and communication over the Internet
or Intranet will become widespread, or that the Company's planned products
addressing the Internet and Intranet markets will become widely accepted.
Because these markets for the Company's existing and developing products are new
and rapidly emerging, it is difficult to predict the future growth rate, if any,
and size of these markets. There can be no assurance that such markets for the
Company's existing and developing products and technology will develop or that
such products will be accepted. If these markets fail to develop, develop more
slowly than anticipated or become saturated with competitors, or if the
Company's products do not obtain customer acceptance, the Company's business,
operating results and financial condition could be materially adversely
affected. See "Business -- Award Strategy."
DEPENDENCE ON KEY CUSTOMER RELATIONSHIPS; CONCENTRATION OF CREDIT RISK
The Company believes that its success to date has been largely due to its
relationship with participants in the desktop PC industry, particularly OEMs in
the desktop PC market. The Company works closely with its customers to provide
quick response to their product design needs and assists them in evaluating new
technological developments as they affect future products and enhancements to be
sold by the Company's customers. The loss of any one of these strategic
relationships or any other significant customer in the PC industry could
adversely affect the Company's product development efforts, business, financial
condition and results of operations.
In the year ended December 31, 1995, Vobis and Toshiba Europa (I.E.) GmbH
("Toshiba") accounted for approximately 13% and 14%, respectively, of the
Company's total revenues. In the quarter ended March 31, 1996, Vobis and Toshiba
accounted for approximately 18% and 13%, respectively, of the Company's total
revenues. The loss of any key customer or the inability of the Company to
replace revenues provided by a key customer would have a material adverse effect
on the Company's business, financial condition and results of operations.
Toshiba recently indicated that it intends to discontinue licensing the
Company's PC Card software, and, therefore, the Company does not currently
expect to receive material revenues from this customer during the second half of
1996. Further, the Company's customer base consists primarily of OEMs in the
desktop PC market, and as a result the Company maintains individually
significant receivable balances from major OEMs. If these OEMs fail to satisfy
their payment obligations, the Company's financial condition and results of
operations would be adversely affected.
DEPENDENCE ON KEY PERSONNEL; ABILITY TO ATTRACT AND RETAIN KEY TECHNICAL
EMPLOYEES
The Company's success to date has depended to a significant extent upon a number
of key management and technical employees. The loss of services of one or more
of these key employees, particularly George C. Huang, the Company's Chairman of
the Board, President and Chief Executive Officer; Lyon T. Lin, General Manager,
Taiwan and President, Award Software Hong Kong Limited, Taiwan Branch; and
Maurice W. Bizzarri, the Company's Vice President, Engineering and Product
Marketing, could have a material adverse effect on the Company's business and
financial condition. Except for the Company's employees in Germany, none of the
Company's employees is party to an employment agreement with the Company. The
Company believes that its future success will also depend in
8
<PAGE> 11
large part upon its ability to attract and retain highly skilled technical,
management and sales and marketing personnel. Moreover, because the development
of the Company's software requires knowledge of computer hardware, operating
system software, system management software and application software, key
technical personnel must be proficient in a number of disciplines. Competition
for such technical personnel is intense, and the failure of the Company to hire
and retain talented technical personnel or the loss of one or more key employees
could have an adverse effect on the Company's business and results of
operations.
Future growth, if any, of the Company will require additional engineering, sales
and marketing, financial and administrative personnel, to expand customer
services and support and to expand operational and financial systems. There can
be no assurance that the Company will be able to attract and retain the
necessary personnel to accomplish its growth strategies or that it will not
experience constraints that will adversely affect its ability to satisfy
customer demand in a timely fashion. If the Company's management is unable to
manage growth effectively, the Company's business and financial condition could
be adversely affected.
MANAGEMENT OF GROWTH
The growth of the Company's business and, in particular, the Company's customer
base, has placed, and is expected to continue to place, a strain on the
Company's management systems and resources. The Company's ability to compete
effectively and manage future growth, if any, will require the Company to
continue to improve its financial and management controls, reporting systems and
procedures on a timely basis and expand, train and manage its work force. There
can be no assurance that the Company will be able to do so successfully, and the
failure to do so would have a material adverse effect upon the Company's
business, operating results and financial condition. The Company's success will
depend to a significant degree on the ability of its executive officers and
other members of its senior management, none of whom has any prior experience in
public companies in their current roles.
INTERNATIONAL OPERATIONS; CURRENCY FLUCTUATIONS; INTERNATIONAL UNREST
The Company operates on a multinational basis, and a significant portion of its
business is conducted in currencies other than the U.S. Dollar. As a result, the
Company is subject to various risks, including exposure to currency
fluctuations, greater difficulty in administering its business globally,
multiple regulatory requirements and other risks associated with international
sales, such as import and export licenses, political and economic instability,
overlapping or differing tax structures, trade restrictions, changes in tariff
rates, different legal regimes and difficulty in protecting intellectual
property, enforcing agreements and collecting accounts receivable. Although
amounts have been immaterial to date, fluctuations of foreign currencies in
relation to the U.S. Dollar could affect the Company's financial condition and
results of operations. The Company does not currently engage in foreign currency
hedging transactions. There can be no assurance that exchange rate fluctuations
will not have a material adverse effect on the Company's financial condition or
results of operations.
In addition, recent events such as the elections in Taiwan and the military
maneuvers conducted by the Peoples Republic of China in the Straits of Taiwan
have increased tensions in that area. In the event that actual hostilities
erupted between the two countries, the operations of the Company's customers
might be interrupted for an indeterminate period of time, which would have a
material adverse effect on the Company's business and financial condition.
INTELLECTUAL PROPERTY AND PROPRIETARY RIGHTS
The Company's success depends in significant part on the development,
maintenance and protection of its intellectual property. The Company regards its
software as proprietary and attempts to protect it with a combination of
patents, copyrights, trademarks and trade secrets, employee and third-party
nondisclosure agreements and other methods of protection. The Company has patent
applications pending in the U.S. and/or abroad on six inventions, three of which
are owned jointly with a third party. Despite these precautions, it may be
possible for unauthorized third parties to copy the Company's software or to
reverse engineer or obtain and use information that the Company regards as
proprietary. The Company licenses its object and source code under written
license agreements. Certain provisions of such licenses, including provisions
protecting against unauthorized use, copying, transfer and disclosure of the
licensed programs, may be unenforceable under the laws of certain jurisdictions.
In addition, the laws of some foreign countries, including Taiwan, do not
protect the Company's proprietary rights to the same extent as do the laws of
the United States. There can be no assurance that the protections put in place
by the Company will be adequate.
Significant and protracted litigation may be necessary to protect the Company's
intellectual property rights to determine the scope of the proprietary rights of
others or to defend against claims of infringement. Moreover, although the
Company is not currently involved in any litigation with respect to intellectual
property rights, in the past there have been allegations that certain portions
of the Company's core BIOS infringed on a third party's copyrights. In response,
the Company rewrote certain software routines in a "clean room" procedure and is
upgrading its customers to the new version of such software routines in order to
avoid any further allegations of infringement. The Company believes that its
software does not presently infringe the copyrights of any third parties.
However, there can be no assurance that other parties will not make allegations
of infringement in the future. Such assertions could require the Company
9
<PAGE> 12
to discontinue the use of certain software codes or processes, to cease the
manufacture, use and sale of infringing products, to incur significant
litigation costs and expenses and to develop non-infringing technology or to
obtain licenses to the alleged infringing technology. Although the Company has
been able to acquire licenses from third parties in the past, there can be no
assurance that the Company would be able to develop alternative technologies or
to obtain such licenses or, if a license were obtainable, that the terms would
be commercially acceptable to the Company in the event such assertions are made
in the future.
CONTROL BY MANAGEMENT SHAREHOLDERS
Upon completion of the Offering, the directors and executive officers of the
Company as a group will beneficially own approximately 48% of the outstanding
Common Stock, excluding the exercise of the Underwriters' over-allotment option.
As a result, such persons will have the ability to control the business and
affairs of the Company. Such concentration of ownership may have the effect of
delaying or preventing a change in control of the Company. See "Management" and
"Principal and Selling Shareholders."
SIGNIFICANT UNALLOCATED NET PROCEEDS
The principal purposes of the Offering are to create a public market for the
Company's Common Stock, facilitate future access to capital markets and enhance
the Company's ability to use its Common Stock as consideration for acquisitions
and as a means of attracting and retaining key employees. The Company intends to
use the net proceeds for general corporate purposes, including working capital
and product development. The Company may use a portion of the net proceeds to
acquire technologies or products complementary to the Company's business and
growth strategy. The Company has no other specific uses of the proceeds of the
Offering, and the exact uses of such proceeds will be subject to the discretion
of management. See "Use of Proceeds."
SHARES ELIGIBLE FOR FUTURE SALE
Sales of a substantial number of shares of Common Stock in the public market
following this offering could adversely affect the market price for the
Company's Common Stock. Upon completion of this offering, the Company will have
outstanding 6,207,127 shares of Common Stock, assuming no exercise of the
Underwriters' over-allotment option and no exercise of outstanding options and
warrants. Of these shares, the 2,000,000 shares sold in the Offering will be
freely tradable without restrictions or further registration under the
Securities Act of 1933, as amended (the "Securities Act"). The remaining
4,207,127 shares of Common Stock held by existing shareholders are "restricted
securities" as such term is defined in Rule 144 under the Securities Act (the
"Restricted Shares"). Restricted Shares may be sold in the public market only if
registered or if they qualify for an exemption from registration under Rules
144, 144(k) or 701 or Regulation S promulgated under the Securities Act. The
Company, all directors and executive officers and certain shareholders of the
Company have agreed not to sell or otherwise dispose of any shares of Common
Stock for a period of 180 days after the date of this Prospectus without the
prior written consent of J.P. Morgan Securities Inc. As a result of contractual
restrictions and the provisions of Rules 144 and 701 and Regulation S,
additional shares will be available for sale in the public market as follows:
(i) no Restricted Shares will be eligible for immediate sale on the date of this
Prospectus, (ii) 5,000 Restricted Shares and 324,727 shares of Common Stock
issuable upon exercise of currently outstanding options will be eligible for
sale beginning 90 days after the date of this Prospectus and (iii) 4,202,157
Restricted Shares, 44,214 additional shares of Common Stock issuable upon
exercise of currently outstanding options and 595,727 shares of Common Stock
issuable upon exercise of currently outstanding warrants will be eligible for
sale 180 days after the date of this Prospectus upon expiration of lock-up
agreements. The Restricted Shares will be eligible for sale from time to time
after completion of this offering. After the Offering, the holders of
approximately 1,735,699 shares of Common Stock will be entitled to certain
demand and piggyback rights with respect to registration of such shares under
the Securities Act. If such holders, by exercising their demand rights, cause a
large number of securities to be registered and sold in the public market, such
sales could have an adverse effect on the market price for the Company's Common
Stock. If such holders, by exercising their piggyback registration rights, cause
a large number of their shares to be included in a public offering by the
Company, the obligation to include such shares could have an adverse effect on
the market price for the Company's Common Stock or on the Company's ability to
raise capital. See "Underwriting" and "Shares Eligible for Future Sale."
NO PRIOR PUBLIC MARKET; POSSIBLE VOLATILITY OF STOCK PRICE
Prior to the Offering, there has not been any public market for the Company's
Common Stock, and there cannot be any assurance that an active trading market
will develop or be sustained after the Offering. The initial public offering
price for the Common Stock to be sold by the Company and the Selling
Shareholders will be determined by negotiation among representatives of the
Company, the Selling Shareholders and the representatives of the Underwriters
and may not be indicative of the future market price. The trading price of the
Common Stock could be subject to wide fluctuations in response to
quarter-to-quarter variations in operating results, changes in earnings
estimates by analysts, announcement of technological innovations or new products
by the Company or its competitors, general conditions in the system management
software and PC industries and other events or factors. In addition, in recent
years the stock market in general, and the shares of technology companies in
particular, have experienced extreme price fluctuations. These broad market
fluctuations may adversely affect the market price of the Common Stock. See
"Underwriting." In addition, there has been significant volatility in the market
price of securities of technology-based companies similar in size to the
Company. Factors such as announcements of technological developments or new
products by the Company or its competitors, variations in the Company's
10
<PAGE> 13
quarterly operating results, or general economic or stock market conditions
unrelated to the Company's operating performance may adversely affect the market
price of the Company's Common Stock.
DILUTION
Purchasers of shares of Common Stock offered hereby will suffer an immediate and
substantial dilution of $ in the net tangible book value per share of the
Common Stock, assuming an initial public offering price of $ per share. In
the event the Company raises additional funds through the issuance of equity
securities, the investors participating in the Offering may experience further
dilution. To the extent outstanding options, warrants and other rights to
purchase shares of Common Stock are exercised, there will be further dilution.
See "Dilution," "Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Liquidity and Capital Resources," "Certain
Transactions" and "Capitalization."
11
<PAGE> 14
USE OF PROCEEDS
The net proceeds to the Company from the sale of the shares of Common Stock
offered by the Company hereby are estimated to be approximately $
($ if the Underwriters' over-allotment option is exercised in full),
assuming an initial public offering price of $ . The Company will not
receive any of the net proceeds from the sale of shares by the Selling
Shareholders. The principal purposes of the Offering are to create a public
market for the Company's Common Stock, facilitate future access to capital
markets and enhance the Company's ability to use its Common Stock as
consideration for acquisitions and as a means of attracting and retaining key
employees.
The Company intends to use the net proceeds for working capital and general
corporate purposes, including an increase in the Company's internal product
development, staffing in connection with new product introductions and other
related product development expenditures. A portion of the proceeds may also be
used to acquire or invest in complementary businesses or products or to obtain
the right to use complementary technologies. From time to time, in the ordinary
course of business, the Company evaluates potential acquisitions of such
businesses, products or technologies. The Company has no present understandings,
commitments or agreements with respect to any material acquisitions of other
businesses, products or technologies. Pending use of the net proceeds for the
above purposes, the Company intends to invest such funds in short-term,
interest-bearing, investment-grade securities.
DIVIDEND POLICY
The Company does not pay any cash dividends on its capital stock. The Company
currently intends to retain any future earnings to finance the growth and
development of its business and therefore does not anticipate paying any cash
dividends in the foreseeable future. Any future determination relating to
dividend policy will be made at the discretion of the Board of Directors of the
Company and will depend on a number of factors, including the future earnings,
capital requirements, financial condition and future prospects of the Company
and such other factors as the Board of Directors may deem relevant.
CAPITALIZATION
The following table sets forth (i) the actual capitalization of the Company as
of March 31, 1996, and (ii) the pro forma capitalization as adjusted to reflect
the sale by the Company of 1,250,000 shares in the Offering (assuming an initial
public offering price of $ per share and after deducting estimated
underwriting discounts and commissions and offering expenses) and the
application of the estimated net proceeds therefrom:
<TABLE>
<CAPTION>
-------------------------
<S> <C> <C>
MARCH 31, 1996
-------------------------
ACTUAL
---------- AS
Dollars in thousands ADJUSTED
----------
(UNAUDITED)
Shareholders' equity
Preferred Stock, no par value, 5,000,000 shares authorized;
no shares issued or outstanding $ -- $ --
Common Stock, no par value, 40,000,000 shares authorized;
4,957,127 shares issued and outstanding, actual
6,207,127 shares issued and outstanding, as adjusted(1) 10,726
Deferred stock compensation (236) (236)
Retained earnings 1,631 1,631
Cumulative translation adjustment (53) (53)
---------- ----------
Total shareholders' equity 12,068
---------- ----------
Total capitalization $12,068 $
========== ==========
</TABLE>
- ---------------
(1) Excludes 1,250,000 shares of Common Stock reserved for issuance upon
exercise of stock options, of which 951,113 shares were subject to outstanding
options at May 31, 1996, and 595,727 shares issuable upon the exercise of Common
Stock warrants outstanding as of May 31, 1996. See "Management -- Stock Option
Plan" and "Certain Transactions."
12
<PAGE> 15
DILUTION
The net tangible book value of the Company at March 31, 1996, was $11,864,000,
or approximately $2.39 per share of Common Stock. 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 the Company's outstanding Common
Stock. See "Risk Factors -- Dilution."
Net tangible book value dilution per share represents the difference between the
amount per share paid by purchasers of Common Stock in the Offering and the pro
forma net tangible book value per share of the Common Stock immediately after
completion of the Offering. After giving effect to the sale of 1,250,000 shares
of Common Stock in the Offering (assuming an initial public offering price of
$ per share and after deducting estimated underwriting discounts and
offering expenses), the pro forma net tangible book value of the Company at
March 31, 1996 would have been $ or $ per share. This
represents an immediate increase in net tangible book value of $ per
share to existing shareholders and an immediate dilution in net tangible book
value of $ per share to purchasers of Common Stock in the Offering, as
illustrated by in the following table:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share $
Net tangible book value per share at March 31, 1996 $2.39
Increase per share attributable to new shareholders
----------
Pro forma net tangible book value per share as of March 31, 1996
after the Offering
----------
Dilution per share to new investors $
==========
</TABLE>
The following table summarizes, as of March 31, 1996, the total consideration
paid and the average price per share paid by the existing shareholders and by
new investors (at an assumed initial public offering price of $ per
share and before deduction of underwriting discounts and commissions and
estimated offering expenses):
<TABLE>
<CAPTION>
--------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
SHARES PURCHASED
------------------- TOTAL CONSIDERATION
-------------------- AVERAGE PRICE
NUMBER PERCENT PERCENT PER SHARE
--------- ------- ------- -------------
AMOUNT
----------
Existing shareholders(1) 4,957,127 80% $9,363,000 % $ 1.89
New investors(1) 1,250,000 20% %
--------- ------- ---------- ------- -------------
Total 6,207,127 100% $ 100% $
========= ====== ========== ====== ==========
</TABLE>
- ---------------
(1) The foregoing table computations assume no exercise of the Underwriters'
over-allotment option or outstanding stock options or warrants. At May 31, 1996,
there were outstanding options to purchase an aggregate of 951,113 shares at an
average exercise price of $3.81 per share and outstanding warrants to purchase
an aggregate 595,727 shares at an average exercise price of $6.16 per share. If
certain of these options and warrants are exercised, there will be further
dilution to new investors. See "Risk Factors -- Dilution," "Management -- Stock
Option Plan," "Certain Transactions" and "Description of Capital Stock." Sales
by selling shareholders in the Offering will reduce the number of shares of
Common Stock held by existing shareholders to 4,207,127 or 68% of the total
number of shares of Common Stock outstanding immediately after the Offering, and
will increase the number of shares of Common Stock held by new investors to
2,000,000 or 32% of the total number of shares of Common Stock outstanding
immediately after the Offering. See "Principal and Selling Shareholders."
13
<PAGE> 16
SELECTED CONSOLIDATED FINANCIAL INFORMATION
The selected consolidated financial information set forth below should be read
in conjunction with the Company's Consolidated Financial Statements and Notes
thereto and "Management's Discussion and Analysis of Financial Condition and
Results of Operations" included elsewhere in this Prospectus. The consolidated
financial information as of December 31, 1994 and 1995 and for the six months
ended July 1, 1993 and December 31, 1993, and the years ended December 31, 1994
and 1995, have been derived from the Consolidated Financial Statements of the
Company and the Predecessor, audited by Price Waterhouse LLP and are included
elsewhere in this Prospectus. The consolidated financial information for the
years ended December 31, 1991 and 1992 and the three months ended March 31, 1995
and 1996 have been derived from the unaudited consolidated financial statements
of the Predecessor and the Company, respectively, which in the opinion of
management, include all adjustments (consisting only of normal recurring
adjustments) necessary to present fairly the information set forth therein. The
results for the three months ended March 31, 1996 are not necessarily indicative
of the results that may be expected for the full year or for any future period.
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
PREDECESSOR
----------------------------
YEAR ENDED
DECEMBER 31, THE COMPANY THREE MONTHS
--------------- ------------------------------------------------
1991 YEAR ENDED ENDED
------ SIX MONTHS SIX MONTHS DECEMBER 31, MARCH 31,
Dollars in thousands, except ENDED ENDED --------------- ---------------
per share data 1992 JULY 1, DECEMBER 31, 1995 1996
------ ---------- ------------ ------ ------
1994
1993 1993 ------ 1995
---------- ------------ ------
(UNAUDITED) (UNAUDITED)
CONSOLIDATED STATEMENT OF
OPERATIONS DATA:
Revenues:
Software and engineering
services $6,487 $5,698 $1,810 $ 2,010 $5,746 $7,228 $1,601 $2,306
Related parties -- -- -- 50 972 1,902 455 506
------ ------ ---------- ------------ ------ ------ ------ ------
Total revenues 6,487 5,698 1,810 2,060 6,718 9,130 2,056 2,812
------ ------ ---------- ------------ ------ ------ ------ ------
Cost of revenues:
Software and engineering
services 814 516 91 105 558 490 50 79
Related parties -- -- -- 12 33 146 35 209
------ ------ ---------- ------------ ------ ------ ------ ------
Total cost of revenues 814 516 91 117 591 636 85 288
------ ------ ---------- ------------ ------ ------ ------ ------
Gross profit 5,673 5,182 1,719 1,943 6,127 8,494 1,971 2,524
------ ------ ---------- ------------ ------ ------ ------ ------
Operating expenses:
Research and development 1,003 836 887 2,071 1,601 2,751 593 855
Sales and marketing 2,557 1,040 845 647 1,537 2,282 425 560
General and administrative 2,129 3,505 615 350 932 1,600 415 590
------ ------ ---------- ------------ ------ ------ ------ ------
Total operating
expenses 5,689 5,381 2,347 3,068 4,070 6,633 1,433 2,005
------ ------ ---------- ------------ ------ ------ ------ ------
Income (loss) from operations (16) (199) (628) (1,125) 2,057 1,861 538 519
Interest expense (56) (83) (27) (54) (19) (9) (10) --
Interest and other income -- 1 -- 1 4 105 2 84
------ ------ ---------- ------------ ------ ------ ------ ------
Income (loss) before income
taxes (72) (281) (655) (1,178) 2,042 1,957 530 603
Provision for income taxes -- 15 -- -- 784 792 214 217
------ ------ ---------- ------------ ------ ------ ------ ------
Net income (loss) $ (72) $ (296) $ (655) $ (1,178) $1,258 $1,165 $ 316 $ 386
====== ====== ======== =========== ====== ====== ====== ======
Net income (loss) per share(1) $ (0.19) $ 0.20 $ 0.18 $ 0.05 $ 0.06
=========== ====== ====== ====== ======
Weighted average common and
common equivalent shares in
thousands 6,307 6,307 6,500 6,622 6,047
</TABLE>
<TABLE>
<CAPTION>
-------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
PREDECESSOR
----------------------------- THE COMPANY
JULY 1, ---------------------------------------
DECEMBER 31, -------
-----------------
1991 1993 DECEMBER 31,
------ ------- ------------------------- MARCH 31,
Dollars in thousands 1992 1994 1995 -----------
------ ------ ------
1996
1993 -----------
-------
(UNAUDITED) (UNAUDITED)
CONSOLIDATED BALANCE SHEET DATA:
Cash and cash equivalents $ 452 $ 313 $ 156 $ 280 $1,374 $6,498 $10,591
Working capital (deficit) (44) (461) (1,189) (1,113) 1,173 6,642 11,315
Total assets 1,596 1,085 1,088 1,807 3,119 9,083 14,238
Shareholders' equity (deficit) (177) (453) (1,099) (468) 1,695 7,169 12,068
</TABLE>
- ---------------
(1) For an explanation of the number of shares used to compute net income (loss)
per share, see Note 2 of Notes to Consolidated Financial Statements.
14
<PAGE> 17
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
The Company was founded in 1983 to design, develop and market a suite of Basic
Input/Output System software ("BIOS") for the system management software market.
During the mid- and late-1980s, the Company established a significant market
presence by providing BIOS for the 286/386 PC markets and achieved early market
success as a BIOS supplier to the Taiwanese motherboard market. The Company was
acquired in July 1993 by GCH Systems, Inc. ("GCH"), an independent developer of
microcomputers and application-specific integrated circuits, and operated as a
wholly owned subsidiary. By 1994, the Company further established itself in the
system management software market with the successful introduction of enhanced
system management software products including its Green BIOS and PCI BIOS. In
December 1994, all of the Common Stock of the Company was distributed to the
existing GCH shareholders on a pro rata basis in a spin-off transaction to allow
the Company to focus exclusively on its system management software business and
facilitate the Company's access to future financing, including the public
capital markets. The Company markets and licenses its products and services
worldwide and is a leading provider of system management software to the PC
motherboard market in Asia, which accounts for approximately 40% of worldwide
motherboard production. More recently, the Company has been focusing on
expanding its core desktop product line by developing a suite of system
management software products for the mobile and network computing markets. In
addition, the Company is developing a suite of applications called SMSAccess
which will enable remote access, diagnosis and repair of disabled systems.
The Company's strategy is to strengthen its presence in Taiwan while pursuing
additional opportunities on a worldwide basis. In November 1993, the Company
entered a joint development agreement with Vobis, a leading PC manufacturer in
Europe. This collaboration resulted in the development of a specialized desktop
BIOS for Vobis for which the Company and Vobis have three joint patents pending.
In January 1996, Vobis acquired 570,033 shares of the Company's Common Stock and
warrants to purchase an additional 272,394 shares. The Company believes that
this relationship will enable it to further penetrate the European market. See
"Risk Factors -- International Operations; Currency Fluctuations; International
Unrest" and "Certain Transactions."
The Company has historically generated the substantial majority of its revenues
from the licensing of desktop system management software, primarily to OEMs.
Sales from international operations, particularly to customers in Taiwan,
comprise a substantial portion of the Company's total revenues. Software license
fees are recognized upon delivery of the product, fulfillment of acceptance
terms, if any, and satisfaction of significant support obligations, if any.
Engineering services revenues generally consist of amounts charged for
customization of the software prior to delivery and are generally recognized as
the services are performed. Related parties revenues include software license
fees and non-recurring engineering services provided to a Common Stock
shareholder and a Common Stock warrant holder. The Company believes that its
business is subject to seasonal fluctuation, with shipments in the fourth
calendar quarter being somewhat higher due to higher levels of PC shipments in
that time period.
The Company plans to increase the number and scope of system management software
products it offers in order to add features and functionality to existing
products and to address new market opportunities. For example, the Company is
developing products to support remote system access, including remote diagnosis
and repair, network-related system management software products, and enhanced
versions of its core BIOS. The Company also plans to expand its presence in the
mobile PC and embedded device system management software markets, which the
Company believes provide an opportunity for greater revenue per unit than the
desktop PC market. There can be no assurance that the Company will be successful
in implementing these plans or that price competition will not lead to price
decreases in one or more of these markets, adversely affecting the Company's
financial condition and results of operations.
The Company has an established international presence and consequently generates
a significant portion of its revenues and expenses in currencies other than the
U.S. Dollar, primarily the German Mark and New Taiwan Dollar. As a result, any
appreciation or depreciation in the U.S. Dollar against these currencies could
adversely affect the Company's business, financial condition, results of
operations and cashflows. In addition, foreign currency transaction gains and
losses arising from normal business operations are credited to or charged
against earnings in the period incurred. During the three years in the period
ended December 31, 1995, fluctuations in the value of currencies in which the
Company conducts its business relative to the U.S. Dollar have not been
significant on an annual basis.
This Prospectus contains forward-looking statements which 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."
15
<PAGE> 18
RESULTS OF OPERATIONS
The following tables set forth, for the periods indicated, certain consolidated
statement of operations information, as well as the percentage of the Company's
total revenues represented by each item. The results of operations for the
Predecessor for the period January 1, 1993 through July 1, 1993 and the Company
for the period July 2, 1993 through December 31, 1993 have been combined to
facilitate presentation of the results of operations on a calendar year basis.
The Company's historical results are not necessarily indicative of results in
any future period.
<TABLE>
<CAPTION>
------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PREDECESSOR
AND THE
COMPANY
COMBINED
------------
THE COMPANY
YEAR ENDED -------------------------------------------------
DECEMBER 31,
------------
1993 YEAR ENDED THREE MONTHS ENDED
------------ DECEMBER 31, MARCH 31,
Dollars in thousands, except per share ----------------- ---------------------------
amounts 1995 1996
------ -----------
1995
1994 -----------
------
(UNAUDITED)
Revenues:
Software and engineering services $ 3,820 $5,746 $7,228 $ 1,601 $ 2,306
Related parties 50 972 1,902 455 506
------------ ------ ------ ----------- -----------
Total revenues 3,870 6,718 9,130 2,056 2,812
------------ ------ ------ ----------- -----------
Cost of revenues:
Software and engineering services 196 558 490 50 79
Related parties 12 33 146 35 209
------------ ------ ------ ----------- -----------
Total cost of revenues 208 591 636 85 288
------------ ------ ------ ----------- -----------
Gross profit 3,662 6,127 8,494 1,971 2,524
------------ ------ ------ ----------- -----------
Operating expenses:
Research and development 2,958 1,601 2,751 593 855
Sales and marketing 1,492 1,537 2,282 425 560
General and administrative 965 932 1,600 415 590
------------ ------ ------ ----------- -----------
Total operating expenses 5,415 4,070 6,633 1,433 2,005
------------ ------ ------ ----------- -----------
Income (loss) from operations (1,753) 2,057 1,861 538 519
Interest expense (81) (19) (9) (10) --
Interest and other income 1 4 105 2 84
------------ ------ ------ ----------- -----------
Income (loss) before income taxes (1,833) 2,042 1,957 530 603
Provision for income taxes -- 784 792 214 217
------------ ------ ------ ----------- -----------
Net income (loss) $ (1,833) $1,258 $1,165 $ 316 $ 386
=========== ====== ====== ========= =========
Net income per share $ 0.20 $ 0.18 $ 0.05 $ 0.06
====== ====== ========= =========
Weighted average common and common
equivalent shares in thousands 6,307 6,500 6,622 6,047
</TABLE>
16
<PAGE> 19
<TABLE>
<CAPTION>
------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PREDECESSOR
AND THE
COMPANY
COMBINED
------------ THE COMPANY
-------------------------------------------------
YEAR ENDED
DECEMBER 31,
------------ YEARS ENDED THREE MONTHS ENDED
1993 DECEMBER 31, MARCH 31,
------------ ----------------- ---------------------------
As a percentage of total revenues 1995 1996
------ -----------
1994 1995
------ -----------
(UNAUDITED)
Revenues:
Software and engineering services 99% 86% 79% 78% 82%
Related parties 1 14 21 22 18
------------ ------ ------ ----------- -----------
Total revenues 100 100 100 100 100
------------ ------ ------ ----------- -----------
Cost of revenues:
Software and engineering services 5 8 5 2 3
Related parties -- 1 2 2 7
------------ ------ ------ ----------- -----------
Total cost of revenues 5 9 7 4 10
------------ ------ ------ ----------- -----------
Gross profit 95 91 93 96 90
------------ ------ ------ ----------- -----------
Operating expenses:
Research and development 76 24 30 29 30
Sales and marketing 39 23 25 21 20
General and administrative 25 14 17 20 21
------------ ------ ------ ----------- -----------
Total operating expenses 140 61 72 70 71
------------ ------ ------ ----------- -----------
Income (loss) from operations (45) 30 21 26 19
Interest expense 2 -- -- -- --
Interest and other income -- -- 1 -- 3
------------ ------ ------ ----------- -----------
Income (loss) before income taxes (47) 30 22 26 22
Provision for income taxes -- 12 9 10 8
------------ ------ ------ ----------- -----------
Net income (loss) (47)% 18% 13% 16% 14%
=========== ====== ====== ========= =========
</TABLE>
COMPARISON OF THREE MONTHS ENDED MARCH 31, 1995 AND MARCH 31, 1996
Revenues. The Company's revenues consist of software license fees and
engineering services. Revenues increased 37% from $2.1 million to $2.8 million
in the three months ended March 31, 1995 and March 31, 1996, respectively.
Software license fees and engineering services revenues increased 44% from $1.6
million to $2.3 million in the three months ended March 31, 1995 and March 31,
1996, respectively. This increase was primarily due to higher software license
fees from the Company's existing Taiwanese OEM customers, and to a lesser degree
from existing U.S. PC and embedded system customers. This increase was partially
offset by a decrease in software license fees from one European customer. A
significant customer, which accounted for 13% of total revenues for the three
months ended March 31, 1996, recently indicated that it intends to discontinue
licensing the Company's PC Card software. Accordingly, the Company does not
currently expect to receive material revenues from that customer during the
second half of 1996. Related parties revenues increased 11% from $455,000 to
$506,000 in the three months ended March 31, 1995 and March 31, 1996,
respectively. The increase was primarily due to higher engineering services
offset by lower software license fees provided to related parties. Revenues
derived from international operations represented 68% and 65% of the Company's
revenues for the three months ended March 31, 1995 and March 31, 1996,
respectively. Fluctuations in foreign currency exchange rates did not have a
material effect on total revenues in the periods presented. However, there can
be no assurance that future fluctuations in foreign currency exchange rates will
not have a material adverse effect on the Company's future revenues and results
of operations.
Cost of Revenues. Cost of revenues consists primarily of the cost of materials
and freight expenses associated with software license fees and direct costs
associated with engineering services revenues. Cost of revenues increased from
$85,000, or 4% of revenues, to $288,000, or 10% of revenues, in the three months
ended March 31, 1995 and March 31, 1996, respectively. Cost of software license
fees and engineering services revenues increased from $50,000 to $79,000 in the
three months ended March 31, 1995 and March 31, 1996, respectively. Cost of
related parties revenues increased from $35,000 to $209,000 in the three months
ended March 31, 1995 and March 31, 1996, respectively. This increase was
primarily due to a higher proportion of project related engineering services,
which have a higher labor-related cost component.
Research and Development. Research and development expenses consist primarily
of engineering personnel and related expenses and equipment costs. Research and
development expenses increased 44% from $593,000, or 29% of revenues, to
$855,000, or 30% of
17
<PAGE> 20
revenues, in the three months ended March 31, 1995 and March 31, 1996,
respectively. This increase was primarily due to the hiring of engineering
personnel to develop new software products, such as mobile BIOS and the
SMSAccess product suite. The Company anticipates that it will continue to devote
substantial resources to product research and development and that such expenses
will continue to increase in absolute dollars over time.
Sales and Marketing. Sales and marketing expenses consist primarily of
personnel and related expenses, sales commissions and travel costs. Sales and
marketing expenses increased 32% from $425,000, or 21% of revenues, to $560,000,
or 20% of revenues, in the three months ended March 31, 1995 and March 31, 1996,
respectively. This increase in expenses was primarily due to higher sales
commissions paid to the Company's sales force for increased revenues and
increased participation in industry standards groups and trade shows.
General and Administrative. General and administrative expenses consist
primarily of personnel and related expenses, professional services and
facilities costs. General and administrative expenses increased 42%, from
$415,000, or 20% of revenues, to $590,000, or 21% of revenues, in the three
months ended March 31, 1995 and March 31, 1996, respectively. This increase was
primarily due to a one-time employee severance cost of $90,000 in the Company's
European operations. In addition, during the second half of 1995, the Company
recorded $297,000 of deferred stock compensation related to the difference
between the exercise price of certain Common Stock options and the deemed fair
market value of the Common Stock on the date of grant. Amortization of deferred
compensation expense of $19,000 is included in general and administrative
expense for the three months ended March 31, 1996.
Interest Expense. Interest expense associated with short-term borrowings
decreased from $10,000 to $0 in the three months ended March 31, 1995 and March
31, 1996, respectively, due to a decrease in short-term borrowings.
Interest and Other Income. Interest income consists primarily of interest
income on cash and cash equivalents. Interest income increased from $2,000 to
$84,000 in the three months ended March 31, 1995 and March 31, 1996,
respectively, due to an increase in interest income earned on higher cash
balances.
Provision for Income Taxes. The Company's effective tax rate decreased from 41%
to 36% for the three months ended March 31, 1995 and March 31, 1996,
respectively. This decrease was primarily due to an increase in income taxable
in Taiwan at rates lower than the applicable statutory rates in the U.S. and
Germany.
COMPARISON OF YEARS ENDED DECEMBER 31, 1994 AND DECEMBER 31, 1995
Revenues. The Company's revenues increased 36% from $6.7 million to $9.1
million in 1994 and 1995, respectively. Software license fees and engineering
services revenues increased 26% from $5.7 million to $7.2 million in 1994 and
1995, respectively. This increase was primarily due to increased software
license fees resulting from the introduction of PCI and other enhanced features.
A significant customer, which accounted for 14% of total revenues for the year
ended December 31, 1995, recently indicated that it intends to discontinue
licensing the Company's PC Card software; accordingly the Company does not
currently expect to receive material revenues from that customer during the
second half of 1996. Related parties revenues increased 96% from $1.0 million to
$1.9 million in 1994 and 1995, respectively. This increase was primarily due to
the growth in software license fees. Revenues derived from international
operations were 75% and 68% of the Company's revenues in 1994 and 1995,
respectively. Fluctuations in foreign currency exchange rates did not have a
material impact on total revenues in 1994 or 1995. However, there can be no
assurance that future fluctuations in foreign currency exchange rates will not
have a material adverse effect on the Company's future revenues and results of
operations.
Cost of Revenues. Cost of revenues increased 8% from $591,000, or 9% of
revenues, to $636,000, or 7% of revenues, in 1994 and 1995, respectively. Cost
of software license fees and engineering services revenues decreased 12% from
$558,000 to $490,000 in 1994 and 1995, respectively. This decrease was primarily
due to the phasing out of a lower gross margin product during the course of the
year, offset by a one-time royalty payment of $200,000 to a third party. Cost of
related parties revenues increased from $33,000 to $146,000 in 1994 and 1995,
respectively. This increase was primarily due to direct costs associated with
engineering services.
Research and Development. Research and development expenses increased 72% from
$1.6 million, or 24% of revenues, to $2.8 million, or 30% of revenues, in 1994
and 1995, respectively. This increase was primarily due to the growth in
research and development personnel from 33 to 45 individuals during the year.
These additional personnel were hired as part of the effort to assist customers
in certifying their products for Windows 95, as well as to develop mobile BIOS
and SMSAccess.
Sales and Marketing. Sales and marketing expenses increased 48% from $1.5
million, or 23% of revenues, to $2.3 million, or 25% of revenues, in 1994 and
1995, respectively. This increase was primarily due to non-recurring charges of
$283,000 related to the recognition of warrants issued to a related party and
$36,000 related to warrants issued to a shareholder in exchange for marketing
services. In addition, higher payroll and related expenses, including sales
commissions, increased travel related to the improvement of customer relations,
and increased participation in industry trade shows and user conferences
accounted for the remainder of the increase. See "Certain Transactions."
18
<PAGE> 21
General and Administrative. General and administrative expenses increased 72%
from $932,000, or 14% of revenues, to $1.6 million, or 17% of revenues, in 1994
and 1995, respectively. The increase was primarily due to increased employee
compensation and office facilities cost, as well as higher professional service
fees. In addition, during the second half of 1995, the Company recorded $297,000
of deferred stock compensation for the difference between the exercise price of
certain Common Stock options and the deemed fair market value of the Common
Stock on the date of grant. The deferred compensation expense will be recognized
over the four-year vesting period of the options. Amortization of deferred
compensation expense of $42,000 is included in general and administrative
expense for the year ended December 31, 1995.
Interest Expense. Interest expense decreased from $19,000 to $9,000 in 1994 and
1995, respectively, due to a decrease in short-term borrowings.
Interest and Other Income. Interest and other income increased from $4,000 to
$105,000 in 1994 and 1995, respectively, primarily due to higher interest income
earned on higher cash balances during the period.
Provision for Income Taxes. Provision for income taxes increased from $784,000
to $792,000 in 1994 and 1995, respectively, representing effective tax rates of
38% and 41%, respectively. This increase was primarily due to an increase in
income. The higher effective income tax rate for 1995 was primarily due to
one-time non-deductible sales and marketing charges of $373,000 associated with
warrants issued offset by the recognition of $117,000 of deferred tax assets
which were previously reserved based on a reevaluation of the realizability of
future tax benefits based on the income earned in 1995.
COMPARISON OF YEARS ENDED DECEMBER 31, 1993 AND DECEMBER 31, 1994
The results of operations for the Predecessor for the period January 1, 1993
through July 1, 1993 and the Company for the period July 2, 1993 through
December 31, 1993 have been determined based upon the historical cost basis of
the Predecessor and the Company and have been combined to facilitate
presentation of the results of operations on a calendar year basis.
Revenues. The Company's revenues increased 74% from $3.9 million to $6.7
million in 1993 and 1994, respectively. Software license fees and engineering
services revenues increased 50% from $3.8 million to $5.7 million in 1993 and
1994, respectively. This increase was primarily due to higher software license
fees resulting from the introduction of the Company's Green BIOS and CardWare.
Related parties revenues increased from $50,000 to $1.0 million in 1993 and
1994, respectively. This increase was primarily due to an increase in software
license fees provided to a related party. Revenues derived from international
operations were 78% and 75% of the Company's revenues in 1993 and 1994,
respectively. Fluctuations in foreign currency exchange rates did not have a
material impact on total revenues in 1993 or 1994. However, there can be no
assurance that future fluctuations in foreign currency exchange rates will not
have a material adverse effect on the Company's future revenues and results of
operations.
Cost of Revenues. Cost of revenues increased from $208,000, or 5% of revenues,
to $591,000, or 9% of revenues, in 1993 and 1994, respectively. Cost of software
license fees and engineering services revenues increased from $196,000 to
$558,000 in 1993 and 1994, respectively. This increase was primarily due to
higher sales of a lower margin product which the Company bundled with its
desktop BIOS product. Cost of related parties revenues increased from $12,000 to
$33,000 in 1993 and 1994, respectively.
Research and Development. Research and development expenses decreased 46%, from
$3.0 million, or 76% of revenues, to $1.6 million, or 24% of revenues, in 1993
and 1994, respectively. This decrease was primarily due to a one-time charge of
$1.0 million recorded in 1993 for in-process research and development purchased
as part of the acquisition of the Company by GCH. At the acquisition date, the
in-process technology was not yet technologically feasible and had no
alternative future use.
Sales and Marketing. Sales and marketing expenses increased 3% from $1.5
million, or 39% of revenues, to $1.6 million, or 23% of revenues, in 1993 and
1994, respectively. This increase was primarily due to increased expenses
related to sales commissions and participation in trade shows.
General and Administrative. General and administrative expenses decreased 3%
from $1.0 million, or 25% of revenues, to $932,000, or 14% of revenues, in 1993
and 1994, respectively. This decrease was primarily due to a reduction in
payroll expenses resulting from a change in management, which was partially
offset by an increase in professional service fees.
Interest Expense. Interest expense decreased from $81,000 to $19,000 in 1993
and 1994, respectively, due to a decrease in short-term borrowings.
Interest and Other Income. Interest and other income increased from $1,000 to
$4,000 in 1993 and 1994, respectively, due to an increase in interest income
earned on higher cash balances.
Provision for Income Taxes. For the period from July 2, 1993 through December
3, 1994, Award was included in GCH's consolidated federal and California state
income tax returns. Under a tax sharing arrangement with GCH, the Company was
allocated a proportionate share of GCH's consolidated income tax liability. The
provision for income taxes was calculated using the separate return methodology
in accordance with SFAS No. 109. The provision for income taxes was $0 and
$784,000 in 1993 and 1994, respectively. The Company incurred a net operating
loss in 1993 and consequently paid no federal, state or foreign income taxes.
The Company's effective income tax rate was 38% for the year ended December 31,
1994.
19
<PAGE> 22
QUARTERLY RESULTS OF OPERATIONS
The following table sets forth certain unaudited results of operations for each
of the quarters in the years ended December 31, 1994 and 1995 and for the
quarter ended March 31, 1996, in both absolute dollars and as a percentage of
the Company's total revenues. In the opinion of management, this information has
been prepared on a basis consistent with the Company's audited Consolidated
Financial Statements, which appear elsewhere in this Prospectus, and includes
all adjustments (consisting only of normal recurring adjustments) that the
Company considers necessary to present fairly the information for the periods
presented when read in conjunction with the Consolidated Financial Statements of
the Company and Notes thereto. The operating results for any quarter are not
necessarily indicative of the results for the full year or any future quarter.
The Company's revenues significantly increased in the fourth quarters of 1994
and 1995, reflecting the seasonality of the Company's business. In addition, the
Company's revenues and profits decreased in the first quarter of 1995 and 1996
as compared with the fourth quarter of the previous year. Quarterly fluctuations
in cost of revenues are due to the mix and volume of software licenses and
engineering services. Cost of revenues in the three months ended December 31,
1995 increased to $315,000 and was attributable primarily to a one-time royalty
payment of $200,000 to a third party. Sales and marketing expenses in the three
months ended September 30, 1995 increased to $757,000. This increase was
attributable primarily to a non-recurring $283,000 charge related to the
recognition of warrants issued to a related party.
The Company has experienced and expects to continue to experience fluctuations
in its quarterly results. The Company's revenues are affected by a number of
factors, including the demand for PCs and other microprocessor-based devices,
timing of new product introductions, product mix, volume and timing of customer
orders, activities of competitors and the ability of the Company to penetrate
new markets. See "Risk Factors -- Fluctuations in Quarterly Operating Results;
Seasonality."
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------
QUARTERS ENDED
--------------------------------------------------------------------------------------------
1994 1995 1996
Dollars in thousands --------------------------------------- --------------------------------------- --------
except per share data MARCH 31 JUNE 30 SEPT. 30 DEC. 31 MARCH 31 JUNE 30 SEPT. 30 DEC. 31 MARCH 31
-------- ------- -------- ------- -------- ------- -------- ------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues:
Software and engineering
services $1,335 $1,437 $1,548 $1,426 $1,601 $1,671 $1,723 $2,233 $2,306
Related parties 119 45 140 668 455 310 535 602 506
-------- ------- -------- ------- -------- ------- -------- ------- --------
Total revenues 1,454 1,482 1,688 2,094 2,056 1,981 2,258 2,835 2,812
-------- ------- -------- ------- -------- ------- -------- ------- --------
Cost of revenues:
Software and engineering
services 261 144 81 72 50 104 71 265 79
Related parties -- -- -- 33 35 33 28 50 209
-------- ------- -------- ------- -------- ------- -------- ------- --------
Total cost of revenues 261 144 81 105 85 137 99 315 288
-------- ------- -------- ------- -------- ------- -------- ------- --------
Gross profit 1,193 1,338 1,607 1,989 1,971 1,844 2,159 2,520 2,524
-------- ------- -------- ------- -------- ------- -------- ------- --------
Operating expenses:
Research and development 351 332 475 443 593 681 674 803 855
Sales and marketing 327 374 360 476 425 612 757 488 560
General and administrative 150 208 189 385 415 437 371 377 590
-------- ------- -------- ------- -------- ------- -------- ------- --------
Total operating expenses 828 914 1,024 1,304 1,433 1,730 1,802 1,668 2,005
-------- ------- -------- ------- -------- ------- -------- ------- --------
Income from operations 365 424 583 685 538 114 357 852 519
Interest expense (income), net 8 3 7 (3 ) 8 5 (13) (96 ) (84)
-------- ------- -------- ------- -------- ------- -------- ------- --------
Income before income taxes 357 421 576 688 530 109 370 948 603
Provision for income taxes 138 163 224 259 214 44 150 384 217
-------- ------- -------- ------- -------- ------- -------- ------- --------
Net income $ 219 $ 258 $ 352 $ 429 $ 316 $ 65 $ 220 $ 564 $ 386
========= ======== ======== ======= ========= ======== ======== ======= =========
Net income per share $ 0.03 $ 0.04 $ 0.06 $ 0.07 $ 0.05 $ 0.01 $ 0.03 $ 0.09 $ 0.06
========= ======== ======== ======= ========= ======== ======== ======= =========
Weighted average common and common
equivalent shares in thousands 6,307 6,307 6,307 6,307 6,622 6,689 6,363 6,328 6,047
</TABLE>
20
<PAGE> 23
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
QUARTERS ENDED
--------------------------------------------------------------------------------------------
1994
---------------------------------------
MARCH 31 1995
-------- --------------------------------------- 1996
As a percentage of total revenues JUNE 30 SEPT. 30 DEC. 31 JUNE 30 SEPT. 30 DEC. 31 --------
------- -------- ------- ------- -------- -------
MARCH 31 MARCH 31
-------- --------
(UNAUDITED)
Revenues:
Software and engineering
services 92% 97% 92% 68% 78% 84% 76% 79% 82%
Related parties 8 3 8 32 22 16 24 21 18
--- ------- --- ------- --- ------- --- ------- ---
Total revenues 100 100 100 100 100 100 100 100 100
Cost of revenues:
Software and engineering
services 18 10 5 3 2 5 3 9 3
Related parties -- -- -- 2 2 2 1 2 7
--- ------- --- ------- --- ------- --- ------- ---
Total cost of revenues 18 10 5 5 4 7 4 11 10
--- ------- --- ------- --- ------- --- ------- ---
Gross profit 82 90 95 95 96 93 96 89 90
--- ------- --- ------- --- ------- --- ------- ---
Operating expenses:
Research and development 24 23 28 21 29 34 30 28 30
Sales and marketing 22 25 22 23 21 31 34 17 20
General and administrative 10 14 11 18 20 22 16 13 21
--- ------- --- ------- --- ------- --- ------- ---
Total operating expenses 56 62 61 62 70 87 80 58 71
--- ------- --- ------- --- ------- --- ------- ---
Income from operations 26 28 34 33 26 6 16 31 19
Interest expense (income), net 1 -- -- -- -- -- (1) (3) (3)
--- ------- --- ------- --- ------- --- ------- ---
Income before income taxes 25 28 34 33 26 6 17 34 22
Provision for income taxes 10 11 13 12 10 3 7 14 8
--- ------- --- ------- --- ------- --- ------- ---
Net income 15% 17% 21% 21% 16% 3% 10% 20% 14%
========= ======== ======== ======= ========= ======== ======== ======= =========
</TABLE>
LIQUIDITY AND CAPITAL RESOURCES
Since its acquisition by GCH, the Company has funded its operations primarily
through the private sale of equity securities and from cash generated from
operations. As of March 31, 1996, the Company had cash and cash equivalents of
$10.6 million and working capital of $11.3 million. Net cash used in operating
activities was $676,000 in 1993 and was primarily due to a net loss and acquired
in-process research and development. Net cash provided by operating activities
was $1.9 million in 1994 and was primarily due to net income and a noncash
charge for income taxes. Net cash provided by operating activities was $2.1
million in 1995 and was primarily due to net income and increases in accrued
liabilities. Net cash provided by operating activities was $679,000 for the
three months ended March 31, 1995 and was primarily due to net income and
increases in accrued liabilities. Net cash used in operating activities was
$166,000 for the three months ended March 31, 1996 and was primarily due to
higher accounts receivable partially offset by net income and accrued
liabilities.
Net cash used in investing activities was $659,000 in 1993 and was primarily due
to the acquisition of the Company from the Predecessor. Net cash used in
investing activities was $75,000 in 1994 and was primarily due to the purchase
of general equipment. Net cash used in investing activities was $147,000,
$34,000 and $233,000 in 1995 and for the three months ended March 31, 1995 and
1996, respectively, and was primarily due to the purchase and upgrade of the
Company's computer hardware.
Net cash provided by financing activities was $1.6 million in 1993 and was
primarily due to proceeds from Common Stock issuance and borrowings from GCH.
Net cash used by financing activities was $781,000 in 1994 and was primarily due
to advances and repayments to GCH and principal payments under unaffiliated
third-party note obligations. Net cash provided by financing activities was $3.1
million in 1995. In 1995 and the three months ended March 31, 1996, the net cash
provided by financing activities was primarily due to proceeds from private
equity sales. For the three months ended March 31, 1995 and 1996, cash used by
financing activities was $811,000 and cash provided by financing activities was
$4.5 million, respectively.
The Company believes that the net proceeds from the sale of Common Stock offered
hereby, together with anticipated cash flow from operations and existing cash
balances, will satisfy the Company's projected expenditures through 1997 for
working capital and general corporate purposes, including an increase in the
Company's internal product development, staffing in connection with new product
introductions and other related product development expenditures. From time to
time, in the ordinary course of business, the Company enters into strategic
relationships with its customers or other participants in the PC industry. Such
strategic relationships may include equity investments in the Company. If
additional funds are raised through the issuance of equity securities, the
percentage ownership of the shareholders of the Company will be reduced,
shareholders may experience additional dilution, or such equity securities may
have rights, preferences or privileges senior to those of the holders of the
Company's Common Stock. The Company has no current commitments or agreements
with respect to any strategic relationships, including any equity investments.
See "Risk Factors -- Dilution" and "Dilution."
21
<PAGE> 24
BUSINESS
Award designs, develops and markets system management software for the global
computing market. System management software is one of the fundamental layers in
PC architecture and provides an essential interface between a PC's operating
system software and hardware. The Company's principal system management software
products include a suite of Basic Input/Output System software ("BIOS"). Award's
customers include designers and manufacturers of motherboards, PC systems and
other microprocessor-based (or "embedded") devices. The Company believes that
its products and engineering services enable customers to rapidly develop new
motherboard designs for state-of-the-art computer systems. The Company markets
and licenses its products and services worldwide, and has established itself as
a leading provider of desktop system management software in Asia, which accounts
for approximately 40% of worldwide desktop motherboard production.
The BIOS, which is the software initially executed after the system is turned
on, tests and initializes hardware components, initiates the operating system
and then provides advanced interface functions. Award's desktop BIOS products
enable a PC to support a number of key advanced technologies, including Plug and
Play, PCI, DMI and APM. The Company is currently developing further enhancements
to its BIOS, including support for USB. The Company's embedded device BIOS
provides customized features to address the specialized needs of its customers
in this market. In addition to the Company's proprietary suite of system
management software products, Award offers PC Card software that enables PCs and
other electronic devices to recognize, install, configure and operate peripheral
devices, such as network or modem cards.
The Company currently services more than 100 customers worldwide, including many
of the world's leading original equipment and embedded device manufacturers. In
response to its customers' need to develop and integrate new technologies
rapidly, the Company has developed its business with a particular emphasis on
providing local engineering service and support in each of its major target
regions: Asia, especially Taiwan, North America and Europe. The Company is
increasing its presence in Europe through a strategic relationship with Vobis,
pursuant to which the Company and Vobis are jointly developing BIOS and
utilities for the desktop PC and embedded device markets. As part of this
relationship, Vobis has purchased approximately 12% of the Company's Common
Stock.
The Company is leveraging its existing customer relationships and desktop
expertise to develop system management software for the mobile and network
computing markets. The Company anticipates that leading Taiwanese desktop system
and motherboard manufacturers, many of which are Award customers, will enter the
mobile PC market, and, in response, the Company is developing enhanced system
management software for mobile PCs. In addition, the Company is developing a
suite of applications called SMSAccess, which will enable remote access to, and
diagnosis and repair of disabled systems.
INDUSTRY BACKGROUND
[GRAPHIC]
PC systems consist of four layers: the hardware, the BIOS, the operating system
and the application software. The computer's primary hardware component, the
motherboard, is connected to peripheral hardware devices, such as a keyboard,
hard disk drive and mouse. The BIOS is stored in a non-volatile memory chip on
the motherboard while the operating system and application software are stored
on the hard disk drive. The BIOS, which is the software initially executed after
the system is turned on, tests and initializes hardware components and initiates
the operating system. After the BIOS completes the start up or "booting" of the
system, it serves as the interface between the computer hardware and the
operating system. By acting as the bridge between the operating system and the
computer hardware, the BIOS makes it possible to develop hardware and software
independently. As a result, the pace of innovation for
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<PAGE> 25
hardware products in the PC industry, where the typical life cycle of a hardware
design is six to twelve months, has not been constrained by the slower pace of
operating system development, where generational advances can take several years
to develop.
Enhanced BIOS and other system management software have been developed to
support implementation of new industry standards and technologies, such as Plug
and Play, PC Card, DMI, "hot-docking" and APM. Improved versions of BIOS are
currently being developed to support USB and the latest PC industry standards.
Many of these new technologies will play an important part in the development of
PCs and embedded devices for the Internet and other network computing
environments.
Several important trends are currently affecting the system management software
industry:
Outsourcing of System Management Software Development. The rapid pace of
technological innovation in recent years has required system makers to adapt to
short production cycles and operate in an environment of continuous innovation.
As PC and motherboard designers and manufacturers continuously improve their
hardware products, they must ensure the compatibility of these new designs with
existing operating systems through a customized BIOS. While some PC and
motherboard manufacturers develop system management software internally,
increasingly complex technology, demand for compatibility and competitive market
pressures are driving many manufacturers to rely on dedicated system management
software providers. These manufacturers demand high levels of support at all
stages of product development, making it necessary for system management
software vendors to provide effective localized engineering support during the
production process.
Outsourcing of Motherboard Production. Competitive pressures in the PC market
have also caused system manufacturers to outsource PC motherboard production to
reduce cost and stay current with advancing technologies. Manufacturers in
Taiwan have taken advantage of this trend to become significant participants in
the world desktop system and motherboard production market. Further, their role
has expanded to include design decisions, such as the selection of the BIOS and
other system management software. To rapidly integrate new motherboard designs
into the overall PC system, these manufacturers require locally based system
management software engineering resources.
Proliferation of x86 Architecture in the Embedded Device Market. Traditional PC
architecture, which is based on the x86 design, is being adopted for use in the
embedded computer market. The implementation of x86 architecture permits the
development of open systems that can employ standard software, development tools
and peripheral hardware products. Embedded devices perform a single or limited
number of complex applications for a dedicated purpose. These embedded devices
require advanced capabilities for data analysis, communication, control and
ease-of-use and depend upon highly customized system management software
solutions to ensure performance, reliability and functionality.
Demands for Product Support Solutions. As PC use by less technically
sophisticated home and business users has grown, PC system manufacturers have
been searching for cost-effective solutions to provide technical customer
support services. The emerging network computing environment potentially
provides system manufacturers with the ability to access the hardware and
operating systems in order to ascertain the problems of the user and to make
repairs. Additionally, manufacturers of embedded systems are searching for
cost-effective ways to maintain and support their products, which are broadly
distributed and sometimes installed in remote locations that cannot be directly
accessed by support personnel. To address this opportunity, providers of system
management software are beginning to work closely with system manufacturers to
develop products with remote access, diagnostic and repair capabilities.
AWARD STRATEGY
The Company's objective is to become the leading designer, developer and
marketer of system management software by providing innovative solutions to the
desktop PC, embedded device, mobile PC and network computing markets. The
Company's strategy includes the following key elements:
Build Upon Desktop Leadership in Asia. Award is currently a leading provider of
system management software to the Asian desktop motherboard market and will
attempt to increase market share in this important region. The Company believes
that PC manufacturers worldwide increasingly outsource PC design decisions,
including the selection of system management software, to the original equipment
manufacturers ("OEMs") and original design manufacturers in Taiwan that form the
core of the Company's client base. Award further believes its longstanding focus
on Asia positions it to take advantage of this market growth, and the Company
plans to maintain a high level of engineering and management resources in this
region.
Leverage Existing Customer Relationships and Desktop Expertise to Pursue the
Mobile and Embedded Markets. The Company believes that it can leverage its
desktop system management software expertise to design and develop products for
the mobile PC and embedded device markets. To complement its mobile BIOS
products, the Company also offers system management software to support the PC
Card standard, which is broadly implemented in the mobile PC market. The Company
believes that the leading Taiwanese desktop system and motherboard
manufacturers, many of which are Award customers, will enter the mobile PC
market and provide the Company with opportunities to license its mobile BIOS
products. In addition, the Company is establishing a full service
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<PAGE> 26
operation in Tokyo to design, develop and market system management software to
the mobile PC manufacturers in Japan, which are significant participants in the
mobile PC market. The Company is also pursuing opportunities with manufacturers
of embedded devices, a market characterized by relatively long product life
cycles, often from three to seven years.
Provide Innovative Products for the Emerging Network and Internet Computing
Marketplace. The Company is designing and developing a number of products for
the emerging network computing market. For example, Award is developing its
RPBAccess software, which will allow an end-user to obtain diagnostic and repair
system support service through a modem or the Internet without a functional
operating system or operational hard disk. In addition, Award's SMSAccess
software suite will allow a network administrator to access and retrieve system
management information, either locally or remotely. The Company's WWWAccess
software will provide embedded devices, such as point-of-sale systems, set-top
boxes and personal digital assistants ("PDAs"), with Internet capabilities.
There can be no assurance, however, that the Company will successfully develop
and market such software.
Provide Localized Customer Service in Key Markets. The Company provides
responsive and competitive system management software engineering and support by
maintaining engineering, marketing and sales staff in three key PC design
centers around the world: Taiwan, the U.S. and Germany. For many of its
customers, Award serves as an important source of research and development,
providing customized solutions within the tight timeframes required in the
competitive motherboard market. In addition, the Company's local service centers
allow it to act as an important conduit between the technology centers in the
U.S. and key PC design centers. Easy accessibility, frequent communication and
localized interaction are crucial to the selection and implementation of Award
system management software. The Company believes that its emphasis on local
service enables it to perform high quality, reliable and timely engineering and
support services and provides it with a competitive advantage.
PRODUCTS -- SYSTEM MANAGEMENT SOFTWARE
AWARD SYSTEM BIOS
The Company's Award System BIOS consists of core software code that can be
combined with additional software modules to add specific functions and
features, including Plug and Play, PCI, APM and DMI. The Company is currently
testing additional modules that support the USB standard. The Company integrates
the core software code with some or all of these software modules to create a
product that meets the needs of its three principal markets: desktop PCs,
embedded devices and mobile PCs. To date, the majority of the Company's software
licensing revenues have been derived from sales in the desktop PC market.
Desktop BIOS integrates the core software code with modules that support the
following technological advancements:
- Plug and Play permits the BIOS and operating system software to
automatically recognize and configure PC hardware and peripherals, such as
printers, network cards and multimedia accessories. A variation of this
technology, known as "hot" Plug and Play, allows for the installation,
recognition and removal of peripherals while power is on.
- PCI was developed by a consortium led by Intel and provides an
automatically configured interface between high-speed peripheral components
and PC systems.
- APM reduces power consumption by continuously monitoring system activity,
sensing idle time and powering down or powering off components.
- DMI is a new industry standard that allows the desktop configuration data
to be easily accessed locally or over a network. This software is capable
of detecting and storing configuration information from devices and systems
that comply with the industry standard Desktop Management Task Force
specification.
The Company is currently developing a module to support USB. USB is a new Plug
and Play interface under development by Microsoft and Intel, which is designed
to provide an easy connection for slow and medium speed peripherals to a PC by
supplying a uniform connector to make installing a peripheral as simple as
plugging in a telephone.
Embedded Device BIOS integrates the core software code with selected modules and
additional custom features. Award works closely with embedded device customers
to incorporate BIOS into design intensive embedded hardware. Unlike PC products,
which typically experience short product cycles, a typical embedded device
solution has a relatively long product life, with most designs lasting through
the life cycles of the products into which they are integrated, often three to
seven or more years.
Mobile PC BIOS is a new customized BIOS solution for use in notebook and other
portable PCs, which will integrate the core software code with modules that
support Plug and Play, PC, APM and DMI. In addition, this new product will
support the hardware associated with mobile PCs, such as chipsets and keyboard
controllers, as well as other advanced technologies. For example, "hot docking"
allows users to connect to and disconnect from their mobile PCs to desktop
docking stations without turning off their machines. The Company is also
developing smart battery support which ensures compatibility and monitors
diagnostic information for the advanced batteries found in mobile PCs.
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<PAGE> 27
PC Card Software
The Personal Computer Memory Card International Association ("PCMCIA") was
formed to enact standards for credit card size computer memory and peripheral
add-on products called "PC Cards." Award supplies software to enable PCs and
other electronic devices to recognize, install, configure and operate peripheral
devices that comply with PCMCIA standards. Award's PC Card software, CardWare
and CardControl, provides a number of benefits over traditional PC Card
software, including the efficient use of system memory, greater portability,
ease of maintenance, and a more modular design.
CardWare consists of several software components: CardWare Socket Services,
which works with the hardware to recognize PC Card socket status and report that
status to other PC Card software; CardWare Card Services, which provides
resource management as well as the industry standard programming interface and
allows the user to hot-swap multiple PC Cards in the system; and a suite of
software drivers, which handle recognition and configuration of CardWare Socket
Services and CardWare Card Services.
CardControl is a software program that operates under Windows and allows a user
to review or configure a PC Card. In addition, this software contains two unique
advisory modes, which automatically configure a card for optimal performance or
suggest available configurations.
SMSAccess
The Company is currently developing the SMSAccess suite of applications, which
includes significant enhancements to traditional system management software
products:
DMIAccess is a Windows application that allows a user to view hardware specific
information without physically looking in the computer or reading the system
start-up messages. Such information includes RAM configuration, system serial
number, motherboard serial number, and hard drive options. In conjunction with
third party software, DMIAccess provides a complete solution which network
administrators can use to remotely access data provided by DMI-compliant
hardware.
BIOSAccess is a Windows application, currently under development, that will
allow a user to view and change system setup information, such as power
management, display, security, sound, keyboard, and serial/parallel port
options. The application also will allow the user to view basic system
parameters such as RAM size, hard disk size, processor type, and BIOS version.
BIOSAccess is expected to replace traditional, less user-friendly
character-based utilities.
RPBAccess is a patent-pending product, currently under development, that will
allow technical support personnel to remotely access a disabled PC via a modem,
network or Internet connection. The Company believes that this software is
unique because it operates without a functioning hard drive or operating system
and thus can solve a greater number of system problems. RPBAccess allows an
expert system or technical support person to run BIOS setup, see error messages,
upload and download files (if the hard disk functions), and upload and download
diagnostic software. Consequently, the system is efficiently diagnosed and
potentially repaired without the usual user telephone relay or site visit.
RPBAccess will benefit PC system manufacturers because it can reduce both the
time and expense to diagnose and repair the system.
USBAccess is a Windows application the Company plans to develop that will
display the type and status of all connected USB devices, providing the user
with access to such USB options as bandwidth allocation and power management. In
conjunction with third party software, USBAccess will provide a complete
solution which network administrators can use to remotely access data provided
by USB-complaint hardware.
CUSTOMERS
The Company services over 100 customers worldwide, including designers and
manufacturers of desktop PC motherboards, PC systems and notebooks and hardware
component and embedded device manufacturers. From time to time, the Company has
worked with selected customers to co-develop certain products and expects to
pursue additional co-development opportunities in the future. For example, the
Company is currently working with Vobis to develop custom products for certain
embedded applications.
The following is a list of customers of the Company who individually accounted
for at least $50,000 in revenues in the year ended December 31, 1995,
representing, in the aggregate, approximately 74% of the Company's revenues.
These customers have licensed the Company's software, and certain of such
customers have contracted for the Company to provide non-recurring engineering
("NRE") services, in the categories in which they are listed below.
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PC Motherboard Designers and Manufacturers
Ansoon
BCM Advanced Research, Inc.
Chaintech
Diamond Flower International Inc.
Elitegroup Computer Systems Inc.
First International Computer Inc.
Full Yes
Gemlight
GigaByte Technology Co., Ltd.
Hsing Tech
Holco
J. Bond Computer Systems Corp.
Ocean
Powertech, Inc.
President
Spring
Sukjung
Rectron
Vector
Vtech Industries, Inc.
PC System and Notebook Manufacturers
Kapok
Mitac Electronics Group
Maxdata Computer GmbH
Siemens Components, Inc.
Synnex Information Technologies, Inc.
Toshiba Europa (I.E.) GmbH
Vobis Microcomputer AG
Hardware Component and Embedded Manufacturers
Advanced Micro Devices, Inc.
Quadrus
Helix Magnetics, Inc.
RadiSys Corporation
In the year ended December 31, 1994, Siemens and Toshiba accounted for
approximately 17% and 12% of the Company's revenues, respectively, and in the
year ended December 31, 1995, Vobis and Toshiba accounted for approximately 13%
and 14% of the Company's revenues, respectively. In the quarter ended March 31,
1996, Vobis and Toshiba accounted for approximately 18% and 13% of the Company's
revenues, respectively. Toshiba recently indicated that it would discontinue
licensing the Company's PC Card software during the third quarter of 1996,
relying instead upon the PC Card and Plug and Play software incorporated in
Windows 95. See "Risk Factors -- Competition" and "-- Dependence on Key Customer
Relationships; Concentration of Credit Risk." See Note 9 of Notes to
Consolidated Financial Statements for geographic segment information.
SALES AND MARKETING
The Company markets its products directly and through independent sales
representatives. In North America, Award sales managers operate from the
Company's headquarters in Mountain View, California. The Company complements its
sales force in the U.S. with an independent sales representative in Southern
California. In Asia, the Company operates from its office in Taipei, Taiwan, and
through independent sales representatives in Korea and Japan. In Europe, the
Company markets through its office in Munich, Germany. The Company supports its
sales efforts with marketing programs that include exhibiting at trade shows,
industry association participation, technical seminars and hardware reference
platforms from chipset manufacturers.
The Company believes that customer service and technical support are important
competitive factors in the system management software market. Accordingly, the
Company provides local service and support for its customers in the U.S., Europe
and Asia. In addition, the Company provides worldwide technical support from the
U.S. for end-users of its products through dial-in telephone services,
facsimile, e-mail and the Company's home page on the World Wide Web at
http://www.award.com. Information contained in the Company's home page shall not
be deemed to be a part of this Prospectus. Award believes that close contact
with its customers not only improves its customers' level of satisfaction, but
also provides early access to its customers' new product plans and requirements.
PRODUCT DEVELOPMENT
Award's research and development efforts consist of new product development,
product enhancements and product customization for individual customers. The
Company develops new products in response to emerging standards such as DMI and
to address perceived opportunities in related markets such as mobile computing
and remote diagnostics. Award's engineers actively participate in a number of
relevant industry standard groups, such as the Personal Computer Memory Card
International Association, the Desktop Management Task Force and the Peripheral
Component Interconnect Special Interest Group, which help guide the Company's
product planning. Software is developed in a modular fashion to facilitate
changes and updates as needed to meet customer requirements and rapid
development of new products.
An important function of the Company's engineering group is to perform the
customization of the BIOS for each new motherboard. The Company works closely
with the customer's engineers to ensure that the final motherboard design and
the Award BIOS are developed
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efficiently. The turnaround time for customizing a BIOS for a customer (from
receipt of motherboard and engineering to quality assurance and product release)
can be as short as one week. Customization of a BIOS can be done either in the
U.S., Taiwan or Europe, depending on resource availability and customer needs.
Because the development of the Company's software products requires knowledge of
computer hardware, operating system software, system management software and
application software, key technical personnel must be proficient in a number of
disciplines. Competition to attract and retain such personnel is intense, and
the failure of the Company to hire and retain talented technical personnel or
the loss of one or more key technical employees could have an adverse effect on
the Company's business and operations. See "Risk Factors -- Dependence on Key
Personnel; Ability to Attract and Retain Key Technical Employees."
COMPETITION
The markets for the Company's products are highly competitive. The principal
competitive factors affecting the markets for the Company's software include
technological excellence, timeliness of product introduction, responsiveness to
customer requirements, customer relationships, industry relationships,
engineering services, ease of use, ease of integration and price. Due to its
technological competence, large customer base in the desktop PC market, and
strong relationships with industry participants, the Company believes it
competes favorably with respect to these factors. Further, part of the Company's
strategy is to develop innovative software product solutions to address the
emerging trends in the PC and embedded device markets. There can be no assurance
that such products or technologies will be successfully developed by the Company
or that such products will not be developed by others, rendering the Company's
software or technologies non-competitive or obsolete. Failure to successfully
implement this strategy could have a material adverse effect upon the Company's
business and financial condition. See "Business -- Industry Background" and
"-- Product Development."
The Company faces competition primarily from other systems management software
companies, including American Megatrends, Inc., Phoenix Technologies Ltd. and
SystemSoft Corporation, and also from the in-house software development staffs
of current and prospective customers. Certain of the companies with which the
Company competes or may in the future compete have substantially greater
financial, marketing, sales and support resources and greater brand-name and
technological leadership recognition than the Company. There can be no assurance
that the Company will be able to develop software comparable or superior to
software offered by its competitors. In addition, the PC market experiences
intense price competition and the Company expects that, in order to remain
competitive, it may have to decrease unit prices on some or all of its software
products. Any such decrease would have a material adverse effect on the
Company's business, financial condition and results of operations.
The Company believes that interdependencies may develop between system
management software companies and their customers, which would need to be
overcome in order to replace an entrenched competitor. While Award believes such
entrenchment may benefit the Company in its existing relationships with key
participants in the PC market, especially with its customers in Taiwan, customer
entrenchment may make it more difficult for the Company to displace competitors
or increase market presence, particularly in the mobile PC market, where
competitors may have strong relationships with certain mobile PC manufacturers.
Intel, for example, has entered into formal agreements with, and become a
significant shareholder in, Phoenix Technologies Ltd. and SystemSoft
Corporation. In addition, SystemSoft Corporation has entered into agreements
with Microsoft, IBM and Compaq to license its PC Card software.
The Company believes that competitive pressures in the system management
software market may increase as (i) microprocessor manufacturers continue to
enter the motherboard manufacturing market and (ii) operating software system
vendors incorporate more system management software into their products. The
entrance or expansion of microprocessor manufacturers who are not customers of
the Company into the motherboard manufacturing markets may have an adverse
effect on the Company's motherboard manufacturing customers. Further, as
software manufacturers provide greater functionality and features, user value
and performance to their products that eliminate or encroach upon the need for
the Company's software products, the market for such products could be
materially diminished.
Microsoft includes basic PC Card software in its Windows 95 operating system and
has announced the inclusion of full PC Card software support in its next
generation Windows 9x and Windows NT operating systems. Currently, the Company
is developing PC Card software for Microsoft's Windows NT. If end-users of
Microsoft's version of the basic PC Card and Plug and Play software included in
its operating systems perceive such software as being adequate for their
computing needs, Award's revenues from PC Card software would be adversely
affected. While the Company believes that the trend in the PC industry toward
greater complexity will continue and that the Company's products offer a
technologically proven, timely and cost-effective solution to this need, there
can be no assurance that other participants in the PC industry will not develop
products and solutions that encroach upon the demand, or obviate the need, for
the Company's products. See "Risk Factors -- Dependence on Key Customer
Relationships; Concentration of Credit Risk."
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INTELLECTUAL PROPERTY
The Company's success depends in significant part on the development,
maintenance and protection of its intellectual property. The Company regards its
software as proprietary and attempts to protect it with a combination of
patents, copyrights, trademarks and trade secrets, employee and third-party
nondisclosure agreements and other methods of protection. The Company has patent
applications pending in the U.S. and/or abroad on six inventions, three of which
are owned jointly with a third party. Despite these precautions, it may be
possible for unauthorized third parties to copy the Company's software or to
reverse engineer or obtain and use information that the Company regards as
proprietary. The Company licenses its object and source code under written
license agreements. Certain provisions of such licenses, including provisions
protecting against unauthorized use, copying, transfer and disclosure of the
licensed programs, may be unenforceable under the laws of certain jurisdictions.
In addition, the laws of some foreign countries, including Taiwan, do not
protect the Company's proprietary rights to the same extent as do the laws of
the United States. There can be no assurance that the protections put in place
by the Company will be adequate.
Significant and protracted litigation may be necessary to protect the Company's
intellectual property rights to determine the scope of the proprietary rights of
others or to defend against claims of infringement. Moreover, although the
Company is not currently involved in any litigation with respect to intellectual
property rights, in the past there have been allegations that certain portions
of the Company's core BIOS infringed on a third party's copyrights. In response,
the Company rewrote certain software routines in a "clean room" procedure and is
upgrading its customers to the new version of such software routines in order to
avoid any further allegations of infringement. The Company believes that its
software does not presently infringe the copyrights of any third parties.
However, there can be no assurance that other parties will not make allegations
of infringement in the future. Such assertions could require the Company to
discontinue the use of certain software routines, to cease the manufacture, use
and sale of infringing products, to incur significant litigation costs and
expenses and to develop non-infringing technology or to obtain licenses to the
alleged infringing technology. Although the Company has been able to acquire
licenses from third parties in the past, there can be no assurance that the
Company would be able to develop alternative technologies or to obtain such
licenses or, if a license is obtainable, that the terms would be commercially
acceptable to the Company in the event such assertions are made in the future.
EMPLOYEES
As of April 30, 1996, the Company had 89 full-time employees, of whom 45 are
engaged in engineering and technical positions, 24 in sales and marketing, and
20 in finance, operations and administration. Except for its employees in
Germany, none of the Company's employees is subject to an employment agreement
with the Company. No employee of the Company is represented by a labor union or
is subject to a collective bargaining agreement. The Company has never
experienced a work stoppage due to labor difficulties and believes that its
employee relations are good.
LEGAL PROCEEDINGS
The Company is not currently engaged in any material litigation or legal
proceedings.
FACILITIES
The Company's headquarters are located in Mountain View, California. The Company
subleases approximately 20,000 square feet in this facility under a lease
agreement that expires on December 31, 1996 and may be renewed on a yearly basis
thereafter. The Company also leases office space in Taipei, Taiwan and Munich,
Germany. These offices provide sales and technical support to its customers in
Asia and Europe, respectively. The Company believes that its facilities are
adequate to support operations for the next twelve months. In the event that
additional space is needed, the Company believes that suitable additional or
alternative space adequate to serve its needs will be readily available on
commercially reasonable terms. See "Certain Transactions."
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MANAGEMENT
The executive officers and directors of Award and their ages as of May 31, 1996
are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
- -------------------- --- ----------------------------------------------------------------------
<S> <C> <C>
George C. Huang 54 Chairman of the Board, President, Chief Executive Officer and Director
Reza Afghan 35 Vice President, Operations
Kevin J. Berry 46 Vice President, Finance, Chief Financial Officer and Secretary
Maurice W. Bizzarri 40 Vice President, Engineering and Product Marketing
Lyon T. Lin 43 General Manager, Taiwan; President, Award Software Hong Kong Limited
Ann P. Shen 55 Vice President, Sales and Marketing
Cheng Ming Lee 53 Director
David S. Lee(1)(2) 58 Director
Theodor L. Lieven 44 Director
Masami Maeda 61 Director
Anthony Sun(1) 43 Director
William P. Tai(1)(2) 34 Director
</TABLE>
- ---------------
(1) Member of Compensation Committee
(2) Member of Audit Committee
GEORGE C. HUANG has served as Chairman of the Board of Directors, President,
Chief Executive Officer and Director of the Company since July 1993. From
January 1984 to the present, Dr. Huang has served as Chairman of the Board of
Directors of GCH Systems, Inc. ("GCH"), a company that develops and markets
embedded controllers, Application Specific Integrated Circuits and PC systems,
and from January 1984 until November 1994, he also served as Chief Executive
Officer of GCH. From February 1987 to the present Dr. Huang has served as a
Director of GCH-Sun Systems Company Ltd. ("GSS"), a subsidiary of GCH. From
January 1990 to May 1996, Dr. Huang served as a Director of Fidelity Venture
Capital Corporation ("FVCC"), a shareholder of GCH. Dr. Huang received a B.S.
from the National Taiwan University, an M.S. from Washington State University,
and a Ph.D. in Electrical Engineering from University of Washington.
REZA AFGHAN has served as Vice President, Operations since January 1994. From
November 1987 to January 1994, Mr. Afghan served as Vice President, Sales and
Operations of GCH. He received his B.S. in Electrical Engineering from Oregon
State University.
KEVIN J. BERRY has served as Vice President, Finance, Chief Financial Officer
and Treasurer since June 1995 and Secretary since October 1995. From December
1988 to May 1995, Mr. Berry served as Vice President, Finance for the CMX and
Aurora divisions of Chyron Corporation, a developer and manufacturer of software
and systems for the video marketplace. Mr. Berry received a B.S. in Finance and
an M.B.A. from New York University.
MAURICE W. BIZZARRI has served as Vice President, Engineering and Product
Marketing since July 1995. From June 1992 to July 1995, Mr. Bizzarri consulted
in the systems software industry. From November 1990 to June 1992, he served as
Vice President, Research and Development of Connective Strategies, Inc., a
hardware/software company.
LYON T. LIN has served as General Manager, Taiwan, and President, Award Software
Hong Kong Limited since July 1993. From January 1984 to June 1993, Mr. Lin
served as Vice President of GCH. Mr. Lin is also a director of GSS. Mr. Lin
received a B.S. in Electrical Engineering from National Chiao-Tung University
and an M.S. in Electrical Engineering from Santa Clara University. Mr. Lin is
the brother-in-law of George C. Huang.
ANN P. SHEN has served as Vice President, Sales and Marketing since December
1994. From June 1994 to December 1994, she served as Vice President, Engineering
and Marketing and from August 1993 to June 1994 she served as Vice President,
Engineering. Dr. Shen served as Vice President, Engineering at GCH from October
1992 to June 1994. From March 1990 to August 1992, Dr. Shen served as Vice
President, Engineering and Manufacturing Director of OPTA, a digital camera and
high-end graphic/video card company. Dr. Shen received a B.S. in Physics from
National Taiwan University, an M.S. in Physics from the University of
California, Los Angeles and a Ph.D. in Solid State Physics from New York
Polytechnical University.
CHENG MING LEE has served as a director since July 1993. From April 1987 to the
present, Dr. Lee has served as the President and Chief Executive Officer of
Taiwan Venture Capital Corporation and Fidelity Venture Capital Corporation. Dr.
Lee serves on the Board of Directors of Taiwan Opportunities Fund Limited and
CNET Technology Corp. Dr. Lee received a B.S. from National Taiwan University,
M.S. from Stanford University and a Ph.D. in Chemical Engineering from the
University of Houston.
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DAVID S. LEE has served as a director since December 1994. From May 1995 to the
present, Mr. Lee has served as the Chairman of CMC Industries, Inc., a contract
manufacturing company. From November 1985 to August 1994, Mr. Lee served as the
President and Chief Executive Officer of DTC Data Technology Corporation
(formerly Qume Corporation), a manufacturer of disk controller and communication
peripherals. Mr. Lee serves on the Board of Directors of Linear Technology
Corporation and Photonics Corporation. In addition, Mr. Lee is a member of the
Board of Regents of the University of California. Mr. Lee holds an Honorary
Doctorate of Engineering and B.S. in Mechanical Engineering from Montana State
University and an M.S. in Mechanical Engineering from North Dakota State
University.
THEODOR L. LIEVEN has served as a director since January 1996. From January 1975
to the present, Mr. Lieven has served as Chief Executive Officer of Vobis
Microcomputer AG, a computer and peripherals retailing and production company
which he co-founded in 1975. For a description of the voting agreement relating
to Mr. Lieven and Vobis, see "Certain Transactions."
MASAMI MAEDA has served as a director since January 1995. From April 1971 to the
present, Mr. Maeda has served as President and Chief Executive Officer of Sun
Electronics Corporation, a manufacturer of electronic devices. He is also a
member of the Board of Directors of GCH and GSS.
ANTHONY SUN has served as a director since October 1995. From August 1979 to the
present, he has been a general partner of Venrock Associates, a venture capital
partnership. Mr. Sun serves on the Board of Directors of Cognex Corporation,
Conductus, Inc., Centura Software Corporation, Fractal Design Corporation,
Inference Corporation, Komag, Inc., Photonics Corporation, StrataCom, Inc. and
World Talk Communications Corp. Mr. Sun holds S.B.E.E. and S.M.E.E. degrees from
Massachusetts Institute of Technology and an M.B.A. from Harvard University.
WILLIAM P. TAI has served as a director since June 1995. From September 1991 to
the present, Mr. Tai has been a general partner of the Walden Group of Venture
Capital Funds. Concurrently, from August 1995 to the present, he has been
Chairman and Chief Executive Officer of AUNET Corporation, an Asia-based
affiliate of UUNET Technologies, Inc. From August 1987 to September 1991, Mr.
Tai served as Vice President of Alex. Brown & Sons Inc., where he was
responsible for the firm's efforts in the semiconductor industry. Mr. Tai also
serves on the Board of Directors of Network Peripherals Inc. Mr. Tai holds a
B.S. with Honors in Electrical Engineering from the University of Illinois and
an M.B.A. from Harvard University.
COMMITTEES OF THE BOARD OF DIRECTORS
The Company's Board of Directors has established a Compensation Committee and an
Audit Committee. The Compensation Committee establishes salaries, incentives and
other forms of compensation for directors, executive officers and employees of
the Company and administers various incentive compensation and benefit plans.
The Audit Committee oversees the work performed by the Company's independent
accountants and reviews the Company's internal controls.
COMPENSATION OF THE BOARD OF DIRECTORS
The Company's directors do not currently receive any cash compensation for
service on the Board of Directors or any committee thereof, but directors may be
reimbursed for certain expenses in connection with attendance at Board and
committee meetings.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee consists of Messrs. David S. Lee, Sun and Tai. 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 of Directors or
Compensation Committee. For a description of transactions and relationships
involving the Company and members of the Compensation Committee, see "Certain
Transactions."
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<PAGE> 33
EXECUTIVE COMPENSATION
The following table sets forth certain compensation of the Company's Chief
Executive Officer and the three highest paid executive officers of the Company
who earned more than $100,000 in the fiscal year ended December 31, 1995
(collectively, the "Named Executive Officers"):
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
------------------------------------------------
<S> <C> <C> <C> <C>
ANNUAL
COMPENSATION
------------------
LONG TERM
SALARY COMPENSATION
-------- AWARDS
------------
ALL OTHER
NAME AND PRINCIPAL POSITION SECURITIES COMPENSATION
- ------------------------------------------------------------ BONUS UNDERLYING ------------
EARNED OPTIONS
------- ------------
George C. Huang $ 92,986 $ -- -- $ --
Chairman of the Board, President and Chief Executive
Officer
Lyon T. Lin 110,618 62,703(1) -- --
General Manager, Taiwan; President, Award Software Hong
Kong Limited
Ann P. Shen 85,000 32,090(1) -- --
Vice President, Sales and Marketing
Cornelia Schumann(2) 79,930 23,367(1) -- 4,400(3)
General Manager, Munich
</TABLE>
- ---------------
(1) Represents sales commissions earned.
(2) Resigned from the Company effective March 31, 1996.
(3) Allowance for automobile.
STOCK OPTION PLAN
The Company's 1995 Stock Option Plan (the "Option Plan") was adopted by the
Board of Directors in December 1994 and amended in November 1995. The purpose of
the Option Plan is to attract and retain qualified personnel, to provide
additional incentives to employees, including officers, directors and
consultants of the Company, and to promote the success of the Company's
business. Pursuant to the Option Plan, the Company may grant or issue incentive
stock options to employees and officers and nonstatutory stock options to
consultants, employees, and directors. A total of 1,250,000 shares of Common
Stock has been reserved for issuance under the Option Plan. At May 31, 1996,
options to purchase 28,333 shares of Common Stock had been exercised under the
Option Plan and the Company had outstanding options to purchase 951,113 shares
of Common Stock at a weighted average per share exercise price of $3.81. A total
of 270,554 shares of Common Stock is available for future issuance under the
Option Plan.
Although no vesting schedule is required under the Option Plan, options
previously granted under the Option Plan generally have become exercisable one
year after date of grant and vest over a maximum period of five years following
the date of grant. The maximum term of a stock option under the Option Plan is
ten years, but if the optionee at the time of grant has voting power over more
than 10% of the Company's outstanding capital stock, the maximum term of
incentive stock option is five years. The exercise price of incentive stock
options granted under the Option Plan must be at least equal to 100%, or 110%
with respect to holders of 10% of the voting power of the Company's outstanding
capital stock, of the fair market value of the stock subject to the option on
the date of grant. The exercise price of nonstatutory stock options granted
under the Option Plan must be at least equal to 85% of the fair market value of
the stock subject to the option on the date of the grant. No executive officer
or director shall be eligible to be granted options covering more than 500,000
shares of the Company's Common Stock in any twelve-month period.
The Option Plan may be amended at any time by the Board, although certain
amendments require shareholder approval. The Option Plan will terminate in
January 2005 unless earlier terminated by the Board.
31
<PAGE> 34
In April 1996, the following Named Executive Officers received grants of options
to purchase shares of Common Stock in the amounts stated below at a weighted
average per share exercise price of $10.56:
<TABLE>
<CAPTION>
----------------
NUMBER OF SHARES
OFFICER SUBJECT TO OPTIONS
- ---------------------------------------------------------------------------------------- -------------------
<S> <C>
George C. Huang 35,000
Lyon T. Lin 20,000
Ann P. Shen 7,500
</TABLE>
OPTIONS GRANTED IN LAST FISCAL YEAR
No options were granted during the year ended December 31, 1995 to the Named
Executive Officers.
OPTIONS EXERCISED IN LAST FISCAL YEAR
No options were exercised during the year ended December 31, 1995 by the Named
Executive Officers.
EXECUTIVE COMPENSATION PLAN
In April 1996, the Company adopted an Executive Compensation Plan, pursuant to
the terms of which the Company's senior management, including the Named
Executive Officers, will receive at the end of 1996 cash bonuses based on the
Company's performance in 1996.
EMPLOYEE STOCK PURCHASE PLAN
In May 1996, the Company's Board of Directors approved the 1996 Employee Stock
Purchase Plan (the "Purchase Plan") covering an aggregate of 150,000 shares of
Common Stock. The Purchase Plan is to become effective upon the effectiveness of
the Offering. The Purchase Plan is intended to qualify as an employee stock
purchase plan within the meaning of Section 423 of the Code. Under the Purchase
Plan, the Board of Directors may authorize participation by eligible employees,
including officers, in periodic offerings following the adoption of the Purchase
Plan. The offering period for any offering will be no more than 27 months.
Employees are eligible to participate if they are employed by the Company or an
affiliate of the Company designated by the Board of Directors. Employees who
participate in an offering can have up to 15% of their earnings withheld
pursuant to the Purchase Plan and applied, on specified dates determined by the
Board of Directors, to the purchase of shares of Common Stock. The price of
Common Stock purchased under the Purchase Plan will be equal to 85% of the lower
of the fair market value of the Common Stock on the commencement date of each
offering period or the relevant 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.
In the event of certain changes of control, the Company and the Board of
Directors have discretion to provide that each right to purchase Common Stock
will be assumed or an equivalent right substituted by the successor corporation,
or the Board may shorten the offering period and provide for all sums collected
by payroll deductions to be applied to purchase stock immediately prior to the
change in control. The Purchase Plan will terminate at the Board's direction.
401(K) PLAN
In January 1995, the Company adopted a tax-qualified employee savings and
retirement plan (the "401(k) Plan") covering all of the Company's employees.
Pursuant to the 401(k) Plan, employees may elect to reduce their current
compensation by up to the lesser of 15% of eligible compensation or the
statutorily prescribed annual limit ($9,500 in 1996) and have the amount of such
reduction contributed to the 401(k) Plan. The trustee under the 401(k) Plan, at
the direction of each participant, invests the assets of the 401(k) Plan in any
of several designated investment options. The 401(k) Plan is intended to qualify
under Section 401 of the Internal Revenue Code so that contributions by
employees to the 401(k) Plan, and income earned on plan contributions, are not
taxable to employees until withdrawn, and so that the contributions by employees
will be deductible by the Company when made.
LIMITATION OF LIABILITY AND INDEMNIFICATION MATTERS
The Company's Bylaws provide that the Company will indemnify its directors, and
may indemnify its officers, employees and other agents, to the fullest extent
not prohibited by California law. The Company is also empowered under its Bylaws
to enter into indemnification agreements with its directors, officers, employees
and other agents and to purchase insurance on behalf of any person whom it is
required or permitted to indemnify. Pursuant to this provision, the Company will
enter into indemnity agreements with each of its directors and executive
officers.
32
<PAGE> 35
In addition, the Company's Amended and Restated Articles of Incorporation
provide that, to the fullest extent permitted by California law, the Company's
directors will not be liable for monetary damages for breach of the directors'
fiduciary duty of care to the Company and its shareholders. This provision in
the Amended and Restated Articles of Incorporation does not eliminate the duty
of care, and in appropriate circumstances, equitable remedies such as an
injunction or other forms of non-monetary relief would remain available under
California law. 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 or knowing or culpable
violations of law that the director believes to be contrary to the best
interests of the Company or its shareholders, for acts or omissions involving a
reckless disregard for the director's duty to the Company or its shareholders
when the director was aware or should have been aware of a risk of serious
injury to the Company or its shareholders, or an unexcused pattern of
inattention that amounts to an abdication of the director's duty to the Company
or its shareholders, for improper transactions between the director and the
Company or for improper distributions to shareholders and loans to directors and
officers, or for acts or omissions by the director as an officer. This provision
also does not affect a director's responsibilities under any other laws, such as
the federal securities laws or state or federal environmental laws.
At the present time, there is no pending litigation or proceeding involving a
director, officer, employee or other agent of the Company in which
indemnification would be required or permitted. The Company is not aware of any
pending or threatened litigation or proceeding which may result in a claim for
such indemnification by any director, officer, employee or other agent.
CERTAIN TRANSACTIONS
FINANCINGS
In January 1996, Vobis purchased 570,033 shares of Common Stock at $12.28 per
share and warrants (the "Vobis Warrant") at $.02 per warrant share to purchase
272,394 shares of Common Stock with an exercise price of $12.28 per share. Vobis
is entitled to purchase (i) up to 96,000 shares of Common Stock at the per share
price sold to the public in the Offering and (ii) up to 31,948 shares of Common
Stock at $ per share (assuming a per share price to the public of $ )
pursuant to that certain Investors' Rights Agreement, dated as of January 12,
1996, among the Company, Vobis and the other parties thereto (the "Investors'
Rights Agreement"). In the event Vobis elects to exercise its purchase options
and participate in the Offering, the Underwriters have indicated to the Company
that they intend to include Vobis as part of the directed shares program. The
balance of such shares would be purchased directly from the Company. Assuming
exercise of its warrants and consummation of such purchases, Vobis will own
954,401 shares of the Company's Common Stock, or approximately 14% of the
Company's outstanding shares, subsequent to the Offering. See "Principal and
Selling Shareholders." In addition, Vobis is entitled to certain rights with
respect to registration of its shares of Common Stock under the Securities Act.
See "Description of Capital Stock -- Registration Rights."
In 1994, 1995 and the three months ended March 31, 1996, Vobis accounted for
revenues of $622,000, $1,227,000 and $506,000, or approximately 9%, 14% and 18%
of the Company's revenues, respectively. Theodor L. Lieven, a director of the
Company, is the Chief Executive Officer of Vobis, which owns approximately 12%
of the Company's outstanding shares of Common Stock prior to the Offering. See
"Principal and Selling Shareholders."
In September 1995, Walden Capital Partners II, L.P. and Walden Technology
Ventures II, L.P. (collectively "Walden") purchased 72,917 and 10,416 shares of
the Company's Common Stock at $6.00 per share and warrants (the "Walden
Warrants") at $.02 per warrant to purchase 35,000 and 5,000 shares of the
Company's Common Stock with an exercise price of $1.00 per share, respectively.
William P. Tai, a director of the Company, is a general partner of Walden
Capital Partners II, L.P. and Walden Technology Ventures II, L.P. In May 1995,
the Company issued Mr. Tai options to purchase 25,000 shares of Common Stock
with an exercise price of $1.00 per share.
In September 1995, Venrock Associates and Venrock Associates II, L.P.
(collectively "Venrock") purchased 229,302 and 104,031 shares of Common Stock at
a purchase price of $6.00 per share and warrants (the "Venrock Warrants") at
$.02 per warrant share to purchase 57,325 and 26,008 shares of the Company's
Common Stock with an exercise price of $1.00 per share, respectively. Anthony
Sun, a director of the Company, is a general partner of Venrock Associates and
Venrock Associates II, L.P. In October 1995, Mr. Sun received options to
purchase 32,105 shares of Common Stock with an exercise price of $5.00.
The Company granted Vobis, Walden and Venrock the right to convert their shares
of Common Stock into shares of preferred stock of the Company in the event the
Company fails to effect a registration of its Common Stock under the Securities
Act on or before June 30, 1996. Such rights to convert have been waived until
December 31, 1996 and expire upon consummation of the Offering. In addition,
Walden and Venrock are entitled to certain rights with respect to the
registration of their shares of Common Stock under the Securities Act. See
"Description of Capital Stock -- Registration Rights."
In connection with Vobis' investment, the Company entered into a voting
agreement with Vobis, Walden, Venrock and the Company's chief executive officer
pursuant to which such shareholders agreed not to reduce the number of directors
on the Board of Directors below five and to elect a person designated by Vobis
to the Company's Board of Directors. This agreement will terminate upon the
33
<PAGE> 36
earlier of (i) January 12, 1999, (ii) a change of control of the Company, (iii)
the date Vobis owns less than 8% of the Company's outstanding shares of Common
Stock on a fully diluted basis, or (iv) an offering of shares of the Company's
Common Stock under the Securities Act with an aggregate offering price to the
public of at least $10,000,000 and a per share price of at least $13.60.
The Vobis, Walden and Venrock Warrants contain a net exercise provision and
expire upon the earlier of (i) September 30, 2001 or (ii) an offering of shares
of Common Stock under the Securities Act with an aggregate offering price to the
public of at least $10,000,000 on a per share price of at least $13.60. The
holders of these warrants are entitled to certain rights with respect to the
registration of the shares of Common Stock issuable upon exercise thereof under
the Securities Act. See "Description of Capital Stock -- Registration Rights."
In December 1994, the Company authorized the issuance of, and in June 1995
issued TVCC, an affiliate of Dr. Lee, and Dr. Lee warrants to purchase 30,000
and 20,000 shares of Common Stock, respectively, with an exercise price of $1.00
per share in consideration of certain marketing services performed for the
Company. Taiwan Venture Capital Corporation ("TVCC") and FVCC intend to sell
25,000 and 75,000 shares of Common Stock, respectively, as Selling Shareholders
in the Offering.
In December 1994, the Company authorized the issuance of, and in June 1995
issued FVCC, an affiliate of Dr. Cheng Ming Lee, warrants to purchase 50,000
shares of Common Stock with an exercise price of $1.00 per share in
consideration of certain marketing services performed for the Company.
In October 1994, the Company issued Synnex Information Technologies, Inc., a
California corporation ("Synnex") a warrant (the "Synnex Warrant") to purchase
up to 200,000 shares of Common Stock. Synnex has agreed to exercise the Synnex
Warrant with respect to 47,500 shares and sell such shares in the Offering as a
Selling Shareholder. The Synnex Warrant contains a net exercise provision and
expires six months after consummation of the Offering. The holder of the Synnex
Warrant is entitled to certain rights with respect to the registration of the
shares of Common Stock issuable upon exercise thereof under the Securities Act.
See "Description of Capital Stock -- Registration Rights."
REPURCHASES
In July 1995 and August 1995, the Company repurchased 33,493 shares of Common
Stock owned by GCH for an aggregate amount of $200,958, or $6.00 per share,
which shares were acquired by GCH from several of its existing shareholders,
including Dr. Huang and Mr. Lin, who transferred 14,110 and 2,604 shares,
respectively.
In July 1995 and August 1995, the Company repurchased 207,628 shares and 112,504
shares, respectively, of Common Stock for an aggregate amount of $899,781 and
$675,027, or $6.00 per share, from certain relatives of George C. Huang,
Chairman of the Board, President and Chief Executive Officer of the Company. In
January 1996 and February 1996, the Company repurchased 55,165 shares and 2,500
shares, respectively, of Common Stock for an aggregate amount of $551,650 and
$25,000, or $10.00 per share, from certain relatives of Dr. Huang. Dr. Huang
disclaims beneficial ownership of any of such shares held by his relatives.
In July 1995 and August 1995, the Company repurchased 139,963 shares and 152,504
shares, respectively, of Common Stock for an aggregate amount of $839,781 and
$915,027, or $6.00 per share, from certain relatives of Lyon T. Lin, General
Manager, Taiwan; President, Award Software Hong Kong Limited, Taiwan Branch. In
January 1996, the Company repurchased 24,392 shares of Common Stock for an
aggregate amount of $243,925, or $10.00 per share, from certain relatives of Mr.
Lin. Mr. Lin disclaims beneficial ownership of any of such shares held by his
relatives.
In January 1996, the Company repurchased 123,549 shares of the Company's Common
Stock for an aggregate amount of $1,235,495, or $10.00 per share, from Intra
Electronics Co., Ltd. ("Intra Electronics"), an affiliate of FVCC, TVCC and Dr.
Lee. Cheng Ming Lee, a director of the Company, was a director of Intra
Electronics at the time of repurchase. Dr. Lee disclaims beneficial ownership of
any such shares held by Intra Electronics.
SELLING SHAREHOLDERS
Certain of the Selling Shareholders who are relatives of Dr. Huang intend to
sell 47,500 shares of Common Stock in the Offering. Dr. Huang disclaims
beneficial ownership of any of such shares held by his relatives.
Certain of the Selling Shareholders who are relatives of Mr. Lin intend to sell
22,500 shares of Common Stock in the Offering. Mr. Lin disclaims beneficial
ownership of any of such shares held by his relatives.
MISCELLANEOUS
In July 1993, GCH purchased all of the issued and outstanding shares of the
Company's Common Stock, after which the Company was operated as a wholly owned
subsidiary until December 1994. On December 31, 1994, GCH effected a spin-off of
the Company by distributing all of the outstanding shares of Common Stock of the
Company to the existing shareholders of GCH on a pro rata basis. Dr. George C.
Huang, the Chairman of the Board, Chief Executive Officer, President and
director of the Company, is a director,
34
<PAGE> 37
executive officer and shareholder of GCH. Masami Maeda, a director of the
Company, is a director and shareholder of GCH. Dr. Cheng Ming Lee, a director of
the Company, is a shareholder of GCH and President and Chief Executive Officer
of TVCC and FVCC, each of which is a shareholder of GCH and the Company. The
Company subleases its headquarters facilities from GCH. In 1993, 1994, 1995 and
for the three months ended March 31, 1996, the Company made lease payments to
GCH of $123,000, $221,000, $273,000 and $79,000, respectively. From time to time
in the past, the Company and GCH have made non-interest bearing inter-company
cash advances to each other for working capital purposes. In 1993, 1994, 1995
and for the three months ended March 31, 1996, GCH, and its affiliates, advanced
to (or borrowed from) the Company a maximum amount of $723,000/$(19,000),
$1,104,000/$(263,000), $616,354/$(1,474,000) and $(272,000), respectively, with
an outstanding balance of $816,000, $413,000, $(282,000) and $(258,000) at the
end of such periods, respectively.
The Company leases its office space in Taipei, Taiwan, from Sun Corporation, an
affiliate of Sun Electronics Corporation ("Sun"), of which Mr. Maeda, a director
of the Company, is President, Chief Executive Officer, director and majority
shareholder, and GSS, an affiliate of Dr. George C. Huang, Dr. Cheng Ming Lee,
Masami Maeda and Lyon T. Lin. In 1993, 1994, 1995 and as of March 31, 1996, the
Company made lease payments to Sun Corporation of $19,700, $15,100, $58,900 and
$15,800, respectively. During the three months ended March 31, 1996, the Company
made lease payments to GSS of $13,500. Sun intends to sell 47,500 shares of
Common Stock as a Selling Shareholder in the Offering.
The Company believes that the foregoing transactions were in its best interests.
As a matter of policy, all future transactions between the Company and any of
its officers, directors or principal shareholders will be approved by a majority
of the independent and disinterested members of the Board of Directors, will be
on terms no less favorable to the Company than could be obtained from
unaffiliated third parties and will be in connection with bona fide business
purposes of the Company.
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<PAGE> 38
PRINCIPAL AND SELLING SHAREHOLDERS
The following table sets forth certain information with respect to the
beneficial ownership of the Company's Common Stock as of May 31, 1996 and as
adjusted to reflect the sale of the Common Stock being offered hereby (assuming
no exercise of the Underwriters' over-allotment option) by (i) each person (or
group of affiliated persons) who is known by the Company to own beneficially
more than 5% of the Common Stock, (ii) each of the Company's directors, (iii)
each of the Named Executive Officers, and (iv) all directors and executive
officers of the Company as a group.
<TABLE>
<CAPTION>
---------------------------------------------------------------------
SHARES
BENEFICIALLY SHARES TO BE
OWNED PRIOR BENEFICIALLY OWNED
TO OFFERING(1) NUMBER OF AFTER OFFERING(1)(2)
------------------------- SHARES BEING --------------------------
BENEFICIAL OWNERS NUMBER PERCENT OFFERED NUMBER PERCENT(2)
- -------------------------------------------------- ------------ ------- ------------ ---------- ----------
<S> <C> <C> <C> <C> <C>
Vobis Microcomputer AG (3) 842,427 16.1% -- 842,427 13.0%
Theodor L. Lieven
Carlo-Schmid-Str. 12
D-52146 Wurselen Germany
George C. Huang (4) 522,659 10.5 -- 522,659 8.4
c/o Award Software International, Inc.
777 East Middlefield Road
Mountain View, CA 94043
Sun Electronics Corporation 472,297 9.5 47,500 424,797 6.8
Masami Maeda
250 Asahi Kochino-Cho
Konan City, Aichi Prefecture 483 Japan
Venrock Associates (5) 416,666 8.3 -- 416,666 6.6
Anthony Sun
30 Rockfeller Plaza, #5508
New York, NY 10112
Taiwan Venture Capital Corporation 375,285 7.6 25,000 350,285 6.6
Cheng Ming Lee
6F, 305 Ming-Shen E. Rd.
Taipei, Taiwan
Fidelity Venture Capital Corporation 318,445 6.4 75,000 243,445 3.9
Cheng Ming Lee
6F, 305 Ming-Shen E. Rd.
Taipei, Taiwan
John Miao(6) 286,750 5.8 27,200 9,550 *
39 Alley
669 Tun Hua S. Rd.
Taipei, Taiwan
Wan Tsai Tsai(7) 251,662 5.1 -- 251,662 4.0
2F, 237 Sec. 1
Chien-Kuo S. Rd.
Taipei, Taiwan
Hung Lien Investment Corporation 250,000 5.0 -- 250,000 4.0
2/F No.76 Tunhwa Road
Sec. 2
Taipei, Taiwan
HanTech Venture Capital Corporation 250,000 5.0 250,000 -- --
International Trade Building
No. 333 Keeling Road, Sec. 1,
Suite 3201
Taipei 10545, Taiwan
Chailease Venture Capital Co., Ltd. 250,000 5.0 95,000 155,000 2.5
and affiliated entities (8)
5th Fl., No. 420
Fu-Shin N. Rd.
Taipei, Taiwan
Theodor L. Lieven (9) 842,427 16.1 -- 842,427 13.0
Cheng Ming Lee (10) 761,349 15.4 -- 661,349 10.7
Masami Maeda (11) 486,359 9.8 -- 438,859 7.1
Anthony Sun (5) 416,666 8.3 -- 416,666 6.6
Lyon T. Lin (12) 133,424 2.7 -- 133,424 2.1
William P. Tai (13) 130,103 2.6 -- 130,103 2.1
David S. Lee (14) 73,500 1.5 -- 73,500 1.2
Ann P. Shen (15) 23,723 * -- 23,723 *
All directors and executive officers as a
group (12 persons)(10)(11)(16) 3,422,397 62.0 -- 3,258,397 48.1
</TABLE>
36
<PAGE> 39
<TABLE>
<CAPTION>
---------------------------------------------------------------------
SHARES
BENEFICIALLY SHARES TO BE
OWNED PRIOR BENEFICIALLY OWNED
TO OFFERING(1) NUMBER OF AFTER OFFERING(1)(2)
------------------------- SHARES BEING --------------------------
NUMBER PERCENT OFFERED NUMBER PERCENT(2)
------------ ------- ------------ ---------- ----------
<S> <C> <C> <C> <C> <C>
OTHER SELLING SHAREHOLDERS
Synnex Information Technologies, Inc.(17)......... 200,000 3.9% 47,500 152,500 2.4%
Hsiang Kang & Chao Yeh(18)........................ 133,041 2.7 10,000 123,041 2.0
John Chao-Piao Huang (19)......................... 109,165 2.2 7,500 101,665 1.6
Pin-Wei Chen (20)................................. 87,760 1.8 3,000 84,760 1.4
James R. McGowan.................................. 73,439 1.5 15,000 58,439 *
Other Selling Shareholders, each holding less than
1% of the
shares outstanding prior to the Offering (16 172,369 3.4 79,770 92,599 1.5
persons) (21)...................................
</TABLE>
- ---------------
* Less than one percent.
(1) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission and generally includes voting or
investment power with respect to securities. Except as indicated by
footnote, and subject to community property laws where applicable, the
persons named in the table above have sole voting and investment power with
respect to all shares of Common Stock shown as beneficially owned by them.
Percentage of beneficial ownership is based on 4,957,127 shares of Common
Stock outstanding as of May 31, 1996 and 6,207,127 shares of Common Stock
outstanding after completion of the Offering.
(2) Assumes no exercise of the Underwriters' over-allotment option to purchase
up to an aggregate of 300,000 shares of Common Stock of the Company.
(3) Includes 272,394 shares issuable pursuant to a warrant exercisable within
60 days of May 31, 1996. Mr. Lieven, a director of the Company, is the
Chief Executive Officer of Vobis Microcomputer AG. Excludes the right to
purchase up to 127,948 shares pursuant to certain purchase options
exercisable in connection with the Offering which if exercised would
reflect the beneficial ownership of 970,375 shares or 14.7%. See "Certain
Transactions." Mr. Lieven disclaims beneficial ownership of shares held by
such entity.
(4) Includes (i) 13,609 shares held by Margaret Huang and (ii) 14,727 shares
held by Dwight Huang, Dr. Huang's wife and son, respectively. Also includes
22,500 and 7,500 shares issuable pursuant to options exercisable within 60
days of May 31, 1996 by Dr. Huang and his wife. Dr. Huang disclaims
beneficial ownership of shares held by his wife and son.
(5) Includes (i) 229,302 shares held by Venrock Associates, (ii) 104,031 shares
held by Venrock Associates II, L.P. and (iii) 57,325 shares and 26,008
shares issuable pursuant to warrants exercisable within 60 days of May 31,
1996 by Venrock Associates and Venrock Associates II, L.P., respectively.
Mr. Sun, a director of the Company, is a general partner of Venrock
Associates. Mr. Sun disclaims beneficial ownership of shares held by such
entities, except to the extent of his pecuniary interest therein.
(6) Includes (i) 250,000 shares held by HanTech Venture Capital Corporation
("HanTech") and (ii) 9,550 shares held by Min Chun Chang, Mr. Miao's wife.
Mr. Miao is deemed to have voting power over the shares held by HanTech. He
disclaims beneficial ownership over the shares held by HanTech and his
wife.
(7) Includes an aggregate of 22,280 shares held by Ming Hsing Tsai, Ming Chung
Tsai and Ming Mei Tsai, Mr. Tsai's children. Mr. Tsai disclaims beneficial
ownership over shares held by his children.
(8) Includes (i) 166,500 shares held by Chinatrust Venture Capital Co., Ltd.
and (ii) 166,500 shares held by Koos Venture Capital Co., Ltd.
(9) Includes (i) 570,033 shares held by Vobis Microcomputer AG and (ii) 272,394
shares issuable pursuant to a warrant exercisable within 60 days of May 31,
1996. Excludes the right to purchase up to 127,948 shares pursuant to
certain purchase options exercisable in connection with the Offering which
if exercised would reflect the beneficial ownership of 970,375 shares or
14.7%. See "Certain Transactions." Mr. Lieven disclaims beneficial
ownership of shares held by such entity.
(10) Includes (i) 375,285 shares held by TVCC, (ii) 318,445 shares held by FVCC,
(iii) 29,920 shares held by South Orient Capital Corporation and (iv)
14,211 shares held by Hwaxing Capital Corporation. Dr. Lee, a director of
the Company, is deemed to have voting power over the shares held by such
entities; however, he disclaims beneficial ownership of the shares.
(11) Includes (i) 472,297 shares held by Sun Electronics Corporation and (ii)
14,062 shares issuable pursuant to options exercisable within 60 days of
May 31, 1996. Mr. Maeda, a director of the Company, is President, Chief
Executive Officer and majority shareholder of Sun Electronics Corporation.
(12) Includes (i) 6,500 shares held by Anne Lin, Mr. Lin's wife, (ii) 10,000
shares held by Christine and Eric Lin, Mr. Lin's children and (iii) 18,750
and 2,812 shares issuable pursuant to options exercisable within 60 days of
May 31, 1996, by Mr. Lin and his wife, respectively. Mr. Lin disclaims
beneficial ownership of shares held by his wife and children.
37
<PAGE> 40
(13) Includes (i) 72,917 shares held by Walden Capital Partners II, L.P., (ii)
10,416 shares held by Walden Technology Ventures II, L.P. and (iii) 35,000
and 5,000 shares issuable pursuant to warrants exercisable within 60 days
of May 31, 1996. Also includes 6,770 shares issuable pursuant to options
exercisable within 60 days of May 31, 1996. Mr. Tai, a director of the
Company, is a general partner of The Walden Group. Mr. Tai disclaims
beneficial ownership of shares held by such entities, except to the extent
of his pecuniary interest therein.
(14) Includes 73,500 shares issuable pursuant to options exercisable within 60
days of May 31, 1996.
(15) Includes 9,768 shares issuable pursuant to options exercisable within 60
days of May 31, 1996.
(16) Includes 167,849 shares issuable pursuant to options held by officers and
directors exercisable within 60 days of May 31, 1996.
(17) Includes 200,000 shares issuable pursuant to warrants exercisable within 60
days of May 31, 1996. David S. Lee, a director of the Company, is a
director of Synnex Information Technologies, Inc. Mr. Lee disclaims
beneficial ownership of shares held by such entity.
(18) Mr. Yeh is a board member of GCH and the brother-in-law of Dr. Huang. Dr.
Huang disclaims beneficial ownership of shares held by this person.
(19) Includes 1,500 shares issuable pursuant to options exercisable within 60
days of May 31, 1996. Mr. Huang is the brother of Dr. Huang. Dr. Huang
disclaims beneficial ownership of shares held by his brother.
(20) Includes 1,875 shares issuable pursuant to options exercisable within 60
days of May 31, 1996. Pin-Wei Chen is the former Secretary and, until May
5, 1995, a director of the Company. Mr. Chen is the brother-in-law of Dr.
Huang. Dr. Huang disclaims beneficial ownership of shares held by his
brother-in-law.
(21) Includes 10,000 shares issuable pursuant to options exercisable within 60
days of May 31, 1996. Certain selling shareholders are relatives of Dr.
Huang and Mr. Lin. Dr. Huang and Mr. Lin disclaim beneficial ownership of
shares held by these persons.
38
<PAGE> 41
DESCRIPTION OF CAPITAL STOCK
The following description of the capital stock of the Company and certain
provisions of the Company's Articles of Incorporation and Bylaws is a summary
that will be in effect at the time of the Offering and is qualified in its
entirety by the provisions of the Certificate of Incorporation and Bylaws, which
have been filed as exhibits to the Company's Registration Statement, of which
this Prospectus is a part.
Upon the closing of the offering the authorized capital stock of the Company
will consist of 40,000,000 shares of Common Stock, without par value ("Common
Stock"), and 5,000,000 shares of Preferred Stock, without par value ("Preferred
Stock").
COMMON STOCK
As of May 31, 1996, there were 4,957,127 shares of Common Stock outstanding held
by 100 holders of record. The holders of Common Stock are entitled to one vote
for each share held of record on all matters submitted to a vote of the
shareholders. The holders of Common Stock are not entitled to cumulative voting
rights with respect to the election of directors, and as a consequence, minority
shareholders will not be able to elect directors on the basis of their votes
alone. Subject to preferences that may be applicable to any shares of Preferred
Stock issued by the Company in the future, holders of Common Stock are entitled
to receive ratably such dividends as may be declared by the Board of Directors
out of funds legally available therefor. See "Dividend Policy." In the event of
a liquidation, dissolution or winding up of the Company, holders of the Common
Stock are entitled to share ratably in all assets remaining after payment of
liabilities and the liquidation preference of any then outstanding Preferred
Stock. Holders of Common Stock have no preemptive rights and no right to convert
their Common Stock into any other securities. There are no redemption or sinking
fund provisions applicable to the Common Stock. All outstanding shares of Common
Stock are, and all shares of Common Stock to be outstanding upon completion of
the Offering will be, fully paid and nonassessable.
PREFERRED STOCK
The Board of Directors has the authority, without further action by the
shareholders, to issue up to 5,000,000 shares of Preferred Stock in one or more
series and to fix the rights, preferences, privileges and restrictions thereof,
including dividend rights, conversion rights, voting rights, terms of
redemption, liquidation preferences, sinking fund terms and the number of shares
constituting any series or the designation of such series, without any further
vote or action by shareholders. The issuance of Preferred Stock could adversely
affect the voting power of holders of Common Stock and the likelihood that such
holders will receive dividend payments and payments upon liquidation and could
have the effect of delaying, deferring or preventing a change in control of the
Company. The Company has no present plan to issue any shares of Preferred Stock.
WARRANTS
The Company has outstanding warrants to purchase 595,727 shares of Common Stock
as of May 31, 1996. For a description of such warrants see "Certain
Transactions."
REGISTRATION RIGHTS
After the Offering, the holders of 1,735,699 shares of Common Stock and warrants
to purchase 595,727 shares of Common Stock will be entitled to certain rights
with respect to the registration of such shares under the Securities Act,
pursuant to the Investors' Rights Agreement among such holders and the Company,
dated January 12, 1996 (the "Investors' Rights Agreement"). Under the terms of
the Investors' Rights Agreement, 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, subject to certain
limitations, to include shares therein. The holders may also require the Company
to file a registration statement under the Securities Act with respect to their
shares, subject to certain limitations. Further, the holders may require the
Company to register their shares on Form S-3 when use of such form becomes
available to the Company. The Company is required to bear all registration
expenses in connection with all subsequent registrations, except that any Form
S-3 registration expenses incurred after the first two registrations shall be
borne by the selling shareholders on a pro rata basis in proportion to the
number of shares sold by each. The selling shareholders in each subsequent
registration are required to bear all selling expenses on a pro rata basis in
proportion to the number of shares sold by each. These 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.
CERTAIN ANTI-TAKEOVER CHARTER PROVISIONS
The Company's Bylaws (i) provide that only a majority of the members of the
Board of Directors in office, although less than a quorum, may elect directors
to fill vacancies created either by resignation, death, disqualification,
removal or by an increase in the size of the
39
<PAGE> 42
Board of Directors and (ii) require advance notice by a shareholder of a
proposal or director nomination that such shareholder desires to present at the
annual meeting. In addition, the Company's Amended and Restated Articles of
Incorporation (i) prohibit shareholder actions by written consent, (ii)
eliminate automatically on and after the Company becomes a "listed corporation"
as defined in Section 301.5 of the California Corporations Code the ability of
the shareholders to cumulate votes in the election of directors and (iii)
provide that the Bylaws of the Company may only be amended by the Board of
Directors or holders of two-thirds of the Company's outstanding voting stock.
These provisions may have the effect of deterring hostile takeovers or delaying
changes in control or management of the Company.
TRANSFER AGENT AND REGISTRAR
First National Bank of Boston has been appointed as the transfer agent and
registrar for the Company's Common Stock. Its telephone number is (617)
575-2900.
40
<PAGE> 43
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of the Offering, the Company will have outstanding 6,207,127
shares of Common Stock, assuming no exercise of the Underwriters' over-allotment
option and no exercise of outstanding options and warrants. Of these shares,
2,000,000 shares sold in the Offering will be freely tradable without
restrictions or further registration under the Securities Act of 1933, as
amended (the "Securities Act"). The remaining 4,207,127 shares of Common Stock
held by existing shareholders are "restricted securities" as the term is defined
in Rule 144 under the Securities Act (the "Restricted Shares"). Restricted
Shares may be sold in the public market only if registered or if they qualify
for an exemption from registration under Rules 144, 144(k) or 701 or Regulation
S promulgated under the Securities Act. As a result of contractual restrictions
and the provisions of Rule 144 and 701 or Regulation S, additional shares will
be available for sale in the public market as follows: (i) no Restricted Shares
will be eligible for immediate sale on the date of this Prospectus, (ii) 5,000
Restricted Shares and 324,727 shares of Common Stock issuable upon exercise of
currently outstanding options will be eligible for sale beginning 90 days after
the date of this Prospectus and (iii) 4,202,157 Restricted Shares, 44,214
additional shares of Common Stock issuable upon exercise of currently
outstanding options and 595,727 shares of Common Stock issuable upon exercise of
currently outstanding warrants will be eligible for sale beginning 180 days
after the date of this Prospectus upon expiration of lock-up agreements. The
Restricted Shares will be eligible for sale from time to time after completion
of the Offering.
The Company, directors, all executive officers and certain shareholders of the
Company and certain holders of options to acquire Common Stock have agreed with
the representatives of the Underwriters for a period of 180 days after the
effective date of this Prospectus (the "Lock-Up 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 or thereafter acquired directly by such holders
or with respect to which they have or hereafter acquire the power of
disposition, without the prior written consent of J.P. Morgan Securities Inc.
However, J.P. Morgan Securities Inc. may, in its sole discretion and at any time
without notice, release all or any portion of the securities subject to lock-up
agreements. In addition, the Company has agreed that during the Lock-Up Period,
the Company will not, without the prior written consent of J.P. Morgan
Securities Inc., 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 the Offering, the issuance of Common Stock upon the
exercise of outstanding options, the Company's sale of shares in the Offering,
and the Company's issuance of options and shares under existing employee stock
option and stock purchase plans.
As of May 31, 1996 there were 951,113 shares of Common Stock subject to
outstanding options. The Company intends to file registration statements under
the Securities Act to register shares of Common Stock reserved for issuance
under the Option Plan and the Purchase Plan, thus permitting the sale of such
shares by non-affiliates in the public market without restriction under the
Securities Act. Such registration statements will become effective immediately
upon filing. Upon effectiveness of such registration statements, holders of
vested options to purchase approximately 261,033 shares will be entitled to
exercise such options and immediately sell such shares. Holders of all of these
option shares have also entered into agreements not to offer to sell, contract
to sell, or otherwise sell, dispose, 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 or thereafter
acquired directly by such holders or with respect to which they have or
hereafter acquire the power of disposition, during the Lock-Up Period without
the prior written consent of J.P. Morgan Securities Inc.
In general, under Rule 144 as currently in effect, beginning 90 days after the
date of this Prospectus, an Affiliate of the Company, or person (or persons
whose shares are aggregated) who has beneficially owned Restricted Shares for at
least two years, will be entitled to sell in any three-month period a number of
shares that does not exceed the greater of (i) 1% of then outstanding shares of
the Company's Common Stock (approximately 69,571 shares immediately after the
Offering) or (ii) the average weekly trading volume of the Company's Common
Stock in the Nasdaq National Market during the four calendar weeks immediately
preceding the date on which notice of the sale is filed with the Securities and
Exchange Commission. Sales pursuant to Rule 144 are subject to certain
requirements relating to manner of sale, notice and availability of current
public information about the Company. A person (or person 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 and who has beneficially
owned Restricted Shares for at least three years is entitled to sell such shares
pursuant to Rule 144(k) without regard to the limitations described above.
In general, under Regulation S as currently in effect, a person who purchased
equity securities pursuant to Regulation S and has owned such equity securities
for at least one year, assuming no other restrictions on resale, will be able to
sell such securities in the United States on the date public trading begins in
the U.S. market in which the Company's Common Stock is traded.
41
<PAGE> 44
An employee, officer or director of or consultant to the Company who purchased
or was awarded shares or options to purchase shares pursuant to a written
compensatory plan or contract is entitled to rely on the resale provisions of
Rule 701 under the Securities Act, which permits Affiliates and non-Affiliates
to sell their Rule 701 shares without having to comply with Rule 144's holding
period restrictions, in each case commencing 90 days after the date of this
Prospectus. In addition, non-Affiliates may sell Rule 701 shares without
complying with the public information, volume and notice provisions of Rule 144.
Prior to the Offering, there has been no public market for the Company's Common
Stock, and there can be no assurance that an active public market for the Common
Stock will develop or will continue after the Offering or that the market price
of the Common Stock will not decline below the initial public offering price.
Future sales of substantial amounts of Common Stock in the public market could
adversely affect market prices prevailing from time to time. As described
herein, only a limited number of shares will be available for sale shortly after
the Offering because of certain contractual and legal restrictions on resale.
Sales of substantial amounts of Common Stock of the Company in the public market
after the restrictions lapse could adversely affect the prevailing market price
and the ability of the Company to raise equity capital in the future.
42
<PAGE> 45
UNDERWRITING
The Underwriters named below (the "Underwriters"), for whom J.P. Morgan
Securities Inc., Prudential Securities Incorporated, and Needham & Company, Inc.
are acting as representatives (the "Representatives"), have severally agreed,
subject to the terms and conditions set forth in the underwriting agreement
among the Company, the Selling Shareholders and the Representatives (the
"Underwriting Agreement"), to purchase from the Company and Selling
Shareholders, and the Company and the Selling Shareholders have agreed to sell
to the Underwriters, the respective numbers of shares of Common Stock set forth
opposite their names:
<TABLE>
<CAPTION>
----------------
UNDERWRITERS NUMBER OF SHARES
- ----------------------------------------------------------------------------------------- ----------------
<S> <C>
J.P. Morgan Securities Inc.
Prudential Securities Incorporated
Needham & Company, Inc.
---------
Total 2,000,000
=========
</TABLE>
The nature of the Underwriters' obligations under the Underwriting Agreement is
such that all of the Common Stock being offered, excluding shares covered by the
over-allotment option granted to the Underwriters, must be purchased if any are
purchased.
The Representatives have advised the Company and the Selling Shareholders that
the several Underwriters propose to offer the Common Stock to the public
initially at the public offering price set forth on the cover page of this
Prospectus and may offer the Common Stock to selected dealers at such price less
a concession not to exceed $ per share. The Underwriters may allow, and
such dealers may reallow, a concession to other dealers not in excess of
$ per share. After the public offering of the Common Stock, the public
offering price and other selling terms may be changed by the Representatives.
The Company has granted the Underwriters an option, exercisable within 30 days
after the date of this Prospectus, to purchase up to 300,000 additional shares
of Common Stock from the Company at the same price per share to be paid by the
Underwriters for the other shares offered hereby. If the Underwriters purchase
any such additional shares pursuant to the option, each of the Underwriters will
be committed to purchase such additional shares in approximately the same
proportion as set forth in the above table. The Underwriters may exercise the
option only to cover over-allotments, if any, made in connection with the
distribution of Common Stock offered hereby.
Prior to the Offering, there has been no public market for the Common Stock. The
initial public offering price will be determined by negotiations among the
Company, the Selling Shareholders and the Representatives. The factors to be
considered in determining the initial offering price include the prevailing
market conditions, the market valuations of certain publicly traded companies,
revenue and earnings of the Company and comparable companies in recent periods,
estimates of the business potential and prospects of the Company, the experience
of the Company's management and the position of the Company in its industry.
The Representatives have informed the Company and the Selling Shareholders that
the Underwriters will not confirm, without customer authorization, sales to
their customer accounts as to which they have discretionary trading power.
The Company, all directors and executive officers and certain shareholders have
agreed not to offer, sell or otherwise dispose of, any Common Stock or any
securities convertible into Common Stock or register for sale under the
Securities Act any Common Stock, for a period of 180 days after the date of this
Prospectus without the prior written consent of the Representatives. See "Shares
Eligible for Future Sale."
The Company and certain of the Selling Shareholders have agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act, or to contribute to payments the Underwriters may be required to
make in respect thereof.
LEGAL MATTERS
The validity of the shares of Common Stock offered hereby will be passed upon
for the Company by Cooley Godward Castro Huddleson & Tatum, Palo Alto,
California. Certain legal matters will be passed upon for the Underwriters by
Wilson Sonsini Goodrich & Rosati, P.C., Palo Alto, California.
EXPERTS
The consolidated financial statements as of December 31, 1994 and 1995 and for
the six-month periods ended July 1, 1993 and December 31, 1993 and for each of
the two years in the period ended December 31, 1995, included in this Prospectus
have been so included in reliance on the report of Price Waterhouse LLP,
independent accountants, given on the authority of said firm as experts in
auditing and accounting.
43
<PAGE> 46
ADDITIONAL INFORMATION
A Registration Statement on Form S-1, including amendments thereto, relating to
the Common Stock offered hereby has been filed by the Company with the
Securities and Exchange Commission, Washington, D.C. This Prospectus does not
contain all of the information set forth in the Registration Statement and the
exhibits and schedules thereto. Statements contained in this Prospectus as to
the contents of any contract or other document referred to are not necessarily
complete and in each instance reference is made to the copy of such contract or
other document filed as an exhibit to the Registration Statement, each such
statement being qualified in all respects by such reference. For further
information with respect to the Company and the Common Stock offered hereby,
reference is made to such Registration Statement, exhibits and schedules. A copy
of the Registration Statement may be inspected by anyone without charge at the
Commission's principal office in Washington, D.C., and copies of all or any part
thereof may be obtained from the Commission upon the payment of certain fees
prescribed by the Commission.
44
<PAGE> 47
AWARD SOFTWARE INTERNATIONAL, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Price Waterhouse LLP, Independent Accountants........................................... F-2
Consolidated Balance Sheet........................................................................ F-3
Consolidated Statement of Operations.............................................................. F-4
Consolidated Statement of Shareholders' Equity.................................................... F-5
Consolidated Statement of Cash Flows.............................................................. F-6
Notes to Consolidated Financial Statements........................................................ F-7
</TABLE>
F-1
<PAGE> 48
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders of
Award Software International, Inc.
The recapitalization and reverse stock split described in the first paragraph of
Note 11 to the consolidated financial statements have not been consummated at
June 3, 1996. When it has been consummated, we will be in a position to furnish
the following report:
"In our opinion, the accompanying consolidated balance sheet and the
related consolidated statements of operations, shareholders' equity and
cash flows present fairly, in all material respects, the financial position
of Award Software International, Inc. and its subsidiary at December 31,
1994 and 1995, and the results of their operations and their cash flows for
the six month periods ended July 1, 1993 and December 31, 1993, and the
years ended December 31, 1994 and 1995 in conformity with generally
accepted accounting principles. These financial statements are the
responsibility of the Company's management; our responsibility is to
express an opinion on these financial statements based on our audits. We
conducted our audits of these statements in accordance with generally
accepted auditing standards which require that we plan and perform the
audits to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining,
on a test basis, evidence supporting the amounts and disclosures in the
financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for the opinion expressed above."
PRICE WATERHOUSE LLP
San Jose, California
May 29, 1996 except for Note 11
which is as of June 3, 1996
F-2
<PAGE> 49
AWARD SOFTWARE INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
----------------------------------------
<S> <C> <C> <C>
DECEMBER 31,
-------------------------
1994 MARCH 31,
---------- 1996
Dollars in thousands, except share data 1995 ----------
----------
(UNAUDITED)
ASSETS
Current assets:
Cash and cash equivalents $ 1,374 $ 6,498 $ 10,591
Accounts receivable, net 953 992 1,475
Accounts receivable from related parties 75 568 915
Receivable from GCH Systems, Inc. -- 282 258
Other current assets 195 216 246
---------- ---------- ----------
Total current assets 2,597 8,556 13,485
Property and equipment, net 204 276 465
Other assets 318 251 288
---------- ---------- ----------
$ 3,119 $ 9,083 $ 14,238
========== ========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 138 $ 191 $ 130
Accrued liabilities 873 1,723 2,040
Payable to GCH Systems, Inc. 413 -- --
---------- ---------- ----------
Total current liabilities 1,424 1,914 2,170
---------- ---------- ----------
Commitments (Note 10)
Shareholders' equity:
Preferred stock, 5,000,000 shares authorized; no par value; no
shares issued or outstanding -- -- --
Common stock, 40,000,000 shares authorized; no par value;
3,841,801,
4,586,283 and 4,957,127 shares issued and outstanding 1,627 6,215 10,726
Deferred stock compensation -- (255) (236)
Retained earnings 80 1,245 1,631
Cumulative translation adjustment (12) (36) (53)
---------- ---------- ----------
Total shareholders' equity 1,695 7,169 12,068
---------- ---------- ----------
$ 3,119 $ 9,083 $ 14,238
========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these Consolidated Financial
Statements.
F-3
<PAGE> 50
AWARD SOFTWARE INTERNATIONAL, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
PREDECESSOR
----------
SIX MONTHS
ENDED
JULY 1,
---------- THE COMPANY
---------------------------------------------------------------
1993 THREE MONTHS ENDED
---------- SIX MONTHS YEAR ENDED DECEMBER 31, MARCH 31,
Dollars in thousands, except ENDED ----------------------- -----------------------
share data DECEMBER 1995 1996
31, ---------- ----------
----------- 1994 1995
---------- ----------
1993
-----------
(UNAUDITED)
Revenues:
Software and engineering
services $ 1,810 $ 2,010 $ 5,746 $ 7,228 $ 1,601 $ 2,306
Related parties -- 50 972 1,902 455 506
---------- ----------- ---------- ---------- ---------- ----------
Total revenues 1,810 2,060 6,718 9,130 2,056 2,812
---------- ----------- ---------- ---------- ---------- ----------
Cost of revenues:
Software and engineering
services 91 105 558 490 50 79
Related parties -- 12 33 146 35 209
---------- ----------- ---------- ---------- ---------- ----------
Total cost of revenues 91 117 591 636 85 288
---------- ----------- ---------- ---------- ---------- ----------
Gross profit 1,719 1,943 6,127 8,494 1,971 2,524
---------- ----------- ---------- ---------- ---------- ----------
Operating expenses:
Research and development 887 2,071 1,601 2,751 593 855
Sales and marketing 845 647 1,537 2,282 425 560
General and administrative 615 350 932 1,600 415 590
---------- ----------- ---------- ---------- ---------- ----------
Total operating
expenses 2,347 3,068 4,070 6,633 1,433 2,005
---------- ----------- ---------- ---------- ---------- ----------
Income (loss) from operations (628) (1,125) 2,057 1,861 538 519
Interest expense (27) (54) (19) (9) (10) --
Interest and other income -- 1 4 105 2 84
---------- ----------- ---------- ---------- ---------- ----------
Income (loss) before income taxes (655) (1,178) 2,042 1,957 530 603
Provision for income taxes -- -- 784 792 214 217
---------- ----------- ---------- ---------- ---------- ----------
Net income (loss) $ (655) $ (1,178) $ 1,258 $ 1,165 $ 316 $ 386
========== =========== ========== ========== ========== ==========
Net income (loss) per share $ (0.19) $ 0.20 $ 0.18 $ 0.05 $ 0.06
=========== ========== ========== ========== ==========
Weighted average common and
common equivalent shares in
thousands 6,307 6,307 6,500 6,622 6,047
=========== ========== ========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these Consolidated Financial
Statements.
F-4
<PAGE> 51
AWARD SOFTWARE INTERNATIONAL, INC.
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
COMMON STOCK
-------------------------
RETAINED
SHARES DEFERRED EARNINGS CUMULATIVE TOTAL
----------- STOCK (ACCUMULATED TRANSLATION SHAREHOLDERS'
Dollars in thousands AMOUNT COMPENSATION DEFICIT) ADJUSTMENT EQUITY
----------- ------------ ------------ ----------- -----------
PREDECESSOR:
Balance at December 31, 1992 450,000.... $ 1 $ -- $ (359) $ (93) $ (451)
Cumulative translation adjustment -- -- -- -- 7 7
Net loss -- -- -- (655) -- (655)
----------- ----------- ------------ ------------ ----------- -----------
Balance at July 1, 1993 450,000 $ 1 -- $ (1,014) $ (86) $ (1,099)
============ ============ ============= ============= ============ ============
-----------------------------------------------------------------------------------
THE COMPANY:
Issuance of Common Stock 3,841,801 $ 725 $ -- -- -- $ 725
Cumulative translation adjustment -- -- -- -- (15) (15)
Net loss -- -- -- (1,178) -- (1,178)
----------- ----------- ------------ ------------ ----------- -----------
Balance at December 31, 1993 3,841,801 725 -- (1,178) (15) (468)
Capital contribution -- 902 -- -- -- 902
Cumulative translation adjustment -- -- -- -- 3 3
Net income -- -- -- 1,258 -- 1,258
----------- ----------- ------------ ------------ ----------- -----------
Balance at December 31, 1994 3,841,801 1,627 -- 80 (12) 1,695
Issuance of Common Stock and related
warrants, net of issuance costs of
$165 1,166,669 6,837 -- -- -- 6,837
Repurchase of Common Stock (499,687) (2,998) -- -- -- (2,998)
Exercise of Common Stock options 7,500 8 -- -- -- 8
Exercise of Common Stock warrants 70,000 70 -- -- -- 70
Warrants issued for services -- 374 -- -- -- 374
Deferred stock compensation -- 297 (297) -- -- --
Amortization of deferred stock
compensation -- -- 42 -- -- 42
Cumulative translation adjustment -- -- -- -- (24) (24)
Net income -- -- -- 1,165 -- 1,165
----------- ----------- ------------ ------------ ----------- -----------
Balance at December 31, 1995 4,586,283 6,215 (255) 1,245 (36) 7,169
Issuance of Common Stock and related
warrants, net of issuance costs of
$45 (Unaudited) 570,011 6,960 -- -- -- 6,960
Repurchase of Common Stock (Unaudited) (250,000) (2,500) -- -- -- (2,500)
Exercise of Common Stock options
(Unaudited) 20,833 21 -- -- -- 21
Exercise of Common Stock warrants (Unaudited) 30,000 30 -- -- -- 30
Amortization of deferred stock
compensation -- -- 19 -- -- 19
Cumulative translation adjustment
(Unaudited) -- -- -- -- (17) (17)
Net income (Unaudited) -- -- -- 386 -- 386
----------- ----------- ------------ ------------ ----------- -----------
Balance at March 31, 1996 (Unaudited) 4,957,127 $ 10,726 $ (236) $ 1,631 $ (53) $ 12,068
============ ============ ============= ============= ============ ============
</TABLE>
The accompanying notes are an integral part of these Consolidated Financial
Statements.
F-5
<PAGE> 52
AWARD SOFTWARE INTERNATIONAL, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
PREDECESSOR
----------
SIX MONTHS
ENDED
JULY 1, THE COMPANY
---------- ---------------------------------------------------------------
THREE MONTHS ENDED
1993 SIX MONTHS YEAR ENDED DECEMBER 31, MARCH 31,
---------- ENDED ----------------------- -----------------------
Dollars in thousands DECEMBER 1995 1996
31, ---------- ----------
----------- 1994
---------- 1995
1993 ----------
-----------
(UNAUDITED)
Cash flows from operating activities:
Net income (loss) $ (655) $ (1,178) $ 1,258 $ 1,165 $ 316 $ 386
Adjustments to reconcile net income
to net cash provided by (used in)
operating activities:
Acquired in-process research and
development -- 1,092 -- -- -- --
Noncash charge for income taxes -- -- 902 -- -- --
Depreciation and amortization 39 135 269 132 55 53
Warrants issued for services -- -- -- 374 -- --
Deferred stock compensation -- -- -- 42 -- 19
Changes in assets and
liabilities, net of
acquisition:
Accounts receivable, net 168 (213) (240) (40) (25) (428)
Accounts receivable from
related parties -- -- (75) (510) 85 (347)
Other current assets (193) (8) (11) (5) 33 (64)
Other assets (28) 67 (7) 24 49 (52)
Accounts payable 309 (334) (131) 49 (16) (58)
Accrued liabilities (71) 194 (44) 899 182 325
---------- ----------- ---------- ---------- ---------- ----------
Net cash provided by (used in)
operating activities (431) (245) 1,921 2,130 679 (166)
---------- ----------- ---------- ---------- ---------- ----------
Cash flows from investing activities:
Acquisition of predecessor company,
net of cash acquired -- (569) -- -- -- --
Purchase of property and equipment (86) (4) (75) (147) (34) (233)
---------- ----------- ---------- ---------- ---------- ----------
Net cash used in investing activities (86) (573) (75) (147) (34) (233)
---------- ----------- ---------- ---------- ---------- ----------
Cash flows from financing activities:
Proceeds from common stock issuance -- 725 -- 3,917 -- 4,511
Advances from GCH 546 272 -- 651 -- 24
Repayments to GCH -- -- (476) (1,346) (778) --
Payments under capital leases (4) (13) (24) -- -- --
Proceeds under note obligations -- 120 -- -- -- --
Payments under note obligations (29) (26) (281) (73) (33) --
---------- ----------- ---------- ---------- ---------- ----------
Net cash provided by (used in)
financing activities 513 1,078 (781) 3,149 (811) 4,535
---------- ----------- ---------- ---------- ---------- ----------
Effect of exchange rate changes on
cash (4) 20 29 (8) 98 (43)
---------- ----------- ---------- ---------- ---------- ----------
Net increase (decrease) in cash and
cash equivalents (8) 280 1,094 5,124 (68) 4,093
Cash and cash equivalents at beginning
of period 164 -- 280 1,374 1,374 6,498
---------- ----------- ---------- ---------- ---------- ----------
Cash and cash equivalents at end of
period $ 156 $ 280 $ 1,374 $ 6,498 $ 1,306 $ 10,591
========== =========== ========== ========== ========== ==========
Supplemental cash flow information:
Cash paid for interest $ 27 $ 20 $ 3 $ 10 $ 2 $ --
Cash paid for income taxes $ 37 $ 17 $ 41 $ 282 $ 6 $ --
</TABLE>
The accompanying notes are an integral part of these Consolidated Financial
Statements.
F-6
<PAGE> 53
AWARD SOFTWARE INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
NOTE 1 -- ORGANIZATION AND BUSINESS
The Company
Award Software International, Inc. ("Award" or the "Company") designs, develops
and markets system management software for the global computing market. System
management software is one of the fundamental layers in personal computer ("PC")
architecture and provides an essential interface between a PC's operating system
software and its hardware. The Company's principal system management software
products include a suite of Basic Input/Output System software ("BIOS"). Award's
customers include designers and manufacturers of motherboards, PC systems and
other microprocessor-based (or "embedded") devices. The Company was incorporated
in California, in 1983, and operates in one business segment through its
headquarters facility in Mountain View, California, a branch office in Munich,
Germany, and a wholly-owned subsidiary in Hong Kong with a branch office in
Taipei, Taiwan.
GCH Acquisition
On July 2, 1993, GCH Systems, Inc. ("GCH"), an independent developer of
microcomputers and application specific integrated circuits, acquired 100
percent of Award's outstanding Common Stock for $1,905 consisting of $725 in
cash and the assumption of $1,180 in liabilities. The transaction was accounted
for as a purchase and established a new accounting basis for Award. The purchase
price was allocated to the tangible and identifiable intangible assets acquired
and liabilities assumed on the basis of their fair values at the acquisition
date. The purchase price exceeded the fair value of Award's net assets by
approximately $265, which was assigned to goodwill. In addition, $1,092 of the
purchase price was allocated to in-process research and development. Because
such in-process technology had not reached the stage of technological
feasibility and had no alternative future use, the amount was immediately
charged to operations.
From the acquisition date through December 30, 1994, Award operated as a
wholly-owned subsidiary of GCH. On December 31, 1994, Award and GCH became
separate companies through a spin-off of 100 percent of Award's Common Stock to
GCH. Award and GCH have certain common members on their Boards of Directors.
Award and GCH, from time to time have made non-interest bearing cash advances to
each other for working capital purposes.
NOTE 2 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The consolidated financial statements include the accounts of the Company and
its wholly owned subsidiary. All intercompany accounts and transactions have
been eliminated in consolidation.
Revenue Recognition
The Company's revenues are derived primarily from software license fees and also
from non-recurring engineering services. Software license fees are recognized
upon delivery of the product, fulfillment of acceptance terms, if any, and
satisfaction of any significant support obligations. Payments received in
advance of revenue recognition are recorded as deferred revenue. Engineering
services revenue generally consist of amounts charged for customization of the
software prior to delivery and are generally recognized as the services are
performed. Related parties revenues include software licenses and non-recurring
engineering services to a holder of the Company's Common Stock and Common Stock
warrants.
The Company does not offer separate post contract customer support contracts,
and due to the nature of the Company's product offerings has not incurred any
significant post-sale warranty or support obligations. Allowances for
uncollectible amounts, returns and credits are recorded in the same period as
the related revenues based upon the Company's historical experience.
Cash and Cash Equivalents
The Company considers all highly-liquid investments with an original maturity of
three months or less to be cash equivalents. Cash equivalents consist
principally of short-term time deposits and money-market deposit accounts that
are stated at cost, which approximates fair value.
Property and Equipment
Property and equipment are stated at cost less accumulated depreciation and
amortization. Depreciation is provided on a straight-line basis over the
estimated useful lives of the assets, which range from three to five years.
F-7
<PAGE> 54
AWARD SOFTWARE INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Software Development Costs
Costs incurred in the research and development of new products and enhancements
to existing products are charged to expense as incurred until the technological
feasibility of the product or enhancement has been established. After
establishing technological feasibility, any additional development costs
incurred through the date the product is available for general release, if any,
are capitalized and amortized over the estimated product life, generally three
years. Capitalized software development costs are included in other assets in
the accompanying financial statements. Amortization expense on capitalized
software development costs totaled $0, $12, $18, $18, $5 and $5 for the six
month periods ended July 1, 1993 and December 31, 1993, the years ended December
31, 1994 and 1995, and the three months ended March 31, 1995 and 1996,
respectively.
Intangible Assets
Goodwill and a covenant not to compete resulting from the acquisition of Award
Common Stock by GCH are included in other assets at December 31, 1995 and are
being amortized using the straight line method over five years and two years,
respectively.
Income Taxes
The provision for income taxes is calculated in accordance with SFAS No. 109,
"Accounting for Income Taxes." Under SFAS No. 109, a current tax liability or
asset is recognized for the estimated taxes payable or refundable on tax returns
for the current period. A deferred tax liability or asset is recognized for the
estimated future tax effects attributable to temporary differences between the
carrying amount and tax bases of other assets and liabilities and for tax
carryforwards. The measurement of deferred tax assets is reduced, if necessary,
by the amount of any tax benefits that, based on available evidence, are not
expected to be realized.
For the period from July 2, 1993 through December 31, 1994, Award was included
in GCH's consolidated federal and California state income tax returns. Under a
tax sharing arrangement with GCH, Award was allocated a proportionate share of
GCH's consolidated income tax liability. The provision for income taxes has been
calculated using the separate return methodology in accordance with SFAS No.
109. The difference between the allocated amount and the separate return
provision totaled $902 and has been reflected as a capital contribution.
Foreign Currency Translation
The Company has a subsidiary in Hong Kong and branch operations in Taiwan and
Germany. The functional currencies of these entities are the local currencies.
Accordingly, all assets and liabilities of these entities are translated at the
current exchange rate in effect at the balance sheet date and revenues and
expenses are translated at the average exchange rates in effect during the
reporting period. Gains and losses resulting from foreign currency translation
are recorded directly into a separate component of shareholders' equity. Foreign
currency transaction gains and losses were immaterial for all periods presented.
Net Income (Loss) per Share
Net income (loss) per share is computed using the weighted average number of
common and common equivalent shares, when dilutive, from stock options and
warrants (using the treasury stock method). Pursuant to a Securities and
Exchange Commission Staff Accounting Bulletin, common and common equivalent
shares (using the treasury stock method and the assumed public offering price)
issued within 12 months prior to the Company's initial public offering by the
Company have been included in the calculation as if they were outstanding for
all periods presented.
Management Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosures of
contingent assets and liabilities at the date of the consolidated financial
statements and the reported amounts of revenue and expenses during the reporting
period. Actual results could differ from those estimates.
Interim Financial Information (Unaudited)
The accompanying consolidated balance sheet as of March 31, 1996 and the
consolidated statements of operations and of cash flows for the three months
ended March 31, 1995 and 1996 and the consolidated statement of shareholders'
equity for the three months ended March 31, 1996, are unaudited. In the opinion
of management, these statements have been prepared on the same basis as the
audited consolidated financial statements and include all adjustments,
consisting only of normal recurring adjustments, necessary for the fair
F-8
<PAGE> 55
AWARD SOFTWARE INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
presentation of the results of the interim periods. The financial and other data
disclosed in these notes to the consolidated financial statements for these
periods are also unaudited.
NOTE 3 -- CONCENTRATIONS OF CREDIT RISK
Financial instruments that potentially subject the Company to significant
concentrations of credit risk consist principally of bank deposits and accounts
receivable. The Company places its cash and cash equivalents in checking and
market rate accounts with major financial institutions and has not incurred any
losses related to these investments.
The Company markets its products to original equipment manufacturers ("OEMs") in
the personal computer market, designers of motherboards and other
microprocessor-based or embedded systems manufacturers and, as a result,
maintains individually significant receivable balances from major customers
located throughout the world. The Company performs ongoing credit evaluations of
its customers' financial condition and maintains an allowance for uncollectible
accounts receivable based upon the expected collectibility of all accounts
receivable.
The following table summarizes the net accounts receivable from customers
located in the United States, Asia Pacific and Europe:
<TABLE>
<CAPTION>
------------------------------------
<S> <C> <C> <C>
DECEMBER 31, MARCH 31,
----------------------- ----------
1994 1995
---------- ---------- 1996
----------
(UNAUDITED)
United States $ 87 $ 20 $ 180
Asia Pacific 424 663 934
Europe 442 309 361
---------- ---------- ----------
$ 953 $ 992 $ 1,475
========== ========== ==========
</TABLE>
All related party receivables are from United States customers. No individual
customer accounted for 10% or more of accounts receivable at December 31, 1994.
One customer accounted for 28.8% of accounts receivable at December 31, 1995.
Two customers accounted for 18.2% and 18.8%, respectively, of accounts
receivable at March 31, 1996.
NOTE 4 -- NONCASH INVESTING AND FINANCING ACTIVITIES
On July 2, 1993, GCH acquired all of the capital stock of the Company for $725.
In connection with the acquisition, liabilities were assumed as follows:
<TABLE>
<CAPTION>
----------
<S> <C>
LIABILITIES
ASSUMED
----------
Tangible assets, including cash of $156 $ 348
Goodwill 265
Covenant not to compete 200
In-process research and development 1,092
Cash paid for common stock (725)
----------
Liabilities assumed $ 1,180
==========
</TABLE>
NOTE 5 -- BALANCE SHEET COMPONENTS
<TABLE>
<CAPTION>
------------------------------------
<S> <C> <C> <C>
DECEMBER 31, MARCH 31,
----------------------- ----------
1994 1995
---------- ---------- 1996
----------
(UNAUDITED)
Accounts receivable:
Accounts receivable $ 991 $ 1,071 $ 1,564
Less: allowance for doubtful accounts (38) (79) (89)
---------- ---------- ----------
$ 953 $ 992 $ 1,475
========== ========== ==========
</TABLE>
F-9
<PAGE> 56
AWARD SOFTWARE INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
------------------------------------
<S> <C> <C> <C>
DECEMBER 31, MARCH 31,
----------------------- ----------
1995
---------- 1996
1994 ----------
----------
(UNAUDITED)
Property and equipment:
Computer equipment $ 201 $ 310 $ 500
Office equipment 63 82 82
Furniture and fixtures 39 62 75
---------- ---------- ----------
303 454 657
Less accumulated depreciation (99) (178) (192)
---------- ---------- ----------
$ 204 $ 276 $ 465
========== ========== ==========
Other assets:
Goodwill $ 265 $ 265 $ 265
Covenant not to compete 200 200 200
Capitalized software 90 139 139
Other 23 28 84
---------- ---------- ----------
578 632 688
Less accumulated amortization:
Goodwill (80) (133) (146)
Covenant not to compete (150) (200) (200)
Capitalized software (30) (48) (54)
---------- ---------- ----------
$ 318 $ 251 $ 288
========== ========== ==========
Accrued liabilities:
Salaries and benefits $ 232 $ 401 $ 286
Royalties 325 476 276
Income taxes payable 53 542 773
Deferred revenue 62 54 251
Other 201 250 454
---------- ---------- ----------
$ 873 $ 1,723 $ 2,040
========== ========== ==========
</TABLE>
NOTE 6 -- SHAREHOLDERS' EQUITY
The Company is authorized to issue 40,000,000 shares of Common Stock.
In connection with the issuance of Common Stock during 1995, the Company agreed
that, in the event that an initial public offering was not completed by June 30,
1996, 416,666 of the common shares may be exchanged for convertible Preferred
Stock of the Company. The convertible Preferred Stock would have certain rights,
preferences and restrictions with respect to conversion, liquidation, voting,
dividends and redemption. In May 1996, the shareholders waived their conversion
rights with respect to these shares through December 31, 1996.
In October 1994, the Company granted 200,000 Common Stock warrants to a customer
under a software licensing agreement. The warrants were deemed to have a nominal
value on the date of grant. The warrants have an exercise price of $1.00 per
share and are exercisable any time up to March 31, 1998. During the period from
October 1994 through June 1995, the customer earned 45,500 of the Common Stock
warrants based on purchasing volumes. In July 1995, to solidify the Company's
long-term relationship with the customer, the Company vested the remaining
154,500 warrants to the customer and recorded the difference between the
estimated fair market value and the exercise price of the warrants of
approximately $283 as sales and marketing expense.
In December 1994, the Company granted 80,000 Common Stock warrants with an
exercise price of $1.00 per share to holders of approximately 16.7% of the
Company's Common Stock at December 31, 1995, in exchange for marketing services.
The warrants had a nominal value when granted and were exercised in November
1995.
F-10
<PAGE> 57
AWARD SOFTWARE INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
In June 1995, the Company granted 20,000 Common Stock warrants with an exercise
price of $1.00 per share to a holder of approximately 0.4% of the Company's
Common Stock, respectively, at the time of grant in exchange for marketing
services. The warrants are exercisable at any time up to the later of (i) June
15, 1998 or (ii) the six month anniversary of the closing of an initial public
offering. The Company recorded the difference between the estimated fair market
value and the exercise price of the warrants of approximately $36 as sales and
marketing expense. The warrants were exercised in December 1995.
In connection with the issuance of shares of Common Stock in 1995, the Company
issued 123,333 Common Stock warrants with an exercise price of $1.00 per share
for $0.02 per share. The warrants are exercisable at any time up to the earlier
of (i) the closing of the Company's initial public offering of its Common Stock,
of which the aggregate offering price is at least $10,000 and the per share
price to the public is $13.60, or (ii) September 30, 2000. No proceeds were
separately allocated to the warrants.
NOTE 7 -- STOCK OPTIONS PLAN
During 1994, the Company adopted the 1995 Stock Option Plan (the "Plan"), under
which 1,250,000 shares of Common Stock are reserved for issuance to eligible
employees, directors and consultants upon exercise of the stock options. Stock
options are granted at prices determined by Board of Directors and generally may
not be less than 100% and 85%, for incentive and nonstatutory options,
respectively, of the estimated fair value of the related shares on the date of
grant. Options granted under the Plan are for periods not to exceed ten years,
are exercisable generally one year after date of grant and vest over a maximum
period of five years following the date of grant. For options expired or
canceled, the stock not purchased under such options shall revert to and again
become available for re-issuance under the plan. The Plan provides for an
unvested share repurchase option on behalf of the Company. In the event an
optionee ceases to be eligible under the Plan for any reason, shares acquired on
the exercise of an option which have not yet vested may be repurchased by the
Company at the optionee's original cost per share. At December 31, 1995, no
shares were subject to repurchase.
A summary of the stock option activity under the Plan for the years ended
December 31, 1994 and 1995 and the three month period ended March 31, 1996, is
as follows:
<TABLE>
<CAPTION>
---------------------------------------
<S> <C> <C> <C>
SHARES SUBJECT TO
OUTSTANDING OPTIONS
OPTIONS -----------------------
AVAILABLE FOR PRICE PER
GRANT SHARE
------------- -----------
NUMBER OF
SHARES
---------
Options authorized 1,250,000 -- --
Granted (564,050) 564,050 $ 1.00
------------- --------- -----------
Balance at December 31, 1994 685,950 564,050 1.00
Granted (191,105) 191,105 1.00-6.00
Exercised -- (7,500) 1.00
Canceled 1,500 (1,500) 1.00
------------- --------- -----------
Balance at December 31, 1995 496,345 746,155 1.00-6.00
Granted (Unaudited) -- -- --
Exercised (Unaudited) -- (20,833) 1.00
Canceled (Unaudited) 43,584 (43,584) 1.00
------------- --------- -----------
Balance at March 31, 1996 (Unaudited) 539,929 681,738 $1.00-$6.00
========== ======== ===========
</TABLE>
During 1995, the Company recorded $297 of deferred stock compensation for the
excess of the deemed fair market value over the exercise price at the date of
grant related to certain options granted in 1995. The compensation expense will
be recognized over the option vesting period of four years. Compensation expense
recognized in 1995 aggregated $42. In April 1996, the Company granted options to
purchase an aggregate of 273,000 shares of common stock at exercise prices of
$10.00 to $11.00 per share.
Options on 106,500 shares of common stock were exercisable at December 31, 1995.
F-11
<PAGE> 58
AWARD SOFTWARE INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 8 -- INCOME TAXES
Income (loss) before income taxes was subject to tax in the following
jurisdictions:
<TABLE>
<CAPTION>
-------------------------------------------------------
<S> <C> <C> <C> <C>
PREDECESSOR
----------
SIX MONTHS THE COMPANY
ENDED JULY ----------------------------------------
1, YEAR ENDED DECEMBER 31,
---------- SIX MONTHS -------------------------
1993 ENDED 1995
---------- DECEMBER ----------
31,
---------- 1994
----------
1993
----------
United States $ (427) $ (1,266) $ 1,638 $ 464
Foreign (228) 88 404 1,493
---------- ---------- ---------- ----------
$ (655) $ (1,178) $ 2,042 $ 1,957
========== ========== ========== ==========
</TABLE>
The provision (benefit) for income taxes is comprised of the following:
<TABLE>
<CAPTION>
-------------------------
<S> <C> <C>
YEAR ENDED DECEMBER 31,
-------------------------
1994 1995
---------- ----------
Current:
Federal $ 674 $ 484
State 185 46
Foreign 43 405
---------- ----------
Total current 902 935
---------- ----------
Deferred:
Federal (98) (133)
State (20) (10)
Foreign -- --
---------- ----------
Total deferred (118) (143)
---------- ----------
$ 784 $ 792
========== ==========
</TABLE>
Significant components of the Company's deferred tax assets (liabilities) were
as follows:
<TABLE>
<CAPTION>
-------------------------
<S> <C> <C>
DECEMBER 31,
-------------------------
1994 1995
---------- ----------
Deferred tax liabilities:
Capitalized software $ (24) $ (17)
---- ----
Deferred tax assets:
Accrued liabilities 116 191
Depreciation 20 19
Allowance for doubtful accounts 15 31
State tax deduction 63 7
Other 45 30
---- ----
259 278
---- ----
Net deferred tax assets 235 261
Deferred tax assets valuation allowance (117) --
---- ----
$ 118 $ 261
==== ====
</TABLE>
The Company provides a valuation allowance for deferred tax assets when it is
more likely than not, based on available evidence, that some portion or all of
the deferred tax assets will not be realized. Based on an evaluation of the
realizability of future tax benefits based on income earned in 1995, the Company
reversed all previously established valuation allowances during 1995.
F-12
<PAGE> 59
AWARD SOFTWARE INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The provision for income taxes differs from the amount of income tax determined
by applying the applicable U.S. statutory federal income tax rate to income
(loss) before income taxes as follows:
<TABLE>
<CAPTION>
-------------------------------------------------------
<S> <C> <C> <C> <C>
THE COMPANY
----------------------------------------
PREDECESSOR
---------- SIX MONTHS
ENDED
SIX MONTHS DECEMBER
ENDED 31,
JULY 1, ---------- YEAR ENDED DECEMBER 31,
---------- -------------------------
1993 1993 1995
---------- ---------- ----------
1994
----------
Tax provision (benefit) at the U.S. federal
statutory
rate of 34% $ (219) $ (398) $ 694 $ 666
Foreign income taxes at different rates -- -- (27) (77)
State and local taxes, net of federal benefit (40) (72) 123 117
Net operating loss carryforwards 259 470 -- --
Release of valuation allowance -- -- (62) (117)
Nondeductible charges and accruals -- -- -- 166
Other -- -- 56 37
----- ----- ---- -----
Provision for income taxes $ -- $ -- $ 784 $ 792
===== ===== ==== =====
Effective tax rates -- -- 38% 41%
===== ===== ==== =====
</TABLE>
NOTE 9 -- SIGNIFICANT CUSTOMERS AND GEOGRAPHIC SEGMENT INFORMATION
Revenues from customers representing 10% or more of consolidated revenues were
as follows:
<TABLE>
<CAPTION>
----------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PREDECESSOR
-----------
THE COMPANY
SIX MONTHS ------------------------------------------------
ENDED YEAR ENDED
JULY 1, DECEMBER 31, THREE MONTHS
----------- ------------- ENDED
1993 SIX MONTHS 1995 MARCH 31,
----------- ENDED ---- -------------
DECEMBER 31,
------------ 1996
1994 -------------
1993 ----
------------ (UNAUDITED)
Customer A -- -- 11.6% 13.9% 12.5%
Customer B -- Related party -- -- -- 13.4% 18.0%
Customer C -- 34.2% 16.5% -- --
</TABLE>
F-13
<PAGE> 60
AWARD SOFTWARE INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The following is a summary of the Company's geographic operations:
<TABLE>
<CAPTION>
-----------------------------------------------------------
<S> <C> <C> <C> <C> <C>
UNITED ASIA
STATES EUROPE PACIFIC ELIMINATIONS CONSOLIDATED
------- ------ ------- ------------ ------------
PREDECESSOR:
Six months ended July 1, 1993
Revenues $ 494 $ 741 $ 575 $ -- $ 1,810
Income (loss) from operations (400) 61 (289) -- (628)
Identifiable assets 696 321 485 (414) 1,088
THE COMPANY:
Six months ended December 31, 1993
Revenues from unaffiliated customers $ 404 $ 921 $ 685 $ -- $ 2,010
Revenue from related parties 50 -- -- -- 50
Income (loss) from operations (1,215) (36) 126 -- (1,125)
Identifiable assets 1,604 631 644 (1,072) 1,807
Year ended December 31, 1994
Revenues from unaffiliated customers $ 700 $2,273 $ 2,773 $ -- $ 5,746
Revenue from related parties 972 -- -- -- 972
Income from operations 1,664 214 179 -- 2,057
Identifiable assets 2,166 1,100 1,891 (2,038) 3,119
Year ended December 31, 1995
Revenues from unaffiliated customers $ 1,017 $2,216 $ 3,995 $ -- $ 7,228
Revenue from related parties 1,902 -- -- -- 1,902
Income from operations 393 59 1,409 -- 1,861
Identifiable assets 6,907 976 2,764 (1,564) 9,083
</TABLE>
NOTE 10 -- COMMITMENTS
The Company leases its facilities in California, Taiwan and Germany. Future
minimum payments under noncancelable operating leases are as follows:
<TABLE>
<CAPTION>
YEAR ENDING
DECEMBER 31, ----------
<S> <C>
1996 $ 227
1997 87
1998 45
----------
Total $ 359
==========
</TABLE>
Under an agreement that extends through 1996, the Company shares GCH office
facilities in Mountain View, California and is charged a pro rata portion of
actual rent and utilities expense incurred by GCH.
Total rent expense, including amounts allocated from GCH, was $101, $123, $221,
$273 and $79 for the six month periods ended July 1, 1993 and December 31, 1993,
the years ended December 31, 1994 and 1995, and the three months ended March 31,
1996, respectively.
NOTE 11 -- SUBSEQUENT EVENTS
Recapitalization and Reverse Stock Split
In May 1996, the Board of Directors approved an increase in the number of common
shares authorized to 40,000,000, authorized 5,000,000 shares of Preferred Stock
and approved a 1-for-2 reverse stock split of the Company's Common Stock,
subject to shareholders' approval, to be effected before the closing of the
Company's initial public offering. All references to the number of common shares
and per share amounts have been retroactively restated in the accompanying
consolidated financial statements to reflect the stock split.
F-14
<PAGE> 61
AWARD SOFTWARE INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Equity transactions
In January 1996, the Company issued 570,033 shares of Common Stock at a price of
$12.28 per share. In connection with the issuance, the Company agreed that in
the event that an initial public offering is not completed by December 31, 1996,
the shares issued may be exchanged for the Company's convertible Preferred
Stock. The convertible Preferred Stock has certain rights, preferences and
restrictions with respect to conversion, liquidation, voting, cumulative
dividends and redemption.
In connection with the issuance and sale of the shares, the Company issued
272,394 Common Stock warrants with an exercise price of $12.28 per share for
$0.02 per warrant. The warrants are exercisable at any time up to the earlier of
(i) the closing of the Company's initial public offering of its Common Stock, of
which the aggregate offering price and per share price to the public are at
least $10,000 and $13.60 per share, respectively, or (ii) September 30, 2000. No
proceeds were separately allocated to the warrants.
During January and February 1996, the Company repurchased 250,000 shares of
common stock from existing shareholders at a price of $10.00 per share.
Employee Stock Purchase Plan
In May 1996, the Board of Directors adopted the Employee Stock Purchase Plan
(the "Purchase Plan"), which provides for the issuance of a maximum of 150,000
shares of Common Stock. Eligible employees may have up to 15% of their earnings
withheld, to be used to purchase shares of the Common Stock on specified dates
determined by the Board of Directors. The price of Common Stock purchased under
the Purchase Plan will be equal to 85% of the lower of the fair market value of
the Common Stock on the commencement date of each offering period or the
specified purchase date.
401(k) Plan
In January 1995, the Board of Directors adopted an employee savings and
retirement plan (the "401(k) Plan") covering substantially all of the Company's
employees. Pursuant to the 401(k) Plan, eligible employees may elect to reduce
their current compensation by up to the statutory prescribed limit and have the
amount of such reduction contributed to the 401(k) Plan. The Company may make
contributions to the 401(k) Plan on behalf of eligible employees. The Company
made no contributions to the 401(k) Plan in 1994 or 1995.
F-15
<PAGE> 62
LOGO
<PAGE> 63
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth all expenses, other than the underwriting
discounts and commissions, payable by the Registrant in connection with the sale
of the Common Stock being registered. All the amounts shown are estimates except
for the registration fee and the NASD filing fee.
<TABLE>
<S> <C>
Registration fee $ 11,897
NASD filing fee 3,950
Nasdaq application fee 1,000
Blue sky qualification fee and expenses *
Printing and engraving expenses *
Legal fees and expenses *
Accounting fees and expenses *
Transfer agent and registrar fees *
Custodian fees *
Miscellaneous *
========
Total $ *
========
</TABLE>
- ---------------
* To be provided by amendment
ITEM 14. INDEMNIFICATION OF OFFICERS AND DIRECTORS.
Section 317 of the California Corporations Code ("CCC") provides that a
corporation may indemnify any person who was or is a party or is threatened to
be made a party to any proceeding or may procure a judgment in its favor by
reason of the fact that the person is or was an agent of the corporation,
against expenses, judgments, fines, settlements, and other amounts actually and
reasonably incurred in connection with the proceeding if that person acted in
good faith and in a manner the person reasonably believed to be in the best
interests of the corporation and, in the case of a criminal proceeding, had no
reasonable cause to believe the conduct of the person was unlawful.
Section 204 of the CCC provides that a corporation's articles of incorporation
may set forth a provision authorizing, whether by bylaw, agreement, or
otherwise, the indemnification of agents in excess of that expressly permitted
by Section 317 for those agents of the corporation for breach of duty to the
corporation and its stockholders, provided, however, that the provision may not
provide for indemnification of any agent for any acts or omissions or
transactions from which a director may not be relieved of liability, including
(i) for acts or omissions that involve intentional misconduct or a knowing and
culpable violation of law, (ii) for acts or omissions that a director believes
to be contrary to the best interests of the corporation or its shareholders or
that involve the absence of good faith on the part of the director, (iii) for
any transaction from which a director derived an improper personal benefit, (iv)
for acts or omissions that show a reckless disregard for the director's duty to
the corporation or its shareholders in circumstances in which the director was
aware, or should have been aware, in the ordinary course of performing a
director's duties, of a risk of serious injury to the corporation or its
shareholders, (v) for acts or omissions that constitute an executed pattern of
inattention that amounts to an abdication of the director's duty to the
corporation or its shareholders, (vi) under Section 310 of the CCC requiring
that a director who has a contract or other transaction with the corporation or
has a material financial interest in a contract or other transaction between the
corporation and another corporation, obtain approval of such contract or
transaction by the shareholders or the board of directors, or (vii) under
Section 316 of the CCC subjecting a director to joint and several liability for
making any improper distribution, loan or guarantee. Section 204 further
provides that no such indemnification provision may eliminate or limit the
liability of (i) a director for any act or omission occurring prior to the date
when the provision becomes effective, or (ii) an officer for any act or omission
as an officer, notwithstanding that the officer is also a director or that his
or her action, if negligent or improper, has been ratified by the directors.
Article V of the Registrant's Amended and Restated Articles of Incorporation
provides that the corporation is authorized to provide indemnification of agents
through bylaw provisions, agreements with agents, vote of shareholders or
disinterested directors or otherwise, in excess of the indemnification otherwise
permitted by Section 317 of the CCC, subject only to the applicable limits on
such excess indemnification set forth in Section 204 of the CCC. Article V of
the Registrant's Amended and Restated Articles of Incorporation further provides
that any repeal or modification of Article V shall only be prospective and shall
not affect the rights under Article V in effect at the time of the alleged
occurrence of any act or omission to act giving rise to indemnification.
Section 63 of the Registrant's Bylaws provides that the corporation shall
indemnify its directors to the fullest extent not prohibited by the California
General Corporation Law; provided, however, that the corporation may limit the
extent of such indemnification by individual
II-1
<PAGE> 64
contracts with its directors; and, provided, further, that the corporation shall
not be required to indemnify any director in connection with any proceeding (or
part thereof) initiated by such person or any proceeding by such person against
the corporation or its directors, officers, employees or other agents unless (i)
such indemnification is expressly required to be made by law, (ii) the
proceeding was authorized by the board of directors of the corporation or (iii)
such indemnification is provided by the corporation, in its sole discretion,
pursuant to the powers vested in the corporation under the California General
Corporation Law. Section 63 of the Registrant's Bylaws further provides that the
corporation shall have power to indemnify its officers, employees and other
agents as set forth in the California General Corporation Law.
Under the form of Underwriting Agreement filed as Exhibit 1.1 hereto, the
Underwriters are obligated, under certain circumstances, to indemnify directors
and officers of the Registrant against certain liabilities, including
liabilities under the Securities Act of 1933, as amended.
The Company intends to purchase a general liability insurance policy which
covers certain liabilities of directors and officers of the Registrant arising
out of claims based on acts or omissions in their capacity as directors or
officers.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
In July 1993, GCH Systems, Inc. ("GCH") acquired all of the capital stock of the
Registrant. Since July 1993, the Registrant has sold and issued the following
unregistered securities (share and dollar amounts reflect a 1-for-2 reverse
stock split):
(1) In October 1994, the Registrant issued a warrant exercisable for up to
200,000 shares of Common Stock to an accredited investor at an exercise
price of $1.00 per share.
(2) In December 1994, GCH distributed all of the Registrant's outstanding
3,841,801 shares of Common Stock, all of the Registrant's capital stock, to
GCH's existing shareholders on a pro rata basis for no consideration.
(3) In June 1995, the Registrant issued warrants exercisable for an
aggregate of 200,000 shares of Common Stock to an accredited group of
investors at an exercise price of $1.00 per share.
(4) In July 1995, the Registrant sold an aggregate of 750,000 shares of
Common Stock to a group of accredited investors for cash in the aggregate
amount of $4,500,000.
(5) In September 1995, the Registrant sold an aggregate of 416,667 shares
for an aggregate purchase price of $2,500,000 and warrants for a purchase
price of $2,467 exercisable for 123,333 shares of Common Stock with an
exercise price of $1.00 per share.
(6) In January 1996, the Registrant sold 570,033 shares of Common Stock for
an aggregate purchase price of $7,000,005 and issued a warrant for $10,896
exercisable for 272,394 shares of Common Stock at an exercise price of
$12.28 per share to an accredited investor.
(7) From December 1994 to May 1996, the Registrant granted incentive stock
options and nonstatutory stock options to employees, directors and
consultants under its 1995 Stock Option Plan covering an aggregate of
1,028,155 shares of the Registrant's Common Stock, at an average exercise
price of $3.60 per share. Options to purchase 48,709 shares of Common Stock
have been canceled or have lapsed without being exercised. The Registrant
has sold 28,333 shares of its Common Stock to employees, directors and
consultants of the Registrant pursuant to exercise of stock options granted
under the 1995 Stock Option Plan.
The sales and issuances of securities in the transactions described in paragraph
(7) above were deemed to be exempt from registration under the Securities Act by
virtue of Rule 701 promulgated thereunder in that they were offered and sold
either pursuant to written compensatory benefit plans or pursuant to a written
contract relating to compensation, as provided by Rule 701.
The sales and issuances of securities in the transactions described in
paragraphs (1) through (6) above were deemed to be exempt from registration
under the Securities Act by virtue of Section 4(2) and/or Regulation D
promulgated under the Securities Act. The purchasers in each case represented
their intention to acquire the securities for investment only and not with a
view to the distribution thereof. Appropriate legends are affixed to the stock
certificates issued in such transactions. Similar legends were imposed in
connection with any subsequent sales of any such securities. All recipients
either received adequate information about the Registrant or had access, through
employment or other relationships, to such information.
II-2
<PAGE> 65
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(A) EXHIBITS.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- ------- ----------------------------------------------------------------------------------------------
<C> <C> <S>
1.1* -- Form of Underwriting Agreement.
3.1 -- Amended and Restated Articles of Incorporation of the Registrant.
3.1.1* -- Form of Amended and Restated Articles of Incorporation of the Registrant, to be effective upon
the completion of Offering.
3.2 -- Bylaws of the Registrant.
3.2.1* -- Form of Bylaws of the Registrant, to be effective upon the completion of the Offering.
4.1 -- Reference is made to Exhibits 3.1 through 3.2.
4.5* -- Specimen stock certificate.
5.1* -- Opinion of Cooley Godward Castro Huddleson & Tatum.
10.1 -- Form of Indemnity Agreement to be entered into between the Registrant and its directors and
officers, with related schedule.
10.2 -- Registrant's 1995 Stock Option Plan, as amended (the "Option Plan").
10.3 -- Form of Incentive Stock Option under the Option Plan.
10.4 -- Form of Nonstatutory Stock Option under the Option Plan.
10.5* -- Registrant's 1996 Employee Stock Purchase Plan.
10.6 -- Registrant's Executive Compensation Plan.
10.7 -- Lease, dated January 1, 1996, between GCH Systems, Inc. and the Registrant.
10.8 -- Summary of Leases, dated March 1, 1996, between Sun Corporation, GSS Corporation and the
Registrant.
10.9 -- Voting Agreement, dated January 12, 1996, between the Registrant and certain persons named
therein.
10.10 -- Investors' Rights Agreement among the Registrant and certain other persons named therein,
dated as of January 12, 1996.
10.11 -- Warrant issued to Synnex Information Technologies, Inc.
10.12 -- Warrant issued to Vobis Microcomputer AG.
10.13 -- Warrant issued to Venrock Associates.
10.14 -- Warrant issued to Venrock Associates II, L.P.
10.15 -- Warrant issued to Walden Capital Partners II, L.P.
10.16 -- Warrant issued to Walden Technology Ventures II, L.P.
11.1 -- Statement regarding calculation of net income (loss) per share.
23.1 -- Consent of Price Waterhouse LLP.
23.2* -- Consent of Cooley Godward Castro Huddleson & Tatum. Reference is made to Exhibit 5.1.
24.1 -- Power of Attorney. Reference is made to page II-5.
27 -- Financial Data Schedule
</TABLE>
- ---------------
* To be filed by amendment.
(B) FINANCIAL STATEMENT SCHEDULES.
<TABLE>
<CAPTION>
NUMBER DESCRIPTION
------------------------------------------------- ----------------------------------------------
<S> <C>
Schedule II Valuation and Qualifying Accounts
</TABLE>
All other schedules are omitted because they are not required, are not
applicable, or the information is included in the consolidated financial
statements or notes thereto.
ITEM 17. UNDERTAKINGS.
The Registrant hereby undertakes to provide 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.
Insofar as indemnification for liabilities arising under the Securities Act of
1933 may be permitted to directors, officers, and controlling persons of the
Registrant pursuant to the provisions described in Item 14 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 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,
II-3
<PAGE> 66
or proceeding) is asserted by such director, officer, or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
The undersigned Registrant undertakes that: (1) for purposes of determining any
liability under the Securities Act of 1933, the information omitted from the
form of prospectus as filed as part of the registration statement in reliance
upon Rule 430A and contained in the 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 the registration statement as of the time it was declared
effective, and (2) for the purpose of determining any liability under the
Securities Act of 1933, 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
<PAGE> 67
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant has
caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Mountain View, County of
Santa Clara, State of California, on the third day of June 1996.
AWARD SOFTWARE INTERNATIONAL, INC.
By: /s/ GEORGE C. HUANG
------------------------------------------
George C. Huang
Chairman of the Board, President and Chief
Executive Officer
POWER OF ATTORNEY
Each person whose signature appears below constitutes and appoints George C.
Huang and Kevin J. Berry his true and lawful attorneys-in-fact and agents, each
acting alone, with full power of substitution and resubstitution, for him and in
his name, place and stead, in any and all capacities, to sign any or all
amendments (including post-effective amendments) to the Registration Statement
on Form S-1, 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, 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, each acting alone, or his substitute or substitutes, may lawfully do or
cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed below by the following persons in the capacities and
on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------------ ------------------------------------------------- -------------
<C> <S> <C>
/s/ GEORGE C. HUANG Chairman of the Board, President, Chief Executive June 3, 1996
- ------------------------------------------ Officer and Director (Principal Executive
George C. Huang Officer)
/s/ KEVIN J. BERRY Vice President, Finance, Chief Financial Officer June 3, 1996
- ------------------------------------------ and Secretary (Principal Financial and Accounting
Kevin J. Berry Officer)
/s/ CHENG MING LEE Director June 3, 1996
- ------------------------------------------
Cheng Ming Lee
/s/ DAVID S. LEE Director June 3, 1996
- ------------------------------------------
David S. Lee
- ------------------------------------------ Director
Theodor L. Lieven
Director
- ------------------------------------------
Masami Maeda
/s/ ANTHONY SUN Director June 3, 1996
- ------------------------------------------
Anthony Sun
/s/ WILLIAM P. TAI Director June 3, 1996
- ------------------------------------------
William P. Tai
</TABLE>
II-5
<PAGE> 68
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Prospectus constituting part of this
Registration Statement on Form S-1 of our report dated May 29, 1996, except as
to the recapitalization and reverse stock split described in Note 11 which is as
of June 3, 1996, relating to the consolidated financial statements of Award
Software International, Inc. in such Prospectus. We also consent to the
application of such report to the Financial Statement Schedules for the three
years ended December 31, 1995 listed under Item 16(b) of this Registration
Statement when such schedules are read in conjunction with the financial
statements referred to in our report. The audits referred to in such report also
included these schedules. We also consent to the references to us under the
headings "Experts" and "Selected Financial Information" in such Prospectus.
However, it should be noted that Price Waterhouse LLP has not prepared or
certified such "Selected Financial Information."
PRICE WATERHOUSE LLP
San Jose, California
June 3, 1996.
II-6
<PAGE> 69
SCHEDULE II
AWARD SOFTWARE INTERNATIONAL, INC.
SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
Balance at Balance at
beginning end of
in thousands of period Provision Write-off period
---------- --------- --------- ----------
<S> <C> <C> <C> <C>
Allowance for doubtful accounts
1993........................................................ $ 45 31 (38) $ 38
1994........................................................ $ 38 -- -- $ 38
1995........................................................ $ 38 50 (9) $ 79
Deferred tax asset valuation allowance
1993........................................................ $152 27 -- $179
1994........................................................ $179 -- (62) $117
1995........................................................ $117 -- (117) $ --
</TABLE>
S-1
<PAGE> 70
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- ------- ----------------------------------------------------------------------------------------------
<C> <C> <S>
1.1* -- Form of Underwriting Agreement.
3.1 -- Amended and Restated Articles of Incorporation of the Registrant.
3.1.1* -- Form of Amended and Restated Articles of Incorporation of the Registrant, to be effective upon
the completion of Offering.
3.2 -- Bylaws of the Registrant.
3.2.1* -- Form of Bylaws of the Registrant, to be effective upon the completion of the Offering.
4.1 -- Reference is made to Exhibits 3.1 through 3.2.
4.5* -- Specimen stock certificate.
5.1* -- Opinion of Cooley Godward Castro Huddleson & Tatum.
10.1 -- Form of Indemnity Agreement to be entered into between the Registrant and its directors and
officers, with related schedule.
10.2 -- Registrant's 1995 Stock Option Plan, as amended (the "Option Plan").
10.3 -- Form of Incentive Stock Option under the Option Plan.
10.4 -- Form of Nonstatutory Stock Option under the Option Plan.
10.5* -- Registrant's 1996 Employee Stock Purchase Plan.
10.6 -- Registrant's Executive Compensation Plan.
10.7 -- Lease, dated January 1, 1996, between GCH Systems, Inc. and the Registrant.
10.8 -- Summary of Leases, dated March 1, 1996, between Sun Corporation, GSS Corporation and the
Registrant.
10.9 -- Voting Agreement, dated January 12, 1996, between the Registrant and certain persons named
therein.
10.10 -- Investors' Rights Agreement among the Registrant and certain other persons named therein,
dated as of January 12, 1996.
10.11 -- Warrant issued to Synnex Information Technologies, Inc.
10.12 -- Warrant issued to Vobis Microcomputer AG.
10.13 -- Warrant issued to Venrock Associates.
10.14 -- Warrant issued to Venrock Associates II, L.P.
10.15 -- Warrant issued to Walden Capital Partners II, L.P.
10.16 -- Warrant issued to Walden Technology Ventures II, L.P.
11.1 -- Statement regarding calculation of net income (loss) per share.
23.1 -- Consent of Price Waterhouse LLP.
23.2* -- Consent of Cooley Godward Castro Huddleson & Tatum. Reference is made to Exhibit 5.1.
24.1 -- Power of Attorney. Reference is made to page II-5.
27 -- Financial Data Schedule
</TABLE>
- ---------------
* To be filed by amendment.
<PAGE> 71
APPENDIX -- DESCRIPTION OF GRAPHICS
OUTSIDE FRONT COVER
Graphic: Award logo.
Graphic caption: Award Software International(R), Inc.; Asia, North America,
Europe.
INSIDE FRONT COVER
Graphic: Uses of Award's System Management Software. This graphic depicts a PC
motherboard which contains a non-volatile memory device bearing the Company's
logo. The PC motherboard is surrounded by four exemplary uses of the Company's
system management software: a personal digital assistant, a client-server tower,
a laptop computer and a symbolic depiction of the Internet/Intranet depicting
the Earth and the words "Internet" and "Intranet." Bordering the corners of the
page are the words "Desktop," "Embedded," "Mobile BIOS," "PCI," "DMI," "USB,"
"Hot Docking," "PC Card" and "[PROAccess]."
Graphic Caption: Award Software International(R), Inc.; http://www.award.com;
[PROAccess], USBAccess and support for USB are under development and not
commercially available.
PAGE 19
Graphic: a cube depicted in three dimensions and divided into four equal
horizontal layers bearing the labels, in order from bottom to top, "Hardware,"
"BIOS," "Operating System" and "Application Software."
Graphic caption: Award Software International(R), Inc.
BACK COVER
Graphic: Award logo.
Graphic caption: Award Software International(R), Inc.; Asia, North America,
Europe.
<PAGE> 1
EXHIBIT 3.1
AMENDED AND RESTATED
ARTICLES OF INCORPORATION
OF
AWARD SOFTWARE, INTERNATIONAL, INC.
The undersigned, George C. Huang and Pin-Wei Chen certify that:
1. They are the duly elected and acting president and secretary,
respectively, of Award Software International, Inc., a California corporation
(the "Corporation").
2. The Articles of Incorporation of the Corporation are hereby
amended and restated to read in full as follows:
I.
The name of this Corporation is AWARD SOFTWARE INTERNATIONAL, INC.
II.
The purpose of this Corporation is to engage in any lawful act or
activity for which a corporation may be organized under the General Corporation
Law of California other than the banking business, the trust company business or
the practice of a profession permitted to be incorporated by the California
Corporations Code.
<PAGE> 2
III.
This Corporation is authorized to issue only one class of stock which
shall be designated "Common Stock". The total number of shares which the
Corporation is authorized to issue is twenty million (20,000,000) shares.
IV.
(a) The liability of the directors of this Corporation for monetary
damages shall be eliminated to the fullest extent permissible under California
law.
(b) This Corporation is authorized to provide indemnification of agents
(as defined in Section 317 of the California Corporations Code) for breach of
duty to the Corporation and its shareholders through bylaw provisions or through
agreements with the agents, or through shareholder resolutions, or otherwise, in
excess of the indemnification otherwise permitted by Section 317 of the
Corporations Code, subject to the limits on such excess indemnification set
forth in Section 204 of the Corporations Code.
(c) Any repeal or modification of this Article shall only be
prospective and shall not affect the rights under this Article in effect at the
time of the alleged occurrence of any act or omission to act giving rise to
liability or indemnification.
V.
The name and address in the State of California of this Corporation's
agent for service of process is:
California
2.
<PAGE> 3
3. The foregoing amendment and restatement of the Articles of
Incorporation has been duly approved by the Board of Directors.
4. The foregoing amendment and restatement of the Articles of
Incorporation has been duly approved by the required vote of shareholders in
accordance with paragraph 902 of the Corporations Code. The total number of
outstanding shares of Common Stock of the Corporation is four hundred
fifty thousand (450,000). The vote to approve the amendment and restatement was
unanimous.
We further declare under penalty of perjury under the laws of the State
of California that the matters set forth above are true and correct of our own
knowledge.
Executed at Mountain View, California, this day of December,
1994.
/s/ George C. Huang
--------------------------
George C. Huang, President
/s/ Pin-Wei Chen
--------------------------
Pin-Wei Chen, Secretary
3.
<PAGE> 1
EXHIBIT 3.2
BYLAWS
OF
AWARD SOFTWARE INTERNATIONAL, INC.
(A CALIFORNIA CORPORATION)
<PAGE> 2
BYLAWS
OF
AWARD SOFTWARE INTERNATIONAL, INC.
(A CALIFORNIA CORPORATION)
ARTICLE I
OFFICES
SECTION 1. PRINCIPAL OFFICE. The principal executive office of the
corporation shall be located at such place as the Board of Directors may from
time to time authorize. If the principal executive office is located outside
this state, and the corporation has one or more business offices in this state,
the Board of Directors shall fix and designate a principal business office in
the State of California.
SECTION 2. OTHER OFFICES. Additional offices of the corporation shall
be located at such place or places, within or outside the State of California,
as the Board of Directors may from time to time authorize.
ARTICLE II
CORPORATE SEAL
SECTION 3. CORPORATE SEAL. If the Board of Directors adopts a corporate
seal such seal shall have inscribed thereon the name of the corporation and the
state and date of its incorporation. If and when a seal is adopted by the Board
of Directors, such seal may be engraved, lithographed, printed, stamped,
impressed upon, or affixed to any contract, conveyance, certificate for shares,
or other instrument executed by the corporation.
ARTICLE III
SHAREHOLDERS' MEETINGS AND VOTING RIGHTS
SECTION 4. PLACE OF MEETINGS. Meetings of shareholders shall be held at
the principal executive office of the corporation, or at any other place, within
or outside the State of California, which may be fixed either by the Board of
Directors or by the written consent of all
1.
<PAGE> 3
persons entitled to vote at such meeting, given either before or after the
meeting and filed with the Secretary of the Corporation.
SECTION 5. ANNUAL MEETING. The annual meeting of the shareholders of
the corporation shall be held on any date and time which may from time to time
be designated by the Board of Directors. At such annual meeting, directors shall
be elected and any other business may be transacted which may properly come
before the meeting.
SECTION 6. POSTPONEMENT OF ANNUAL MEETING. The Board of Directors and
the President shall each have authority to hold at an earlier date and/or time,
or to postpone to a later date and/or time, the annual meeting of shareholders.
SECTION 7. SPECIAL MEETINGS.
(A) Special meetings of the shareholders, for any purpose
or purposes, may be called by the Board of Directors, the Chairman of the Board
of Directors, the President, or the holders of shares entitled to cast not less
than ten percent (10%) of the votes at the meeting.
(B) Upon written request to the Chairman of the Board of
Directors, the President, any vice president or the Secretary of the corporation
by any person or persons (other than the Board of Directors) entitled to call a
special meeting of the shareholders, such officer forthwith shall cause notice
to be given to the shareholders entitled to vote, that a meeting will be held at
a time requested by the person or persons calling the meeting, such time to be
not less than thirty-five (35) nor more than sixty (60) days after receipt of
such request. If such notice is not given within twenty (20) days after receipt
of such request, the person or persons calling the meeting may give notice
thereof in the manner provided by law or in these bylaws. Nothing contained in
this Section 7 shall be construed as limiting, fixing or affecting the time or
date when a meeting of shareholders called by action of the Board of Directors
may be held.
SECTION 8. NOTICE OF MEETINGS. Except as otherwise may be required by
law and subject to subsection 7(b) above, written notice of each meeting of
shareholders shall be given to each shareholder entitled to vote at that meeting
(see Section 15 below), by the Secretary, assistant secretary or other person
charged with that duty, not less than ten (10) (or, if sent by third class mail,
thirty (30)) nor more than sixty (60) days before such meeting.
Notice of any meeting of shareholders shall state the date, place and
hour of the meeting and,
(A) in the case of a special meeting, the general nature
of the business to be transacted, and no other business may be transacted at
such meeting;
(B) in the case of an annual meeting, the general nature
of matters which the Board of Directors, at the time the notice is given,
intends to present for action by the shareholders;
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(C) in the case of any meeting at which directors are to
be elected, the names of the nominees intended at the time of the notice to be
presented by management for election; and
(D) in the case of any meeting, if action is to be taken
on any of the following proposals, the general nature of such proposal:
(1) a proposal to approve a transaction within
the provisions of California Corporations Code, Section 310 (relating to certain
transactions in which a director has a direct or indirect financial interest);
(2) a proposal to approve a transaction within
the provisions of California Corporations Code, Section 902 (relating to
amending the Articles of Incorporation of the corporation);
(3) a proposal to approve a transaction within
the provisions of California Corporations Code, Sections 181 and 1201 (relating
to reorganization);
(4) a proposal to approve a transaction within
the provisions of California Corporations Code, Section 1900 (winding up and
dissolution);
(5) a proposal to approve a plan of distribution
within the provisions of California Corporations Code, Section 2007 (relating to
certain plans providing for distribution not in accordance with the liquidation
rights of preferred shares, if any).
At a special meeting, notice of which has been given in accordance with
this Section, action may not be taken with respect to business, the general
nature of which has not been stated in such notice. At an annual meeting, action
may be taken with respect to business stated in the notice of such meeting,
given in accordance with this Section, and, subject to subsection 8(d) above,
with respect to any other business as may properly come before the meeting.
SECTION 9. MANNER OF GIVING NOTICE. Notice of any meeting of
shareholders shall be given either personally or by first-class mail, or, if the
corporation has outstanding shares held of record by 500 or more persons
(determined as provided in California Corporations Code Section 605) on the
record date for such meeting, third-class mail, or telegraphic or other written
communication, addressed to the shareholder at the address of that shareholder
appearing on the books of the corporation or given by the shareholder to the
corporation for the purpose of notice. If no such address appears on the
corporation's books or is given, notice shall be deemed to have been given if
sent to that shareholder by first-class mail or telegraphic or other written
communication to the corporation's principal executive office, or if published
at least once in a newspaper of general circulation in the county where that
office is located. Notice shall be deemed to have been given at the time when
delivered personally or deposited in the mail or sent by telegram or other means
of written communication.
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If any notice addressed to a shareholder at the address of that
shareholder appearing on the books of the corporation is returned to the
corporation by the United States Postal Service marked to indicate that the
United States Postal Service is unable to deliver the notice to the shareholder
at that address, all future notices shall be deemed to have been duly given
without further mailing if these shall be available to the shareholder on
written demand by the shareholder at the principal executive office of the
corporation for a period of one year from the date of the giving of the notice.
An affidavit of mailing of any notice or report in accordance with the
provisions of this Section 9, executed by the Secretary, Assistant Secretary or
any transfer agent, shall be prima facie evidence of the giving of the notice.
SECTION 10. QUORUM AND TRANSACTION OF BUSINESS.
(A) At any meeting of the shareholders, a majority of the
shares entitled to vote, represented in person or by proxy, shall constitute a
quorum. If a quorum is present, the affirmative vote of the majority of shares
represented at the meeting and entitled to vote on any matter shall be the act
of the shareholders, unless the vote of a greater number or voting by classes is
required by law or by the Articles of Incorporation, and except as provided in
subsection (b) below.
(B) The shareholders present at a duly called or held
meeting of the shareholders at which a quorum is present may continue to do
business until adjournment, notwithstanding the withdrawal of enough
shareholders to leave less than a quorum, provided that any action taken (other
than adjournment) is approved by at least a majority of the shares required to
constitute a quorum.
(C) In the absence of a quorum, no business other than
adjournment may be transacted, except as described in subsection (b) above.
SECTION 11. ADJOURNMENT AND NOTICE OF ADJOURNED MEETINGS. Any meeting
of shareholders may be adjourned from time to time, whether or not a quorum is
present, by the affirmative vote of a majority of shares represented at such
meeting either in person or by proxy and entitled to vote at such meeting.
In the event any meeting is adjourned, it shall not be necessary to
give notice of the time and place of such adjourned meeting pursuant to Sections
8 and 9 of these bylaws; provided that if any of the following three events
occur, such notice must be given:
(A) announcement of the adjourned meeting's time and
place is not made at the original meeting which it continues or
(B) such meeting is adjourned for more than forty- five
(45) days from the date set for the original meeting or
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(C) a new record date is fixed for the adjourned meeting.
At the adjourned meeting, the corporation may transact any business
which might have been transacted at the original meeting.
SECTION 12. WAIVER OF NOTICE, CONSENT TO MEETING OR APPROVAL OF
MINUTES.
(A) Subject to subsection (b) of this Section, the
transactions of any meeting of shareholders, however called and noticed, and
wherever held, shall be as valid as though made at a meeting duly held after
regular call and notice, if a quorum is present either in person or by proxy,
and if, either before or after the meeting, each of the persons entitled to vote
but not present in person or by proxy signs a written waiver of notice or a
consent to holding of the meeting or an approval of the minutes thereof.
(B) A waiver of notice, consent to the holding of a
meeting or approval of the minutes thereof need not specify the business to be
transacted or transacted at nor the purpose of the meeting; provided that in the
case of proposals described in subsection (d) of Section 8 of these bylaws, the
general nature of such proposals must be described in any such waiver of notice
and such proposals can only be approved by waiver of notice, not by consent to
holding of the meeting or approval of the minutes.
(C) All waivers, consents and approvals shall be filed
with the corporate records or made a part of the minutes of the meeting.
(D) A person's attendance at a meeting shall constitute
waiver of notice of and presence at such meeting, except when such person
objects at the beginning of the meeting to transaction of any business because
the meeting is not lawfully called or convened and except that attendance at a
meeting is not a waiver of any right to object to the consideration of matters
which are required by law or these bylaws to be in such notice (including those
matters described in subsection (d) of Section 8 of these bylaws), but are not
so included if such person expressly objects to consideration of such matter or
matters at any time during the meeting.
SECTION 13. ACTION BY WRITTEN CONSENT WITHOUT A MEETING. Any action
which may be taken at any meeting of shareholders may be taken without a meeting
and without prior notice if written consents setting forth the action so taken
are signed by the holders of the outstanding shares having not less than the
minimum number of votes that would be necessary to authorize or take such action
at a meeting at which all shares entitled to vote thereon were present and
voted.
Directors may not be elected by written consent except by unanimous
written consent of all shares entitled to vote for the election of directors;
provided that any vacancy on the Board of Directors (other than a vacancy
created by removal) which has not been filled by the board of directors may be
filled by the written consent of a majority of outstanding shares entitled to
vote for the election of directors.
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Any written consent may be revoked pursuant to California Corporations
Code Section 603(c) prior to the time that written consents of the number of
shares required to authorize the proposed action have been filed with the
Secretary. Such revocation must be in writing and will be effective upon its
receipt by the Secretary.
If the consents of all shareholders entitled to vote have not been
solicited in writing, and if the unanimous written consent of all such
shareholders shall not have been received, the Secretary shall give prompt
notice of any corporate action approved by the shareholders without a meeting to
those shareholders entitled to vote on such matters who have not consented
thereto in writing. This notice shall be given in the manner specified in
Section 9 of these bylaws. In the case of approval of (i) a transaction within
the provisions of California Corporations Code, Section 310 (relating to certain
transactions in which a director has an interest), (ii) a transaction within the
provisions of California Corporations Code, Section 317 (relating to
indemnification of agents of the corporation), (iii) a transaction within the
provisions of California Corporations Code, Sections 181 and 1201 (relating to
reorganization), and (iv) a plan of distribution within the provisions of
California Corporations Code, Section 2007 (relating to certain plans providing
for distribution not in accordance with the liquidation rights of preferred
shares, if any), the notice shall be given at least ten (10) days before the
consummation of any action authorized by that approval.
SECTION 14. VOTING. The shareholders entitled to vote at any meeting of
shareholders shall be determined in accordance with the provisions of Section 15
of these bylaws, subject to the provisions of Sections 702 through 704 of the
California Corporations Code (relating to voting shares held by a fiduciary, in
the name of a corporation, or in joint ownership). Voting at any meeting of
shareholders need not be by ballot; provided, however, that elections for
directors must be by ballot if balloting is demanded by a shareholder at the
meeting and before the voting begins.
Every person entitled to vote at an election for directors may cumulate
the votes to which such person is entitled, i.e., such person may cast a total
number of votes equal to the number of directors to be elected multiplied by the
number of votes to which such person's shares are entitled, and may cast said
total number of votes for one or more candidates in such proportions as such
person thinks fit; provided, however, no shareholder shall be entitled to so
cumulate such shareholder's votes unless the candidates for which such
shareholder is voting have been placed in nomination prior to the voting and a
shareholder has given notice at the meeting, prior to the vote, of an intention
to cumulate votes. In any election of directors, the candidates receiving the
highest number of votes, up to the number of directors to be elected, are
elected.
Except as may be otherwise provided in the Articles of Incorporation or
by law, and subject to the foregoing provisions regarding the cumulation of
votes, each shareholder shall be entitled to one vote for each share held.
Any shareholder may vote part of such shareholder's shares in favor of
a proposal and refrain from voting the remaining shares or vote them against the
proposal, other than elections to office, but, if the shareholder fails to
specify the number of shares such shareholder is voting
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affirmatively, it will be conclusively presumed that the shareholder's approving
vote is with respect to all shares such shareholder is entitled to vote.
No shareholder approval, other than unanimous approval of those
entitled to vote, will be valid as to proposals described in subsection 8(d) of
these bylaws unless the general nature of such business was stated in the notice
of meeting or in any written waiver of notice.
SECTION 15. PERSONS ENTITLED TO VOTE OR CONSENT. The Board of Directors
may fix a record date pursuant to Section 60 of these bylaws to determine which
shareholders are entitled to notice of and to vote at a meeting or consent to
corporate actions, as provided in Sections 13 and 14 of these bylaws. Only
persons in whose name shares otherwise entitled to vote stand on the stock
records of the corporation on such date shall be entitled to vote or consent.
If no record date is fixed:
(A) The record date for determining shareholders entitled
to notice of or to vote at a meeting of shareholders shall be at the close of
business on the business day next preceding the day notice is given or, if
notice is waived, at the close of business on the business day next preceding
the day on which the meeting is held;
(B) The record date for determining shareholders entitled
to give consent to corporate action in writing without a meeting, when no prior
action by the Board of Directors has been taken, shall be the day on which the
first written consent is given;
(C) The record date for determining shareholders 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, or the sixtieth (60th) day
prior to the date of such other action, whichever is later.
A determination of shareholders of record entitled to notice of or to
vote at a meeting of shareholders shall apply to any adjournment of the meeting
unless the Board of Directors fixes a new record date for the adjourned meeting;
provided, however, that the Board of Directors shall fix a new record date if
the meeting is adjourned for more than forty-five (45) days from the date set
for the original meeting.
Shares of the corporation held by its subsidiary or subsidiaries (as
defined in California Corporations Code, Section 189(b)) are not entitled to
vote in any matter.
SECTION 16. PROXIES. Every person entitled to vote or execute consents
may do so either in person or by one or more agents authorized to act by a
written proxy executed by the person or such person's duly authorized agent and
filed with the Secretary of the corporation; provided that no such proxy shall
be valid after the expiration of eleven (11) months from the date of its
execution unless otherwise provided in the proxy. The manner of execution,
suspension, revocation, exercise and effect of proxies is governed by law.
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SECTION 17. INSPECTORS OF ELECTION. Before any meeting of shareholders,
the Board of Directors may appoint any persons, other than nominees for office,
to act as inspectors of election at the meeting or its adjournment. If no
inspectors of election are so appointed, the chairman of the meeting may, and on
the request of any shareholder or a shareholder's proxy shall, appoint
inspectors of election at the meeting. The number of inspectors shall be either
one (1) or three (3). If inspectors are appointed at a meeting on the request of
one or more shareholders or proxies, the majority of shares represented in
person or proxy shall determine whether one (1) or three (3) inspectors are to
be appointed. If any person appointed as inspector fails to appear or fails or
refuses to act, the chairman of the meeting may, and upon the request of any
shareholder or a shareholder's proxy shall, appoint a person to fill that
vacancy.
These inspectors shall:
(A) Determine the number of shares outstanding and the
voting power of each, the shares represented at the meeting, the existence of a
quorum, and the authenticity, validity, and effect of proxies;
(B) Receive votes, ballots, or consents;
(C) Hear and determine all challenges and questions in
any way arising in connection with the right to vote;
(D) Count and tabulate all votes or consents;
(E) Determine when the polls shall close;
(F) Determine the result; and
(G) Do any other acts that may be proper to conduct the
election or vote with fairness to all shareholders.
ARTICLE IV
BOARD OF DIRECTORS
SECTION 18. POWERS. Subject to the provisions of law or any limitations
in the Articles of Incorporation or these bylaws, as to action required to be
approved by the shareholders or by the outstanding shares, the business and
affairs of the corporation shall be managed and all corporate powers shall be
exercised, by or under the direction of the Board of Directors. The Board of
Directors may delegate the management of the day-to-day operation of the
business of the corporation to a management company or other person, provided
that the business and affairs of the corporation shall be managed and all
corporate powers shall be exercised under the ultimate direction of the Board of
Directors.
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SECTION 19. NUMBER OF DIRECTORS. The authorized number of directors of
the corporation shall be not less than a minimum of five (5) nor more than a
maximum of nine (9) (which maximum number in no case shall be greater than two
times said minimum, minus one) and the number of directors presently authorized
is [five (5)]. The exact number of directors shall be set within these limits
from time to time (a) by approval of the Board of Directors, or (b) by the
affirmative vote of a majority of the shares represented and voting at a duly
held meeting at which a quorum is present (which shares voting affirmatively
also constitute at least a majority of the required quorum) or by the written
consent of shareholders pursuant to Section 13 hereinabove.
Any amendment of these bylaws changing the maximum or minimum number of
directors may be adopted only by the affirmative vote of a majority of the
outstanding shares entitled to vote; provided, an amendment reducing the minimum
number of directors to less than five (5), cannot be adopted if votes cast
against its adoption at a meeting or the shares not consenting to it in the case
of action by written consent are equal to more than 16-2/3 percent of the
outstanding shares entitled to vote.
No reduction of the authorized number of directors shall remove any
director prior to the expiration of such director's term of office.
SECTION 20. ELECTION OF DIRECTORS, TERM, QUALIFICATIONS. The directors
shall be elected at each annual meeting of shareholders to hold office until the
next annual meeting. Each director, including a director elected or appointed to
fill a vacancy, shall hold office either until the expiration of the term for
which elected or appointed and until a successor has been elected and qualified,
or until his death, resignation or removal. Directors need not be shareholders
of the corporation.
SECTION 21. RESIGNATIONS. Any director of the corporation may resign
effective upon giving written notice to the Chairman of the Board, the
President, the Secretary or the Board of Directors of the corporation, unless
the notice specifies a later time for the effectiveness of such resignation. If
the resignation specifies effectiveness at a future time, a successor may be
elected pursuant to Section 23 of these bylaws to take office on the date that
the resignation becomes effective.
SECTION 22. REMOVAL. The Board of Directors may declare vacant the
office of a director who has been declared of unsound mind by an order of court
or who has been convicted of a felony.
The entire Board of Directors or any individual director may be removed
from office without cause by the affirmative vote of a majority of the
outstanding shares entitled to vote on such removal; provided, however, that
unless the entire Board is removed, no individual director may be removed when
the votes cast against such director's removal, or not consenting in writing to
such removal, would be sufficient to elect that director if voted cumulatively
at an election at which the same total number of votes cast were cast (or, if
such action is taken by
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written consent, all shares entitled to vote were voted) and the entire number
of directors authorized at the time of such director's most recent election were
then being elected.
SECTION 23. VACANCIES. A vacancy or vacancies on the Board of Directors
shall be deemed to exist in case of the death, resignation or removal of any
director, or upon increase in the authorized number of directors or if
shareholders fail to elect the full authorized number of directors at an annual
meeting of shareholders or if, for whatever reason, there are fewer directors on
the Board of Directors, than the full number authorized. Such vacancy or
vacancies may be filled by a majority of the remaining directors, though less
than a quorum, or by a sole remaining director. The shareholders may elect a
director at any time to fill any vacancy not filled by the directors. Any such
election by written consent, other than to fill a vacancy created by removal,
requires the consent of a majority of the outstanding shares entitled to vote.
Any such election by written consent to fill a vacancy created by removal
requires the consent of all of the outstanding shares entitled to vote.
If, after the filling of any vacancy by the directors, the directors
then in office who have been elected by the shareholders constitute less than a
majority of the directors then in office, any holder or holders of an aggregate
of five percent (5%) or more of the shares outstanding at that time and having
the right to vote for such directors may call a special meeting of shareholders
to be held to elect the entire Board of Directors. The term of office of any
director shall terminate upon such election of a successor.
SECTION 24. REGULAR MEETINGS. Regular meetings of the Board of
Directors shall be held at such times, places and dates as fixed in these bylaws
or by the Board of Directors; provided, however, that if the date for such a
meeting falls on a legal holiday, then the meeting shall be held at the same
time on the next succeeding full business day. Regular meetings of the Board of
Directors held pursuant to this Section 24 may be held without notice.
SECTION 25. PARTICIPATION BY TELEPHONE. Members of the Board of
Directors may participate in a meeting through use of conference telephone or
similar communications equipment, so long as all members participating in such
meeting can hear one another. Such participation constitutes presence in person
at such meeting.
SECTION 26. SPECIAL MEETINGS. Special meetings of the Board of
Directors for any purpose may be called by the Chairman of the Board or the
President or any vice president or the Secretary of the corporation or any two
(2) directors.
SECTION 27. NOTICE OF MEETINGS. Notice of the date, time and place of
all meetings of the Board of Directors, other than regular meetings held
pursuant to Section 24 above shall be delivered personally, orally or in
writing, or by telephone or telegraph to each director, at least forty-eight
(48) hours before the meeting, or sent in writing to each director by
first-class mail, charges prepaid, at least four (4) days before the meeting.
Such notice may be given by the Secretary of the corporation or by the person or
persons who called a meeting. Such notice need not specify the purpose of the
meeting. Notice of any meeting of the Board of Directors need not be given to
any director who signs a waiver of notice of such meeting, or a consent to
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holding the meeting or an approval of the minutes thereof, either before or
after the meeting, or who attends the meeting without protesting prior thereto
or at its commencement such director's lack of notice. All such waivers,
consents and approvals shall be filed with the corporate records or made a part
of the minutes of the meeting.
SECTION 28. PLACE OF MEETINGS. Meetings of the Board of Directors may
be held at any place within or without the state which has been designated in
the notice of the meeting or, if not stated in the notice or there is no notice,
designated in the bylaws or by resolution of the Board of Directors.
SECTION 29. ACTION BY WRITTEN CONSENT WITHOUT A MEETING. Any action
required or permitted to be taken by the Board of Directors may be taken without
a meeting, if all members of the Board of Directors individually or collectively
consent in writing to such action. Such written consent or consents shall be
filed with the minutes of the proceedings of the Board of Directors. Such action
by written consent shall have the same force and effect as a unanimous vote of
such directors.
SECTION 30. QUORUM AND TRANSACTION OF BUSINESS. A majority of the
authorized number of directors shall constitute a quorum for the transaction of
business. Every act or decision done or made by a majority of the authorized
number of directors present at a meeting duly held at which a quorum is present
shall be the act of the Board of Directors, unless the law, the Articles of
Incorporation or these bylaws specifically require a greater number. A meeting
at which a quorum is initially present may continue to transact business,
notwithstanding withdrawal of directors, if any action taken is approved by at
least a majority of the number of directors constituting a quorum for such
meeting. In the absence of a quorum at any meeting of the Board of Directors, a
majority of the directors present may adjourn the meeting, as provided in
Section 31 of these bylaws.
SECTION 31. ADJOURNMENT. Any meeting of the Board of Directors, whether
or not a quorum is present, may be adjourned to another time and place by the
affirmative vote of a majority of the directors present. If the meeting is
adjourned for more than twenty-four (24) hours, notice of such adjournment to
another time or place shall be given prior to the time of the adjourned meeting
to the directors who were not present at the time of the adjournment.
SECTION 32. ORGANIZATION. The Chairman of the Board shall preside at
every meeting of the Board of Directors, if present. If there is no Chairman of
the Board or if the Chairman is not present, a Chairman chosen by a majority of
the directors present shall act as chairman. The Secretary of the corporation
or, in the absence of the Secretary, any person appointed by the Chairman shall
act as secretary of the meeting.
SECTION 33. COMPENSATION. Directors and members of committees may
receive such compensation, if any, for their services, and such reimbursement
for expenses, as may be fixed or determined by the Board of Directors.
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SECTION 34. COMMITTEES. The Board of Directors may, by resolution
adopted by a majority of the authorized number of directors, designate one or
more committees, each consisting of two (2) or more directors, to serve at the
pleasure of the Board of Directors. The Board of Directors, by a vote of the
majority of authorized directors, may designate one or more directors as
alternate members of any committee, to replace any absent member at any meeting
of such committee. Any such committee shall have authority to act in the manner
and to the extent provided in the resolution of the Board of Directors, and may
have all the authority of the Board of Directors in the management of the
business and affairs of the corporation, except with respect to:
(A) the approval of any action for which shareholders'
approval or approval of the outstanding shares also is required by the
California Corporations Code;
(B) the filling of vacancies on the Board of Directors or
any of its committees;
(C) the fixing of compensation of directors for serving
on the Board of Directors or any of its committees;
(D) the adoption, amendment or repeal of these bylaws;
(E) the amendment or repeal of any resolution of the
Board of Directors which by its express terms is not so amendable or repealable;
(F) a distribution to shareholders, except at a rate or
in a periodic amount or within a price range determined by the Board of
Directors; or
(G) the appointment of other committees of the Board of
Directors or the members thereof.
Any committee may from time to time provide by resolution for regular
meetings at specified times and places. If the date of such a meeting falls on a
legal holiday, then the meeting shall be held at the same time on the next
succeeding full business day. No notice of such a meeting need be given. Such
regular meetings need not be held if the committee shall so determine at any
time before or after the time when such meeting would otherwise have taken
place. Special meetings may be called at any time in the same manner and by the
same persons as stated in Sections 26 and 27 of these bylaws for meetings of the
Board of Directors. The provisions of Sections 25, 28, 29, 30, 31 and 32 of
these bylaws shall apply to committees, committee members and committee meetings
as if the words "committee" and "committee member" were substituted for the word
"Board of Directors", and "director", respectively, throughout such sections.
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ARTICLE V
OFFICERS
SECTION 35. OFFICERS. The corporation shall have a Chairman of the
Board or a President or both, a Secretary, a Chief Financial Officer and such
other officers with such titles and duties as the Board of Directors may
determine. Any two or more offices may be held by the same person.
SECTION 36. APPOINTMENT. All officers shall be chosen and appointed by
the Board of Directors; provided, however, the Board of Directors may empower
the chief executive officer of the corporation to appoint such officers, other
than Chairman of the Board, President, Secretary or Chief Financial Officer, as
the business of the corporation may require. All officers shall serve at the
pleasure of the Board of Directors, subject to the rights, if any, of an officer
under a contract of employment.
SECTION 37. INABILITY TO ACT. In the case of absence or inability to
act of any officer of the corporation or of any person authorized by these
bylaws to act in such officer's place, the Board of Directors may from time to
time delegate the powers or duties of such officer to any other officer, or any
director or other person whom it may select, for such period of time as the
Board of Directors deems necessary.
SECTION 38. RESIGNATIONS. Any officer may resign at any time upon
written notice to the corporation, without prejudice to the rights, if any, of
the corporation under any contract to which such officer is a party. Such
resignation shall be effective upon its receipt by the Chairman of the Board,
the President, the Secretary or the Board of Directors, unless a different time
is specified in the notice for effectiveness of such resignation. The acceptance
of any such resignation shall not be necessary to make it effective unless
otherwise specified in such notice.
SECTION 39. REMOVAL. Any officer may be removed from office at any
time, with or without cause, but subject to the rights, if any, of such officer
under any contract of employment, by the Board of Directors or by any committee
to whom such power of removal has been duly delegated, or, with regard to any
officer who has been appointed by the chief executive officer pursuant to
Section 36 above, by the chief executive officer or any other officer upon whom
such power of removal may be conferred by the Board of Directors.
SECTION 40. VACANCIES. A vacancy occurring in any office for any cause
may be filled by the Board of Directors, in the manner prescribed by this
Article of the bylaws for initial appointment to such office.
SECTION 41. CHAIRMAN OF THE BOARD. The Chairman of the Board, if there
be such an officer, shall, if present, preside at all meetings of the Board of
Directors and shall exercise and perform such other powers and duties as may be
assigned from time to time by the Board of Directors or prescribed by these
bylaws. If no President is appointed, the Chairman of the
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Board is the general manager and chief executive officer of the corporation, and
shall exercise all powers of the President described in Section 42 below.
SECTION 42. PRESIDENT. Subject to such powers, if any, as may be given
by the Board of Directors to the Chairman of the Board, if there be such an
officer, the President shall be the general manager and chief executive officer
of the corporation and shall have general supervision, direction, and control
over the business and affairs of the corporation, subject to the control of the
Board of Directors. The President may sign and execute, in the name of the
corporation, any instrument authorized by the Board of Directors, except when
the signing and execution thereof shall have been expressly delegated by the
Board of Directors or by these bylaws to some other officer or agent of the
corporation. The President shall have all the general powers and duties of
management usually vested in the president of a corporation, and shall have such
other powers and duties as may be prescribed from time to time by the Board of
Directors or these bylaws. The President shall have discretion to prescribe the
duties of other officers and employees of the corporation in a manner not
inconsistent with the provisions of these bylaws and the directions of the Board
of Directors.
SECTION 43. VICE PRESIDENTS. In the absence or disability of the
President, in the event of a vacancy in the office of President, or in the event
such officer refuses to act, the Vice President shall perform all the duties of
the President and, when so acting, shall have all the powers of, and be subject
to all the restrictions on, the President. If at any such time the corporation
has more than one vice president, the duties and powers of the President shall
pass to each vice president in order of such vice president's rank as fixed by
the Board of Directors or, if the vice presidents are not so ranked, to the vice
president designated by the Board of Directors. The vice presidents shall have
such other powers and perform such other duties as may be prescribed for them
from time to time by the Board of Directors or pursuant to Sections 35 and 36 of
these bylaws or otherwise pursuant to these bylaws.
SECTION 44. SECRETARY. The Secretary shall:
(A) Keep, or cause to be kept, minutes of all meetings of
the corporation's shareholders, Board of Directors, and committees of the Board
of Directors, if any. Such minutes shall be kept in written form.
(B) Keep, or cause to be kept, at the principal executive
office of the corporation, or at the office of its transfer agent or registrar,
if any, a record of the corporation's shareholders, showing the names and
addresses of all shareholders, and the number and classes of shares held by
each. Such records shall be kept in written form or any other form capable of
being converted into written form.
(C) Keep, or cause to be kept, at the principal executive
office of the corporation, or if the principal executive office is not in
California, at its principal business office in California, an original or copy
of these bylaws, as amended.
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(D) Give, or cause to be given, notice of all meetings of
shareholders, directors and committees of the Board of Directors, as required by
law or by these bylaws.
(E) Keep the seal of the corporation, if any, in safe
custody.
(F) Exercise such powers and perform such duties as are
usually vested in the office of secretary of a corporation, and exercise such
other powers and perform such other duties as may be prescribed from time to
time by the Board of Directors or these bylaws.
If any assistant secretaries are appointed, the assistant secretary, or
one of the assistant secretaries in the order of their rank as fixed by the
Board of Directors or, if they are not so ranked, the assistant secretary
designated by the Board of Directors, in the absence or disability of the
Secretary or in the event of such officer's refusal to act or if a vacancy
exists in the office of Secretary, shall perform the duties and exercise the
powers of the Secretary and discharge such duties as may be assigned from time
to time pursuant to these bylaws or by the Board of Directors.
SECTION 45. CHIEF FINANCIAL OFFICER. The Chief Financial Officer shall:
(A) Be responsible for all functions and duties of the
treasurer of the corporation.
(B) Keep and maintain, or cause to be kept and
maintained, adequate and correct books and records of account for the
corporation.
(C) Receive or be responsible for receipt of all monies
due and payable to the corporation from any source whatsoever; have charge and
custody of, and be responsible for, all monies and other valuables of the
corporation and be responsible for deposit of all such monies in the name and to
the credit of the corporation with such depositaries as may be designated by the
Board of Directors or a duly appointed and authorized committee of the Board of
Directors.
(D) Disburse or be responsible for the disbursement of
the funds of the corporation as may be ordered by the Board of Directors or a
duly appointed and authorized committee of the Board of Directors.
(E) Render to the chief executive officer and the Board
of Directors a statement of the financial condition of the corporation if called
upon to do so.
(F) Exercise such powers and perform such duties as are
usually vested in the office of chief financial officer of a corporation, and
exercise such other powers and perform such other duties as may be prescribed by
the Board of Directors or these bylaws.
If any assistant financial officer is appointed, the assistant
financial officer, or one of the assistant financial officers, if there are more
than one, in the order of their rank as fixed by the
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Board of Directors or, if they are not so ranked, the assistant financial
officer designated by the Board of Directors, shall, in the absence or
disability of the Chief Financial Officer or in the event of such officer's
refusal to act, perform the duties and exercise the powers of the Chief
Financial Officer, and shall have such powers and discharge such duties as may
be assigned from time to time pursuant to these bylaws or by the Board of
Directors.
SECTION 46. COMPENSATION. The compensation of the officers shall be
fixed from time to time by the Board of Directors, and no officer shall be
prevented from receiving such compensation by reason of the fact that such
officer is also a director of the corporation.
ARTICLE VI
CONTRACTS, LOANS, BANK ACCOUNTS, CHECKS AND DRAFTS
SECTION 47. EXECUTION OF CONTRACTS AND OTHER INSTRUMENTS. Except as
these bylaws may otherwise provide, the Board of Directors or its duly appointed
and authorized committee may authorize any officer or officers, agent or agents,
to enter into any contract or execute and deliver any instrument in the name of
and on behalf of the corporation, and such authorization may be general or
confined to specific instances. Except as so authorized or otherwise expressly
provided in these bylaws, no officer, agent, or employee shall have any power or
authority to bind the corporation by any contract or engagement or to pledge its
credit or to render it liable for any purpose or in any amount.
SECTION 48. LOANS. No loans shall be contracted on behalf of the
corporation and no negotiable paper shall be issued in its name, unless and
except as authorized by the Board of Directors or its duly appointed and
authorized committee. When so authorized by the Board of Directors or such
committee, any officer or agent of the corporation may effect loans and advances
at any time for the corporation from any bank, trust company, or other
institution, or from any firm, corporation or individual, and for such loans and
advances may make, execute and deliver promissory notes, bonds or other
evidences of indebtedness of the corporation and, when authorized as aforesaid,
may mortgage, pledge, hypothecate or transfer any and all stocks, securities and
other property, real or personal, at any time held by the corporation, and to
that end endorse, assign and deliver the same as security for the payment of any
and all loans, advances, indebtedness, and liabilities of the corporation. Such
authorization may be general or confined to specific instances.
SECTION 49. BANK ACCOUNTS. The Board of Directors or its duly appointed
and authorized committee from time to time may authorize the opening and keeping
of general and/or special bank accounts with such banks, trust companies, or
other depositaries as may be selected by the Board of Directors, its duly
appointed and authorized committee or by any officer or officers, agent or
agents, of the corporation to whom such power may be delegated from time to time
by the Board of Directors. The Board of Directors or its duly appointed and
authorized committee may make such rules and regulations with respect to said
bank accounts, not inconsistent with the provisions of these bylaws, as are
deemed advisable.
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SECTION 50. CHECKS, DRAFTS, ETC. All checks, drafts or other orders for
the payment of money, notes, acceptances or other evidences of indebtedness
issued in the name of the corporation shall be signed by such officer or
officers, agent or agents, of the corporation, and in such manner, as shall be
determined from time to time by resolution of the Board of Directors or its duly
appointed and authorized committee. Endorsements for deposit to the credit of
the corporation in any of its duly authorized depositaries may be made, without
counter-signature, by the President or any vice president or the Chief Financial
Officer or any assistant financial officer or by any other officer or agent of
the corporation to whom the Board of Directors or its duly appointed and
authorized committee, by resolution, shall have delegated such power or by
hand-stamped impression in the name of the corporation.
ARTICLE VII
CERTIFICATES FOR SHARES AND THEIR TRANSFER
SECTION 51. CERTIFICATE FOR SHARES. Every holder of shares in the
corporation shall be entitled to have a certificate signed in the name of the
corporation by the Chairman or Vice Chairman of the Board or the President or a
Vice President and by the Chief Financial Officer or an assistant financial
officer or by the Secretary or an assistant secretary, certifying the number of
shares and the class or series of shares owned by the shareholder. Any or all of
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 such person were an officer, transfer
agent or registrar at the date of issue.
In the event that the corporation shall issue any shares as only partly
paid, the certificate issued to represent such partly paid shares shall have
stated thereon the total consideration to be paid for such shares and the amount
paid thereon.
SECTION 52. TRANSFER ON THE BOOKS. Upon surrender to the Secretary or
transfer agent (if any) of the corporation of a certificate for shares of the
corporation duly endorsed, with reasonable assurance that the endorsement is
genuine and effective, or accompanied by proper evidence of succession,
assignment or authority to transfer and upon compliance with applicable federal
and state securities laws and if the corporation has no statutory duty to
inquire into adverse claims or has discharged any such duty and if any
applicable law relating to the collection of taxes has been complied with, it
shall be the duty of the corporation, by its Secretary or transfer agent, to
cancel the old certificate, to issue a new certificate to the person entitled
thereto and to record the transaction on the books of the corporation.
SECTION 53. LOST, DESTROYED AND STOLEN CERTIFICATES. The holder of any
certificate for shares of the corporation alleged to have been lost, destroyed
or stolen shall notify the corporation by making a written affidavit or
affirmation of such fact. Upon receipt of said affidavit or affirmation the
Board of Directors, or its duly appointed and authorized committee
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or any officer or officers authorized by the Board so to do, may order the
issuance of a new certificate for shares in the place of any certificate
previously issued by the corporation and which is alleged to have been lost,
destroyed or stolen. However, the Board of Directors or such authorized
committee, officer or officers may require the owner of the allegedly lost,
destroyed or stolen certificate, or such owner's legal representative, to give
the corporation a bond or other adequate security sufficient to indemnify the
corporation and its transfer agent and/or registrar, if any, against any claim
that may be made against it or them on account of such allegedly lost, destroyed
or stolen certificate or the replacement thereof. Said bond or other security
shall be in such amount, on such terms and conditions and, in the case of a
bond, with such surety or sureties as may be acceptable to the Board of
Directors or to its duly appointed and authorized committee or any officer or
officers authorized by the Board of Directors to determine the sufficiency
thereof. The requirement of a bond or other security may be waived in particular
cases at the discretion of the Board of Directors or its duly appointed and
authorized committee or any officer or officers authorized by the Board of
Directors so to do.
SECTION 54. ISSUANCE, TRANSFER AND REGISTRATION OF SHARES. The Board of
Directors may make such rules and regulations, not inconsistent with law or with
these bylaws, as it may deem advisable concerning the issuance, transfer and
registration of certificates for shares of the capital stock of the corporation.
The Board of Directors may appoint a transfer agent or registrar of transfers,
or both, and may require all certificates for shares of the corporation to bear
the signature of either or both.
ARTICLE VIII
INSPECTION OF CORPORATE RECORDS
SECTION 55. INSPECTION BY DIRECTORS. Every director shall have the
absolute right at any reasonable time to inspect and copy all books, records,
and documents of every kind of the corporation and any of its subsidiaries and
to inspect the physical properties of the corporation and any of its
subsidiaries. Such inspection may be made by the director in person or by agent
or attorney, and the right of inspection includes the right to copy and make
extracts.
ARTICLE IX
MISCELLANEOUS
SECTION 56. FISCAL YEAR. Unless otherwise fixed by resolution of the
Board of Directors, the fiscal year of the corporation shall end on the 31st day
of December in each calendar year.
SECTION 57. RECORD DATE. The Board of Directors may fix a time in the
future as a record date for the determination of the shareholders entitled to
notice of or to vote at any meeting or entitled to receive payment of any
dividend or other distribution or allotment of any
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rights or entitled to exercise any rights in respect of any change, conversion
or exchange of shares or entitled to exercise any rights in respect of any other
lawful action. The record date so fixed shall not be more than sixty (60) days
nor less than ten (10) days prior to the date of the meeting nor more than sixty
(60) days prior to any other action or event for the purpose of which it is
fixed. If no record date is fixed, the provisions of Section 15 of these bylaws
shall apply with respect to notice of meetings, votes, and consents and the
record date for determining shareholders for any other purpose shall be at the
close of business on the day on which the Board of Directors adopts the
resolutions relating thereto, or the sixtieth (60th) day prior to the date of
such other action or event, whichever is later.
Only shareholders of record at the close of business on the record date
shall be entitled to notice and to vote or to receive the dividend, distribution
or allotment of rights or to exercise the rights, as the case may be,
notwithstanding any transfer of any shares on the books of the corporation after
the record date, except as otherwise provided in the Articles of Incorporation,
by agreement or by law.
SECTION 58. BYLAW AMENDMENTS. Except as otherwise provided by law or
Section 19 of these bylaws, these bylaws may be amended or repealed by the Board
of Directors or by the affirmative vote of a majority of the outstanding shares
entitled to vote, including, if applicable, the affirmative vote of a majority
of the outstanding shares of each class or series entitled by law or the
Articles of Incorporation to vote as a class or series on the amendment or
repeal or adoption of any bylaw or bylaws; provided, however, after issuance of
shares, a bylaw specifying or changing a fixed number of directors or the
maximum or minimum number or changing from a fixed to a variable board or vice
versa may only be adopted by approval of the outstanding shares as provided
herein.
SECTION 59. CONSTRUCTION AND DEFINITION. Unless the context requires
otherwise, the general provisions, rules of construction, and definitions
contained in the California Corporations Code shall govern the construction of
these bylaws.
Without limiting the foregoing, "shall" is mandatory and "may" is
permissive.
ARTICLE X
INDEMNIFICATION
SECTION 60. INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES
AND OTHER AGENTS.
(A) DIRECTORS. The corporation shall indemnify its
directors to the fullest extent not prohibited by the California General
Corporation Law; provided, however, that the corporation may limit the extent of
such indemnification by individual contracts with its directors; and, provided,
further, that the corporation shall not be required to indemnify any director in
connection with any proceeding (or part thereof) initiated by such person or any
proceeding by such person against the corporation or its directors, officers,
employees or other
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agents unless (i) such indemnification is expressly required to be made by law,
(ii) the proceeding was authorized by the board of directors of the corporation
or (iii) such indemnification is provided by the corporation, in its sole
discretion, pursuant to the powers vested in the corporation under the
California General Corporation Law.
(B) OFFICERS, EMPLOYEES AND OTHER AGENTS. The corporation
shall have power to indemnify its officers, employees and other agents as set
forth in the California General Corporation Law.
(C) DETERMINATION BY THE CORPORATION. Promptly after
receipt of a request for indemnification hereunder (and in any event within 90
days thereof) a reasonable, good faith determination as to whether
indemnification of the director is proper under the circumstances because each
director has met the applicable standard of care shall be made by:
(1) a majority vote of a quorum consisting of
directors who are not parties to such proceeding;
(2) if such quorum is not obtainable, by
independent legal counsel in a written opinion; or
(3) approval or ratification by the affirmative
vote of a majority of the shares of this corporation represented and voting at a
duly held meeting at which a quorum is present (which shares voting
affirmatively also constitute at least a majority of the required quorum) or by
written consent of a majority of the outstanding shares entitled to vote; where
in each case the shares owned by the person to be indemnified shall not be
considered entitled to vote thereon.
(D) GOOD FAITH.
(1) For purposes of any determination under this
bylaw, a director shall be deemed to have acted in good faith and in a manner he
reasonably believed to be in the best interests of the corporation and its
shareholders, and, with respect to any criminal action or proceeding, to have
had no reasonable cause to believe that his conduct was unlawful, if his action
is based on information, opinions, reports and statements, including financial
statements and other financial data, in each case prepared or presented by:
(I) one or more officers or employees
of the corporation whom the director believed to be reliable and competent in
the matters presented;
(II) counsel, independent accountants or
other persons as to matters which the director believed to be within such
person's professional competence; and
(III) a committee of the Board upon which
such director does not serve, as to matters within such committee's designated
authority, which committee the
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director believes to merit confidence; so long as, in each case, the director
acts without knowledge that would cause such reliance to be unwarranted.
(2) The termination of any proceeding by
judgment, order, settlement, conviction or upon a plea of nolo contendere or its
equivalent shall not, of itself, create a presumption that the person did not
act in good faith and in a manner which he reasonably believed to be in the best
interests of the corporation and its shareholders or that he had reasonable
cause to believe that his conduct was unlawful.
(3) The provisions of this paragraph (d) shall
not be deemed to be exclusive or to limit in any way the circumstances in which
a person may be deemed to have met the applicable standard of conduct set forth
by the California General Corporation Law.
(E) EXPENSES. The corporation shall advance, prior to the
final disposition of any proceeding, promptly following request therefor, all
expenses incurred by any director in connection with such proceeding upon
receipt of an undertaking by or on behalf of such person to repay said amounts
if it shall be determined ultimately that such person is not entitled to be
indemnified under this bylaw or otherwise.
(F) ENFORCEMENT. Without the necessity of entering into
an express contract, all rights to indemnification and advances to directors
under this bylaw shall be deemed to be contractual rights and be effective to
the same extent and as if provided for in a contract between the corporation and
the director. Any right to indemnification or advances granted by this bylaw to
a director shall be enforceable by or on behalf of the person holding such right
in the forum in which the proceeding is or was pending or, if such forum is not
available or a determination is made that such forum is not convenient, in any
court of competent jurisdiction if (i) the claim for indemnification or advances
is denied, in whole or in part, or (ii) no disposition of such claim is made
within ninety (90) days of request therefor. The claimant in such enforcement
action, if successful in whole or in part, shall be entitled to be paid also the
expense of prosecuting his claim. The corporation shall be entitled to raise as
a defense to any such action (other than an action brought to enforce a claim
for expenses incurred in connection with any proceeding in advance of its final
disposition when the required undertaking has been tendered to the corporation)
that the claimant has not met the standards of conduct that make it permissible
under the California General Corporation Law for the corporation to indemnify
the claimant for the amount claimed. Neither the failure of the corporation
(including its board of directors, independent legal counsel or its
shareholders) to have made a determination prior to the commencement of such
action that indemnification of the claimant is proper in the circumstances
because he has met the applicable standard of conduct set forth in the
California General Corporation Law, nor an actual determination by the
corporation (including its board of directors, independent legal counsel or its
shareholders) that the claimant has not met such applicable standard of conduct,
shall be a defense to the action or create a presumption that claimant has not
met the applicable standard of conduct.
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(G) NON-EXCLUSIVITY OF RIGHTS. To the fullest extent
permitted by the corporation's Articles of Incorporation and the California
General Corporation Law, the rights conferred on any person by this bylaw shall
not be exclusive of any other right which such person may have or hereafter
acquire under any statute, provision of the Articles of Incorporation, bylaws,
agreement, vote of shareholders or disinterested directors or otherwise, both as
to action in his official capacity and as to action in another capacity while
holding office. The corporation is specifically authorized to enter into
individual contracts with any or all of its directors, officers, employees or
agents respecting indemnification and advances, to the fullest extent permitted
by the California General Corporation Law and the corporation's Articles of
Incorporation.
(H) SURVIVAL OF RIGHTS. The rights conferred on any
person by this bylaw shall continue as to a person who has ceased to be a
director and shall inure to the benefit of the heirs, executors and
administrators of such a person.
(I) INSURANCE. The corporation, upon approval by the
board of directors, may purchase insurance on behalf of any person required or
permitted to be indemnified pursuant to this bylaw.
(J) AMENDMENTS. Any repeal or modification of this bylaw
shall only be prospective and shall not affect the rights under this bylaw in
effect at the time of the alleged occurrence of any action or omission to act
that is the cause of any proceeding against any agent of the corporation.
(K) EMPLOYEE BENEFIT PLANS. The corporation shall
indemnify the directors and officers of the corporation who serve at the request
of the corporation as trustees, investment managers or other fiduciaries of
employee benefit plans to the fullest extent permitted by the California General
Corporation Law.
(L) SAVING CLAUSE. If this bylaw or any portion hereof
shall be invalidated on any ground by any court of competent jurisdiction, then
the corporation shall nevertheless indemnify each director to the fullest extent
permitted by any applicable portion of this bylaw that shall not have been
invalidated, or by any other applicable law.
(M) CERTAIN DEFINITIONS. For the purposes of this bylaw,
the following definitions shall apply:
(1) The term "PROCEEDING" shall be broadly
construed and shall include, without limitation, the investigation, preparation,
prosecution, defense, settlement and appeal of any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative,
arbitrative or investigative.
(2) The term "EXPENSES" shall be broadly
construed and shall include, without limitation, court costs, attorneys' fees,
witness fees, fines, amounts paid in settlement or judgment and any other costs
and expenses of any nature or kind incurred in connection with
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any proceeding, including expenses of establishing a right to indemnification
under this bylaw or any applicable law.
(3) The term the "CORPORATION" shall include, in
addition to the resulting corporation, any constituent corporation (including
any constituent of a constituent) absorbed in a consolidation or merger which,
if its separate existence had continued, would have had power and authority to
indemnify its directors, officers, and employees or agents, so that any person
who is or was a director, officer, employee or agent of such constituent
corporation, or is or was serving at the request of such constituent corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, shall stand in the same position under
the provisions of this bylaw with respect to the resulting or surviving
corporation as he would have with respect to such constituent corporation if its
separate existence had continued.
(4) References to a "DIRECTOR," "OFFICER,"
"EMPLOYEE," or "AGENT" of the corporation shall include, without limitation,
situations where such person is serving at the request of the corporation as a
director, officer, employee, trustee or agent of another corporation,
partnership, joint venture, trust or other enterprise.
ARTICLE XI
RESALE RESTRICTION
SECTION 61. RESALE RESTRICTION. Prior to December 31, 1997, the right
to sell, assign, pledge, or in any manner transfer any of the shares of stock of
the corporation or any right or interest therein, whether voluntarily or by
operation of law, or by gift or otherwise, shall be subject to the terms of any
lockup agreement that may be entered into by the corporation, with the approval
of the Board of Directors, with the underwriter(s) in connection with the first
underwritten public offering of stock by the corporation.
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EXHIBIT 10.1
AWARD SOFTWARE INTERNATIONAL, INC.
INDEMNITY AGREEMENT
THIS AGREEMENT is made and entered into as of the ____ day of ________
1996 by and between Award Software International, Inc., a California corporation
(the "Corporation"), and _______________ (the "Indemnified Person").
RECITALS
WHEREAS, the Indemnified Person performs a valuable service to the
Corporation in such person's capacity as ____________ of the Corporation;
WHEREAS, the shareholders of the Corporation have adopted provisions in
the Articles of Incorporation (the "Articles") and the bylaws (the "Bylaws")
providing for the indemnification of the directors, officers, employees and
other agents of the Corporation, including persons serving at the request of the
Corporation in such capacities with other corporations or enterprises, as
authorized by the California General Corporation Law (the "Code");
WHEREAS, the Articles, the Bylaws and the Code, by their nonexclusive
nature, permit contracts between the Corporation and its directors, officers,
employees and other agents with respect to indemnification of such persons; and
WHEREAS, in order to induce the Indemnified Person to continue to serve
as ___________ of the Corporation, the Corporation has determined and agreed to
enter into this Agreement with the Indemnified Person;
NOW, THEREFORE, in consideration of the Indemnified Person's continued
service as ___________ after the date hereof, the parties hereto agree as
follows:
AGREEMENT
1. SERVICES TO THE CORPORATION. The Indemnified Person will serve, at
the will of the Corporation or under separate contract, if any such contract
exists, as ____________ of the Corporation or as a director, officer or other
fiduciary of an affiliate of the Corporation (including any employee benefit
plan of the Corporation) faithfully and to the best of the Indemnified Person's
ability so long as the Indemnified Person is duly elected and qualified in
accordance with the provisions of the Bylaws or other applicable charter
documents of the Corporation or such affiliate; provided, however, that the
Indemnified Person may at any time and for any reason resign from such position
(subject to any contractual obligation that the Indemnified Person may have
assumed apart from this Agreement) and that the Corporation or any affiliate
shall have no obligation under this Agreement to continue the Indemnified Person
in any such position.
1.
<PAGE> 2
2. INDEMNITY. The Corporation hereby agrees to hold harmless and
indemnify the Indemnified Person to the fullest extent authorized or permitted
by the provisions of the Bylaws and the Code, as the same may be amended from
time to time, (but only to the extent that any such amendment permits the
Corporation to provide broader indemnification rights than the Bylaws or the
Code permitted prior to adoption of any such amendment).
3. ADDITIONAL INDEMNITY. Subject to a determination pursuant to Section
9 hereof, the Corporation hereby agrees to hold harmless and indemnify the
Indemnified Person:
(a) against any and all expenses (including attorneys' fees),
witness fees, damages, judgments, fines and amounts paid in settlement and any
other amounts that the Indemnified Person becomes legally obligated to pay
because of any claim or claims made against or by such person in connection with
any threatened, pending or completed action, suit or proceeding, whether civil,
criminal, arbitral, administrative or investigative (including an action by or
in the right of the Corporation) to which the Indemnified Person is, was or at
any time becomes a party, or is threatened to be made a party, by reason of the
fact that the Indemnified Person is, was or at any time becomes a director,
officer, employee or other agent of Corporation, or is or was serving or at any
time serves at the request of the Corporation as a director, officer, employee
or other agent of another corporation, partnership, joint venture, trust,
employee benefit plan or other enterprise; and
(b) otherwise to the fullest extent not prohibited by the
Articles, the Bylaws or the Code.
4. LIMITATIONS ON ADDITIONAL INDEMNITY. To the extent that any of the
matters set forth in subsections (a) through (l) of this Section 4 are
successfully established by the Corporation as defenses in accordance with the
provisions of Section 9 hereof, no indemnity pursuant to Sections 2 or 3 hereof
will be payable by the Corporation:
(a) on account of any claim against the Indemnified Person for
an accounting of profits made from the purchase or sale by the Indemnified
Person of securities of the Corporation pursuant to the provisions of Section
16(b) of the Securities Exchange Act of 1934 and amendments thereto or similar
provisions of any federal, state or local statutory law;
(b) on account of the Indemnified Person's conduct from which
the Indemnified Person derived an improper personal benefit;
(c) on account of the Indemnified Person's conduct that he or
she believed to be contrary to the best interests of the Corporation or its
shareholders or that involved the absence of good faith on the part of the
Indemnified Person;
(d) on account of the Indemnified Person's conduct that
constituted intentional misconduct or a knowing and culpable violation of law;
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<PAGE> 3
(e) on account of the Indemnified Person's conduct that showed
a reckless disregard for the Indemnified Person's duty to the Corporation or its
shareholders in circumstances in which the Indemnified Person was aware, or
should have been aware, in the ordinary course of performing his or her duties,
of a risk of serious injury to the Corporation or its shareholders;
(f) on account of the Indemnified Person's conduct that
constituted an unexcused pattern of inattention that amounted to an abdication
of the Indemnified Person's duty to the Corporation or its shareholders;
(g) on account of the Indemnified Person's conduct which
constituted a violation of the Indemnified Person's duties under Section 310
(interested party transactions) or Section 316 (distributions, loans or
guarantees) of the Code;
(h) for which payment is actually made to the Indemnified
Person under a valid and collectible insurance policy or under a valid and
enforceable indemnity clause, bylaw or agreement, except in respect of any
excess beyond payment under such insurance, clause, bylaw or agreement;
(i) if indemnification is not lawful (and, in this respect,
both the Corporation and the Indemnified Person have been advised that the
Securities and Exchange Commission believes that indemnification for liabilities
arising under the federal securities laws is against public policy and is,
therefore, unenforceable and that claims for indemnification should be submitted
to appropriate courts for adjudication);
in connection with any proceeding (or part thereof)
initiated by the Indemnified Person, or any proceeding by the Indemnified Person
against the Corporation or its directors, officers, employees or other agents,
unless (i) such indemnification is expressly required to be made by law, (ii)
the proceeding was authorized by the Board of Directors of the Corporation,
(iii) such indemnification is provided by the Corporation, in its sole
discretion, pursuant to the powers vested in the Corporation under the Code, or
(iv) the proceeding is initiated pursuant to Section 9 hereof;
(j) with respect to any action by or in the right of the
Corporation:
(i) if the Indemnified Person is adjudged to be
liable to the Corporation in performance of the Indemnified Person's duty to the
Corporation and its shareholders, unless and only to the extent that the court
in which such action is or was pending shall determine upon application that, in
view of all of the circumstances of the case, the Indemnified Person is fairly
and reasonably entitled to indemnity for expenses, and then only to the extent
that the court shall determine;
(ii) for expenses incurred in defending a pending
action which is settled or otherwise disposed of without court approval; or
3.
<PAGE> 4
(iii) for amounts paid in settling or otherwise
disposing of a pending action without court approval; and
(k) to the extent, and only to the extent, that
indemnification with respect to such action (i) would be inconsistent with the
Articles of Incorporation or Bylaws, or a resolution of the shareholders or
agreement of the Corporation prohibiting or otherwise limiting such
indemnification and in effect at the time of the accrual of the action or (ii)
would be inconsistent with any condition expressly imposed by a court in
approving a settlement, unless the Indemnified Person has been successful on the
merits or unless the indemnification has been approved by the shareholders of
the corporation in accordance with Section 153 of the Code (with the shares of
the Indemnified Person not being entitled to vote thereon).
5. CONTINUATION OF INDEMNITY. All agreements and obligations of the
Corporation contained herein shall continue during the period the Indemnified
Person is a director, officer, employee or other agent of the Corporation (or is
serving or has served at the request of the Corporation as a director, officer,
employee or other agent of another corporation, partnership, joint venture,
trust, employee benefit plan or other enterprise) and shall continue thereafter
so long as the Indemnified Person shall be subject to any possible claim or
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, arbitral, administrative or investigative, by reason of the fact that
the Indemnified Person had served in the capacity referred to herein.
6. PARTIAL INDEMNIFICATION. The Indemnified Person shall be entitled
under this Agreement to indemnification by the Corporation for a portion of the
expenses (including attorneys' fees), witness fees, damages, judgments, fines
and amounts paid in settlement and any other amounts that the Indemnified Person
becomes legally obligated to pay in connection with any action, suit or
proceeding referred to in Section 3 hereof even if not entitled hereunder to
indemnification for the total amount thereof, and the Corporation shall
indemnify the Indemnified Person for the portion thereof to which the
Indemnified Person is entitled.
7. NOTIFICATION AND DEFENSE OF CLAIM. Not later than thirty (30) days
after receipt by the Indemnified Person of notice of the commencement of any
action, suit or proceeding, the Indemnified Person will, if a claim in respect
thereof is to be made against the Corporation under this Agreement, notify the
Corporation of the commencement thereof; but the omission so to notify the
Corporation will not relieve it from any liability which it may have to the
Indemnified Person otherwise than under this Agreement. With respect to any such
action, suit or proceeding as to which Agent notifies the Corporation of the
commencement thereof:
(a) the Corporation will be entitled to participate therein at
its own expense;
(b) except as otherwise provided below, the Corporation may,
at its option and jointly with any other indemnifying party similarly notified
and electing to assume such defense, assume the defense thereof, with counsel
reasonably satisfactory to the Indemnified Person. After notice from the
Corporation to the Indemnified Person of its election to assume the defense
thereof, the Corporation will not be liable to the Indemnified Person under this
Agreement for
4.
<PAGE> 5
any legal or other expenses subsequently incurred by the Indemnified Person in
connection with the defense thereof except for reasonable costs of investigation
or otherwise as provided below. The Indemnified Person shall have the right to
employ separate counsel in such action, suit or proceeding but the fees and
expenses of such counsel incurred after notice from the Corporation of its
assumption of the defense thereof shall be at the expense of the Indemnified
Person unless (i) the employment of counsel by the Indemnified Person has been
authorized by the Corporation, (ii) the Indemnified Person shall have reasonably
concluded that there may be a conflict of interest between the Corporation and
the Indemnified Person in the conduct of the defense of such action or (iii) the
Corporation shall not in fact have employed counsel to assume the defense of
such action, in each of which cases the fees and expenses of the Indemnified
Person's separate counsel shall be at the expense of the Corporation. The
Corporation shall not be entitled to assume the defense of any action, suit or
proceeding brought by or on behalf of the Corporation or as to which the
Indemnified Person shall have made the conclusion provided for in clause (ii)
above; and
(c) the Corporation shall not be liable to indemnify the
Indemnified Person under this Agreement for any amounts paid in settlement of
any action or claim effected without its written consent, which shall not be
unreasonably withheld. The Corporation shall be permitted to settle any action
except that it shall not settle any action or claim in any manner which would
impose any penalty or limitation on the Indemnified Person without the
Indemnified Person's written consent, which may be given or withheld in the
Indemnified Person's sole discretion.
8. EXPENSES. The Corporation shall advance, prior to the final
disposition of any proceeding, within 20 days after request therefor, all
expenses incurred by the Indemnified Person in connection with such proceeding
upon receipt of an undertaking by or on behalf of the Indemnified Person to
repay said amounts if it shall be determined ultimately that the Indemnified
Person is not entitled to be indemnified under the provisions of this Agreement,
the Bylaws, the Articles, the Code or otherwise. Notwithstanding the foregoing,
unless otherwise determined pursuant to Section 9, no advance shall be made by
the corporation if within 20 days after a request for such advance a reasonable
determination is made by the Board of Directors by a majority vote of a quorum
consisting of directors who are not parties to the proceeding (or, if no such
quorum exists, by independent legal counsel in a written opinion) that the facts
known to the decision making party at the time such determination is made
clearly and convincingly demonstrate that such person acted in bad faith or in a
manner that such person did not believe to be in the best interests of the
Corporation and its shareholders.
9. DETERMINATION BY THE CORPORATION. To the extent required by the
Code, promptly after receipt of a request for indemnification hereunder made by
the Indemnified Person (and in any event within 90 days), the Corporation shall
make a reasonable, good faith determination as to whether indemnification of the
Indemnified Person is proper under the Code by means of:
(a) A majority vote of a quorum consisting of directors who
are not parties to such proceeding;
5.
<PAGE> 6
(b) If such quorum is not obtainable, by independent legal
counsel in a written opinion; or
(c) Approval or ratification by the affirmative vote of a
majority of the shares of the Corporation represented and voting at a duly held
meeting in which a quorum is present (which shares voting affirmatively also
constitute at least a majority of the required quorum) or by written consent of
a majority of the outstanding shares entitled to vote, where in each case the
shares owned by the person to be indemnified shall not be considered entitled to
vote thereon.
Such determination shall be reasonably made in good faith by the
decision making party based upon the facts known to the decision making party at
the time such determination is made.
10. ENFORCEMENT. Any right to indemnification or advances granted by
this Agreement to the Indemnified Person shall be enforceable by or on behalf of
the Indemnified Person in the forum in which the proceeding is or was pending,
or, if such forum is not available or a determination is made that such forum is
not convenient, in any court of competent jurisdiction if (i) the claim for
indemnification or advances is denied, in whole or in part, or (ii) no
disposition of such claim is made within ninety (90) days of request therefor.
The Indemnified Person, in such enforcement action, if successful in whole or in
part, shall be entitled to be paid also the expense of prosecuting his or her
claim. The Corporation shall be entitled to raise by pleading as an affirmative
defense to any action for which a claim for indemnification is made under
Sections 2 or 3 hereof that the Indemnified Person is not entitled to
indemnification because of the limitations set forth in Section 4 hereof.
Neither the failure of the Corporation (including its Board of Directors, its
shareholders or independent legal counsel) to have made a determination prior to
the commencement of such enforcement action that indemnification of the
Indemnified Person is proper in the circumstances, nor an actual determination
by the Corporation (including its Board of Directors, its shareholders or
independent legal counsel) that such indemnification is improper shall be a
defense to the action or create a presumption that the Indemnified Person is not
entitled to indemnification under this Agreement or otherwise.
11. SUBROGATION. In the event of payment under this Agreement, the
Corporation shall be subrogated to the extent of such payment to all of the
rights of recovery of the Indemnified Person, who shall execute all documents
required and shall do all acts that may be necessary to secure such rights and
to enable the Corporation effectively to bring suit to enforce such rights.
12. NONEXCLUSIVITY OF RIGHTS. The rights conferred on the Indemnified
Person by this Agreement shall not be exclusive of any other right which the
Indemnified Person may have or hereafter acquire under any statute, provision of
the Articles or Bylaws, agreement, vote of shareholders or directors, or
otherwise, both as to action in such person's official capacity and as to action
in another capacity while holding office.
6.
<PAGE> 7
13. SURVIVAL OF RIGHTS.
(a) The rights conferred on the Indemnified Person by this
Agreement shall continue after the Indemnified Person has ceased to be a
director, officer, employee or other agent of the Corporation or to serve at the
request of the Corporation as a director, officer, employee or other agent of
another corporation, partnership, joint venture, trust, employee benefit plan or
other enterprise and shall inure to the benefit of the Indemnified Person's
heirs, executors and administrators.
(b) The Corporation shall require any successor (whether
direct or indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business or assets of the Corporation, expressly to
assume and agree to perform this Agreement in the same manner and to the same
extent that the Corporation would be required to perform if no such succession
had taken place.
14. SEPARABILITY. Each of the provisions of this Agreement is a
separate and distinct agreement and independent of the others, so that if any
provision hereof shall be held to be invalid for any reason, such invalidity or
unenforceability shall not affect the validity or enforceability of the other
provisions hereof. Furthermore, if this Agreement shall be invalidated in its
entirety on any ground, then the Corporation shall nevertheless indemnify the
Indemnified Person to the fullest extent provided by the Articles, the Bylaws,
the Code or any other applicable law.
15. GOVERNING LAW. This Agreement shall be interpreted and enforced in
accordance with the laws of the State of California, without giving effect to
principles of conflict of laws.
16. AMENDMENT AND TERMINATION. No amendment, modification, termination
or cancellation of this Agreement shall be effective unless in writing signed by
both parties hereto.
17. 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 but one and the same
Agreement. Only one such counterpart need be produced to evidence the existence
of this Agreement.
18. HEADINGS. The headings of the sections of this Agreement are
inserted for convenience only and shall not be deemed to constitute part of this
Agreement or to affect the construction hereof.
19. NOTICES. All notices, requests, demands and other communications
hereunder shall be in writing and shall be deemed to have been duly given (i)
upon delivery if delivered by hand to the party to whom such communication was
directed or (ii) upon the third business day after the date on which such
communication was mailed if mailed by certified or registered mail with postage
prepaid:
7.
<PAGE> 8
(a) If to the Indemnified Person, at the address indicated
below such person's signature hereunder.
If to the Corporation, to
Award Software International, Inc.
777 East Middlefield Rd.
Mountain View, CA 94043
or to such other address as may have been furnished to the Indemnified Person by
the Corporation.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
and as of the day and year first above written.
CORPORATION: AWARD SOFTWARE INTERNATIONAL, INC.
By:
------------------------------
Title:
---------------------------
INDEMNIFIED PERSON:
---------------------------------
Name:
----------------------------
Address:
-------------------------
---------------------------------
---------------------------------
8.
<PAGE> 1
EXHIBIT 10.2
AWARD SOFTWARE INTERNATIONAL, INC.
1995 STOCK OPTION PLAN
ADOPTED DECEMBER 15, 1994
AMENDED NOVEMBER 29, 1995
1. PURPOSES.
(a) The purpose of the Plan is to provide a means by which
selected Employees and Directors of and Consultants to the Company, and its
Affiliates, may be given an opportunity to purchase stock of the Company.
(b) The Company, by means of the Plan, seeks to retain the
services of persons who are now Employees or Directors of or Consultants to the
Company or its Affiliates, to secure and retain the services of new Employees,
Directors and Consultants, and to provide incentives for such persons to exert
maximum efforts for the success of the Company and its Affiliates.
(c) The Company intends that the Options issued under the Plan
shall, in the discretion of the Board or any Committee to which responsibility
for administration of the Plan has been delegated pursuant to subsection 3(c),
be either Incentive Stock Options or Nonstatutory Stock Options. All Options
shall be separately designated Incentive Stock Options or Nonstatutory Stock
Options at the time of grant, and in such form as issued pursuant to Section 6,
and a separate certificate or certificates will be issued for shares purchased
on exercise of each type of Option.
1.
<PAGE> 2
2. DEFINITIONS.
(a) "AFFILIATE" means any parent corporation or subsidiary
corporation, whether now or hereafter existing, as those terms are defined in
Sections 424(e) and (f) respectively, of the Code.
(b) "BOARD" means the Board of Directors of the Company.
(c) "CODE" means the Internal Revenue Code of 1986, as amended.
(d) "COMMITTEE" means a Committee appointed by the Board in
accordance with subsection 3(c) of the Plan.
(e) "COMPANY" means Award Software International, Inc., a
California corporation.
(f) "CONSULTANT" means any person, including an advisor, engaged
by the Company or an Affiliate to render consulting services and who is
compensated for such services, provided that the term "Consultant" shall not
include Directors who are paid only a director's fee by the Company or who are
not compensated by the Company for their services as Directors.
(g) "CONTINUOUS STATUS AS AN EMPLOYEE, DIRECTOR OR CONSULTANT"
means the employment or relationship as a Director or Consultant is not
interrupted or terminated. The Board, in its sole discretion, may determine
whether Continuous Status as an Employee, Director or Consultant shall be
considered interrupted in the case of: (i) any leave of absence approved by the
Board, including sick leave, military leave, or any other personal leave; or
(ii) transfers between locations of the Company or between the Company,
Affiliates or their successors.
(h) "COVERED EMPLOYEE" means the Chief Executive Officer and the
four (4) other highest compensated officers of the Company.
(i) "DIRECTOR" means a member of the Board.
2.
<PAGE> 3
(j) "DISINTERESTED PERSON" means a Director who either (i) was not
during the one year prior to service as an administrator of the Plan granted or
awarded equity securities pursuant to the Plan or any other plan of the Company
or any of its affiliates entitling the participants therein to acquire equity
securities of the Company or any of its affiliates except as permitted by Rule
16b-3(c)(2)(i); or (ii) is otherwise considered to be a "disinterested person"
in accordance with Rule 16b-3(c)(2)(i), or any other applicable rules,
regulations or interpretations of the Securities and Exchange Commission.
(k) "EMPLOYEE" means any person, including Officers and Directors,
employed by the Company or any Affiliate of the Company. Neither service as a
Director nor payment of a director's fee by the Company shall be sufficient to
constitute "employment" by the Company.
(l) "EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
(m) "FAIR MARKET VALUE" means the value of the common stock as
determined in good faith by the Board and in a manner consistent with Section
260.140.50 of Title 10 of the California Code of Regulations.
(n) "INCENTIVE STOCK OPTION" means an Option intended to qualify
as an incentive stock option within the meaning of Section 422 of the Code and
the regulations promulgated thereunder.
(o) "NONSTATUTORY STOCK OPTION" means an Option not intended to
qualify as an Incentive Stock Option.
(p) "OFFICER" means a person who is an officer of the Company
within the meaning of Section 16 of the Exchange Act and the rules and
regulations promulgated thereunder.
(q) "OPTION" means a stock option granted pursuant to the Plan.
3.
<PAGE> 4
(r) "OPTION AGREEMENT" means a written agreement between the
Company and an Optionee evidencing the terms and conditions of an individual
Option grant. Each Option Agreement shall be subject to the terms and conditions
of the Plan.
(s) "OPTIONEE" means an Employee, Director or Consultant who holds
an outstanding Option.
(t) "OUTSIDE DIRECTOR" means a Director who either (i) is not a
current employee of the Company or an "affiliated corporation" (as defined in
the Treasury regulations promulgated under Section 162(m) of the Code), is not a
former employee of the Company or an affiliated corporation receiving
compensation for prior services (other than benefits under a tax qualified
pension plan), was not an officer of the Company or an affiliated corporation at
any time, and is not currently receiving compensation for personal services in
any capacity other than as a Director, or (ii) is otherwise considered an
"outside director" for purposes of Section 162(m) of the Code.
(u) "PLAN" means this 1995 Stock Option Plan.
(v) "RULE 16B-3" means Rule 16b-3 of the Exchange Act or any
successor to Rule 16b-3, as in effect when discretion is being exercised with
respect to the Plan.
3. ADMINISTRATION.
(a) The Plan shall be administered by the Board unless and until
the Board delegates administration to a Committee, as provided in subsection
3(c).
(b) The Board shall have the power, subject to, and within the
limitations of, the express provisions of the Plan:
(1) To determine from time to time which of the persons
eligible under the Plan shall be granted Options; when and how each Option shall
be granted; whether an Option
4.
<PAGE> 5
will be an Incentive Stock Option or a Nonstatutory Stock Option; the provisions
of each Option granted (which need not be identical), including the time or
times such Option may be exercised in whole or in part; and the number of shares
for which an Option shall be granted to each such person.
(2) To construe and interpret the Plan and Options
granted under it, and to establish, amend and revoke rules and regulations for
its administration. The Board, in the exercise of this power, may correct any
defect, omission or inconsistency in the Plan or in any Option Agreement, in a
manner and to the extent it shall deem necessary or expedient to make the Plan
fully effective.
(3) To amend the Plan as provided in Section 11.
(c) The Board may delegate administration of the Plan to a
committee composed of not fewer than two (2) members (the "Committee"), all of
the members of which Committee shall be Disinterested Persons and may also be,
in the discretion of the Board, Outside Directors. If administration is
delegated to a Committee, the Committee shall have, in connection with the
administration of the Plan, the powers theretofore possessed by the Board (and
references in this Plan to the Board shall thereafter be to the Committee),
subject, however, to such resolutions, not inconsistent with the provisions of
the Plan, as may be adopted from time to time by the Board. The Board may
abolish the Committee at any time and revest in the Board the administration of
the Plan. Additionally, prior to the date of the first registration of an equity
security of the Company under Section 12 of the Exchange Act, and
notwithstanding anything to the contrary contained herein, the Board may
delegate administration of the Plan to any person or persons and the term
"Committee" shall apply to any person or persons to whom such authority has been
delegated. Notwithstanding anything in this Section 3 to the contrary,
5.
<PAGE> 6
the Board or the Committee may delegate to a committee of one or more members of
the Board the authority to grant Options to eligible persons who (1) are not
then subject to Section 16 of the Exchange Act and/or (2) are either (i) not
then Covered Employees and are not expected to be Covered Employees at the time
of recognition of income resulting from such Option, or (ii) not persons with
respect to whom the Company wishes to comply with Section 162(m) of the Code.
(d) Any requirement that an administrator of the Plan be a
Disinterested Person shall not apply (i) prior to the date of the first
registration of an equity security of the Company under Section 12 of the
Exchange Act, or (ii) if the Board or the Committee expressly declares that such
requirement shall not apply. Any Disinterested Person shall otherwise comply
with the requirements of Rule 16b-3.
4. SHARES SUBJECT TO THE PLAN.
(a) Subject to the provisions of Section 10 relating to
adjustments upon changes in stock, the stock that may be sold pursuant to
Options shall not exceed in the aggregate two million five hundred thousand
(2,500,000) shares of the Company's common stock. If any Option shall for any
reason expire or otherwise terminate, in whole or in part, without having been
exercised in full, the stock not purchased under such Option shall revert to and
again become available for issuance under the Plan.
(b) The stock subject to the Plan may be unissued shares or
reacquired shares, bought on the market or otherwise.
5. ELIGIBILITY.
(a) Incentive Stock Options may be granted only to Employees.
Nonstatutory Stock Options may be granted only to Employees, Directors or
Consultants.
6.
<PAGE> 7
(b) A Director shall in no event be eligible for the benefits of
the Plan unless at the time discretion is exercised in the selection of the
Director as a person to whom Options may be granted, or in the determination of
the number of shares which may be covered by Options granted to the Director:
(i) the Board has delegated its discretionary authority over the Plan to a
Committee which consists solely of Disinterested Persons; or (ii) the Plan
otherwise complies with the requirements of Rule 16b-3. The Board shall
otherwise comply with the requirements of Rule 16b-3. This subsection 5(b) shall
not apply (i) prior to the date of the first registration of an equity security
of the Company under Section 12 of the Exchange Act, or (ii) if the Board or
Committee expressly declares that it shall not apply.
(c) No person shall be eligible for the grant of an Option if, at
the time of grant, such person owns (or is deemed to own pursuant to Section
424(d) of the Code) stock possessing more than ten percent (10%) of the total
combined voting power of all classes of stock of the Company or of any of its
Affiliates unless the exercise price of such Option is at least one hundred ten
percent (110%) of the Fair Market Value of such stock at the date of grant and
the Option is not exercisable after the expiration of five (5) years from the
date of grant.
(d) Subject to the provisions of Section 10 relating to
adjustments upon changes in stock, no person shall be eligible to be granted
Options covering more than five hundred thousand (500,000) shares of the
Company's common stock in any twelve (12) month period.
6. OPTION PROVISIONS.
Each Option shall be in such form and shall contain such terms and
conditions as the Board shall deem appropriate. The provisions of separate
Options need not be identical, but
7.
<PAGE> 8
each Option shall include (through incorporation of provisions hereof by
reference in the Option or otherwise) the substance of each of the following
provisions:
(a) TERM. No Option shall be exercisable after the expiration of
ten (10) years from the date it was granted.
(b) PRICE. The exercise price of each Incentive Stock Option shall
be not less than one hundred percent (100%) of the Fair Market Value of the
stock subject to the Option on the date the Option is granted. The exercise
price of each Nonstatutory Stock Option shall be not less than eighty-five
percent (85%) of the Fair Market Value of the stock subject to the Option on the
date the Option is granted.
(c) CONSIDERATION. The purchase price of stock acquired pursuant
to an Option shall be paid, to the extent permitted by applicable statutes and
regulations, either (i) in cash at the time the Option is exercised, or (ii) at
the discretion of the Board or the Committee, either at the time of the grant or
exercise of the Option, (A) by delivery to the Company of other common stock of
the Company, (B) according to a deferred payment or other arrangement (which may
include, without limiting the generality of the foregoing, the use of other
common stock of the Company) with the person to whom the Option is granted or to
whom the Option is transferred pursuant to subsection 6(d), or (C) in any other
form of legal consideration that may be acceptable to the Board.
In the case of any deferred payment arrangement, interest shall be
payable at least annually and shall be charged at the minimum rate of interest
necessary to avoid the treatment as interest, under any applicable provisions of
the Code, of any amounts other than amounts stated to be interest under the
deferred payment arrangement.
8.
<PAGE> 9
(d) TRANSFERABILITY. An Incentive Stock Option shall not be
transferable except by will or by the laws of descent and distribution, and
shall be exercisable during the lifetime of the person to whom the Incentive
Stock Option is granted only by such person. A Nonstatutory Stock Option shall
not be transferable except by will or by the laws of descent and distribution or
pursuant to a qualified domestic relations order satisfying the requirements of
Rule 16b-3 and the rules thereunder (a "QDRO"), and shall be exercisable during
the lifetime of the person to whom the Option is granted only by such person or
any transferee pursuant to a QDRO. The person to whom the Option is granted may,
by delivering written notice to the Company, in a form satisfactory to the
Company, designate a third party who, in the event of the death of the Optionee,
shall thereafter be entitled to exercise the Option.
(e) VESTING. The total number of shares of stock subject to an
Option may, but need not, be allotted in periodic installments (which may, but
need not, be equal). The Option Agreement may provide that from time to time
during each of such installment periods, the Option may become exercisable
("vest") with respect to some or all of the shares allotted to that period, and
may be exercised with respect to some or all of the shares allotted to such
period and/or any prior period as to which the Option became vested but was not
fully exercised. The Option may be subject to such other terms and conditions on
the time or times when it may be exercised (which may be based on performance or
other criteria) as the Board may deem appropriate. The vesting provisions of
individual Options may vary but in each case will provide for vesting of at
least twenty percent (20%) per year of the total number of shares subject to the
Option. The provisions of this subsection 6(e) are subject to any Option
provisions governing the minimum number of shares as to which an Option may be
exercised.
9.
<PAGE> 10
(f) SECURITIES LAW COMPLIANCE. The Company may require any
Optionee, or any person to whom an Option is transferred under subsection 6(d),
as a condition of exercising any such Option, (1) to give written assurances
satisfactory to the Company as to the Optionee's knowledge and experience in
financial and business matters and/or to employ a purchaser representative
reasonably satisfactory to the Company who is knowledgeable and experienced in
financial and business matters, and that he or she is capable of evaluating,
alone or together with the purchaser representative, the merits and risks of
exercising the Option; and (2) to give written assurances satisfactory to the
Company stating that such person is acquiring the stock subject to the Option
for such person's own account and not with any present intention of selling or
otherwise distributing the stock. The foregoing requirements, and any assurances
given pursuant to such requirements, shall be inoperative if (i) the issuance of
the shares upon the exercise of the Option has been registered under a then
currently effective registration statement under the Securities Act of 1933, as
amended (the "Securities Act"), or (ii) as to any particular requirement, a
determination is made by counsel for the Company that such requirement need not
be met in the circumstances under the then applicable securities laws. The
Company may, upon advice of counsel to the Company, place legends on stock
certificates issued under the Plan as such counsel deems necessary or
appropriate in order to comply with applicable securities laws, including, but
not limited to, legends restricting the transfer of the stock.
(g) TERMINATION OF EMPLOYMENT OR RELATIONSHIP AS A DIRECTOR OR
CONSULTANT. In the event an Optionee's Continuous Status as an Employee,
Director or Consultant terminates (other than upon the Optionee's death or
disability), the Optionee may exercise his or her Option (to the extent that the
Optionee was entitled to exercise it at the date of termination) but only within
such period of time ending on the earlier of (i) the date three (3) months after
the
10.
<PAGE> 11
termination of the Optionee's Continuous Status as an Employee, Director or
Consultant (or such longer or shorter period, which in no event shall be less
than thirty (30) days, specified in the Option Agreement), or (ii) the
expiration of the term of the Option as set forth in the Option Agreement. If,
after termination, the Optionee does not exercise his or her Option within the
time specified in the Option Agreement, the Option shall terminate, and the
shares covered by such Option shall revert to and again become available for
issuance under the Plan.
(h) DISABILITY OF OPTIONEE. In the event an Optionee's Continuous
Status as an Employee, Director or Consultant terminates as a result of the
Optionee's disability, the Optionee may exercise his or her Option (to the
extent that the Optionee was entitled to exercise it at the date of
termination), but only within such period of time ending on the earlier of (i)
the date twelve (12) months following such termination (or such longer or
shorter period, which in no event shall be less than six (6) months, specified
in the Option Agreement), or (ii) the expiration of the term of the Option as
set forth in the Option Agreement. If, at the date of termination, the Optionee
is not entitled to exercise his or her entire Option, the shares covered by the
unexercisable portion of the Option shall revert to and again become available
for issuance under the Plan. If, after termination, the Optionee does not
exercise his or her Option within the time specified herein, the Option shall
terminate, and the shares covered by such Option shall revert to and again
become available for issuance under the Plan.
(i) DEATH OF OPTIONEE. In the event of the death of an Optionee
during, or within a period specified in the Option after the termination of the
Optionee's Continuous Status as an Employee, Director or Consultant, the Option
may be exercised (to the extent the Optionee was entitled to exercise the Option
at the date of death) by the Optionee's estate, by a person who acquired the
right to exercise the Option by bequest or inheritance or by a person designated
to
11.
<PAGE> 12
exercise the option upon the Optionee's death pursuant to subsection 6(d), but
only within the period ending on the earlier of (i) the date eighteen (18)
months following the date of death (or such longer or shorter period, which in
no event shall be less than six (6) months, specified in the Option Agreement),
or (ii) the expiration of the term of such Option as set forth in the Option
Agreement. If, at the time of death, the Optionee was not entitled to exercise
his or her entire Option, the shares covered by the unexercisable portion of the
Option shall revert to and again become available for issuance under the Plan.
If, after death, the Option is not exercised within the time specified herein,
the Option shall terminate, and the shares covered by such Option shall revert
to and again become available for issuance under the Plan.
(j) EARLY EXERCISE. The Option may, but need not, include a
provision whereby the Optionee may elect at any time while an Employee, Director
or Consultant to exercise the Option as to any part or all of the shares subject
to the Option prior to the full vesting of the Option. Any unvested shares so
purchased shall be subject to a repurchase right in favor of the Company, with
the repurchase price to be equal to the original purchase price of the stock, or
to any other restriction the Board determines to be appropriate; provided,
however, that (i) the right to repurchase at the original purchase price shall
lapse at a minimum rate of twenty percent (20%) per year over five (5) years
from the date the Option was granted, and (ii) such right shall be exercisable
only within (A) the ninety (90) day period following the termination of
employment or the relationship as a Director or Consultant, or (B) such longer
period as may be agreed to by the Company and the Optionee (for example, for
purposes of satisfying the requirements of Section 1202(c)(3) of the Code
(regarding "qualified small business stock")), and (iii) such right shall be
exercisable only for cash or cancellation of purchase money indebtedness for the
shares. Should the right of repurchase be assigned by the Company, the
12.
<PAGE> 13
assignee shall pay the Company cash equal to the difference between the original
purchase price and the stock's Fair Market Value if the original purchase price
is less than the stock's Fair Market Value.
(k) WITHHOLDING. To the extent provided by the terms of an Option
Agreement, the Optionee may satisfy any federal, state or local tax withholding
obligation relating to the exercise of such Option by any of the following means
or by a combination of such means: (1) tendering a cash payment; (2) authorizing
the Company to withhold shares from the shares of the common stock otherwise
issuable to the participant as a result of the exercise of the Option; or (3)
delivering to the Company owned and unencumbered shares of the common stock of
the Company.
7. COVENANTS OF THE COMPANY.
(a) During the terms of the Options, the Company shall keep
available at all times the number of shares of stock required to satisfy such
Options.
(b) The Company shall seek to obtain from each regulatory
commission or agency having jurisdiction over the Plan such authority as may be
required to issue and sell shares of stock upon exercise of the Options;
provided, however, that this undertaking shall not require the Company to
register under the Securities Act either the Plan, any Option or any stock
issued or issuable pursuant to any such Option. If, after reasonable efforts,
the Company is unable to obtain from any such regulatory commission or agency
the authority which counsel for the Company deems necessary for the lawful
issuance and sale of stock under the Plan, the Company shall be relieved from
any liability for failure to issue and sell stock upon exercise of such Options
unless and until such authority is obtained.
13.
<PAGE> 14
8. USE OF PROCEEDS FROM STOCK.
Proceeds from the sale of stock pursuant to Options shall constitute
general funds of the Company.
9. MISCELLANEOUS.
(a) Neither an Optionee nor any person to whom an Option is
transferred under subsection 6(d) shall be deemed to be the holder of, or to
have any of the rights of a holder with respect to, any shares subject to such
Option unless and until such person has satisfied all requirements for exercise
of the Option pursuant to its terms.
(b) Throughout the term of any Option, the Company shall deliver
to the holder of such Option, not later than one hundred twenty (120) days after
the close of each of the Company's fiscal years during the Option term, a
balance sheet and an income statement. This section shall not apply when
issuance is limited to key employees whose duties in connection with the Company
assure them access to equivalent information.
(c) Nothing in the Plan or any instrument executed or Option
granted pursuant thereto shall confer upon any Employee, Director, Consultant or
Optionee any right to continue in the employ of the Company or any Affiliate (or
to continue acting as a Director or Consultant) or shall affect the right of the
Company or any Affiliate to terminate the employment or relationship as a
Director or Consultant of any Employee, Director, Consultant or Optionee with or
without cause.
(d) To the extent that the aggregate Fair Market Value (determined
at the time of grant) of stock with respect to which Incentive Stock Options
granted after 1986 are exercisable for the first time by any Optionee during any
calendar year under all plans of the Company and its Affiliates exceeds one
hundred thousand dollars ($100,000), the Options or portions thereof
14.
<PAGE> 15
which exceed such limit (according to the order in which they were granted)
shall be treated as Nonstatutory Stock Options.
(e) (1) The Board or the Committee shall have the authority
to effect, at any time and from time to time (i) the repricing of any
outstanding Options under the Plan and/or (ii) with the consent of the affected
holders of Options, the cancellation of any outstanding Options and the grant in
substitution therefor of new Options under the Plan covering the same or
different numbers of shares of Common Stock, but having an exercise price per
share not less than eighty-five percent (85%) of the Fair Market Value (one
hundred percent (100%) of the Fair Market Value in the case of an Incentive
Stock Option or, in the case of a ten percent (10%) stockholder (as defined in
subsection 5(c)), not less than one hundred and ten percent (110%) of the Fair
Market Value) per share of Common Stock on the new grant date.
(2) Shares subject to an Option canceled under this
subsection 9(e) shall continue to be counted against the maximum award of
Options permitted to be granted pursuant to subsection 5(d) of the Plan. The
repricing of an Option under this subsection 9(e), resulting in a reduction of
the exercise price, shall be deemed to be a cancellation of the original Option
and the grant of a substitute Option; in the event of such repricing, both the
original and the substituted Options shall be counted against the maximum awards
of Options permitted to be granted pursuant to subsection 5(d) of the Plan. The
provisions of this subsection 9(e) shall be applicable only to the extent
required by Section 162(m) of the Code.
10. ADJUSTMENTS UPON CHANGES IN STOCK.
(a) If any change is made in the stock subject to the Plan, or
subject to any Option (through merger, consolidation, reorganization,
recapitalization, stock dividend, dividend in property other than cash, stock
split, liquidating dividend, combination of shares, exchange of
15.
<PAGE> 16
shares, change in corporate structure or otherwise), the Plan will be
appropriately adjusted in the class(es) and maximum number of shares subject to
the Plan pursuant to subsection 4(a) and the maximum number of shares subject to
award to any person during any twelve (12) month period pursuant to subsection
5(d), and the outstanding Options will be appropriately adjusted in the
class(es) and number of shares and price per share of stock subject to such
outstanding Options.
(b) In the event of: (1) a merger or consolidation in which the
Company is not the surviving corporation or (2) a reverse merger in which the
Company is the surviving corporation but the shares of the Company's common
stock outstanding immediately preceding the merger are converted by virtue of
the merger into other property, whether in the form of securities, cash or
otherwise then to the extent permitted by applicable law: (i) any surviving
corporation shall assume any Options outstanding under the Plan or shall
substitute similar Options for those outstanding under the Plan, or (ii) such
Options shall continue in full force and effect. In the event any surviving
corporation refuses to assume or continue such Options, or to substitute similar
options for those outstanding under the Plan, then such Options shall be
terminated if not exercised prior to such event. In the event of a dissolution
or liquidation of the Company, any Options outstanding under the Plan shall
terminate if not exercised prior to such event.
11. AMENDMENT OF THE PLAN.
(a) The Board at any time, and from time to time, may amend the
Plan. However, except as provided in Section 10 relating to adjustments upon
changes in stock, no amendment shall be effective unless approved by the
stockholders of the Company within twelve (12) months before or after the
adoption of the amendment, where the amendment will:
(1) Increase the number of shares reserved for Options
under the Plan;
16.
<PAGE> 17
(2) Modify the requirements as to eligibility for
participation in the Plan (to the extent such modification requires stockholder
approval in order for the Plan to satisfy the requirements of Section 422 of the
Code); or
(3) Modify the Plan in any other way if such modification
requires stockholder approval in order for the Plan to satisfy the requirements
of Section 422 of the Code or to comply with the requirements of Rule 16b-3.
(b) The Board may in its sole discretion submit any other
amendment to the Plan for stockholder approval, including, but not limited to,
amendments to the Plan intended to satisfy the requirements of Section 162(m) of
the Code and the regulations promulgated thereunder regarding the exclusion of
performance-based compensation from the limit on corporate deductibility of
compensation paid to certain executive officers.
(c) It is expressly contemplated that the Board may amend the Plan
in any respect the Board deems necessary or advisable to provide Optionees with
the maximum benefits provided or to be provided under the provisions of the Code
and the regulations promulgated thereunder relating to Incentive Stock Options
and/or to bring the Plan and/or Incentive Stock Options granted under it into
compliance therewith.
(d) Rights and obligations under any Option granted before
amendment of the Plan shall not be altered or impaired by any amendment of the
Plan unless (i) the Company requests the consent of the person to whom the
Option was granted and (ii) such person consents in writing.
12. TERMINATION OR SUSPENSION OF THE PLAN.
(a) The Board may suspend or terminate the Plan at any time.
Unless sooner terminated, the Plan shall terminate on January 10, 2005, which
shall be within ten (10) years
17.
<PAGE> 18
from the date the Plan is adopted by the Board or approved by the stockholders
of the Company, whichever is earlier. No Options may be granted under the Plan
while the Plan is suspended or after it is terminated.
(b) Rights and obligations under any Option granted while the Plan
is in effect shall not be altered or impaired by suspension or termination of
the Plan, except with the consent of the person to whom the Option was granted.
13. EFFECTIVE DATE OF PLAN.
The Plan shall become effective as determined by the Board, but no
Options granted under the Plan shall be exercised unless and until the Plan has
been approved by the stockholders of the Company, which approval shall be within
twelve (12) months before or after the date the Plan is adopted by the Board,
and, if required, an appropriate permit has been issued by the Commissioner of
Corporations of the State of California.
18.
<PAGE> 1
EXHIBIT 10.3
IT IS UNLAWFUL TO CONSUMMATE A SALE
OR TRANSFER OF THIS SECURITY, OR
ANY INTEREST THEREIN, OR TO RECEIVE
ANY CONSIDERATION THEREFOR, WITHOUT
THE PRIOR WRITTEN CONSENT OF THE
COMMISSIONER OF CORPORATIONS OF THE
STATE OF CALIFORNIA, EXCEPT AS
PERMITTED IN THE COMMISSIONER'S
RULES.
INCENTIVE STOCK OPTION
1-, Optionee:
AWARD SOFTWARE INTERNATIONAL, INC. (the "Company"), pursuant to its
1995 Stock Option Plan (the "Plan"), has this day granted to you, the optionee
named above, an option to purchase shares of the common stock of the Company
("Common Stock"). This option is intended to qualify as an "incentive stock
option" within the meaning of Section 422 of the Internal Revenue Code of 1986,
as amended (the "Code").
The grant hereunder is in connection with and in furtherance of the
Company's compensatory benefit plan for participation of the Company's employees
(including officers), directors and consultants and is intended to comply with
the provisions of Rule 701 promulgated by the Securities and Exchange Commission
under the Securities Act of 1933, as amended (the "Act").
The details of your option are as follows:
1. The total number of shares of Common Stock subject to this
option is 3-. Subject to the limitations contained herein, this option shall be
exercisable with respect to each installment shown below on or after the date of
vesting applicable to such installment, as follows:
<TABLE>
<CAPTION>
NUMBER OF SHARES (INSTALLMENT) DATE OF EARLIEST EXERCISE (VESTING)
<S> <C>
25% First day of the month following a full
calendar year from the date of this Option.
2.0833% Thereafter on the first day of each
succeeding month for the following 36
months.
</TABLE>
1.
<PAGE> 2
2. (a) The exercise price of this option is 5 - per share,
being not less than the fair market value of the Common Stock on the date of
grant of this option.
(b) Payment of the exercise price per share is due in
full upon exercise of all or any part of each installment which has accrued to
you. You may elect, to the extent permitted by applicable statutes and
regulations, to make payment of the exercise price under one of the following
alternatives:
(i) Payment of the exercise price per share in
cash (including check) at the time of exercise;
(ii) Payment pursuant to a program developed
under Regulation T as promulgated by the Federal Reserve Board which results in
the receipt of cash (or check) by the Company prior to the issuance of Common
Stock;
(iii) Provided that at the time of exercise the
Company's Common Stock is publicly traded and quoted regularly in the Wall
Street Journal, payment by delivery of already-owned shares of Common Stock,
held for the period required to avoid a charge to the Company's reported
earnings, and owned free and clear of any liens, claims, encumbrances or
security interests, which Common Stock shall be valued at its fair market value
on the date of exercise;
(iv) Payment by a combination of the methods of
payment permitted by subparagraph 2(b)(i) through 2(b)(iii) above.
3. This option may not be exercised for any number of shares
which would require the issuance of anything other than whole shares.
4. Notwithstanding anything to the contrary contained herein,
this option may not be exercised unless the shares issuable upon exercise of
this option are then registered under the Securities Act of 1933, as amended
(the "Act"), or, if such shares are not then so registered, the Company has
determined that such exercise and issuance would be exempt from the registration
requirements of the Act.
5. The term of this option commences on the date hereof and,
unless sooner terminated as set forth below or in the Plan, terminates on 2 -
(which date shall be no more than ten (10) years from date this option is
granted). In no event may this option be exercised on or after the date on which
it terminates. This option shall terminate prior to the expiration of its term
as follows: three (3) months after the termination of your employment with the
Company or an affiliate of the Company (as defined in the Plan) for any reason
or for no reason unless
(a) such termination of employment is due to your
disability, in which event the option shall terminate on the earlier of the
termination date set forth above or twelve (12) months following such
termination of employment; or
2.
<PAGE> 3
(b) such termination of employment is due to your death,
in which event the option shall terminate on the earlier of the termination date
set forth above or eighteen (18) months after your death; or
(c) during any part of such three (3) month period the
option is not exercisable solely because of the condition set forth in paragraph
4 above, in which event the option shall not terminate until the earlier of the
termination date set forth above or until it shall have been exercisable for an
aggregate period of three (3) months after the termination of employment; or
(d) exercise of the option within three (3) months after
termination of your employment with the Company or with an affiliate would
result in liability under section 16(b) of the Securities Exchange Act of 1934,
in which case the option will terminate on the earlier of (i) the tenth (10th)
day after the last date upon which exercise would result in such liability or
(ii) six (6) months and ten (10) days after the termination of your employment
with the Company or an affiliate.
However this option may be exercised following termination of
employment only as to that number of shares as to which it was exercisable on
the date of termination of employment under the provisions of paragraph 1 of
this option.
6. (a) This option may be exercised, to the extent specified
above, by delivering a notice of exercise (in a form designated by the Company)
together with the exercise price to the Secretary of the Company, or to such
other person as the Company may designate, during regular business hours,
together with such additional documents as the Company may then require pursuant
to subparagraph 6(f) of the Plan.
(b) By exercising this option you agree that:
(i) the Company may require you to enter an
arrangement providing for the payment by you to the Company of any tax
withholding obligation of the Company arising by reason of (1) the exercise of
this option; (2) the lapse of any substantial risk of forfeiture to which the
shares are subject at the time of exercise; or (3) the disposition of shares
acquired upon such exercise;
(ii) you will notify the Company in writing
within fifteen (15) days after the date of any disposition of any of the shares
of the Common Stock issued upon exercise of this option that occurs within two
(2) years after the date of this option grant or within one (1) year after such
shares of Common Stock are transferred upon exercise of this option; and
(iii) the Company (or a representative of the
underwriters) may, in connection with the first underwritten registration of the
offering of any securities of the Company under the Act, require that you not
sell or otherwise transfer or dispose of any shares of Common Stock or other
securities of the Company during such period (not to exceed one hundred eighty
(180) days) following the effective date (the "Effective Date") of the
registration
3.
<PAGE> 4
statement of the Company filed under the Act as may be requested by the Company
or the representative of the underwriters. For purposes of this restriction you
will be deemed to own securities which (i) are owned directly or indirectly by
you, including securities held for your benefit by nominees, custodians, brokers
or pledgees; (ii) may be acquired by you within sixty (60) days of the Effective
Date; (iii) are owned directly or indirectly, by or for your brothers or sisters
(whether by whole or half blood) spouse, ancestors and lineal descendants; or
(iv) are owned, directly or indirectly, by or for a corporation, partnership,
estate or trust of which you are a shareholder, partner or beneficiary, but only
to the extent of your proportionate interest therein as a shareholder, partner
or beneficiary thereof. You further agree that the Company may impose
stop-transfer instructions with respect to securities subject to the foregoing
restrictions until the end of such period.
7. This option is not transferable, except by will or by the laws
of descent and distribution, and is exercisable during your life only by you. By
delivering written notice to the Company, in a form satisfactory to the Company,
you may designate a third party who, in the event of your death, shall
thereafter be entitled to exercise this option.
8. This option is not an employment contract and nothing in this
option shall be deemed to create in any way whatsoever any obligation on your
part to continue in the employ of the Company, or of the Company to continue
your employment with the Company.
9. Any notices provided for in this option or the Plan shall be
given in writing and shall be deemed effectively given upon receipt or, in the
case of notices delivered by the Company to you, five (5) days after deposit in
the United States mail, postage prepaid, addressed to you at the address
specified below or at such other address as you hereafter designate by written
notice to the Company.
10. This option is subject to all the provisions of the Plan, a
copy of which is attached hereto and its provisions are hereby made a part of
this option, including without limitation the provisions of paragraph 6 of the
Plan relating to option provisions, and is further subject to all
4.
<PAGE> 5
interpretations, amendments, rules and regulations which may from time to time
be promulgated and adopted pursuant to the Plan. In the event of any conflict
between the provisions of this option and those of the Plan, the provisions of
the Plan shall control.
Dated the 4 -.
Very truly yours,
AWARD SOFTWARE INTERNATIONAL, INC.
By______________________________________
Duly authorized on behalf
of the Board of Directors
ATTACHMENTS:
1995 Stock Option Plan
Regulation 260.141.11
Notice of Exercise
5.
<PAGE> 6
The undersigned:
(a) Acknowledges receipt of the foregoing option and the
attachments referenced therein and understands that all rights and liabilities
with respect to this option are set forth in the option and the Plan; and
(b) Acknowledges that as of the date of grant of this option, it
sets forth the entire understanding between the undersigned optionee and the
Company and its affiliates regarding the acquisition of stock in the Company and
supersedes all prior oral and written agreements on that subject with the
exception of (i) the options previously granted and delivered to the undersigned
under stock option plans of the Company, and (ii) the following agreements only:
NONE __________________
(Initial)
OTHER ____________________________________
____________________________________
(c) Acknowledges receipt of a copy of Section 260.141.11 of Title
10 of the California Code of Regulations.
___________________________________
1 -
Address: _________________________
_________________________
6.
<PAGE> 7
NOTICE OF EXERCISE
Award Software International, Inc.
777 E. Middlefield Road
Mountain View, CA 94043 Date of Exercise: __________
Ladies and Gentlemen:
This constitutes notice under my stock option that I elect to purchase
the number of shares for the price set forth below.
Type of option (check one): Incentive / / Nonstatutory / /
Stock option dated: ____________________
Number of shares as
to which option is
exercised: ____________________
Certificates to be
issued in name of:
Total exercise price: $___________________
Cash payment delivered
herewith: $___________________
Value of ______ shares of
______________ common
stock delivered herewith(1): $____________________
____________________
(1) Shares must meet the public trading requirements set forth in the
option. Shares must be valued in accordance with the terms of the option being
exercised, must have been owned for the minimum period required in the option,
and must be owned free and clear of any liens, claims, encumbrances or security
interests. Certificates must be endorsed or accompanied by an executed
assignment separate from certificate.
7.
<PAGE> 8
By this exercise, I agree (i) to provide such additional documents as
you may require pursuant to the terms of the Award Software International, Inc.
1995 Stock Option Plan, (ii) to provide for the payment by me to you (in the
manner designated by you) of your withholding obligation, if any, relating to
the exercise of this option, and (iii) if this exercise relates to an incentive
stock option, to notify you in writing within fifteen (15) days after the date
of any disposition of any of the shares of Common Stock issued upon exercise of
this option that occurs within two (2) years after the date of grant of this
option or within one (1) year after such shares of Common Stock are issued upon
exercise of this option.
I hereby make the following certifications and representations with
respect to the number of shares of Common Stock of the Company listed above (the
"Shares"), which are being acquired by me for my own account upon exercise of
the Option as set forth above:
I acknowledge that the Shares have not been registered under the
Securities Act of 1933, as amended (the "Act"), and are deemed to constitute
"restricted securities" under Rule 701 and "control securities" under Rule 144
promulgated under the Act. I warrant and represent to the Company that I have no
present intention of distributing or selling said Shares, except as permitted
under the Act and any applicable state securities laws.
I further acknowledge that I will not be able to resell the Shares for
at least ninety days after the stock of the Company becomes publicly traded
(i.e., subject to the reporting requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934) under Rule 701 and that more restrictive
conditions apply to affiliates of the Company under Rule 144.
I further acknowledge that all certificates representing any of the
Shares subject to the provisions of the Option shall have endorsed thereon
appropriate legends reflecting the foregoing limitations, as well as any legends
reflecting restrictions pursuant to the Company's Articles of Incorporation,
Bylaws and/or applicable securities laws.
I further agree that, if required by the Company (or a representative
of the underwriters) in connection with the first underwritten registration of
the offering of any securities of the Company under the Act, I will not sell or
otherwise transfer or dispose of any shares of Common Stock or other securities
of the Company during such period (not to exceed one hundred eighty (180) days)
following the effective date of the registration statement of the Company filed
under the Act (the "Effective Date") as may be requested by the Company or the
representative of the underwriters. For purposes of this restriction I will be
deemed to own securities that (i) are owned directly or indirectly by me,
including securities held for my benefit by nominees, custodians, brokers or
pledgees; (ii) may be acquired by me within sixty (60) days of the Effective
Date; (iii) are owned directly or indirectly, by or for my brothers or sisters
(whether by whole or half blood), spouse, ancestors and lineal descendants; or
(iv) are owned, directly or indirectly, by or for a corporation, partnership,
estate or trust of which I am a
8.
<PAGE> 9
shareholder, partner or beneficiary, but only to the extent of my proportionate
interest therein as a shareholder, partner or beneficiary thereof. I further
agree that the Company may impose stop-transfer instructions with respect to
securities subject to the foregoing restrictions until the end of such period.
Very truly yours,
1 -
9.
<PAGE> 10
STATE OF CALIFORNIA - CALIFORNIA ADMINISTRATIVE CODE
TITLE 10. Investment - Chapter 3. Commissioner of Corporations
260.141.11: RESTRICTION ON TRANSFER. (a) The issuer of any security upon which a
restriction on transfer has been imposed pursuant to Sections 260.102.6,
260.141.10 or 260.534 shall cause a copy of this section to be delivered to each
issuee or transferee of such security at the time the certificate evidencing the
security is delivered to the issuee or transferee.
(b) It is unlawful for the holder of any such security to consummate a sale or
transfer of such security, or any interest therein, without the prior written
consent of the Commissioner (until this condition is removed pursuant to Section
260.141.12 of these rules), except:
(A) to the issuer;
(B) pursuant to the order or process of any court;
(C) to any person described in subdivision (i) of Section 25102 of
the Code or Section 260.105.14 of these rules;
(D) to the transferor's ancestors, descendants or spouse, or any
custodian or trustee for the account of the transferor or the
transferor's ancestors, descendants, or spouse; or to a
transferee by a trustee or custodian for the account of the
transferee or the transferee's ancestors, descendants or
spouse;
(E) to holders of securities of the same class of the same issuer;
(F) by way of gift or donation inter vivos or on death;
(G) by or through a broker-dealer licensed under the Code (either
acting as such or as a finder) to a resident of a foreign
state, territory or country who is neither domiciled in this
state to the knowledge of the broker-dealer, nor actually
present in this state if the sale of such securities is not in
violation of any securities law of the foreign state,
territory or country concerned;
(H) to a broker-dealer licensed under the Code in a principal
transaction, or as an underwriter or a member of an
underwriting syndicate or selling group;
(I) if the interest sold or transferred is a pledge or other lien
given by the purchaser to the seller upon a sale of the
security for which the Commissioner's written consent is
obtained or under this rule not required;
(J) by way of a sale qualified under Sections 25111, 25112, 25113,
or 25121 of the Code, of the securities to be transferred,
provided that no order under Section 25140 or Subdivision (a)
of Section 25143 is in effect with respect to such
qualification;
(K) by a corporation to a wholly owned subsidiary of such
corporation, or by a wholly owned subsidiary of a corporation
to such corporation;
(L) by way of an exchange qualified under Section 25111, 25112 or
25113 of the Code, provided that no order under Section 25140
or Subdivision (a) of Section 25143 is in effect with respect
to such qualification;
(M) between residents of foreign states, territories or countries
who are neither domiciled nor actually present in this state;
(N) to the State Controller pursuant to the Unclaimed Property Law
or to the administrator of the unclaimed property law of
another state; or
(O) by the State Controller pursuant to the Unclaimed Property Law
or by the administrator of the unclaimed property law of
another state if, in either such case, such person (i)
discloses to potential purchasers at the sale that transfer of
the securities is restricted under this rule, (ii) delivers to
each purchaser a copy of this rule, and (iii) advises the
Commissioner of the name of each purchaser;
(P) by a trustee to a successor trustee when such transfer does
not involve a change in the beneficial ownership of the
securities;
(Q) by way of an offer and sale of outstanding securities in an
issuer transaction that is subject to the qualification
requirement of Section 25110 of the Code but exempt from that
qualification requirement by subdivision (f) of Section 25102;
provided that any such transfer is on the condition that any
certificate evidencing the security issued to such transferee
shall contain the legend required by this section.
(c) The certificates representing all such securities subject to such a
restriction on transfer, whether upon initial issuance or upon any
transfer thereof, shall bear on their face a legend, prominently
stamped or printed thereon in capital letters of not less than 10-point
size, reading as follows:
"IT IS UNLAWFUL TO CONSUMMATE A SALE OR TRANSFER OF THIS
SECURITY, OR ANY INTEREST THEREIN, OR TO RECEIVE ANY
CONSIDERATION THEREFOR, WITHOUT THE PRIOR WRITTEN CONSENT OF
THE COMMISSIONER OF CORPORATIONS OF THE STATE OF CALIFORNIA,
EXCEPT AS PERMITTED IN THE COMMISSIONER'S RULES."
<PAGE> 1
EXHIBIT 10.4
IT IS UNLAWFUL TO CONSUMMATE A SALE
OR TRANSFER OF THIS SECURITY, OR
ANY INTEREST THEREIN, OR TO RECEIVE
ANY CONSIDERATION THEREFOR, WITHOUT
THE PRIOR WRITTEN CONSENT OF THE
COMMISSIONER OF CORPORATIONS OF THE
STATE OF CALIFORNIA, EXCEPT AS
PERMITTED IN THE COMMISSIONER'S
RULES.
NONSTATUTORY STOCK OPTION
1-, Optionee:
AWARD SOFTWARE INTERNATIONAL, INC. (the "Company"), pursuant to its
1995 Stock Option Plan (the "Plan") has this day granted to you, the optionee
named above, an option to purchase shares of the common stock of the Company
("Common Stock"). This option is not intended to qualify as and will not be
treated as an "incentive stock option" within the meaning of Section 422 of the
Internal Revenue Code of 1986, as amended (the "Code").
The grant hereunder is in connection with and in furtherance of the
Company's compensatory benefit plan for participation of the Company's employees
(including officers), directors or consultants and is intended to comply with
the provisions of Rule 701 promulgated by the Securities and Exchange Commission
under the Securities Act of 1933, as amended (the "Act").
The details of your option are as follows:
1. The total number of shares of Common Stock subject to this
option is 2-. Subject to the limitations contained herein, this option shall be
exercisable with respect to each installment shown below on or after the date of
vesting applicable to such installment, as follows:
<TABLE>
<CAPTION>
NUMBER OF SHARES (INSTALLMENT) DATE OF EARLIEST EXERCISE (VESTING)
<S> <C>
25% First day of the month following a full
calendar year from the date of this Option.
2.0833% Thereafter on the first day of each
succeeding month for the following 36
months.
</TABLE>
1.
<PAGE> 2
2. (a) The exercise price of this option is 4 - per share,
being not less than 85% of the fair market value of the Common Stock on the date
of grant of this option.
(b) Payment of the exercise price per share is due in
full upon exercise of all or any part of each installment which has accrued to
you. You may elect, to the extent permitted by applicable statutes and
regulations, to make payment of the exercise price under one of the following
alternatives:
(i) Payment of the exercise price per share in
cash (including check) at the time of exercise;
(ii) Payment pursuant to a program developed
under Regulation T as promulgated by the Federal Reserve Board which results in
the receipt of cash (or check) by the Company prior to the issuance of Common
Stock;
(iii) Provided that at the time of exercise the
Company's Common Stock is publicly traded and quoted regularly in the Wall
Street Journal, payment by delivery of already-owned shares of Common Stock,
held for the period required to avoid a charge to the Company's reported
earnings, and owned free and clear of any liens, claims, encumbrances or
security interests, which Common Stock shall be valued at its fair market value
on the date of exercise;
(iv) Payment by a combination of the methods of
payment permitted by subparagraph 2(b)(i) through 2(b)(iii) above.
3. This option may not be exercised for any number of shares
which would require the issuance of anything other than whole shares.
4. Notwithstanding anything to the contrary contained herein,
this option may not be exercised unless the shares issuable upon exercise of
this option are then registered under the Act or, if such Shares are not then so
registered, the Company has determined that such exercise and issuance would be
exempt from the registration requirements of the Act.
5. The term of this option commences on the date hereof and,
unless sooner terminated as set forth below or in the Plan, terminates on 5 -
(which date shall be no more than ten (10) years from the date this option is
granted). In no event may this option be exercised on or after the date on which
it terminates. This option shall terminate prior to the expiration of its term
as follows: three (3) months after the termination of your employment with the
Company or an affiliate of the Company (as defined in the Plan) for any reason
or for no reason unless:
(a) such termination of employment is due to your
disability, in which event the option shall terminate on the earlier of the
termination date set forth above or twelve (12) months following such
termination of employment; or
2.
<PAGE> 3
(b) such termination of employment is due to your death,
in which event the option shall terminate on the earlier of the termination date
set forth above or eighteen (18) months after your death; or
(c) during any part of such three (3) month period the
option is not exercisable solely because of the condition set forth in paragraph
4 above, in which event the option shall not terminate until the earlier of the
termination date set forth above or until it shall have been exercisable for an
aggregate period of three (3) months after the termination of employment; or
(d) exercise of the option within three (3) months after
termination of your employment with the Company or with an affiliate would
result in liability under section 16(b) of the Securities Exchange Act of 1934,
in which case the option will terminate on the earlier of (i) the termination
date set forth above, (ii) the tenth (10th) day after the last date upon which
exercise would result in such liability or (iii) six (6) months and ten (10)
days after the termination of your employment with the Company or an affiliate.
However, this option may be exercised following termination of
employment only as to that number of shares as to which it was exercisable on
the date of termination of employment under the provisions of paragraph 1 of
this option.
6. (a) This option may be exercised, to the extent specified
above, by delivering a notice of exercise (in a form designated by the Company)
together with the exercise price to the Secretary of the Company, or to such
other person as the Company may designate, during regular business hours,
together with such additional documents as the Company may then require pursuant
to subparagraph 6(f) of the Plan.
(b) By exercising this option you agree that:
(i) the Company may require you to enter an
arrangement providing for the cash payment by you to the Company of any tax
withholding obligation of the Company arising by reason of: (1) the exercise of
this option; (2) the lapse of any substantial risk of forfeiture to which the
shares are subject at the time of exercise; or (3) the disposition of shares
acquired upon such exercise; and
(ii) the Company (or a representative of the
underwriters) may, in connection with the first underwritten registration of the
offering of any securities of the Company under the Act, require that you not
sell or otherwise transfer or dispose of any shares of Common Stock or other
securities of the Company during such period (not to exceed one hundred eighty
(180) days) following the effective date (the "Effective Date") of the
registration statement of the Company filed under the Act as may be requested by
the Company or the representative of the underwriters. For purposes of this
restriction you will be deemed to own securities which (i) are owned directly or
indirectly by you, including securities held for your benefit by nominees,
custodians, brokers or pledgees; (ii) may be acquired by you within sixty (60)
days of the Effective Date; (iii) are owned directly or indirectly, by or for
your brothers or sisters (whether by whole or half blood) spouse, ancestors and
lineal descendants; or (iv) are
3.
<PAGE> 4
owned, directly or indirectly, by or for a corporation, partnership, estate or
trust of which you are a shareholder, partner or beneficiary, but only to the
extent of your proportionate interest therein as a shareholder, partner or
beneficiary thereof. You further agree that the Company may impose stop-transfer
instructions with respect to securities subject to the foregoing restrictions
until the end of such period.
7. This option is not transferable, except by will or by the laws
of descent and distribution or pursuant to a qualified domestic relations order
as defined in the Code or Title I of the Employee Retirement Income Security Act
(a "QDRO"), and is exercisable during your life only by you or a transferee
pursuant to a QDRO. By delivering written notice to the Company, in a form
satisfactory to the Company, you may designate a third party who, in the event
of your death, shall thereafter be entitled to exercise this option.
8. This option is not an employment contract and nothing in this
option shall be deemed to create in any way whatsoever any obligation on your
part to continue in the employ of the Company, or of the Company to continue
your employment with the Company. In the event that this option is granted to
you in connection with the performance of services as a consultant or director,
references to employment, employee and similar terms shall be deemed to include
the performance of services as a consultant or a director, as the case may be,
provided, however, that no rights as an employee shall arise by reason of the
use of such terms.
9. Any notices provided for in this option or the Plan shall be
given in writing and shall be deemed effectively given upon receipt or, in the
case of notices delivered by the Company to you, five (5) days after deposit in
the United States mail, postage prepaid, addressed to you at the address
specified below or at such other address as you hereafter designate by written
notice to the Company.
4.
<PAGE> 5
10. This option is subject to all the provisions of the Plan, a
copy of which is attached hereto and its provisions are hereby made a part of
this option, including without limitation the provisions of paragraph 6 of the
Plan relating to option provisions, and is further subject to all
interpretations, amendments, rules and regulations which may from time to time
be promulgated and adopted pursuant to the Plan. In the event of any conflict
between the provisions of this option and those of the Plan, the provisions of
the Plan shall control.
Dated the 3 -.
Very truly yours,
AWARD SOFTWARE INTERNATIONAL, INC.
By_____________________________________
Duly authorized on behalf
of the Board of Directors
ATTACHMENTS:
1995 Stock Option Plan
Regulation 260.141.11
Notice of Exercise
5.
<PAGE> 6
The undersigned:
(a) Acknowledges receipt of the foregoing option and the
attachments referenced therein and understands that all rights and liabilities
with respect to this option are set forth in the option and the Plan; and
(b) Acknowledges that as of the date of grant of this option, it
sets forth the entire understanding between the undersigned optionee and the
Company and its affiliates regarding the acquisition of stock in the Company and
supersedes all prior oral and written agreements on that subject with the
exception of (i) the options previously granted and delivered to the undersigned
under stock option plans of the Company, and (ii) the following agreements only:
NONE __________________
(Initial)
OTHER ___________________________________
___________________________________
___________________________________
(c) Acknowledges receipt of a copy of Section 260.141.11 of Title
10 of the California Code of Regulations.
____________________________________
1 -
Address: __________________________
__________________________
6.
<PAGE> 7
NOTICE OF EXERCISE
Award Software International, Inc.
777 E. Middlefield Road
Mountain View, CA 94043 Date of Exercise:_________________
Ladies and Gentlemen:
This constitutes notice under my stock option that I elect to purchase
the number of shares for the price set forth below.
Type of option (check one): Incentive / / Nonstatutory / /
Stock option dated: ____________________
Number of shares as
to which option is
exercised: ____________________
Certificates to be
issued in name of: ____________________
Total exercise price: $___________________
Cash payment delivered
herewith: $___________________
Value of ______ shares of
______________ common
stock delivered herewith(1): $___________________
___________
(1) Shares must meet the public trading requirements set forth in the
option. Shares must be valued in accordance with the terms of the option being
exercised, must have been owned for the minimum period required in the option,
and must be owned free and clear of any liens, claims, encumbrances or security
interests. Certificates must be endorsed or accompanied by an executed
assignment separate from certificate.
7.
<PAGE> 8
By this exercise, I agree (i) to provide such additional documents as
you may require pursuant to the terms of the Award Software International, Inc.
1995 Stock Option Plan, (ii) to provide for the payment by me to you (in the
manner designated by you) of your withholding obligation, if any, relating to
the exercise of this option, and (iii) if this exercise relates to an incentive
stock option, to notify you in writing within fifteen (15) days after the date
of any disposition of any of the shares of Common Stock issued upon exercise of
this option that occurs within two (2) years after the date of grant of this
option or within one (1) year after such shares of Common Stock are issued upon
exercise of this option.
I hereby make the following certifications and representations with
respect to the number of shares of Common Stock of the Company listed above (the
"Shares"), which are being acquired by me for my own account upon exercise of
the Option as set forth above:
I acknowledge that the Shares have not been registered under the
Securities Act of 1933, as amended (the "Act"), and are deemed to constitute
"restricted securities" under Rule 701 and "control securities" under Rule 144
promulgated under the Act. I warrant and represent to the Company that I have no
present intention of distributing or selling said Shares, except as permitted
under the Act and any applicable state securities laws.
I further acknowledge that I will not be able to resell the Shares for
at least ninety days after the stock of the Company becomes publicly traded
(i.e., subject to the reporting requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934) under Rule 701 and that more restrictive
conditions apply to affiliates of the Company under Rule 144.
I further acknowledge that all certificates representing any of the
Shares subject to the provisions of the Option shall have endorsed thereon
appropriate legends reflecting the foregoing limitations, as well as any legends
reflecting restrictions pursuant to the Company's Articles of Incorporation,
Bylaws and/or applicable securities laws.
I further agree that, if required by the Company (or a representative
of the underwriters) in connection with the first underwritten registration of
the offering of any securities of the Company under the Act, I will not sell or
otherwise transfer or dispose of any shares of Common Stock or other securities
of the Company during such period (not to exceed one hundred eighty (180) days)
following the effective date of the registration statement of the Company filed
under the Act (the "Effective Date") as may be requested by the Company or the
representative of the underwriters. For purposes of this restriction I will be
deemed to own securities that (i) are owned directly or indirectly by me,
including securities held for my benefit by nominees, custodians, brokers or
pledgees; (ii) may be acquired by me within sixty (60) days of the Effective
Date; (iii) are owned directly or indirectly, by or for my brothers or sisters
(whether by whole or half blood), spouse, ancestors and lineal descendants; or
(iv) are owned, directly or indirectly, by or for a corporation, partnership,
estate or trust of which I am a
8.
<PAGE> 9
shareholder, partner or beneficiary, but only to the extent of my proportionate
interest therein as a shareholder, partner or beneficiary thereof. I further
agree that the Company may impose stop-transfer instructions with respect to
securities subject to the foregoing restrictions until the end of such period.
Very truly yours,
1 -
9.
<PAGE> 10
STATE OF CALIFORNIA - CALIFORNIA ADMINISTRATIVE CODE
TITLE 10. Investment - Chapter 3. Commissioner of Corporations
260.141.11: RESTRICTION ON TRANSFER. (a) The issuer of any security upon which a
restriction on transfer has been imposed pursuant to Sections 260.102.6,
260.141.10 or 260.534 shall cause a copy of this section to be delivered to each
issuee or transferee of such security at the time the certificate evidencing the
security is delivered to the issuee or transferee.
(b) It is unlawful for the holder of any such security to consummate a sale or
transfer of such security, or any interest therein, without the prior written
consent of the Commissioner (until this condition is removed pursuant to Section
260.141.12 of these rules), except:
(A) to the issuer;
(B) pursuant to the order or process of any court;
(C) to any person described in subdivision (i) of Section 25102 of
the Code or Section 260.105.14 of these rules;
(D) to the transferor's ancestors, descendants or spouse, or any
custodian or trustee for the account of the transferor or the
transferor's ancestors, descendants, or spouse; or to a
transferee by a trustee or custodian for the account of the
transferee or the transferee's ancestors, descendants or
spouse;
(E) to holders of securities of the same class of the same issuer;
(F) by way of gift or donation inter vivos or on death;
(G) by or through a broker-dealer licensed under the Code (either
acting as such or as a finder) to a resident of a foreign
state, territory or country who is neither domiciled in this
state to the knowledge of the broker-dealer, nor actually
present in this state if the sale of such securities is not in
violation of any securities law of the foreign state,
territory or country concerned;
(H) to a broker-dealer licensed under the Code in a principal
transaction, or as an underwriter or a member of an
underwriting syndicate or selling group;
(I) if the interest sold or transferred is a pledge or other lien
given by the purchaser to the seller upon a sale of the
security for which the Commissioner's written consent is
obtained or under this rule not required;
(J) by way of a sale qualified under Sections 25111, 25112, 25113,
or 25121 of the Code, of the securities to be transferred,
provided that no order under Section 25140 or Subdivision (a)
of Section 25143 is in effect with respect to such
qualification;
(K) by a corporation to a wholly owned subsidiary of such
corporation, or by a wholly owned subsidiary of a corporation
to such corporation;
(L) by way of an exchange qualified under Section 25111, 25112 or
25113 of the Code, provided that no order under Section 25140
or Subdivision (a) of Section 25143 is in effect with respect
to such qualification;
(M) between residents of foreign states, territories or countries
who are neither domiciled nor actually present in this state;
(N) to the State Controller pursuant to the Unclaimed Property Law
or to the administrator of the unclaimed property law of
another state; or
(O) by the State Controller pursuant to the Unclaimed Property Law
or by the administrator of the unclaimed property law of
another state if, in either such case, such person (i)
discloses to potential purchasers at the sale that transfer of
the securities is restricted under this rule, (ii) delivers to
each purchaser a copy of this rule, and (iii) advises the
Commissioner of the name of each purchaser;
(P) by a trustee to a successor trustee when such transfer does
not involve a change in the beneficial ownership of the
securities;
(Q) by way of an offer and sale of outstanding securities in an
issuer transaction that is subject to the qualification
requirement of Section 25110 of the Code but exempt from that
qualification requirement by subdivision (f) of Section 25102;
provided that any such transfer is on the condition that any
certificate evidencing the security issued to such transferee
shall contain the legend required by this section.
(c) The certificates representing all such securities subject to such a
restriction on transfer, whether upon initial issuance or upon any
transfer thereof, shall bear on their face a legend, prominently
stamped or printed thereon in capital letters of not less than 10-point
size, reading as follows:
"IT IS UNLAWFUL TO CONSUMMATE A SALE OR TRANSFER OF THIS
SECURITY, OR ANY INTEREST THEREIN, OR TO RECEIVE ANY
CONSIDERATION THEREFOR, WITHOUT THE PRIOR WRITTEN CONSENT OF
THE COMMISSIONER OF CORPORATIONS OF THE STATE OF CALIFORNIA,
EXCEPT AS PERMITTED IN THE COMMISSIONER'S RULES."
<PAGE> 1
EXHIBIT 10.6
COMPENSATION PLAN
1. Corporate Structure-
This Plan covers the compensation details for corporate top managers - Vice
Presidents and above, at Award Software International. Award Software currently
is organized into three groups: Headquarters in Mountain View, Taiwan Office in
Taipei and European Office in Munich. This organization supports the local
business needs worldwide. The General Managers in Taiwan and Europe have P/L
responsibilities for the regions under their management. The top managers in
the headquarters have the responsibilities for US operating P/L, corporate
marketing, R/D, and financial management. The overall corporate financial
performance responsibility resides with the CEO, who is assisted by senior
staff.
2. Performance Goals-
The business plan for Award Software calls for continued profitability with a
goal of operating income of 28% on revenue. The revenue is planned to grow to
$14M, 56% over 1995 ($9M), which means that an operating income of $4M for 1996.
The longer term goal for Award Software is to dominate selected areas of system
management software. Certain acquisition targets are being investigated and
expansion into Internet business is being pursued. Revenue-wise Award Software
should target to become a $100M company as soon as possible, preferably in the
next 4 years. Currently, there is an adequate group of senior managers to
achieve near term goals. But an experienced VP of Marketing should be hired and
a COO or President should also be recruited to assist the CEO to accomplish the
long term goals.
<PAGE> 2
3. Compensation Components-
The compensation philosophy is based on the theory that job reward comes from
the feeling of accomplishment, ownership in the company and cash income. The
compensation package for a senior manager typically consists of Base Salary,
Performance Bonus and Stock Option. The sales bonuses (commissions) are set
between 1% to 3% on revenue. The performance bonuses are calculated by the
following formula:
Performance Bonus = [operating income as a percentage of target - 70%] x base
salary.
4. Stock Option-
Currently, the management group has approximately 17% stock ownership and one
million shares of employee stock option. Another one million shares of stock
option has been added for the current and future employees. The following table
(TABLE I) summarizes the compensation packages for all top managers. All those
packages should be revised and approved by the Compensation Committee from time
to time.
<PAGE> 1
EXHIBIT 10.7
GCH [letterhead]
SYSTEMS, INC.
Award Software International, Inc.
777 East Middlefield Road
Mountain View, California 94043-4023
RE: SCHEDULE OF RENTAL PAYMENTS
Gentlemen:
This Agreement is entered into between GCH Systems, Inc. (hereafter known as
GCH) located at 777 East Middlefield Road, Mountain View, CA 94043-4023 and
Award Software International, Inc. (hereafter known as ASI) located at 777 East
Middlefield Road, Mountain View, CA 94043-4023.
GCH agrees to sub-lease space in the building at the above address to ASI from
January 1, 1996 through December 31, 1996 at $13,400 per month including
utilities. All payments to be made on or before seven (7) days of the beginning
of each month. This Agreement will be renewed for 1997 and years that follow.
Executed this 1st day of January 1, 1996.
GCH Systems Incorporated Award Software International, Inc.
/s/ Reza Afghan /s/ George C. Huang
- ------------------------ ----------------------------------
Signature Signature
Vice President Chairman CEO
- ------------------------ ----------------------------------
Title Title
Jan. 1, 1996 Jan. 1, 1996
- ------------------------ ----------------------------------
Date Date
<PAGE> 1
EXHIBIT 10.8
Summary of Award Taiwan Office Lease Agreement
(1)
Address: 9F-1, 17 Sec. 1 Cheng Te Road, Taipei Taiwan
Rent: NT$165,532/Mo. (Equivalent to US$6,131)
Deposit: NT$331,368 (Equivalent to US$12,273)
Space: Approx. 3,560 Square feet
Commencing: March 1, 1996
Expiring: February 28, 1997
Landlord: Sun Corporation
Tenant: Award
Association fee: NT$12,111/Mo., overtime electricity and air
conditioner usage are extra charge
Utilities: Not included
Property Tax: Covered by Landlord
(2)
Address: 9F-6, 17 Sec. 1 Cheng Te Road, Taipei Taiwan
Rent: NT$352,400/Mo. (Equivalent to US$13,052)
Deposit: NT$952,000 (Equivalent to US$35,259)
Space: Approx. 7,141 Square feet
Commencing: March 1, 1996
Expiring: February 28, 1997
Landlord: GSS Corporation
Tenant: Award
Association fee: NT$20,623/Mo., overtime electricity and air
conditioner usage are extra charge
Utilities: Not included
Property Tax: Covered by Landlord
<PAGE> 1
EXHIBIT 10.9
VOTING AGREEMENT
This Voting Agreement (this "Agreement") is made and entered into as of
January 12, 1996 (the "Effective Date") by and among Award Software
International, Inc., a California corporation (the "Company"), Vobis
Microcomputer AG, a company organized under the laws of the Federal Republic of
Germany (the "Investor"), and the parties listed on Exhibit A attached hereto
(the "Shareholders"). The Investor and the Shareholders are sometimes
hereinafter collectively referred to herein as the "Holders".
RECITALS
WHEREAS, concurrently herewith, the Investor is purchasing from the
Company shares of its Common Stock and a warrant to purchase its Common Stock
(collectively, the "Securities") pursuant to a Securities Purchase Agreement
dated of even date herewith between the Company and the Investor (the "Purchase
Agreement");
WHEREAS, as an inducement to Vobis to purchase the Securities pursuant
to the Purchase Agreement, the Investor, the Shareholders and the Company desire
to enter into this Agreement to set forth their agreements and understandings
with respect to how shares of the Company's capital stock held by them will be
voted on certain matters;
NOW, THEREFORE, in consideration of the above recitals and the mutual
covenants made herein, the parties hereby agree as follows:
1. Size of Board of Directors. During the term of this Agreement,
each Holder agrees to vote all shares of capital stock of the Company now or
hereafter directly or indirectly owned (of record or beneficially) by such
Holder to maintain the authorized number of members of the Board of Directors of
the Company (the "Board") at no less than five (5) directors, and to oppose any
effort by any party to change the authorized number of directors of the Company
to less than five (5) directors. In addition, the Company agrees to maintain the
authorized number of members of the Board at no less than five (5) directors.
2. Election of Board of Directors.
2..1 Voting; Board Composition. During the term of this
Agreement, each Holder agrees to vote all shares of capital stock of the Company
now or hereafter directly or indirectly owned (of record or beneficially) by
such Holder, in such manner as may be necessary to elect (and maintain in
office) as a members of the Board an individual designated by the Investor who
is reasonably agreeable to the Company (the "Investor Designee").
2.2 Initial Board Members. As of the Effective Date, the
initial Vobis Designee shall be Theo Lieven.
<PAGE> 2
2.3 Changes in Board Designees. From time to time during
the term of this Agreement, the Investor may, in its sole discretion;
(a) elect to remove from the Board any incumbent
Investor Designee who occupies a Board seat for which the Investor is entitled
to designate the Investor Designee under Section 2.1; and/or
(b) designate a new Investor Designee for election
to a Board seat for which the Investor is entitled to designate the Investor
Designee under Section 2.1 (whether to replace a prior Investor Designee or to
fill a vacancy in such Board seat); provided such removal and/or designation of
the Investor Designee is approved in a writing signed by the Investor, in which
case such election to remove the Investor Designee and/or elect a new Investor
Designee will be binding on the Investor. In the event of such removal and/or
designation of the Investor Designee under this Section 2.3, the Holders shall
vote their shares of the Company's capital stock as provided in Section 2.1 to
cause: (a) he removal from the Board of the Investor Designee so designated for
removal by the Investor; and (b) the election to the Board of any new Investor
Designee so designated for election to the Board by the Investor.
2.4 Notice; Cumulative Voting. The Company shall promptly
give each of the Holders written notice of any change in composition of the
Board and of any proposal by the Investor to remove or elect a new Investor
Designee. In any election of directors pursuant to this Section 2, the Holders
shall vote their shares in a manner sufficient to elect to the board the
individuals to be elected thereto as provided in this Section 2, utilizing
cumulative voting, if and to the extent necessary to do so.
3. Further Assurances. Each of the Holders and the Company agree not
to vote any shares of the Company's capital stock, or to take any other actions,
that would in any manner defeat, impair, be inconsistent with or adversely
affect he stated intentions of the parties under Sections 1 and 2 of this
Agreement.
4. Transferees; Legends on Certificates.
4.1 Effect on Transferees. Each and every transferee or
assignee of any shares of capital stock of the Company from any Holder which or
who is Affiliate (as defined below) of such Holder shall be bound by and subject
to the terms and conditions of this Agreement that are applicable to such
transferee's transferor or assignor, and the Company shall require, as a
condition precedent to the transfer of any shares of capital stock of the
Company subject to this Agreement, that the transferee agrees in writing to be
bound by, and subject to, all the terms and conditions of this Agreement. For
purposes of this Agreement, "Affiliate" shall mean as to any Holder: (a) any
other person directly or indirectly controlling, controlled by or under common
control with such Holder; (b) any other person owning or controlling 10% or more
of the outstanding voting securities of such Holder; (c) any officer, director
or partner of such Holder; (d) any business entity for which Holder acts as an
officer, director or partner;
2
<PAGE> 3
(e) the spouse or any relative of such Holder; and (f) any trust or other estate
in which such Holder or any other person covered by items (a) through (e) has a
beneficial interest or as to which such Holder serves as trustee or in a similar
capacity.
4.2 Legend. The Holders agree that all Company share
certificates now or hereafter held by them that represent shares of capital
stock of the Company subject to this Agreement will be stamped or otherwise
imprinted with a legend to read as follows:
THE SHARES EVIDENCED BY THIS CERTIFICATE ARE SUBJECT TO AGREEMENTS AND
RESTRICTIONS WITH REGARD TO THE VOTING OF SUCH SHARES AND THEIR
TRANSFER, AS PROVIDED IN THE PROVISIONS OF A VOTING AGREEMENT, A COPY
OF WHICH IS ON FILE IN THE OFFICE OF THE SECRETARY OF THE CORPORATION.
5. Enforcement of Agreement. Each of the Holders acknowledge
and agree that any breach of any of them of this Agreement shall cause the
Investor irreparable harm which may not be adequately compensable by money
damages. Accordingly, in the event of a breach or threatened breach by a Holder
of any provision of this Agreement, the Company and the Investor shall each be
entitled to the remedies of specific performance, injunction or other
preliminary or equitable relief, including the right to compel any such
breaching Holder, as appropriate, to vote such Holder's shares of capital stock
of the Company in accordance with the provisions of this Agreement, in addition
to such other rights remedies as may be available to the Company or the Investor
for any such breach or threatened breach, including but not limited to the
recovery of money damages.
6. Term. This Agreement shall commence on the Effective Date and
shall terminate upon the first to occur of the following:
(a) The date that is three (3) years from the Effective
Date;
(b) The consummation of the sale of securities of the
Company to the public pursuant to an effective registration statement filed by
the Company under the Securities Act of 1933, as amended, pursuant to which the
aggregate offering price to the public is at least $10,000,000.00 and the price
per share is at least $6.80.
(c) Immediately prior to the closing of (i) any
consolidation or merger of the Company with or into any other corporation or
corporations in which the holders of the Company's outstanding shares
immediately before such consolidation or merger do not, immediately after such
consolidation or merger, retain stock representing a majority of the voting
power of the surviving corporation of such consolidation or merger or stock
representing a majority of the voting power of a corporation that wholly owns,
directly or indirectly, the surviving corporation or such consolidation or
merger; (ii) the sale, transfer or assignment of securities of the Company
representing a majority of the
3
<PAGE> 4
voting power of all the Company's outstanding voting securities by the holders
thereof to an acquiring party in a single transaction or series of related
transactions; (iii) any other sale, transfer or assignment of securities of the
Company representing over fifty percent (50%) of the voting power of the
Company's then outstanding voting securities by the holders thereof to an
acquiring party;' or (iv) the sale of all or substantially all the Company's
assets; or
(d) The date that the aggregate percentage ownership
interest in the Company of the Investor and any wholly-owned subsidiaries of the
Investor collectively equals less than eight percent (8%), as determined in
accordance with Section 3.1 of that certain Investor's Rights Agreement dated as
of even date herewith among the Company, the Investor and certain shareholders
of the Company.
7. Miscellaneous.
7.1 Governing Law. This Agreement shall be governed by and
construed in accordance with the internal laws of the State of California
applicable to contracts made among residents of, and wholly to be performed
within, the State of California, without reference to principles of conflict of
laws or choice of laws.
7.2 Further Instruments. From time to time, each party
hereto shall execute and deliver such instruments and documents as may be
reasonably necessary to carry out the purposes and intent of this Agreement.
7.3 Successors. This Agreement shall be binding upon and
shall inure to the benefit of the executors, administrators, legal
representatives, heirs, successors, and assigns of the parties hereto; provided,
however, that any transferee of any shares of stock of the Company affected by
this Agreement which or who is an Affiliate of the transferring Holder of such
shares shall be required, as a condition precedent to acquiring such shares, to
first agree in writing to be bound by all the terms and conditions of this
Agreement applicable to such transferee's transferor; and provided further that
no rights under this Agreement may be assigned apart from the related shares of
the Company's capital stock.
7.4 Counterparts. This 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.
7.5 Entire Agreement. This document constitutes and
contains the entire agreement and understanding of the parties regarding the
subject matter of this Agreement and supersedes any and all prior negotiations,
correspondence, understandings and agreements among the parties respecting the
subject matter hereof.
7.6 Amendments and Waivers. Any terms of this Agreement may
be amended and the observance of any term of the Agreement may be waived (either
4
<PAGE> 5
generally or in a particular instance and either retroactively or prospectively)
with the written consent of the Company and the Investor. Any amendment or
waiver effected in accordance with this Section shall be binding upon the
Company, all the Holders and their permitted transferees and assignees.
IN WITNESS WHEREOF, the parties have executed this Agreement on the
date and year first above written.
COMPANY: INVESTOR:
Name: Name:
------------------------------ -------------------------------
By: By:
-------------------------------- ---------------------------------
Title: Title:
----------------------------- ------------------------------
SHAREHOLDERS:
Name:
------------------------------
By:
--------------------------------
Title:
-----------------------------
5
<PAGE> 6
IN WITNESS WHEREOF, the parties have executed this Agreement on the
date and year first above written.
COMPANY: INVESTOR:
Name: Name:
------------------------------ -------------------------------
By: By:
-------------------------------- ---------------------------------
Title: Title:
----------------------------- ------------------------------
SHAREHOLDERS:
Name:
------------------------------
By:
--------------------------------
Title:
-----------------------------
[Signature Page to Voting Agreement]
6
<PAGE> 7
IN WITNESS WHEREOF, the parties have executed this Agreement on the
date and year first above written.
COMPANY: INVESTOR:
Name: Name:
------------------------------ -------------------------------
By: By:
-------------------------------- ---------------------------------
Title: Title:
----------------------------- ------------------------------
SHAREHOLDERS:
Name: Name:
------------------------------ -------------------------------
By: By:
-------------------------------- ---------------------------------
Title: Title:
----------------------------- ------------------------------
7
<PAGE> 8
WALDEN CAPITAL PARTNERS II, L.P.
By:
------------------------------------
Title:
---------------------------------
Address: 750 Battery Street
Floor 7
San Francisco, CA 94111-1523
WALDEN TECHNOLOGY VENTURES II, L.P.
By:
------------------------------------
Title:
---------------------------------
Address: 750 Battery Street
Floor 7
San Francisco, CA 94111-1523
8
<PAGE> 1
EXHIBIT 10.10
AWARD SOFTWARE INTERNATIONAL, INC.
INVESTORS' RIGHTS AGREEMENT
<PAGE> 2
TABLE OF CONTENTS
PAGE
I. GENERAL.......................................................... 1.
1.1 Definitions............................................. 1.
II. REGISTRATION; RESTRICTIONS ON TRANSFER........................... 3.
2.1 Restrictions on Transfer................................ 3.
2.2 Demand Registration..................................... 4.
2.3 Piggyback Registrations................................. 5.
2.4 Form S-3 Registration................................... 6.
2.5 Expenses of Registration................................ 7.
2.6 Obligations of the Company.............................. 8.
2.7 Delay of Registration; Furnishing Information........... 9.
2.8 Indemnification......................................... 9.
2.9 Assignment of Registration Rights....................... 11.
2.10 Amendment of Registration Rights........................ 11.
2.11 Limitation on Subsequent Registration Rights............ 12.
2.12 "Market Stand-Off" Agreement............................ 12.
2.13 Rule 144 Reporting...................................... 12.
III. RIGHTS OF FIRST REFUSAL.......................................... 13.
3.1 Subsequent Offerings.................................... 13.
3.2 Exercise of Rights...................................... 13.
3.3 Issuance of Equity Securities to Other Persons.......... 13.
3.4 Termination of Rights of First Refusal.................. 14.
3.5 Transfer of Rights of First Refusal..................... 14.
3.6 Excluded Securities..................................... 14.
3.7 Catch-up Rights......................................... 14.
IV. MISCELLANEOUS.................................................... 15.
4.1 Governing Law........................................... 15.
4.2 Survival................................................ 15.
4.3 Successors and Assigns.................................. 15.
4.4 Severability............................................ 16.
4.5 Amendment and Waiver.................................... 16.
4.6 Delays or Omissions..................................... 16.
4.7 Notices................................................. 16.
4.8 Attorneys' Fees......................................... 16.
4.9 Titles and Subtitles.................................... 16.
4.10 Counterparts............................................ 17.
4.11 Termination Of Prior Agreements......................... 17.
i.
<PAGE> 3
INVESTORS' RIGHTS AGREEMENT
THIS INVESTORS' RIGHTS AGREEMENT (this "Agreement") is entered into as
of January __, 1996, by and among AWARD SOFTWARE INTERNATIONAL, INC., a
California corporation (the "Company"), and the persons and entities set forth
on Exhibit A (collectively referred to hereinafter as the "Investors" and each
individually as an "Investor").
RECITALS
WHEREAS, the Company proposes to sell and issue up to 1,140,066 shares
of its Common Stock and a warrant to purchase up to 544,788 shares of its Common
Stock to Vobis Microcomputer AG ("Vobis") pursuant to that certain Securities
Purchase Agreement of even date herewith (the "Purchase Agreement");
WHEREAS, certain of the Investors are parties to either that certain
Common Stock Purchase Agreement, dated as of July 17, 1995, or that certain
Investors' Rights Agreement, dated as of September 30, 1995 (together, the
"Prior Agreements"), which provide such Investors with registration rights;
WHEREAS, such Investors desire to supersede those rights set forth in
such agreements with the rights set forth in this Agreement; and
WHEREAS, it is a condition precedent of entering into the Purchase
Agreement that the Company and all the Investors to enter into this Agreement.
NOW, THEREFORE, in consideration of the mutual promises,
representations, warranties, covenants and conditions set forth in this
Agreement and in the Purchase Agreement, the parties mutually agree as follows:
I. GENERAL.
1.1 DEFINITIONS. As used in this Agreement the following terms shall
have the following respective meanings:
"COMMON STOCK" means the Company's common stock, no par value.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
"FORM S-3" means such form under the Securities Act as in effect on the
date hereof or any successor registration form under the Securities 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.
"HOLDER" means any person owning of record Registrable Securities that
have not been sold to the public or any assignee of record of such Registrable
Securities in accordance with Section 2.10 hereof.
<PAGE> 4
"INITIAL OFFERING" means the Company's first firm commitment
underwritten public offering of its Common Stock registered under the Securities
Act.
"REGISTER," "REGISTERED," and "REGISTRATION" refer to a registration
effected by preparing and filing a registration statement in compliance with the
Securities Act, and the declaration or ordering of effectiveness of such
registration statement or document.
"REGISTRABLE SECURITIES" means (i) the Shares; (ii) the Underlying
Shares and (iii) any Common Stock of the Company now or hereafter held by the
Investors. Notwithstanding the foregoing, Registrable Securities shall not
include any securities sold by a person to the public either pursuant to a
registration statement or Rule 144 or sold in a private transaction in which the
transferror's rights under Article II of this Agreement are not assigned.
"REGISTRABLE SECURITIES THEN OUTSTANDING" shall be the number of
shares determined by calculating the total number of shares of the Company's
Common Stock that are Registrable Securities and either (1) are then issued and
outstanding or (2) are issuable pursuant to then exercisable or convertible
securities.
"REGISTRATION EXPENSES" shall mean all expenses incurred by the Company
in complying with Sections 2.2, 2.3 and 2.4 hereof, including, without
limitation, all registration and filing fees, printing expenses, fees and
disbursements of counsel for the Company, reasonable fees and disbursements not
to exceed Twenty Thousand Dollars ($20,000) of a single special counsel for the
Holders, blue sky fees and expenses and the expense of any special audits
incident to or required by any such registration (but excluding the compensation
of regular employees of the Company which shall be paid in any event by the
Company).
"SECURITIES ACT" shall mean the Securities Act of 1933, as amended.
"SELLING EXPENSES" shall mean all underwriting discounts and selling
commissions applicable to the sale.
"SHARES" shall mean shares of the Company's Common Stock issued
pursuant to or covered by the Purchase Agreement or the Prior Agreements,
including the Underlying Shares.
"SEC" or "COMMISSION" means the Securities and Exchange Commission.
"UNDERLYING SHARES" shall mean the shares of the Company's Common Stock
issuable upon exercise of the Warrants.
"WARRANTS" shall mean the Warrants issued pursuant to or in connection
with the Purchase Agreement and the Prior Agreements to purchase shares of the
Company's Common Stock.
2.
<PAGE> 5
II. REGISTRATION; RESTRICTIONS ON TRANSFER.
2.1 RESTRICTIONS ON TRANSFER.
(a) Each Holder agrees not to make any disposition of all or
any portion of the Shares or Registrable Securities unless and until:
(i) There is then in effect a registration statement
under the Securities Act covering such proposed disposition and such disposition
is made in accordance with such registration statement; or
(ii) (A) The transferee has agreed in writing to be
bound by this Section 2.1, (B) Such Holder shall have notified the Company of
the proposed disposition and shall have furnished the Company with a detailed
statement of the circumstances surrounding the proposed disposition, and (C) if
reasonably requested by the Company, such Holder shall have furnished the
Company with an opinion of counsel, reasonably satisfactory to the Company, that
such disposition will not require registration of such shares under the
Securities Act. It is agreed that the Company will not require opinions of
counsel for transactions made pursuant to Rule 144 except in unusual
circumstances.
(iii) Notwithstanding the provisions of paragraphs (i)
and (ii) above, no such registration statement or opinion of counsel shall be
necessary for a transfer by a Holder which is (A) a partnership to its partners
or former partners in accordance with partnership interests, (B) a corporation
to its shareholders in accordance with their interest in the corporation, (C) a
limited liability company to its members or former members in accordance with
their interest in the limited liability company, or (D) to the Holder's family
member or trust for the benefit of an individual Holder, provided the transferee
will be subject to the terms of this Section 2.1 to the same extent as if he
were an original Holder hereunder.
(b) Each certificate representing Shares or Registrable
Securities shall (unless otherwise permitted by the provisions of the Agreement)
be stamped or otherwise imprinted with a legend substantially similar to the
following (in addition to any legend required under applicable state securities
laws or as provided elsewhere in this Agreement):
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 (THE "ACT") AND MAY NOT BE OFFERED, SOLD OR
OTHERWISE TRANSFERRED, ASSIGNED, PLEDGED OR HYPOTHECATED UNLESS AND
UNTIL REGISTERED UNDER THE ACT OR UNLESS THE COMPANY HAS RECEIVED AN
OPINION OF COUNSEL SATISFACTORY TO THE COMPANY AND ITS COUNSEL THAT
SUCH REGISTRATION IS NOT REQUIRED.
or
THE SHARES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND FOR A
3.
<PAGE> 6
PERIOD OF TWELVE MONTHS FROM THE DATE OF ISSUANCE MAY NOT BE SOLD,
PLEDGED OR OTHERWISE TRANSFERRED WITHIN THE UNITED STATES, ITS
TERRITORIES AND POSSESSIONS OR ANY AREA SUBJECT TO ITS JURISDICTION OR
TO ANY PERSON WHO IS A NATIONAL THEREOF OR RESIDENT THEREIN (INCLUDING
ANY ESTATE OF SUCH PERSON) OR ANY CORPORATION, PARTNERSHIP OR OTHER
ENTITY CREATED OR ORGANIZED THEREIN WITHOUT AN EFFECTIVE REGISTRATION
THEREOF UNDER SUCH ACT OR AN OPINION OF COUNSEL, SATISFACTORY TO THE
CORPORATION AND ITS COUNSEL, THAT SUCH REGISTRATION IS NOT REQUIRED.
(c) The Company shall be obligated to reissue promptly
unlegended certificates at the request of any holder thereof if the holder shall
have obtained an opinion of counsel (which counsel may be counsel to the
Company) reasonably acceptable to the Company to the effect that the securities
proposed to be disposed of may lawfully be so disposed of without registration,
qualification or legend, including, without limitation, pursuant to an exemption
under Rule 144 and Regulation S promulgated under the Securities Act.
(d) Any legend endorsed on an instrument pursuant to
applicable state securities laws and the stop-transfer instructions with respect
to such securities shall be removed upon receipt by the Company of an order of
the appropriate blue sky authority authorizing such removal.
2.2 DEMAND REGISTRATION.
2.2.1 Subject to the conditions of this Section 2.2, if the
Company shall receive a written request from the Holders of more than a majority
of the Registrable Securities then outstanding (the "Initiating Holders") that
the Company file a registration statement under the Securities Act covering the
registration of Registrable Securities having an aggregate offering price to the
public of at least $10,000,000 and a per share price which is at least $6.80 (as
adjusted for stock splits, stock dividends and the like) (a "Qualified Public
Offering"), then the Company shall, within thirty (30) days of the receipt
thereof, give written notice of such request to all Holders, and subject to the
limitations of this Section 2.2, effect, as soon as practicable, the
registration under the Securities Act of all Registrable Securities that the
Holders request to be registered.
2.2.2 If the 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
this Section 2.2 and the Company shall include such information in the written
notice referred to in Section 2.2.1. In such event, the right of any Holder to
include its 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 enter into an underwriting agreement in
customary form with the underwriter or underwriters selected for such
underwriting by a majority in interest of the Initiating Holders (which
underwriter or underwriters shall be
4.
<PAGE> 7
reasonably acceptable to the Company). Notwithstanding any other provision of
this Section 2.2, if the underwriter advises the Company that marketing factors
require a limitation of the number of securities to be underwritten (including
Registrable Securities) then the Company shall so advise all Holders of
Registrable Securities which would otherwise be underwritten pursuant hereto,
and the number of shares that may be included in the underwriting shall be
allocated to the Holders of such Registrable Securities on a pro rata basis
based on the number of Registrable Securities held by all such Holders
(including the Initiating Holders). Any Registrable Securities excluded or
withdrawn from such underwriting shall be withdrawn from the registration.
2.2.3 The Company shall not be required to effect a
registration pursuant to this Section 2.2:
(i) prior to earlier of the third anniversary of the
date of this Agreement or the date six months after the effective date of its
Initial Offering; or
(ii) after the Company has effected a registration
pursuant to this Section 2.2, and such registration has been declared or ordered
effective; or
(iii) during the period starting with the date of
filing of, and ending on the date one hundred eighty (180) days following the
effective date of the registration statement pertaining to the Initial Offering,
provided that the Company is making reasonable and good faith efforts to cause
such registration statement to become effective; or
(iv) if within thirty (30) days of receipt of a written
request from Initiating Holders pursuant to Section 2.2.1, the Company gives
notice to the Holders of the Company's intention to make its Initial Offering
within ninety (90) days; or
(v) if the Company shall furnish to Holders requesting
a registration statement pursuant to this Section 2.2, a certificate signed by
the Chairman of the Board 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 registration statement to be effected at such
time, in which event the Company shall have the right to defer such filing for a
period of not more than ninety (90) days after receipt of the request of the
Initiating Holders; provided that such right to delay a request shall be
exercised by the Company no more than twice in any one-year period.
2.3 PIGGYBACK REGISTRATIONS. The Company shall notify all Holders of
Registrable Securities in writing at least thirty (30) days prior to the filing
of any registration statement under the Securities Act for purposes of a public
offering of securities of the Company (including, but not limited to,
registration statements relating to secondary offerings of securities of the
Company, but excluding registration statements relating to employee benefit
plans or with respect to corporate reorganizations or other transactions under
Rule 145 of the Securities Act) and will afford each such Holder an opportunity
to include in such registration statement all or part of such Registrable
Securities held by such Holder. Each Holder desiring to include in any such
registration statement all or any part of the Registrable Securities held by it
shall, within fifteen (15) days after the above-described notice from the
Company, so notify the Company in writing. Such notice shall state the intended
method of disposition of the Registrable Securities
5.
<PAGE> 8
by such Holder. If a Holder decides not to include all of its Registrable
Securities in any registration statement thereafter filed by the Company, such
Holder shall nevertheless continue to have the right to include any Registrable
Securities in any subsequent such registration statement or registration
statements as may be filed by the Company with respect to offerings of its
securities, all upon the terms and conditions set forth herein.
2.3.1 UNDERWRITING. If the registration statement under which
the Company gives notice under this Section 2.3 is for an underwritten offering,
the Company shall so advise the Holders of Registrable Securities. In such
event, the right of any such Holder to be included in a registration pursuant to
this Section 2.3 shall be conditioned upon such Holder's participation in such
underwriting and the inclusion of such Holder's Registrable Securities in the
underwriting to the extent provided herein. All Holders proposing to distribute
their Registrable Securities through such underwriting shall enter into an
underwriting agreement in customary form with the underwriter or underwriters
selected for such underwriting by the Company. Notwithstanding any other
provision of this Agreement, if the underwriter determines in good faith that
marketing factors require a limitation of the number of shares to be
underwritten, the number of shares that may be included in the underwriting
shall be allocated, first, to the Company; second, to the Holders on a pro rata
basis based on the total number of Registrable Securities held by the Holders;
and third, to any shareholder of the Company (other than a Holder) on a pro rata
basis. No such reduction shall reduce the securities being offered by the
Company for its own account to be included in the registration and underwriting,
and in no event shall the amount of securities of the selling Holders included
in the registration be reduced below twenty-five percent (25%) of the total
amount of securities included in such registration, unless such offering is the
Initial Offering and such registration does not include shares of any other
selling shareholders, in which event any or all of the Registrable Securities of
the Holders may be excluded in accordance with the immediately preceding
sentence. In no event will shares of any other selling shareholder be included
in such registration which would reduce the number of shares which may be
included by Holders without the written consent of Holders of not less than a
majority of the Registrable Securities proposed to be sold in the offering.
2.3.2 RIGHT TO TERMINATE REGISTRATION. The Company shall have
the right to terminate or withdraw any registration initiated or withdraw any
registration initiated by it under this Section 2.3 prior to the effectiveness
of such registration whether or not any Holder has elected to include securities
in such registration. The Registration Expenses of such withdrawn registration
shall be borne by the Company in accordance with Section 2.5 hereof.
2.4 FORM S-3 REGISTRATION. In case the Company shall receive from any
Holder or Holders of Registrable Securities a written request or requests that
the Company effect a registration on Form S-3 (or any successor to Form S-3) or
any similar short-form registration statement 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:
2.4.1 promptly give written notice of the proposed
registration, and any related qualification or compliance, to all other Holders
of Registrable Securities; and
6.
<PAGE> 9
2.4.2 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 fifteen (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 2.4:
(i) if Form S-3 (or any successor or similar form) is
not available for such offering by the Holders, or
(ii) 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 of less than $500,000, or
(iii) if the Company shall furnish to the Holders a
certificate signed by the Chairman of the Board of Directors 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 ninety (90) days after receipt of the
request of the Holder or Holders under this Section 2.4: provided, that such
right to delay a request shall be exercised by the Company nor more than twice
in any one-year period, or
(iv) if the Company has, within the twelve (12) month
period preceding the date of such request, already effected two (2)
registrations on Form S-3 for the Holders pursuant to this Section 2.4, or
(v) 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.
2.4.3 Subject to the foregoing, the Company shall file a Form
S-3 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 such Registration Expenses incurred
in connection with registrations requested pursuant to this Section 2.4 after
the first two (2) registrations shall be paid by the selling Holders pro rata in
proportion to the number of shares sold by each.
2.5 EXPENSES OF REGISTRATION. Except as specifically provided herein,
all Registration Expenses incurred in connection with any registration,
qualification or compliance pursuant to Section 2.2 or any registration under
Section 2.3 or Section 2.4 herein shall be borne by the Company. All Selling
Expenses incurred in connection with any registrations hereunder, shall be borne
by the holders of the securities so registered pro rata on the basis of the
number of shares so registered. The Company shall not, however, be required to
pay for expenses of any registration proceeding begun pursuant to Section 2.2 or
2.4, the request of which has been
7.
<PAGE> 10
subsequently withdrawn by the Initiating Holders unless (a) the withdrawal is
based upon material adverse information concerning the Company of which the
Initiating Holders were not aware at the time of such request or (b) the Holders
of a majority of Registrable Securities agree to forfeit their right to one
requested registration pursuant to Section 2.2 or Section 2.4, as applicable, in
which event such right shall be forfeited by all Holders). If the Holders are
required to pay the Registration Expenses, such expenses shall be borne by the
holders of securities (including Registrable Securities) requesting such
registration in proportion to the number of shares for which registration was
requested. If the Company is required to pay the Registration Expenses of a
withdrawn offering pursuant to clause (a) above, then the Holders shall not
forfeit their rights pursuant to Section 2.2 or Section 2.4 to a demand
registration.
2.6 OBLIGATIONS OF THE COMPANY. Whenever required to effect the
registration of any Registrable Securities, the Company shall, as expeditiously
as reasonably possible:
2.6.1 Prepare and file with the SEC a registration statement
with respect to such Registrable Securities and use all reasonable 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 up to ninety (90) days (except in
the case of a registration statement prepared pursuant to Section 2.4 (Form S-3)
keep effective for up to twelve (12) months) or, if earlier, until the Holder or
Holders have completed the distribution related thereto.
2.6.2 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 Securities Act with respect to the disposition of all
securities covered by such registration statement.
2.6.3 Furnish to the Holders such number of copies of a
prospectus, including a preliminary prospectus, in conformity with the
requirements of the Securities Act, and such other documents as they may
reasonably request in order to facilitate the disposition of Registrable
Securities owned by them.
2.6.4 Use all reasonable 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.
2.6.5 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(s) of such offering. Each Holder
participating in such underwriting shall also enter into and perform its
obligations under such an agreement.
2.6.6 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 Securities 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
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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.
2.6.7 Furnish, at the request of a majority of the Holders
participating in the registration, on the date that such Registrable Securities
are delivered to the underwriters for sale, if such securities are being sold
through underwriters, or, if such securities are not being sold through
underwriters, on the date that the registration statement with respect to such
securities becomes effective, (i) an opinion, dated as of such date, of the
counsel representing the Company for the purposes of such registration, in form
and substance as is customarily given to underwriters in an underwritten public
offering and reasonably satisfactory to a majority in interest of the Holders
requesting registration, addressed to the underwriters, if any, and to the
Holders requesting registration of Registrable Securities and (ii) a letter
dated as of such date, from the independent certified public accountants of the
Company, in form and substance as is customarily given by independent certified
public accountants to underwriters in an underwritten public offering and
reasonably satisfactory to a majority in interest of the Holders requesting
registration, addressed to the underwriters, if any, and if permitted by
applicable accounting standards, to the Holders requesting registration of
Registrable Securities.
2.7 DELAY OF REGISTRATION; FURNISHING INFORMATION.
2.7.1 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 Article II.
2.7.2 It shall be a condition precedent to the obligations of
the Company to take any action pursuant to Section 2.2, 2.3 or 2.4 that the
selling Holders shall furnish to the Company such information regarding
themselves, the Registrable Securities held by them and the intended method of
disposition of such securities as shall be required to effect the registration
of their Registrable Securities.
2.8 INDEMNIFICATION. In the event any Registrable Securities are
included in a registration statement under Sections 2.2, 2.3 or 2.4:
2.8.1 To the extent permitted by law, the Company will
indemnify and hold harmless each Holder, the partners, officers, directors and
legal counsel of each Holder, any underwriter (as defined in the Securities Act)
for such Holder and each person, if any, who controls such Holder or underwriter
within the meaning of the Securities Act or the Exchange Act, against any
losses, claims, damages, or liabilities (joint or several) to which they may
become subject under the Securities Act, the Exchange 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") by the Company: (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 Securities Act,
the Exchange Act, any state securities law or any rule or regulation
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promulgated under the Securities Act, the Exchange Act or any state securities
law in connection with the offering covered by such registration statement; and
the Company will reimburse each such Holder, partner, officer or director,
underwriter or controlling person for 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 Section 2.8.1 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 such Holder, partner, officer, director, underwriter
or controlling person of such Holder.
2.8.2 To the extent permitted by law, each Holder will, if
Registrable Securities held by such Holder are included in the securities as to
which such registration qualifications or compliance is being effected,
indemnify and hold harmless the Company, each of its directors, its officers,
and legal counsel and each person, if any, who controls the Company within the
meaning of the Securities Act, any underwriter and any other Holder selling
securities under such registration statement or any of such other Holder's
partners, directors or officers or any person who controls such Holder, against
any losses, claims, damages or liabilities (joint or several) to which the
Company or any such director, officer, controlling person, underwriter or other
such Holder, or partner, director, officer or controlling person of such other
Holder may become subject under the Securities Act, the Exchange 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 by such
Holder under an instrument duly executed by such Holder and stated to be
specifically for use in connection with such registration; and each such Holder
will reimburse any legal or other expenses reasonably incurred by the Company or
any such director, officer, controlling person, underwriter or other Holder, or
partner, officer, director or controlling person of such other Holder in
connection with investigating or defending any such loss, claim, damage,
liability or action if it is judicially determined that there was such a
Violation; provided, however, that the indemnity agreement contained in this
Section 2.8.2 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 further, that in no event shall any indemnity under this Section 2.8
exceed the proceeds from the offering received by such Holder.
2.8.3 Promptly after receipt by an indemnified party under
this Section 2.8 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 2.8, 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 shall
have the right to retain its own counsel, with the fees and expenses to be paid
by the indemnifying party, if representation of such indemnified party by the
counsel
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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 materially prejudicial to its ability to defend such action,
shall relieve such indemnifying party of any liability to the indemnified party
under this Section 2.8, 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 2.8.
2.8.4 If the indemnification provided for in this Section 2.8
is held by a court of competent jurisdiction to be unavailable to an indemnified
party with respect to any losses, claims, damages or liabilities referred to
herein, the indemnifying party, in lieu of indemnifying such indemnified party
thereunder, shall to the extent permitted by applicable law contribute to the
amount paid or payable by such indemnified party as a result of such loss,
claim, damage or liability 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 Violation(s) that resulted in such
loss, claim, damage or liability, as well as any other relevant equitable
considerations. The relative fault of the indemnifying party and of the
indemnified party shall be determined by a court of law 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; provided, that in no event shall any contribution by a
Holder hereunder exceed the proceeds from the offering received by such Holder.
2.8.5 The obligations of the Company and Holders under this
Section 2.8 shall survive completion of any offering of Registrable Securities
in a registration statement. No Indemnifying Party, in the defense of any such
claim or litigation, shall, except with the consent of each Indemnified Party,
consent to entry of any judgment or enter into any settlement which does not
include as an unconditional term thereof the giving by the claimant or plaintiff
to such Indemnified Party of a release from all liability in respect to such
claim or litigation.
2.9 ASSIGNMENT OF REGISTRATION RIGHTS. The rights to cause the Company
to register Registrable Securities pursuant to this Article II may be assigned
by a Holder to a transferee or assignee of Registrable Securities which (i) is a
subsidiary, parent, general partner, limited partner or retired partner of a
Holder, (ii) is a Holder's family member or trust for the benefit of an
individual Holder, or (iii) acquires at least eighty-three thousand (83,000)
shares of Registrable Securities (as adjusted for stock splits and
combinations); provided, however, (A) the transferor shall, within ten (10) days
after such transfer, furnish to the Company 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 and (B) such transferee shall agree
to be subject to all restrictions set forth in this Agreement.
2.10 AMENDMENT OF REGISTRATION RIGHTS. Any provision of this Article II
may be amended and the observance thereof 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 at least a majority of the
Registrable Securities. Any amendment or waiver effected
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in accordance with this Section 2.11 shall be binding upon each Holder and the
Company. By acceptance of any benefits under this Article II, Holders of
Registrable Securities hereby agree to be bound by the provisions hereunder.
2.11 LIMITATION ON SUBSEQUENT REGISTRATION RIGHTS. After the date of
this Agreement, the Company shall not, without the prior written consent of the
Holders of a majority of the Registrable Securities, enter into any agreement
with any holder or prospective holder of any securities of the Company that
would grant such holder registration rights senior to those granted to the
Holders hereunder.
2.12 "MARKET STAND-OFF" AGREEMENT. If requested by the Company as the
representative of the underwriters of Common Stock (or other securities) of the
Company, each Holder shall not sell or otherwise transfer or dispose of any
Shares Common Stock (or other securities) of the Company held by such each
Holder (other than those included in the registration) for a period specified by
the representative of the underwriters not to exceed one hundred eighty (180)
days following the effective date of a registration statement of the Company
filed under the Securities Act, provided that:
(i) such agreement shall apply only to the Company's Initial
Offering; and
(ii) all officers and directors of the Company shall enter into
similar agreements.
The obligations described in this Section 2.12 shall not apply to a
registration relating solely to employee benefit plans on Form S-1 or Form S-8
or similar forms that may be promulgated in the future, or a registration
relating solely to a Commission Rule 145 transaction on Form S-4 or similar
forms that may be promulgated in the future. The Company may impose
stop-transfer instructions with respect to the shares of Common Stock (or other
securities) subject to the foregoing restriction until the end of said one
hundred eighty (180) day period.
2.13 RULE 144 REPORTING. With a view to making available to the Holders
the benefits of certain rules and regulations of the SEC which may permit the
sale of the Registrable Securities to the public without registration, the
Company agrees to use its best efforts to:
(a) Make and keep public information available, as those terms
are understood and defined in SEC Rule 144 or any similar or analogous rule
promulgated under the Securities Act, at all times after the effective date of
the first registration filed by the Company for an 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 Exchange Act;
(c) So long as a Holder owns any Registrable Securities,
furnish to such Holder forthwith upon request: a written statement by the
Company as to its compliance with the reporting requirements of said Rule 144 of
the Securities Act, and of the Exchange Act (at any time after it has become
subject to such reporting requirements); a copy of the most recent
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annual or quarterly report of the Company; and such other reports and documents
as a Holder may reasonably request in availing itself of any rule or regulation
of the SEC allowing it to sell any such securities without registration.
III. RIGHTS OF FIRST REFUSAL.
3.1 SUBSEQUENT OFFERINGS. Each Investor shall have a right of first
refusal to purchase its pro rata share of all Equity Securities, as defined
below, that the Company may, from time to time, propose to sell and issue after
the date of this Agreement, other than the Equity Securities excluded by Section
3.6 hereof. Each Investor's pro rata share is equal to the ratio of (A) the
number of shares of the Company's Common Stock that are held by such Investor
plus the number of shares of Common Stock issuable upon exercise of any Warrant
held by such Investor immediately prior to the issuance of such Equity
Securities to (B) the total number of shares of the Company's Common Stock
outstanding plus the number of shares of Common Stock issuable upon exercise of
the Warrants immediately prior to the issuance of the Equity Securities. The
term "Equity Securities" shall mean (i) any Common Stock, Preferred Stock or
other security of the Company, (ii) any security convertible, with or without
consideration, into any Common Stock, Preferred Stock or other security
(including any option to purchase such a convertible security), (iii) any
security carrying any warrant or right to subscribe to or purchase any Common
Stock, Preferred Stock or other security or (iv) any such warrant or right.
3.2 EXERCISE OF RIGHTS. If the Company proposes to issue any Equity
Securities, it shall give each Investor written notice of its intention,
describing the Equity Securities, the price and the terms and conditions upon
which the Company proposes to issue the same. Each Investor shall have fifteen
(15) days from the giving of such notice to agree to purchase up to its pro rata
share of the Equity Securities for the price and upon the terms and conditions
specified in the notice by giving written notice to the Company and stating
therein the quantity of Equity Securities to be purchased. Notwithstanding the
foregoing, the Company shall not be required to offer or sell such Equity
Securities to any Investor who would cause the Company to be in violation of
applicable federal securities laws by virtue of such offer or sale.
3.3 ISSUANCE OF EQUITY SECURITIES TO OTHER PERSONS. If not all of the
Investors elect to purchase their pro rata share of the Equity Securities, then
the Company shall promptly notify in writing the Investors who do so elect and
shall offer such Investors the right to acquire such unsubscribed shares. The
Investors shall have five (5) days after receipt of such notice to notify the
Company of its election to purchase all or a portion thereof of the unsubscribed
shares. If the Investors fail to exercise in full the rights of first refusal,
the Company shall have ninety (90) days thereafter to sell the Equity Securities
in respect of which the Investor's rights were not exercised, at a price and
upon general terms and conditions materially no more favorable to the purchasers
thereof than specified in the Company's notice to the Investors pursuant to
Section 3.2 hereof. If the Company has not sold such Equity Securities within
days of the notice provided pursuant to Section 3.2, the Company shall not
thereafter issue or sell any Equity Securities, without first offering such
securities to the Investors in the manner provided above.
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3.4 TERMINATION OF RIGHTS OF FIRST REFUSAL. The rights of first refusal
set forth in Sections 3.1, 3.2 and 3.3 above shall terminate upon the closing
date of the registration statement pertaining to a Qualified Public Offering.
3.5 TRANSFER OF RIGHTS OF FIRST REFUSAL. The rights of first refusal of
each Investor under this Article III may be transferred to the same parties,
subject to the same restrictions, as any transfer of registration rights
pursuant to Section 2.9.
3.6 EXCLUDED SECURITIES. The rights of first refusal established by
this Article III shall have no application to any of the following Equity
Securities:
3.6.1 shares of Common Stock (and/or options, warrants or
other Common Stock purchase rights issued pursuant to such options, warrants or
other rights) issued or to be issued to employees, officers or directors of, or
consultants or advisors to the Company or any subsidiary, pursuant to stock
purchase or stock option plans or other arrangements that are approved by the
Board of Directors;
3.6.2 stock issued pursuant to any rights or agreements
outstanding as of the date of this Agreement, options and warrants (other than
options, warrants or other Common Stock purchase rights covered by Section 3.6.1
above) outstanding as of the date of this Agreement; and stock issued pursuant
to any such rights or agreements granted after the date of this Agreement,
provided that the rights of first refusal established by this Article III
applied with respect to the initial sale or grant by the Company of such rights
or agreements;
3.6.3 any Equity Securities issued for consideration other
than cash pursuant to a merger, consolidation, acquisition or similar business
combination;
3.6.4 shares of Common Stock issued in connection with any
stock split, stock dividend or recapitalization by the Company;
3.6.5 any Equity Securities issued pursuant to any equipment
leasing arrangement, or bank financing;
3.6.6 any Equity Securities that are issued by the Company
pursuant to a registration statement filed under the Securities Act; and
3.6.7 shares of the Company's Common Stock or Preferred Stock
issued in connection with strategic transactions involving the Company and other
entities, including (A) joint ventures, manufacturing, marketing or distribution
arrangements or (B) technology transfer or development arrangements; provided
that such strategic transactions and the issuance of shares therein, has been
approved by the Company's Board of Directors.
3.7 CATCH-UP RIGHTS. In the event the Company (a) issues any shares of
Common Stock and/or grants any options, warrants or other Common Stock purchase
rights exercisable for Common Stock in a transaction that is not subject to the
right of first refusal established by this Article III by reason of Section
3.6.1 and after such transaction the Employee Stock Pool, as hereinafter
defined, is greater than 1,500,000 (as adjusted appropriately for any stock
splits,
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stock dividends or other such changes in the capitalization of the Company) or
(b) issues any Equity Securities in a transaction that is not subject to the
right of first refusal established by this Article III by reason of Sections
3.6.3, 3.6.5, 3.6.6 (unless such offering is for a Qualified Public Offering) or
3.6.7, the Company will give Vobis written notice of such grant or issuance not
later that ten (10) days after it has occurred, providing relevant details of
the transaction including the purchase price of the Equity Securities issued and
the Vobis Purchase Price (as defined below). For purposes hereof, the Employee
Stock Pool, as of a given date, shall be the sum of (i) the number of shares of
Common Stock issuable upon exercise of options, warrants or other Common Stock
purchase rights granted to employees, officers or directors of, or consultants
or advisors to the Company or any subsidiary ("Employee Rights") and then
outstanding and (ii) the number of shares of Common Stock previously issued upon
exercise of Employee Rights outstanding at any time after the date of this
Agreement, minus the number of any such shares of Common Stock as to which Vobis
has previously been given notice in respect of its rights hereunder (all such
numbers having been adjusted appropriately for any stock splits, stock dividends
or other such changes in the capitalization of the Company). For purposes of
this Section 3.7, the "Vobis Purchase Price" shall mean the purchase price for
which the Vobis Group (as defined below) may exercise its rights under this
Section 3.7 to purchase securities from the Company which shall equal: (i) in
the case of direct issuances of Common Stock under (a) above, the fair market
value of the Common Stock on the date of issuance; (ii) in the case of the
issuances of Employee Rights under (a) above, the fair market of the underlying
Common Stock on the date of grant of such Employee Right; (iii) in the case of
any Equity Securities covered by (b) above, the actual price paid or payable
with respect to such Equity Securities; and (iv) in the event the consideration
for the Equity Securities issued by the Company under (a) or (b) above was other
than cash, the fair market value of such consideration as reasonably determined
in good faith by the Board of Directors of the Company as of the date of
issuance of such Equity Securities; provided, however, that notwithstanding the
above, if the fair market value as determined in (i) or (ii) above is higher
than the price paid or payable in connection with any issuances under (i) or
(ii) above, then the Vobis Purchase Price shall equal the average of such fair
market value and such actual purchase price paid or payable for such issuance.
Vobis and any of its wholly-owned subsidiaries holding Registrable Securities
(collectively, the "Vobis Group") shall have the right, exercisable at any time
within thirty (30) days after such notice is given, to purchase from the Company
at the Vobis Purchase Price specified that number of Equity Securities (which
shall be Common Stock in the case of any Employee Rights) as is necessary to
restore its percentage ownership interest (determined in accordance with Section
3.1) to the percentage ownership interest of the Vobis Group immediately prior
to such issuance, but in no event to greater than seventeen and one-half percent
(17.5%). Notwithstanding the foregoing, in the case of transactions involving
the issuance of Common Stock and Employee Rights representing less than three
and one-half percent (3.5%) of the Common Stock outstanding immediately prior to
the first of such transactions, the Company may at its election defer giving
such notice until issuances in that and any subsequent transactions as to which
notice has been deferred hereunder, constitute in the aggregate three and
one-half percent (3.5%) or more of the Common Stock outstanding. In such case,
the notice given by the Company shall specify the information called for herein
with respect to each such transaction, and the right of the Vobis Group to
purchase with respect to all such transactions shall be at the Vobis Purchase
Price applicable to the shares of Common Stock sold or issuable upon exercise of
Employee Rights granted in such transactions. The rights granted to the Vobis
Group under this Section 3.7 shall terminate and be of no further force or
effect on the earlier of (A) the
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closing date of a Qualified Public Offering or (B) on the day prior to a
transaction (or the first of a series of transactions to be covered by a
deferred notice) to which this Section 3.7 would otherwise apply, if on such
date the percentage ownership interest of the Vobis Group (determined in
accordance with Section 3.1) is less than eight percent (8%). Notwithstanding
the foregoing, in the event of a Qualified Public Offering in which the Company
offers in excess of 1,500,000 shares, as presently constituted (including any
shares to be offered under any overallotment option), the Company agrees to give
the Vobis Group the opportunity to purchase in a single transaction up to twelve
percent (12.0%) of such excess in such offering. Any right to purchase Equity
Securities under this Section 3.7 may be allocated among the members of the
Vobis Group on such basis as Vobis may determine.
IV. MISCELLANEOUS.
4.1 GOVERNING LAW. This Agreement shall be governed by and construed
under the laws of the State of California as applied to agreements among
California residents entered into and to be performed entirely within
California.
4.2 SURVIVAL. The representations, warranties, covenants, and
agreements made herein shall survive any investigation made by any Holder and
the closing of the transactions contemplated hereby.
4.3 SUCCESSORS AND ASSIGNS. Except as otherwise expressly provided
herein, the provisions hereof shall inure to the benefit of, and be binding
upon, the successors, assigns, heirs, executors, and administrators of the
parties hereto and shall inure to the benefit of and be enforceable by each
person who shall be a holder of Registrable Securities from time to time;
provided, however, that prior to the receipt by the Company of adequate written
notice of the transfer of any Registrable Securities specifying the full name
and address of the transferee, the Company may deem and treat the person listed
as the holder of such shares in its records as the absolute owner and holder of
such shares for all purposes, including the payment of dividends or any
redemption price.
4.4 SEVERABILITY. In case any provision of the Agreement shall be
invalid, illegal, or unenforceable, the validity, legality, and enforceability
of the remaining provisions shall not in any way be affected or impaired
thereby.
4.5 AMENDMENT AND WAIVER. Except as otherwise expressly provided, this
Agreement may be amended or modified, 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 upon the written consent of the Company
and the holders of at least a majority of the Registrable Securities; provided,
however, only Vobis may waive or amend the rights granted under Section 3.7.
4.6 DELAYS OR OMISSIONS. It is agreed that no delay or omission to
exercise any right, power, or remedy accruing to any Holder, upon any breach,
default or noncompliance of the Company under this Agreement shall impair any
such right, power, or remedy, nor shall it be construed to be a waiver of any
such breach, default or noncompliance, or any acquiescence therein, or of any
similar breach, default or noncompliance thereafter occurring. It is further
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agreed that any waiver, permit, consent, or approval of any kind or character on
any Holder's part of any breach, default or noncompliance under the Agreement or
any waiver on such Holder's part of any provisions or conditions of this
Agreement must be in writing and shall be effective only to the extent
specifically set forth in such writing. All remedies, either under this
Agreement, by law, or otherwise afforded to Holders, shall be cumulative and not
alternative.
4.7 NOTICES. All notices required or permitted hereunder shall be in
writing and shall be deemed effectively given: (i) upon personal delivery to the
party to be notified, (ii) when sent by confirmed telex or facsimile if sent
during normal business hours of the recipient; if not, then on the next business
day, (iii) if to an Investor located in the United States, five (5) days after
having been sent by registered or certified mail, return receipt requested,
postage prepaid, or (iv) if to an Investor located in the United States, one (1)
day, and if to an Investor located outside of the United States, four (4)
business days, after deposit with an internationally recognized overnight
courier, specifying express delivery, with written verification of receipt. All
communications shall be sent to the party to be notified at the address as set
forth on the signature pages hereof or Exhibit A hereto or at such other address
as such party may designate by ten (10) days advance written notice to the other
parties hereto.
4.8 ATTORNEYS' FEES. In the event that any dispute among the parties to
this Agreement should result in litigation, the prevailing party in such dispute
shall be entitled to recover from the losing party all fees, costs and expenses
of enforcing any right of such prevailing party under or with respect to this
Agreement, including without limitation, such reasonable fees and expenses of
attorneys and accountants, which shall include, without limitation, all fees,
costs and expenses of appeals.
4.9 TITLES AND SUBTITLES. The titles of the sections and subsections of
this Agreement are for convenience of reference only and are not to be
considered in construing this Agreement.
4.10 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
4.11 TERMINATION OF PRIOR AGREEMENTS. The Investors hereby agree to the
termination of (i) that certain Investors' Rights Agreement, dated as of
September 30, 1995 (the "Rights Agreement") and (ii) Sections 6 and 7 of that
certain Common Stock Purchase Agreement, dated as of July 17, 1995 (the "Prior
Agreement"), and hereby agree that the Company shall have no further obligations
under the Rights Agreement and Sections 6 and 7 of the Prior Agreement and that
the rights granted hereunder are in lieu thereof. As required by Section 4.5 of
the Rights Agreement and Section 8.4 of the Prior Agreement, the undersigned
represent at least two-thirds (66 2/3%) of the Registrable Securities and all of
the Purchasers, respectively, thereunder. Notwithstanding anything herein to the
contrary, unless otherwise amended or modified by this Section 4.11, the rights
and obligations of the parties under the Prior Agreement (excluding Sections 6
and 7 thereof) shall remain in full force and effect.
17.
<PAGE> 20
18.
<PAGE> 21
[THIS SPACE INTENTIONALLY LEFT BLANK]
19.
<PAGE> 22
IN WITNESS WHEREOF, the parties hereto have executed this Investors'
Rights Agreement as of the date set forth in the first paragraph hereof.
COMPANY INVESTORS
AWARD SOFTWARE INTERNATIONAL, INC. VENROCK ASSOCIATES
By: By:
------------------------------- ------------------------------------
Title: Title:
---------------------------- ---------------------------------
Address: 777 East Middlefield Road Address: 30 Rockefeller Plaza, Rm 5508
Mountain View, CA 94043 New York, NY 10112
VENROCK ASSOCIATES II, L.P.
By:
------------------------------------
Title:
---------------------------------
Address: 30 Rockefeller Plaza, Rm 5508
New York, NY 10112
INVESTORS' RIGHTS AGREEMENT
<PAGE> 23
WALDEN CAPITAL PARTNERS II, L.P.
By:
-----------------------------------
Title:
--------------------------------
Address: 750 Battery Street
Floor 7
San Francisco, CA 94111-1523
WALDEN TECHNOLOGY VENTURES II, L.P.
By:
-----------------------------------
Title:
--------------------------------
Address: 750 Battery Street
Floor 7
San Francisco, CA 94111-1523
INVESTORS' RIGHTS AGREEMENT
<PAGE> 24
VOBIS MICROCOMPUTER AG
By:
---------------------------------
Title:
------------------------------
Address: Carlo-Schmid-Str. 12
D-52146 Wurselen
Germany
INVESTORS' RIGHTS AGREEMENT
<PAGE> 25
CHAILEASE VENTURE CAPITAL CO., LTD.
By:
------------------------------------------
Title:
---------------------------------------
Address: 5th Fl., No. 420 Fu-Hsin N. Rd.
Taipei, Taiwan
KOOS VENTURE CAPITAL CO., LTD.
By:
------------------------------------------
Title:
---------------------------------------
Address: 5th Fl., No. 420 Fu-Hsin N. Rd.
Taipei, Taiwan
CHINATRUST VENTURE CAPITAL CO., LTD.
By:
------------------------------------------
Title:
---------------------------------------
Address: 5th Fl., No. 420 Fu-Hsin N. Rd.
Taipei, Taiwan
INVESTORS' RIGHTS AGREEMENT
<PAGE> 26
HANTECH VENTURE CAPITAL CO., LTD.
By:
-----------------------------------------
Title:
--------------------------------------
Address: Suite 3201, 32F, International
Trade Building
No. 333, Keelung Road, Sec. 1
Taipei Taiwan
INVESTORS' RIGHTS AGREEMENT
<PAGE> 27
HUNG LIEN INVESTMENT
By:
------------------------
Title:
---------------------
Address:
-------------------
-------------------
-------------------
INVESTORS' RIGHTS AGREEMENT
<PAGE> 28
EXHIBIT A
SCHEDULE OF INVESTORS
Venrock Associates
Venrock Associates II, L.P.
Walden Capital Partners II, L.P.
Walden Technology Ventures II, L.P.
Vobis Microcomputer AG
Chailease Venture Capital Co., Ltd.
Koos Venture Capital Co., Ltd.
Chinatrust Venture Capital Co., Ltd.
Hantech Venture Capital Co., Ltd.
Hung Lien Investment
<PAGE> 1
EXHIBIT 10.11
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR
QUALIFIED UNDER APPLICABLE STATE SECURITIES LAWS AND HAS BEEN TAKEN FOR
INVESTMENT PURPOSES ONLY AND NOT WITH A VIEW TO OR FOR SALE IN CONNECTION WITH
ANY DISTRIBUTION THEREOF. IT MAY NOT BE SOLD OR OTHERWISE TRANSFERRED IN THE
ABSENCE OF SUCH REGISTRATION AND QUALIFICATION WITHOUT, EXCEPT UNDER CERTAIN
SPECIFIC LIMITED CIRCUMSTANCES, AN OPINION OF COUNSEL FOR HOLDER, CONCURRED IN
BY COUNSEL FOR THE COMPANY THAT SUCH REGISTRATION AND QUALIFICATION ARE NOT
REQUIRED.
AWARD SOFTWARE INTERNATIONAL, INC.
WARRANT TO PURCHASE SHARES OF
COMMON STOCK
This certifies that as of the 14th day of October, 1994, Synnex
Information Technologies ("Synnex"), for value received, is entitled to purchase
from Award Software International, Inc., a California corporation (the
"Company"), the number of shares of fully paid and nonassessable Common Stock of
the Company, determined in accordance with paragraph 1 hereof, up to a maximum
of Four Hundred Thousand (400,000) shares, at a price of Fifty Cents ($0.50) per
share (the "Exercise Price"), subject to the provisions and upon the terms and
conditions hereinafter set forth.
This Warrant is subject to the following additional terms and
conditions:
1. NUMBER OF SHARES. The number of shares of Common Stock as to which
this Warrant may be exercised shall be equal to the U.S. dollar value (i.e.,
aggregate dollars divided by one) of all BIOS licenses purchased by Synnex or
its affiliate, Mitac, during the period commencing on the date hereof and
ending on the earlier of October 1, 1996 or termination of this Warrant.
2. TERMINATION. This Warrant and all rights to exercise this Warrant
in whole or in part, shall immediately terminate at 5:00 p.m., Pacific Time, on
the later of (a) March 31, 1998 and (b) the first to occur of (i) the day
preceding the closing of the sale of all or substantially all of the assets of
the Company or the acquisition of the Company by another entity by means of a
merger or consolidation or sale of stock resulting in the exchange of more than
50% of the outstanding shares of the Company for securities or consideration
issued, or caused to be issued, by the acquiring entity (a "Sale of the
Company") or (ii) the six month anniversary of the closing of the first
registered public offering of any equity securities of the Company (an "IPO").
1.
<PAGE> 2
3. RESERVATION OF COMMON STOCK. The Company agrees at all times
to reserve a sufficient number of shares of authorized but unissued Common Stock
when and as required for the purpose of complying with the terms of this
Warrant.
4. RIGHTS OF SHAREHOLDERS. Nothing contained in this Warrant
shall be construed as conferring upon the holder hereof or any other person the
right to vote or to consent or to receive notice as a shareholder in respect of
meetings of shareholders for the election of directors of the Company or any
other matter or any rights whatsoever as a shareholder of the Company; and no
dividends or interest shall be payable or accrued in respect of this Warrant or
the interest represented hereby or the shares purchasable hereunder until, and
only to the extent that, this Warrant shall have been exercised.
5. METHOD OF EXERCISE; PAYMENT; ISSUANCE OF NEW WARRANT. Subject
to Section 2 hereof, the purchase right represented by this Warrant may be
exercised by the holder hereof, in whole or in part, by the surrender of this
Warrant (with a duly executed notice of exercise in the form attached hereto as
Exhibit A) at the principal office of the Company and by the payment to the
Company, by check, or cancellation of Company indebtedness, of an amount equal
to the then applicable Exercise Price per share multiplied by the number of
shares then being purchased. In the event of any exercise of the rights
represented by this Warrant, certificates for the shares of stock so purchased
shall be in the name of, and delivered to, the holder hereof, or as such holder
may direct (subject to the restrictions upon transfer contained herein and upon
payment by such holder hereof of any applicable transfer taxes). Such delivery
shall be made within ten (10) days after exercise of the Warrant and at the
Company's expense and, unless this Warrant has been fully exercised or has
expired, a new Warrant representing the number of shares of Common Stock, if
any, with respect to which this Warrant shall not then have been exercised shall
also be issued to the holder hereof within ten (10) days after exercise of the
Warrant.
6. EXCHANGE OF WARRANT FOR COMMON STOCK. Upon receipt of notice
from the Company, pursuant to Section 11 below, of a proposed IPO, the holder of
this Warrant may elect to exchange all but not part of the Warrant for that
number of shares of Common Stock determined by dividing the Inherent Value (as
hereinafter defined) of the Warrant by the Fair Market Value (as hereinafter
defined). The "Inherent Value" of the Warrant shall be (a) the Fair Market
Value (as defined below) of the number of shares of Common Stock of the Company
issuable upon exercise of the Warrant at the time of the IPO, less (b) the total
Exercise Price of the Warrant. The "Fair Market Value" of the Common Stock
shall equal the actual offering price of such shares of Common Stock in such
IPO.
7. EXCHANGE OF WARRANT FOR OTHER WARRANTS. This Warrant, with or
without similar Warrants, when surrendered properly endorsed at the principal
offices of the Company may be exchanged for another Warrant or Warrants of
different denominations, of like tenor and representing in the aggregate the
right to purchase a like number of shares of Common Stock of the Company.
2.
<PAGE> 3
8. TRANSFERABILITY. Subject to such restrictions on transfer as
may be contained in this Warrant, this Warrant is transferable on the books of
the Company at its principal office by the above named holder of record in
person or by duly authorized attorney, upon surrender of this Warrant properly
endorsed. The Company may treat the holder of record of this Warrant as the
absolute owner hereof for all purposes and shall not be affected by any notice
to the contrary.
9. ADJUSTMENT OF EXERCISE PRICE. In the event of changes in the
outstanding Common Stock of the Company by reason of stock dividends, split-ups,
recapitalizations, reclassifications, combinations or exchanges of shares,
separations, reorganizations, liquidations, or the like, the number and class of
shares available under the Warrant in the aggregate and the Exercise Price shall
be correspondingly adjusted to give the holder of the Warrant, on exercise for
the same aggregate Exercise Price, the total number, class, and kind of shares
as the holder would have owned had the Warrant been exercised prior to the event
and had the holder continued to hold such shares until after the event requiring
adjustment.
10. FRACTIONAL SHARES. No fractional share shall be issued upon
exercise of this Warrant. The Company shall, in lieu of issuing any fractional
share, pay the holder entitled to such fraction a sum in cash equal to the fair
market value of such fraction on the date of exercise (as determined in good
faith by the Board of Directors of the Company).
11. NOTICE OF CERTAIN ACTIONS. In the event of (i) any taking by
the Company 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 or other distribution, or (ii) any reclassification or recapitalization
of the capital stock of the Company, and Sale of the Company, any IPO, or any
voluntary or involuntary dissolution, liquidation, or winding up of the Company,
the Company shall mail to the holder of this Warrant at least fifteen (15) days
prior to the record date specified therein, a notice specifying (A) the date on
which any such record is to be taken for the purpose of such dividend or
distribution and a description of such dividend or distribution, (B) the date on
which any such reclassification, recapitalization, Sale of the Company, IPO,
dissolution, liquidation, or winding up is expected to become effective, and (C)
the time, if any, that is to be fixed, as to when the holders of record of
Common Stock (or other securities) shall be entitled to exchange their shares of
Common Stock (or other securities) for securities or other property deliverable
upon such reclassification, recapitalization, Sale of the Company, IPO,
dissolution, liquidation, or winding up.
12. GOVERNING LAW. This Warrant is issued in and shall be governed
by the laws of the State of California, as applied to contracts entered into
between California residents and to be performed entirely within the State of
California.
3.
<PAGE> 4
IN WITNESS WHEREOF the Company has caused this Warrant to be duly
executed by its officers thereunto duly authorized as of the date first written
above.
AWARD SOFTWARE INTERNATIONAL, INC.
By: GEORGE HUANG
----------------------------------
George Huang
Chairman and CEO
4.
<PAGE> 5
FORM OF SUBSCRIPTION
--------------------
(To be signed only upon exercise of Warrant)
To ____________________:
The undersigned, the holder of the within Warrant, hereby irrevocably
elects to exercise the purchase right represented by such Warrant for, and to
purchase thereunder, __________________________________ (______________) shares
of Common Stock of AWARD SOFTWARE INTERNATIONAL, INC. and herewith makes payment
of _______________________________ DOLLARS ($______) therefor, and requests the
certificates for such shares be issued in the name of, and delivered to,
_______________________________________________________________, whose address
is ___________________________________________________________
The undersigned represents that it is acquiring such Common Stock for
its own account for investment and not with a view to or for sale in connection
with any distribution thereof.
DATED: _________________
By: _______________________
Title: _____________________
Address: ___________________
____________________________
Exhibit A
<PAGE> 1
EXHIBIT 10.12
No.W-5
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR
INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR ANY
STATE SECURITIES LAWS. SUCH SECURITIES MAY NOT BE SOLD OR TRANSFERRED IN THE
ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER SAID ACT AND ANY
APPLICABLE STATE SECURITIES LAWS.
WARRANT TO PURCHASE A MAXIMUM OF
544,788 SHARES OF COMMON STOCK OF
AWARD SOFTWARE INTERNATIONAL, INC.
(Void after September 30, 2000)
This certifies that VOBIS MICROCOMPUTER AG (the "Holder"), or assigns,
for good and valuable consideration, the receipt and sufficiency of which is
hereby acknowledged, is entitled to purchase from AWARD SOFTWARE INTERNATIONAL,
INC., a California corporation (the "Company"), having a place of business at
777 East Middlefield Road, Mountain View, CA 94043-4023, a maximum of Five
Hundred Forty-Four Thousand, Seven Hundred Eighty-Eight (544,788) fully paid
and nonassessable shares of the Company's Common Stock ("Common Stock") for
cash at a price of six dollars fourteen cents ($6.14) per share (the "Stock
Purchase Price") at any time or from time to time up to and including the
earlier of (i) the closing of the Company's initial public offering of its
Common Stock of which the aggregate offering price and per share price to the
public are at least $10,000,000 and $6.80, respectively (a "Qualified Public
Offering"), pursuant to a registration statement under the Securities Act of
1933, as amended, if the warrants covering 246,664 shares of Common Stock
currently held by the Walden and Venrock investor groups terminate at the
closing of a Qualified Public Offering; provided, the Holder has received at
least ten (10) business days prior notice that such warrants will so terminate,
or (ii) 5:00 p.m. (Pacific time) on September 30, 2000, such earlier day being
referred to herein as the "Expiration Date", upon surrender to the Company at
its principal office (or at such other location as the Company may advise the
Holder in writing) of this Warrant properly endorsed with the Form of
Subscription attached hereto duly filled in and signed and, if applicable, upon
payment in cash or by check of the aggregate Stock Purchase Price for the
number of shares for which this Warrant is being exercised determined in
accordance with the provisions hereof. The Stock Purchase Price and the number
of shares purchasable hereunder are subject to adjustment as provided in
Section 3 of this Warrant.
1.
<PAGE> 2
This Warrant is subject to the following terms and conditions:
1. EXERCISE; ISSUANCE OF CERTIFICATES; PAYMENT FOR SHARES.
1.1 GENERAL. This Warrant is exercisable at the option of the
holder of record hereof, at any time or from time to time, up to the Expiration
Date for all or any part of the shares of Common Stock (but not for a fraction
of a share) which may be purchased hereunder. The Company agrees that the
shares of Common Stock purchased under this Warrant shall be and are deemed to
be issued to the Holder hereof as the record owner of such shares as of the
close of business on the date on which this Warrant shall have been surrendered,
properly endorsed, the completed, executed Form of Subscription delivered and
payment made for such shares. Certificates for the shares of Common Stock so
purchased, together with any other securities or property to which the Holder
hereof by the Company at the Company's expense within a reasonable time after
the rights represented by this Warrant have been so exercised. In case of a
purchase of less than all the shares which may be purchased under this Warrant,
the Company shall cancel this Warrant and execute and deliver a new Warrant or
Warrants of like tenor for the balance of the shares purchasable under the
Warrant surrendered upon such purchase to the Holder hereof within a reasonable
time. Each stock certificate so delivered shall be in such denominations of
Common Stock as may be requested by the Holder hereof and shall be registered
in the name of such Holder.
1.2 NET ISSUE EXERCISE. Notwithstanding any provisions herein to the
contrary, in lieu of exercising this Warrant for cash, the Holder may elect to
receive shares equal to the value (as determined below) of this Warrant (or the
portion thereof being canceled) by surrender of this Warrant at the principal
office of the Company together with the properly endorsed Form of Subscription
and notice of such election in which event the Company shall issue to the
Holder a number of shares of Common Stock computed using the following formula:
X=Y(A-B)
------
A
WHERE X= the number of shares of Common Stock to be issued to the
Holder
Y= the number of shares of Common Stock purchasable under the
Warrant or, if only a portion of the Warrant is being
exercised, the portion of the Warrant being canceled
(at the date of such calculation)
A= the fair market value of one share of the Company's Common
Stock (at the date of such calculation)
B= Stock Purchase Price (as adjusted to the date of such
calculation)
2.
<PAGE> 3
For purposes of the above calculation, fair market value of one share of Common
Stock shall be determined by the Company's Board of Directors in good faith;
provided, however, that in the event the Company makes an initial public
offering of its Common Stock the fair market value per share shall be the
average of the closing prices of such security's sales on all domestic
securities exchanges on which such security may at the time be listed, or, if
there have been no sales on any such exchange on any day, the average of the
highest bid and lowest asked prices on all such exchanges at the end of such
day, or, if on any day such security is not so listed, the average of the
representative bid and asked prices quoted in the NASDAQ System as of 4:00
P.M., New York time, on such day, or, if on any day such security is not quoted
in the NASDAQ system, the average of the highest bid and lowest asked prices on
such day in the domestic over-the-counter market as reported by the National
Quotation Bureau, Incorporation, or any similar successor organization, in each
such case averaged over a period of 21 days consisting of the day as of which
"fair market value" is being determined and the 20 consecutive business days
prior to such day; provided that if such security is listed on any domestic
securities exchange the term "business days" as used in this sentence means
business days on which such exchange is open for trading; provided, further,
that if the Warrant is exercised at or immediately prior to the Qualified
Public Offering of its Common Stock, the fair market value per share be the per
share offering price to the public of such Qualified Public Offering.
2. SHARES TO BE FULLY PAID; RESERVATION OF SHARES. The Company
covenants and agrees that all shares of Common Stock which may be issued upon
the exercise of the rights represented by this Warrant will, upon issuance, be
duly authorized, validly issued, fully paid and nonassessable and free from all
preemptive rights of any shareholder and free of all taxes, liens and charges
with respect to the issue thereof. The Company further covenants and agrees
that during the period within which the rights represented by this Warrant may
be exercised, the Company will at all times have authorized and reserved, for
the purpose of issue or transfer upon exercise of the subscription rights
evidenced by this Warrant, a sufficient number of shares of authorized but
unissued Common Stock, or other securities and property, when and as required
to provide for the exercise of the rights represented by this Warrant. The
Company will take all such action as may be necessary to assure that such
shares of Common Stock may be issued as provided herein without violation of
any applicable law or regulation, or of any requirements of any domestic
securities exchange upon which the Common Stock may be listed; provided,
however, that the Company shall not be required to effect a registration under
Federal or state securities laws with respect to such exercise. The Company
will not take any action which would result in any adjustment of the Stock
Purchase Price (as defined in Section 3 hereof) (i) if the total number of
shares of Common Stock issuable after such action upon exercise of all
outstanding warrants, together with all shares of Common Stock then outstanding
and all shares of Common Stock then issuable upon exercise of all options and
upon the conversion of all convertible securities then outstanding, would
exceed the total number of shares of Common Stock then authorized by the
Company's Articles of Incorporation, or (ii) if the total number of shares of
Common Stock issuable after such action upon the conversion of all such shares
of Common Stock, together with all shares of Common Stock then issuable upon
exercise of all options and upon the conversion of all such shares of Common
Stock, together with all shares of Common Stock then outstanding and all shares
of Common Stock then issuable upon exercise of all options and upon the
conversion of all convertible securities then outstanding
3.
<PAGE> 4
would exceed the total number of shares of Common Stock then authorized by the
Company's Articles of Incorporation.
3. ADJUSTMENT OF STOCK PURCHASE PRICE AND NUMBER OF SHARES. The Stock
Purchase Price and the number of shares purchasable upon the exercise of this
Warrant shall be subject to adjustment from time to time upon the occurrence of
certain events described in this Section 3. Upon each adjustment of the Stock
Purchase Price, the Holder of this Warrant shall thereafter be entitled to
purchase, at the Stock Purchase Price resulting from such adjustment, the
number of shares obtained by multiplying the Stock Purchase Price in effect
immediately prior to such adjustment by the number of shares purchasable
pursuant hereto immediately prior to such adjustment, and dividing the product
thereof by the Stock Purchase Price resulting from such adjustment.
3.1 SUBDIVISION OR COMBINATION OF STOCK. In case the Company
shall at any time subdivide its outstanding shares of Common Stock into a
greater number of shares, the Stock Purchase Price in effect immediately prior
to such subdivision shall be proportionately reduced, and conversely, in case
the outstanding shares of Common Stock of the Company shall be combined into a
smaller number of shares, the Stock Purchase Price in effect immediately prior
to such combination shall be proportionately increased.
3.2 DIVIDENDS IN COMMON STOCK, OTHER STOCK, PROPERTY,
RECLASSIFICATION. If at any time or from time to time the Holders of Common
Stock (or any shares of stock or other securities at the time receivable upon
the exercise of this Warrant) shall have received or become entitled to
receive, without payment therefor,
(A) Common Stock or any shares of stock or other
securities which are at any time directly or indirectly convertible into or
exchangeable for Common Stock, or any rights or options to subscribe for,
purchase or otherwise acquire any of the foregoing by way of dividend or other
distribution,
(B) any cash paid or payable otherwise than as a cash
dividend, or
(C) Common Stock or additional stock or other
securities or property (including cash) by way of spinoff, split-up,
reclassification, combination of shares or similar corporate rearrangement,
(other than (i) shares of Common Stock issued as a stock split, adjustments in
respect of which shall be covered by the terms of Section 3.1 above or (ii) an
event for which adjustment is otherwise made pursuant to Section 3.4 below),
then and in each such case, the Holder hereof shall, upon the exercise of this
Warrant, be entitled to receive, in addition to the number of shares of Common
Stock receivable thereupon, and without payment of any additional consideration
therefor, the amount of stock and other securities and property (including cash
in the cases referred to in clauses (B) and (C) above) which such Holder would
hold on the date of such exercise had he been the holder of record of such
Common Stock as of the date on which holders of Common Stock received or became
entitled to receive such shares or all other additional stock and other
securities and property.
4.
<PAGE> 5
3.3 REORGANIZATION, RECLASSIFICATION, CONSOLIDATION, MERGER OR
SALE. If any capital reorganization of the capital stock of the Company, or any
consolidation or merger of the Company with another corporation, or the sale of
all or substantially all of its assets to another corporation shall be effected
in such a way that holders of Common Stock shall be entitled to receive stock,
securities, or other assets or property, then, as a condition of such
reorganization, reclassification, consolidation, merger or sale, lawful and
adequate provisions shall be made whereby the holder hereof shall thereafter
have the right to purchase and receive (in lieu of the shares of the Common
Stock of the Company immediately theretofore purchasable and receivable upon
the exercise of the rights represented hereby) such shares of stock, securities
or other assets or property as may be issued or payable with respect to or in
exchange for a number of outstanding shares of such Common Stock equal to the
number of shares of such stock immediately theretofore purchasable and
receivable upon the exercise of the rights represented hereby. In any
reorganization described above, appropriate provision shall be made with
respect to the rights and interests of the Holder of this Warrant to the end
that the provisions hereof (including, without limitation, provisions for
adjustments of the Stock Purchase Price and of the number of shares purchasable
and receivable upon the exercise of this Warrant) shall thereafter be
applicable, as nearly as may be, in relation to any shares of stock, securities
or assets thereafter deliverable upon the exercise hereof. The Company will not
effect any such consolidation, merger or sale unless, prior to the consummation
thereof, the successor corporation (if other than the Company) resulting from
such consolidation or the corporation purchasing such assets shall assume by
written instrument, executed and mailed or delivered to the registered Holder
hereof at the last address of such Holder appearing on the books of the
Company, the obligation to deliver to such Holder such shares of stock,
securities or assets as, in accordance with the foregoing provisions, such
Holder may be entitled to purchase.
3.4 OTHER NOTICES. If at any time:
(1) the Company shall declare any cash dividend upon
its Common Stock;
(2) the Company shall declare any dividend upon its
Common Stock payable in stock or make any special dividend or other
distribution to the holders of its Common Stock;
(3) the Company shall offer for subscription pro rata
to the holders of its Common Stock any additional shares of stock of any class
or other rights;
(4) there shall be any capital reorganization or
reclassification of the capital stock of the Company; or consolidation or
merger of the Company with, or sale of all or substantially all of its assets
to, another corporation;
(5) there shall be a voluntary or involuntary
dissolution, liquidation or winding-up of the Company; or
(6) there shall be an initial public offering of
Company securities;
5.
<PAGE> 6
then, in any one or more of said cases, the Company shall give written notice
to the Holder of this Warrant at the address of such Holder as shown on the
books of the Company, (a) at least thirty (30) days' prior written notice of
the date on which the books of the Company shall close or a record shall be
taken for such dividend, distribution or subscription rights or for determining
rights to vote in respect of any such reorganization, reclassification,
consolidation, merger, sale, dissolution, liquidation or winding-up, and (b) in
the case of any such reorganization, reclassification, consolidation, merger,
sale, dissolution, liquidation, winding-up or public offering, at least thirty
(30) days' prior written notice of the date when the same shall take place;
provided, however, that the Holder shall make a best efforts attempt to respond
to such notice as early as possible after the receipt thereof. Any notice
given in accordance with the foregoing clause (a) shall also specify, in the
case of any such dividend, distribution or subscription rights, the date on
which the holders of Common Stock shall be entitled thereto. Any notice given
in accordance with the foregoing clause (b) shall also specify the date on
which the holders of Common Stock shall be entitled to exchange their Common
Stock for securities or other property deliverable upon such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation,
winding-up, conversion or public offering, as the case may be.
3.5 CERTAIN EVENTS. If any change in the outstanding Common Stock
of the Company or any other event occurs as to which the other provisions of
this Section 3 are not strictly applicable or if strictly applicable would not
fairly protect the purchase rights of the Holder of the Warrant in accordance
with such provisions, then the Board of Directors of the Company shall make an
adjustment in the number and class of shares available under the Warrant, the
Stock Purchase Price or the application of such provisions, so as to protect
such purchase rights as aforesaid. The adjustment shall be such as will give
the Holder of the Warrant upon exercise for the same aggregate Stock Purchase
Price the total number, class and kind of shares as he would have owned had the
Warrant been exercised prior to the event and had he continued to hold such
shares until after the event requiring adjustment.
4. ISSUE TAX. The issuance of certificates for shares of Common
Stock upon the exercise of the Warrant shall be made without charge to the
Holder of the Warrant for any issue tax (other than any applicable income
taxes) in respect thereof; provided, however, that the Company shall not be
required to pay any tax which may be payable in respect of any transfer
involved in the issuance and delivery of any certificate in a name other than
that of the then Holder of the Warrant being exercised.
5. CLOSING OF BOOKS. The Company will at no time close its
transfer books against the transfer of any warrant or of any shares of Common
Stock issued or issuable upon the exercise of any warrant in any manner which
interferes with the timely exercise of this Warrant.
6. NO VOTING OR DIVIDEND RIGHTS; LIMITATION OF LIABILITY. Nothing
contained in this Warrant shall be construed as conferring upon the holder
hereof the right to vote or to consent or to receive notice as a shareholder of
the Company or any other matters or any rights whatsoever as a shareholder of
the Company. No dividends or interest shall be payable or accrued in respect of
this Warrant or the interest represented hereby or the shares
6.
<PAGE> 7
purchasable hereunder until, and only to the extent that, this Warrant shall
have been exercised. No provisions hereof, in the absence of affirmative
action by the holder to purchase shares of Common Stock, and no mere
enumeration herein of the rights or privileges of the holder hereof, shall give
rise to any liability of such holder for the Stock Purchase Price or as
a shareholder of the Company, whether such liability is asserted by the Company
or by its creditors.
7. REGISTRATION RIGHTS AGREEMENT. The registration rights of the
Holder (including Holders' successors) with respect to the stock underlying
this Warrant will be the same as granted to the holders of the Company's Common
Stock under that certain Investors' Rights Agreement of even date herewith (the
"Investors' Rights Agreement").
8. WARRANTS TRANSFERABLE. Subject to compliance with applicable
federal and state securities laws and the transfer restrictions set forth in the
Investors' Rights Agreement, this Warrant and all rights hereunder are
transferable, in whole or in part, without charge to the holder hereof (except
for transfer taxes), upon surrender of this Warrant properly endorsed and
compliance with the provisions of the Investors' Rights Agreement. Each taker
and holder of this Warrant, by taking or holding the same, consents and agrees
that this Warrant, when endorsed in blank, shall be deemed negotiable, and that
the holder hereof, when this Warrant shall have been so endorsed, may be treated
by the Company, at the Company's option, and all other persons dealing with
this Warrant as the absolute owner hereof for any purpose and as the person
entitled to exercise the rights represented by this Warrant, or to the transfer
hereof on the books of the Company any notice to the contrary notwithstanding;
but until such transfer on such books, the Company may treat the registered
owner hereof as the owner for all purposes.
9. RIGHTS AND OBLIGATIONS SURVIVE EXERCISE OF WARRANT. The rights
and obligations of the Company, of the holder of this Warrant and of the
holder of shares of Common Stock issued upon exercise of this Warrant, referred
to in Sections 7 and 8 shall survive the exercise of this Warrant.
10. MODIFICATION AND WAIVER. This Warrant and any provision hereof
may be changed, waived, discharged or terminated only by an instrument in
writing signed by the party against which enforcement of the same is sought.
11. NOTICES. All notices required or permitted hereunder shall be in
writing and shall be deemed effectively given: (i) upon personal delivery to the
party to be notified, (ii) when sent by confirmed telex or facsimile if sent
during normal business hours of the recipient; if not, then on the next business
day, or (iii) four (4) business days, after deposit with an internationally
recognized overnight courier, specifying express delivery, with written
verification of receipt. All communications shall be sent to the party to be
notified at the address as shown on the books of the Company or at such other
address as such party may designate by ten (10) days advance written notice to
the other parties hereto.
12. BINDING EFFECT ON SUCCESSORS. This Warrant shall be binding
upon any corporation succeeding the Company by merger, consolidation or
acquisition of all or substantially all of the Company's assets. All of the
obligations of the Company relating to the
7.
<PAGE> 8
Common Stock issuable upon the exercise of this Warrant shall survive the
exercise and termination of this Warrant. All of the covenants and agreements
of the Company shall inure to the benefit of the successors and assigns of the
holder hereof.
13. DESCRIPTIVE HEADINGS AND GOVERNING LAW. The description
headings of the several sections and paragraphs of this Warrant are inserted
for convenience only and do not constitute a part of this Warrant. This
Warrant shall be construed and enforced in accordance with, and the rights of
the parties shall be governed by, the laws of the State of California without
giving effect to principles of conflicts of law.
14. LOST WARRANTS. The Company represents and warrants to the
Holder hereof that upon receipt of evidence reasonably satisfactory to the
Company of the loss, theft, destruction, or mutilation of this Warrant and, in
the case of any such loss, theft or destruction, upon receipt of an indemnity
reasonably satisfactory to the Company, or in the case of any such mutilation
upon surrender and cancellation of such Warrant, the Company, at its expense,
will make and deliver a new Warrant, of like tenor, in lieu of the lost,
stolen, destroyed or mutilated Warrant.
8.
<PAGE> 9
15. FRACTIONAL SHARES. No fractional shares shall be issued upon
exercise of this Warrant. The Company shall, in lieu of issuing any
fractional share, pay the holder entitled to such fraction a sum in cash equal
to such fraction multiplied by the then effective Stock Purchase Price.
IN WITNESS WHEREOF, the Company has caused this Warrant to be duly
executed by its officers, thereunto duly authorized this 12 day of January,
1996.
AWARD SOFTWARE INTERNATIONAL, INC.
a California corporation
By:
-----------------------------------------
Title:
--------------------------------------
ATTEST:
- -----------------------------
Secretary
<PAGE> 10
EXHIBIT A
SUBSCRIPTION FORM
Date: 19
------------------------, --
Award Software International, Inc.
- ---------------------------------
- ---------------------------------
Attn: President
Gentlemen:
/ / The undersigned hereby elects to exercise the warrant issued to it by
Award Software International, Inc. (the "Company") and dated January , 1996
--
Warrant No. W- (the "Warrant") and to purchase thereunder
-------- ---------------
shares of the Common Stock of the Company (the "Shares") at a purchase price of
Six Dollars Fourteen Cents ($6.14) per Share or an aggregate purchase price of
Dollars ($ )(the "Purchase Price").
- ------------------------ ----------
/ / The undersigned hereby elects to convert percent
-----------------------
( %) of the value of the Warrant pursuant to the provisions of Section
-------
1.2 of the Warrant.
Pursuant to the terms of the Warrant the undersigned has delivered the
Purchase Price herewith in full in cash or by certified check or wire transfer.
The undersigned also makes the representations set forth on the attached
Exhibit B of the Warrant.
Very truly yours,
---------------------------------------
By:
------------------------------------
Title:
---------------------------------
<PAGE> 11
EXHIBIT B
INVESTMENT REPRESENTATIONS
THIS AGREEMENT MUST BE COMPLETED, SIGNED, AND RETURNED TO
---------------------
ALONG WITH THE SUBSCRIPTION FORM BEFORE THE COMMON STOCK ISSUABLE UPON EXERCISE
OF THE WARRANT CERTIFICATE DATED JANUARY , 1996, WILL BE ISSUED.
19
---------------------, --
Award Software International, Inc.
[Address]
- ---------------------------------
- ---------------------------------
Attention: President
The undersigned, ("Purchaser"), intends to
--------------------------
acquire up to shares of the Common Stock (the "Common Stock") of
---------------
Award Software International, Inc. (the "Company") from the Company pursuant
to the exercise or conversion of certain Warrants to purchase Common Stock held
by Purchaser. The Common Stock will be issued to Purchaser in a transaction
not involving a public offering and pursuant to an exemption from registration
under the Securities Act of 1933, as amended, (the "1933 Act") and applicable
state securities laws. In connection with such purchase and in order to comply
with the exemptions from registration relied upon by the Company, Purchaser
represents, warrants and agrees as follows:
Purchaser is acquiring the Common Stock for its own account, to hold
for investment, and Purchaser shall not make any sale, transfer or other
disposition of the Common Stock in violation of the 1933 Act or the General
Rules and Regulations promulgated thereunder by the Securities and Exchange
Commission (the "SEC") or in violation of any applicable state securities law.
Purchaser has been advised that the Common Stock has not been
registered under the 1933 Act or state securities laws on the ground that this
transaction is exempt from registration, and that reliance by the Company on
such exemptions is predicated in part on Purchaser's representations set forth
in this letter.
Purchaser has been informed that under the 1933 Act, the Common Stock
must be held indefinitely unless it is subsequently registered under the 1933
Act or unless an exemption from such registration (such as Rule 144) is
available with respect to any proposed transfer or disposition by Purchaser of
the Common Stock. Purchaser further agrees that the Company may refuse to
permit Purchaser to sell, transfer or dispose of the Common Stock (except as
permitted
1.
<PAGE> 12
under Rule 144) unless there is in effect a registration statement under the
1933 Act and any applicable state securities laws covering such transfer, or
unless Purchaser furnishes an opinion of counsel reasonably satisfactory to
counsel for the Company, to the effect that such registration is not required.
Purchaser also understands and agrees that there will be placed on the
certificate(s) for the Common Stock, or any substitutions therefor, a legend
stating in substance:
"The shares represented by this certificate have not been
registered under the Securities Act of 1933, as amended (the
"Securities Act"), or any state securities laws. These shares have
been acquired for investment and may not be sold or otherwise
transferred in the absence of an effective registration statement
for these shares under the Securities Act and applicable state
securities laws, or an opinion of counsel satisfactory to the Company
that registration is not required and that an applicable exemption
is available."
Purchaser has carefully read this letter and has discussed its
requirements and other applicable limitations upon Purchaser's resale of the
Common Stock with Purchaser's counsel.
Very truly yours,
------------------------------
By:
----------------------------
<PAGE> 1
EXHIBIT 10.13
No. W-6
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR INVESTMENT
AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR ANY STATE
SECURITIES LAWS. SUCH SECURITIES MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE
OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER SAID ACT AND ANY APPLICABLE
STATE SECURITIES LAWS.
WARRANT TO PURCHASE A MAXIMUM OF
114,651 SHARES OF COMMON STOCK OF
AWARD SOFTWARE INTERNATIONAL, INC.
(Void after September 30, 2000)
This certifies that VENROCK ASSOCIATES (the "Holder"), or assigns, for
payment of one cent ($0.01), is entitled to purchase from AWARD SOFTWARE
INTERNATIONAL, INC., a California corporation (the "Company"), having a place of
business at 777 East Middlefield Road, Mountain View, CA 94043-4023, a maximum
of One Hundred Fourteen Thousand, Six Hundred Fifty-One (114,651) fully paid and
nonassessable shares of the Company's Common Stock ("Common Stock") for cash at
a price of fifty cents ($0.50) per share (the "Stock Purchase Price") at any
time or from time to time up to and including the earlier of (i) the closing of
the Company's initial public offering of its Common Stock, of which the
aggregate offering price and per share price to the public are at least
$10,000,000 and $6.80, respectively, pursuant to a registration statement under
the Securities Act of 1933, as amended, or (ii) 5:00 p.m. (Pacific time) on
September 30, 2000, such earlier day being referred to herein as the "Expiration
Date", upon surrender to the Company at its principal office (or at such other
location as the Company may advise the Holder in writing) of this Warrant
properly endorsed with the Form of Subscription attached hereto duly filled in
and signed and, if applicable, upon payment in cash or by check of the aggregate
Stock Purchase Price for the number of shares for which this Warrant is being
exercised determined in accordance with the provisions hereof. The Stock
Purchase Price and the number of shares purchasable hereunder are subject to
adjustment as provided in Section 3 of this Warrant.
This Warrant is subject to the following terms and conditions:
1. Exercise; Issuance of Certificates; Payment for Shares.
1.1 General. This Warrant is exercisable at the option of the
holder of record hereof, at any time or from time to time, up to the Expiration
Date for all or any part of the shares of Common Stock (but not for a fraction
of a share) which may be purchased hereunder. The Company agrees that the shares
of Common Stock purchased under this Warrant shall be
1.
<PAGE> 2
and are deemed to be issued to the Holder hereof as the record owner of such
shares as of the close of business on the date on which this Warrant shall have
been surrendered, properly endorsed, the completed, executed Form of
Subscription delivered and payment made for such shares. Certificates for the
shares of Common Stock so purchased, together with any other securities or
property to which the Holder hereof is entitled upon such exercise, shall be
delivered to the Holder hereof by the Company at the Company's expense within a
reasonable time after the rights represented by this Warrant have been so
exercised. In case of a purchase of less than all the shares which may be
purchased under this Warrant, the Company shall cancel this Warrant and execute
and deliver a new Warrant or Warrants of like tenor for the balance of the
shares purchasable under the Warrant surrendered upon such purchase to the
Holder hereof within a reasonable time. Each stock certificate so delivered
shall be in such denominations of Common Stock as may be requested by the Holder
hereof and shall be registered in the name of such Holder.
1.2 Net Issue Exercise. Notwithstanding any provisions herein
to the contrary, in lieu of exercising this Warrant for cash, the Holder may
elect to receive shares equal to the value (as determined below) of this Warrant
(or the portion thereof being canceled) by surrender of this Warrant at the
principal office of the Company together with the properly endorsed Form of
Subscription and notice of such election in which event the Company shall issue
to the Holder a number of shares of Common Stock computed using the following
formula:
X = Y (A-B)
-------
A
Where X = the number of shares of Common Stock to be
issued to the Holder
Y = the number of shares of Common Stock
purchasable under the Warrant or, if only a
portion of the Warrant is being exercised, the
portion of the Warrant being canceled (at the
date of such calculation)
A = the fair market value of one share of the
Company's Common Stock (at the date of such
calculation)
B = Stock Purchase Price (as adjusted to the date
of such calculation)
For purposes of the above calculation, fair market value of one share of Common
Stock shall be determined by the Company's Board of Directors in good faith;
provided, however, that in the event the Company makes an initial public
offering of its Common Stock the fair market value per share shall be the
average of the closing prices of such security's sales on all domestic
securities exchanges on which such security may at the time be listed, or, if
there have been no sales on any such exchange on any day, the average of the
highest bid and lowest asked prices on all such exchanges at the end of such
day, or, if on any day such security is not so listed, the average of the
representative bid and asked prices quoted in the NASDAQ System as of 4:00 P.M.,
New York time, on such day, or, if on any day such security is not quoted in the
2.
<PAGE> 3
NASDAQ system, the average of the highest bid and lowest asked prices on such
day in the domestic over-the-counter market as reported by the National
Quotation Bureau, Incorporation, or any similar successor organization, in each
such case averaged over a period of 21 days consisting of the day as of which
"fair market value" is being determined and the 20 consecutive business days
prior to such day; provided that if such security is listed on any domestic
securities exchange the term "business days" as used in this sentence means
business days on which such exchange is open for trading.
2. Shares to be Fully Paid; Reservation of Shares. The Company
covenants and agrees that all shares of Common Stock which may be issued upon
the exercise of the rights represented by this Warrant will, upon issuance, be
duly authorized, validly issued, fully paid and nonassessable and free from all
preemptive rights of any shareholder and free of all taxes, liens and charges
with respect to the issue thereof. The Company further covenants and agrees that
during the period within which the rights represented by this Warrant may be
exercised, the Company will at all times have authorized and reserved, for the
purpose of issue or transfer upon exercise of the subscription rights evidenced
by this Warrant, a sufficient number of shares of authorized but unissued Common
Stock, or other securities and property, when and as required to provide for the
exercise of the rights represented by this Warrant. The Company will take all
such action as may be necessary to assure that such shares of Common Stock may
be issued as provided herein without violation of any applicable law or
regulation, or of any requirements of any domestic securities exchange upon
which the Common Stock may be listed; provided, however, that the Company shall
not be required to effect a registration under Federal or State securities laws
with respect to such exercise. The Company will not take any action which would
result in any adjustment of the Stock Purchase Price (as defined in Section 3
hereof) (i) if the total number of shares of Common Stock issuable after such
action upon exercise of all outstanding warrants, together with all shares of
Common Stock then outstanding and all shares of Common Stock then issuable upon
exercise of all options and upon the conversion of all convertible securities
then outstanding, would exceed the total number of shares of Common Stock then
authorized by the Company's Articles of Incorporation, or (ii) if the total
number of shares of Common Stock issuable after such action upon the conversion
of all such shares of Common Stock, together with all shares of Common Stock
then issuable upon exercise of all options and upon the conversion of all such
shares of Common Stock, together with all shares of Common Stock then
outstanding and all shares of Common Stock then issuable upon exercise of all
options and upon the conversion of all convertible securities then outstanding
would exceed the total number of shares of Common Stock then authorized by the
Company's Articles of Incorporation.
3. Adjustment of Stock Purchase Price and Number of Shares. The Stock
Purchase Price and the number of shares purchasable upon the exercise of this
Warrant shall be subject to adjustment from time to time upon the occurrence of
certain events described in this Section 3. Upon each adjustment of the Stock
Purchase Price, the Holder of this Warrant shall thereafter be entitled to
purchase, at the Stock Purchase Price resulting from such adjustment, the number
of shares obtained by multiplying the Stock Purchase Price in effect immediately
prior to such adjustment by the number of shares purchasable pursuant hereto
immediately prior
3.
<PAGE> 4
to such adjustment, and dividing the product thereof by the Stock Purchase Price
resulting from such adjustment.
3.1 Subdivision or Combination of Stock. In case the Company
shall at any time subdivide its outstanding shares of Common Stock into a
greater number of shares, the Stock Purchase Price in effect immediately prior
to such subdivision shall be proportionately reduced, and conversely, in case
the outstanding shares of Common Stock of the Company shall be combined into a
smaller number of shares, the Stock Purchase Price in effect immediately prior
to such combination shall be proportionately increased.
3.2 Dividends in Common Stock, Other Stock, Property,
Reclassification. If at any time or from time to time the Holders of Common
Stock (or any shares of stock or other securities at the time receivable upon
the exercise of this Warrant) shall have received or become entitled to receive,
without payment therefor,
(A) Common Stock or any shares of stock or other
securities which are at any time directly or indirectly convertible into or
exchangeable for Common Stock, or any rights or options to subscribe for,
purchase or otherwise acquire any of the foregoing by way of dividend or other
distribution,
(B) any cash paid or payable otherwise than as a cash
dividend, or
(C) Common Stock or additional stock or other
securities or property (including cash) by way of spinoff, split-up,
reclassification, combination of shares or similar corporate rearrangement,
(other than (i) shares of Common Stock issued as a stock split, adjustments in
respect of which shall be covered by the terms of Section 3.1 above or (ii) an
event for which adjustment is otherwise made pursuant to Section 3.4 below),
then and in each such case, the Holder hereof shall, upon the exercise of this
Warrant, be entitled to receive, in addition to the number of shares of Common
Stock receivable thereupon, and without payment of any additional consideration
therefor, the amount of stock and other securities and property (including cash
in the cases referred to in clauses (B) and (C) above) which such Holder would
hold on the date of such exercise had he been the holder of record of such
Common Stock as of the date on which holders of Common Stock received or became
entitled to receive such shares or all other additional stock and other
securities and property.
3.3 Reorganization, Reclassification, Consolidation, Merger or
Sale. If any capital reorganization of the capital stock of the Company, or any
consolidation or merger of the Company with another corporation, or the sale of
all or substantially all of its assets to another corporation shall be effected
in such a way that holders of Common Stock shall be entitled to receive stock,
securities, or other assets or property, then, as a condition of such
reorganization, reclassification, consolidation, merger or sale, lawful and
adequate provisions shall be made whereby the holder hereof shall thereafter
have the right to purchase and receive (in lieu of the shares of the Common
Stock of the Company immediately theretofore purchasable and receivable upon the
exercise of the rights represented hereby) such shares of stock, securities or
other assets or property as may be issued or payable with respect to or in
exchange for a
4.
<PAGE> 5
number of outstanding shares of such Common Stock equal to the number of shares
of such stock immediately theretofore purchasable and receivable upon the
exercise of the rights represented hereby. In any reorganization described
above, appropriate provision shall be made with respect to the rights and
interests of the Holder of this Warrant to the end that the provisions hereof
(including, without limitation, provisions for adjustments of the Stock Purchase
Price and of the number of shares purchasable and receivable upon the exercise
of this Warrant) shall thereafter be applicable, as nearly as may be, in
relation to any shares of stock, securities or assets thereafter deliverable
upon the exercise hereof. The Company will not effect any such consolidation,
merger or sale unless, prior to the consummation thereof, the successor
corporation (if other than the Company) resulting from such consolidation or the
corporation purchasing such assets shall assume by written instrument, executed
and mailed or delivered to the registered Holder hereof at the last address of
such Holder appearing on the books of the Company, the obligation to deliver to
such Holder such shares of stock, securities or assets as, in accordance with
the foregoing provisions, such Holder may be entitled to purchase.
3.4 Other Notices. If at any time:
(1) the Company shall declare any cash dividend upon
its Common Stock;
(2) the Company shall declare any dividend upon its
Common Stock payable in stock or make any special dividend or other distribution
to the holders of its Common Stock;
(3) the Company shall offer for subscription pro rata
to the holders of its Common Stock any additional shares of stock of any class
or other rights;
(4) there shall be any capital reorganization or
reclassification of the capital stock of the Company; or consolidation or merger
of the Company with, or sale of all or substantially all of its assets to,
another corporation;
(5) there shall be a voluntary or involuntary
dissolution, liquidation or winding-up of the Company; or
(6) there shall be an initial public offering of
Company securities;
then, in any one or more of said cases, the Company shall give, by first class
mail, postage prepaid, addressed to the Holder of this Warrant at the address of
such Holder as shown on the books of the Company, (a) at least thirty (30) days'
prior written notice of the date on which the books of the Company shall close
or a record shall be taken for such dividend, distribution or subscription
rights or for determining rights to vote in respect of any such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation or
winding-up, and (b) in the case of any such reorganization, reclassification,
consolidation, merger, sale, dissolution, liquidation, winding-up or public
offering, at least thirty (30) days' prior written notice of the date when the
same shall take place; provided, however, that the Holder shall make a best
5.
<PAGE> 6
efforts attempt to respond to such notice as early as possible after the receipt
thereof. Any notice given in accordance with the foregoing clause (a) shall also
specify, in the case of any such dividend, distribution or subscription rights,
the date on which the holders of Common Stock shall be entitled thereto. Any
notice given in accordance with the foregoing clause (b) shall also specify the
date on which the holders of Common Stock shall be entitled to exchange their
Common Stock for securities or other property deliverable upon such
reorganization, reclassification, consolidation, merger, sale, dissolution,
liquidation, winding-up, conversion or public offering, as the case may be.
3.5 Certain Events. If any change in the outstanding Common
Stock of the Company or any other event occurs as to which the other provisions
of this Section 3 are not strictly applicable or if strictly applicable would
not fairly protect the purchase rights of the Holder of the Warrant in
accordance with such provisions, then the Board of Directors of the Company
shall make an adjustment in the number and class of shares available under the
Warrant, the Stock Purchase Price or the application of such provisions, so as
to protect such purchase rights as aforesaid. The adjustment shall be such as
will give the Holder of the Warrant upon exercise for the same aggregate Stock
Purchase Price the total number, class and kind of shares as he would have owned
had the Warrant been exercised prior to the event and had he continued to hold
such shares until after the event requiring adjustment.
4. Issue Tax. The issuance of certificates for shares of Common Stock
upon the exercise of the Warrant shall be made without charge to the Holder of
the Warrant for any issue tax (other than any applicable income taxes) in
respect thereof; provided, however, that the Company shall not be required to
pay any tax which may be payable in respect of any transfer involved in the
issuance and delivery of any certificate in a name other than that of the then
Holder of the Warrant being exercised.
5. Closing of Books. The Company will at no time close its transfer
books against the transfer of any warrant or of any shares of Common Stock
issued or issuable upon the exercise of any warrant in any manner which
interferes with the timely exercise of this Warrant.
6. No Voting or Dividend Rights; Limitation of Liability. Nothing
contained in this Warrant shall be construed as conferring upon the holder
hereof the right to vote or to consent or to receive notice as a shareholder of
the Company or any other matters or any rights whatsoever as a shareholder of
the Company. No dividends or interest shall be payable or accrued in respect of
this Warrant or the interest represented hereby or the shares purchasable
hereunder until, and only to the extent that, this Warrant shall have been
exercised. No provisions hereof, in the absence of affirmative action by the
holder to purchase shares of Common Stock, and no mere enumeration herein of the
rights or privileges of the holder hereof, shall give rise to any liability of
such holder for the Stock Purchase Price or as a shareholder of the Company,
whether such liability is asserted by the Company or by its creditors.
7. Registration Rights Agreement. The registration rights of the Holder
(including Holders' successors) with respect to the stock underlying this
Warrant will be the same as
6.
<PAGE> 7
granted to the holders of the Company's Common Stock under that certain
Investors' Rights Agreement of even date herewith (the "Investors' Rights
Agreement").
8. Warrants Transferable. Subject to compliance with applicable federal
and state securities laws and the transfer restrictions set forth in the
Investors' Rights Agreement, this Warrant and all rights hereunder are
transferable, in whole or in part, without charge to the holder hereof (except
for transfer taxes), upon surrender of this Warrant properly endorsed and
compliance with the provisions of the Investors' Rights Agreement. Each taker
and holder of this Warrant, by taking or holding the same, consents and agrees
that this Warrant, when endorsed in blank, shall be deemed negotiable, and that
the holder hereof, when this Warrant shall have been so endorsed, may be treated
by the Company, at the Company's option, and all other persons dealing with this
Warrant as the absolute owner hereof for any purpose and as the person entitled
to exercise the rights represented by this Warrant, or to the transfer hereof on
the books of the Company any notice to the contrary notwithstanding; but until
such transfer on such books, the Company may treat the registered owner hereof
as the owner for all purposes.
9. Rights and Obligations Survive Exercise of Warrant. The rights and
obligations of the Company, of the holder of this Warrant and of the holder of
shares of Common Stock issued upon exercise of this Warrant, referred to in
Sections 7 and 8 shall survive the exercise of this Warrant.
10. Modification and Waiver. This Warrant and any provision hereof may
be changed, waived, discharged or terminated only by an instrument in writing
signed by the party against which enforcement of the same is sought.
11. Notices. Any notice, request or other document required or
permitted to be given or delivered to the holder hereof or the Company shall be
delivered or shall be sent by certified mail, postage prepaid, to each such
holder at its address as shown on the books of the Company or to the Company at
the address indicated therefor in the first paragraph of this Warrant or such
other address as either may from time to time provide to the other.
12. Binding Effect on Successors. This Warrant shall be binding upon
any corporation succeeding the Company by merger, consolidation or acquisition
of all or substantially all of the Company's assets. All of the obligations of
the Company relating to the Common Stock issuable upon the exercise of this
Warrant shall survive the exercise and termination of this Warrant. All of the
covenants and agreements of the Company shall inure to the benefit of the
successors and assigns of the holder hereof.
13. Descriptive Headings and Governing Law. The description headings of
the several sections and paragraphs of this Warrant are inserted for convenience
only and do not constitute a part of this Warrant. This Warrant shall be
construed and enforced in accordance with, and the rights of the parties shall
be governed by, the laws of the State of California.
14. Lost Warrants. The Company represents and warrants to the Holder
hereof that upon receipt of evidence reasonably satisfactory to the Company of
the loss, theft, destruction,
7.
<PAGE> 8
or mutilation of this Warrant and, in the case of any such loss, theft or
destruction, upon receipt of an indemnity reasonably satisfactory to the
Company, or in the case of any such mutilation upon surrender and cancellation
of such Warrant, the Company, at its expense, will make and deliver a new
Warrant, of like tenor, in lieu of the lost, stolen, destroyed or mutilated
Warrant.
15. Fractional Shares. No fractional shares shall be issued upon
exercise of this Warrant. The Company shall, in lieu of issuing any fractional
share, pay the holder entitled to such fraction a sum in cash equal to such
fraction multiplied by the then effective Stock Purchase Price.
8.
<PAGE> 9
IN WITNESS WHEREOF, the Company has caused this Warrant to be duly
executed by its officers, thereunto duly authorized this 30th day of September,
1995.
AWARD SOFTWARE INTERNATIONAL, INC.
a California corporation
By:_____________________________________
Title:__________________________________
ATTEST:
______________________________________
Secretary
9.
<PAGE> 10
EXHIBIT A
SUBSCRIPTION FORM
Date: _________________, 19___
Award Software International, Inc.
_____________________________
_____________________________
Attn: President
Gentlemen:
/ / The undersigned hereby elects to exercise the warrant issued to it by
Award Software International, Inc. (the "Company") and dated September
30, 1995 Warrant No. W-___ (the "Warrant") and to purchase thereunder
__________________________________ shares of the Common Stock of the
Company (the "Shares") at a purchase price of Fifty Cents ($.50) per
Share or an aggregate purchase price of
__________________________________ Dollars ($__________) (the "Purchase
Price").
/ / The undersigned hereby elects to convert _______________________
percent (____%) of the value of the Warrant pursuant to the provisions
of Section 1.2 of the Warrant.
Pursuant to the terms of the Warrant the undersigned has delivered the
Purchase Price herewith in full in cash or by certified check or wire transfer.
The undersigned also makes the representations set forth on the attached Exhibit
B of the Warrant.
Very truly yours,
________________________________________
By:_____________________________________
Title:__________________________________
1.
<PAGE> 11
EXHIBIT B
INVESTMENT REPRESENTATIONS
THIS AGREEMENT MUST BE COMPLETED, SIGNED AND RETURNED TO _______________ ALONG
WITH THE SUBSCRIPTION FORM BEFORE THE COMMON STOCK ISSUABLE UPON EXERCISE OF THE
WARRANT CERTIFICATE DATED SEPTEMBER 30, 1995, WILL BE ISSUED.
_____________________, 19__
Award Software International, Inc.
[ADDRESS]
_____________________________
_____________________________
Attention: President
The undersigned, _________________________ ("Purchaser"), intends to
acquire up to ______________ shares of the Common Stock (the "Common Stock") of
Award Software International, Inc. (the "Company") from the Company pursuant to
the exercise or conversion of certain Warrants to purchase Common Stock held by
Purchaser. The Common Stock will be issued to Purchaser in a transaction not
involving a public offering and pursuant to an exemption from registration under
the Securities Act of 1933, as amended (the "1933 Act") and applicable state
securities laws. In connection with such purchase and in order to comply with
the exemptions from registration relied upon by the Company, Purchaser
represents, warrants and agrees as follows:
Purchaser is acquiring the Common Stock for its own account, to hold
for investment, and Purchaser shall not make any sale, transfer or other
disposition of the Common Stock in violation of the 1933 Act or the General
Rules and Regulations promulgated thereunder by the Securities and Exchange
Commission (the "SEC") or in violation of any applicable state securities law.
Purchaser has been advised that the Common Stock has not been
registered under the 1933 Act or state securities laws on the ground that this
transaction is exempt from registration, and that reliance by the Company on
such exemptions is predicated in part on Purchaser's representations set forth
in this letter.
Purchaser has been informed that under the 1933 Act, the Common Stock
must be held indefinitely unless it is subsequently registered under the 1933
Act or unless an exemption from such registration (such as Rule 144) is
available with respect to any proposed transfer or disposition by Purchaser of
the Common Stock. Purchaser further agrees that the Company may refuse to permit
Purchaser to sell, transfer or dispose of the Common Stock (except as permitted
<PAGE> 12
under Rule 144) unless there is in effect a registration statement under the
1933 Act and any applicable state securities laws covering such transfer, or
unless Purchaser furnishes an opinion of counsel reasonably satisfactory to
counsel for the Company, to the effect that such registration is not required.
Purchaser also understands and agrees that there will be placed on the
certificate(s) for the Common Stock, or any substitutions therefor, a legend
stating in substance:
"The shares represented by this certificate have not been
registered under the Securities Act of 1933, as amended (the
"Securities Act"), or any state securities laws. These shares have been
acquired for investment and may not be sold or otherwise transferred in
the absence of an effective registration statement for these shares
under the Securities Act and applicable state securities laws, or an
opinion of counsel satisfactory to the Company that registration is not
required and that an applicable exemption is available."
Purchaser has carefully read this letter and has discussed its
requirements and other applicable limitations upon Purchaser's resale of the
Common Stock with Purchaser's counsel.
Very truly yours,
_______________________________
By:_____________________________________
2.
<PAGE> 1
EXHIBIT 10.14
No. W-7
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR INVESTMENT
AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR ANY STATE
SECURITIES LAWS. SUCH SECURITIES MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE
OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER SAID ACT AND ANY APPLICABLE
STATE SECURITIES LAWS.
WARRANT TO PURCHASE A MAXIMUM OF
52,016 SHARES OF COMMON STOCK OF
AWARD SOFTWARE INTERNATIONAL, INC.
(Void after September 30, 2000)
This certifies that VENROCK ASSOCIATES II, L.P. (the "Holder"), or
assigns, for payment of one cent ($0.01), is entitled to purchase from AWARD
SOFTWARE INTERNATIONAL, INC., a California corporation (the "Company"), having a
place of business at 777 East Middlefield Road, Mountain View, CA 94043-4023, a
maximum of Fifty-Two Thousand Sixteen (52,016) fully paid and nonassessable
shares of the Company's Common Stock ("Common Stock") for cash at a price of
fifty cents ($0.50) per share (the "Stock Purchase Price") at any time or from
time to time up to and including the earlier of (i) the closing of the Company's
initial public offering of its Common Stock, of which the aggregate offering
price and per share price to the public are at least $10,000,000 and $6.80,
respectively, pursuant to a registration statement under the Securities Act of
1933, as amended, or (ii) 5:00 p.m. (Pacific time) on September 30, 2000, such
earlier day being referred to herein as the "Expiration Date", upon surrender to
the Company at its principal office (or at such other location as the Company
may advise the Holder in writing) of this Warrant properly endorsed with the
Form of Subscription attached hereto duly filled in and signed and, if
applicable, upon payment in cash or by check of the aggregate Stock Purchase
Price for the number of shares for which this Warrant is being exercised
determined in accordance with the provisions hereof. The Stock Purchase Price
and the number of shares purchasable hereunder are subject to adjustment as
provided in Section 3 of this Warrant.
This Warrant is subject to the following terms and conditions:
1. Exercise; Issuance of Certificates; Payment for Shares.
1.1 General. This Warrant is exercisable at the option of the
holder of record hereof, at any time or from time to time, up to the Expiration
Date for all or any part of the shares of Common Stock (but not for a fraction
of a share) which may be purchased hereunder. The Company agrees that the shares
of Common Stock purchased under this Warrant shall be
1.
<PAGE> 2
and are deemed to be issued to the Holder hereof as the record owner of such
shares as of the close of business on the date on which this Warrant shall have
been surrendered, properly endorsed, the completed, executed Form of
Subscription delivered and payment made for such shares. Certificates for the
shares of Common Stock so purchased, together with any other securities or
property to which the Holder hereof is entitled upon such exercise, shall be
delivered to the Holder hereof by the Company at the Company's expense within a
reasonable time after the rights represented by this Warrant have been so
exercised. In case of a purchase of less than all the shares which may be
purchased under this Warrant, the Company shall cancel this Warrant and execute
and deliver a new Warrant or Warrants of like tenor for the balance of the
shares purchasable under the Warrant surrendered upon such purchase to the
Holder hereof within a reasonable time. Each stock certificate so delivered
shall be in such denominations of Common Stock as may be requested by the Holder
hereof and shall be registered in the name of such Holder.
1.2 Net Issue Exercise. Notwithstanding any provisions herein
to the contrary, in lieu of exercising this Warrant for cash, the Holder may
elect to receive shares equal to the value (as determined below) of this Warrant
(or the portion thereof being canceled) by surrender of this Warrant at the
principal office of the Company together with the properly endorsed Form of
Subscription and notice of such election in which event the Company shall issue
to the Holder a number of shares of Common Stock computed using the following
formula:
X = Y (A-B)
-------
A
Where X = the number of shares of Common Stock to be
issued to the Holder
Y = the number of shares of Common Stock
purchasable under the Warrant or, if only a
portion of the Warrant is being exercised, the
portion of the Warrant being canceled (at the
date of such calculation)
A = the fair market value of one share of the
Company's Common Stock (at the date of such
calculation)
B = Stock Purchase Price (as adjusted to the date
of such calculation)
For purposes of the above calculation, fair market value of one share of Common
Stock shall be determined by the Company's Board of Directors in good faith;
provided, however, that in the event the Company makes an initial public
offering of its Common Stock the fair market value per share shall be the
average of the closing prices of such security's sales on all domestic
securities exchanges on which such security may at the time be listed, or, if
there have been no sales on any such exchange on any day, the average of the
highest bid and lowest asked prices on all such exchanges at the end of such
day, or, if on any day such security is not so listed, the average of the
representative bid and asked prices quoted in the NASDAQ System as of 4:00 P.M.,
New York time, on such day, or, if on any day such security is not quoted in the
2.
<PAGE> 3
NASDAQ system, the average of the highest bid and lowest asked prices on such
day in the domestic over-the-counter market as reported by the National
Quotation Bureau, Incorporation, or any similar successor organization, in each
such case averaged over a period of 21 days consisting of the day as of which
"fair market value" is being determined and the 20 consecutive business days
prior to such day; provided that if such security is listed on any domestic
securities exchange the term "business days" as used in this sentence means
business days on which such exchange is open for trading.
2. Shares to be Fully Paid; Reservation of Shares. The Company
covenants and agrees that all shares of Common Stock which may be issued upon
the exercise of the rights represented by this Warrant will, upon issuance, be
duly authorized, validly issued, fully paid and nonassessable and free from all
preemptive rights of any shareholder and free of all taxes, liens and charges
with respect to the issue thereof. The Company further covenants and agrees that
during the period within which the rights represented by this Warrant may be
exercised, the Company will at all times have authorized and reserved, for the
purpose of issue or transfer upon exercise of the subscription rights evidenced
by this Warrant, a sufficient number of shares of authorized but unissued Common
Stock, or other securities and property, when and as required to provide for the
exercise of the rights represented by this Warrant. The Company will take all
such action as may be necessary to assure that such shares of Common Stock may
be issued as provided herein without violation of any applicable law or
regulation, or of any requirements of any domestic securities exchange upon
which the Common Stock may be listed; provided, however, that the Company shall
not be required to effect a registration under Federal or State securities laws
with respect to such exercise. The Company will not take any action which would
result in any adjustment of the Stock Purchase Price (as defined in Section 3
hereof) (i) if the total number of shares of Common Stock issuable after such
action upon exercise of all outstanding warrants, together with all shares of
Common Stock then outstanding and all shares of Common Stock then issuable upon
exercise of all options and upon the conversion of all convertible securities
then outstanding, would exceed the total number of shares of Common Stock then
authorized by the Company's Articles of Incorporation, or (ii) if the total
number of shares of Common Stock issuable after such action upon the conversion
of all such shares of Common Stock, together with all shares of Common Stock
then issuable upon exercise of all options and upon the conversion of all such
shares of Common Stock, together with all shares of Common Stock then
outstanding and all shares of Common Stock then issuable upon exercise of all
options and upon the conversion of all convertible securities then outstanding
would exceed the total number of shares of Common Stock then authorized by the
Company's Articles of Incorporation.
3. Adjustment of Stock Purchase Price and Number of Shares. The Stock
Purchase Price and the number of shares purchasable upon the exercise of this
Warrant shall be subject to adjustment from time to time upon the occurrence of
certain events described in this Section 3. Upon each adjustment of the Stock
Purchase Price, the Holder of this Warrant shall thereafter be entitled to
purchase, at the Stock Purchase Price resulting from such adjustment, the number
of shares obtained by multiplying the Stock Purchase Price in effect immediately
prior to such adjustment by the number of shares purchasable pursuant hereto
immediately prior
3.
<PAGE> 4
to such adjustment, and dividing the product thereof by the Stock Purchase Price
resulting from such adjustment.
3.1 Subdivision or Combination of Stock. In case the Company
shall at any time subdivide its outstanding shares of Common Stock into a
greater number of shares, the Stock Purchase Price in effect immediately prior
to such subdivision shall be proportionately reduced, and conversely, in case
the outstanding shares of Common Stock of the Company shall be combined into a
smaller number of shares, the Stock Purchase Price in effect immediately prior
to such combination shall be proportionately increased.
3.2 Dividends in Common Stock, Other Stock, Property,
Reclassification. If at any time or from time to time the Holders of Common
Stock (or any shares of stock or other securities at the time receivable upon
the exercise of this Warrant) shall have received or become entitled to receive,
without payment therefor,
(A) Common Stock or any shares of stock or other
securities which are at any time directly or indirectly convertible into or
exchangeable for Common Stock, or any rights or options to subscribe for,
purchase or otherwise acquire any of the foregoing by way of dividend or other
distribution,
(B) any cash paid or payable otherwise than as a cash
dividend, or
(C) Common Stock or additional stock or other
securities or property (including cash) by way of spinoff, split-up,
reclassification, combination of shares or similar corporate rearrangement,
(other than (i) shares of Common Stock issued as a stock split, adjustments in
respect of which shall be covered by the terms of Section 3.1 above or (ii) an
event for which adjustment is otherwise made pursuant to Section 3.4 below),
then and in each such case, the Holder hereof shall, upon the exercise of this
Warrant, be entitled to receive, in addition to the number of shares of Common
Stock receivable thereupon, and without payment of any additional consideration
therefor, the amount of stock and other securities and property (including cash
in the cases referred to in clauses (B) and (C) above) which such Holder would
hold on the date of such exercise had he been the holder of record of such
Common Stock as of the date on which holders of Common Stock received or became
entitled to receive such shares or all other additional stock and other
securities and property.
3.3 Reorganization, Reclassification, Consolidation, Merger or
Sale. If any capital reorganization of the capital stock of the Company, or any
consolidation or merger of the Company with another corporation, or the sale of
all or substantially all of its assets to another corporation shall be effected
in such a way that holders of Common Stock shall be entitled to receive stock,
securities, or other assets or property, then, as a condition of such
reorganization, reclassification, consolidation, merger or sale, lawful and
adequate provisions shall be made whereby the holder hereof shall thereafter
have the right to purchase and receive (in lieu of the shares of the Common
Stock of the Company immediately theretofore purchasable and receivable upon the
exercise of the rights represented hereby) such shares of stock, securities or
other assets or property as may be issued or payable with respect to or in
exchange for a
4.
<PAGE> 5
number of outstanding shares of such Common Stock equal to the number of shares
of such stock immediately theretofore purchasable and receivable upon the
exercise of the rights represented hereby. In any reorganization described
above, appropriate provision shall be made with respect to the rights and
interests of the Holder of this Warrant to the end that the provisions hereof
(including, without limitation, provisions for adjustments of the Stock Purchase
Price and of the number of shares purchasable and receivable upon the exercise
of this Warrant) shall thereafter be applicable, as nearly as may be, in
relation to any shares of stock, securities or assets thereafter deliverable
upon the exercise hereof. The Company will not effect any such consolidation,
merger or sale unless, prior to the consummation thereof, the successor
corporation (if other than the Company) resulting from such consolidation or the
corporation purchasing such assets shall assume by written instrument, executed
and mailed or delivered to the registered Holder hereof at the last address of
such Holder appearing on the books of the Company, the obligation to deliver to
such Holder such shares of stock, securities or assets as, in accordance with
the foregoing provisions, such Holder may be entitled to purchase.
3.4 Other Notices. If at any time:
(1) the Company shall declare any cash dividend upon
its Common Stock;
(2) the Company shall declare any dividend upon its
Common Stock payable in stock or make any special dividend or other distribution
to the holders of its Common Stock;
(3) the Company shall offer for subscription pro rata
to the holders of its Common Stock any additional shares of stock of any class
or other rights;
(4) there shall be any capital reorganization or
reclassification of the capital stock of the Company; or consolidation or merger
of the Company with, or sale of all or substantially all of its assets to,
another corporation;
(5) there shall be a voluntary or involuntary
dissolution, liquidation or winding-up of the Company; or
(6) there shall be an initial public offering of
Company securities;
then, in any one or more of said cases, the Company shall give, by first class
mail, postage prepaid, addressed to the Holder of this Warrant at the address of
such Holder as shown on the books of the Company, (a) at least thirty (30) days'
prior written notice of the date on which the books of the Company shall close
or a record shall be taken for such dividend, distribution or subscription
rights or for determining rights to vote in respect of any such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation or
winding-up, and (b) in the case of any such reorganization, reclassification,
consolidation, merger, sale, dissolution, liquidation, winding-up or public
offering, at least thirty (30) days' prior written notice of the date when the
same shall take place; provided, however, that the Holder shall make a best
5.
<PAGE> 6
efforts attempt to respond to such notice as early as possible after the receipt
thereof. Any notice given in accordance with the foregoing clause (a) shall also
specify, in the case of any such dividend, distribution or subscription rights,
the date on which the holders of Common Stock shall be entitled thereto. Any
notice given in accordance with the foregoing clause (b) shall also specify the
date on which the holders of Common Stock shall be entitled to exchange their
Common Stock for securities or other property deliverable upon such
reorganization, reclassification, consolidation, merger, sale, dissolution,
liquidation, winding-up, conversion or public offering, as the case may be.
3.5 Certain Events. If any change in the outstanding Common
Stock of the Company or any other event occurs as to which the other provisions
of this Section 3 are not strictly applicable or if strictly applicable would
not fairly protect the purchase rights of the Holder of the Warrant in
accordance with such provisions, then the Board of Directors of the Company
shall make an adjustment in the number and class of shares available under the
Warrant, the Stock Purchase Price or the application of such provisions, so as
to protect such purchase rights as aforesaid. The adjustment shall be such as
will give the Holder of the Warrant upon exercise for the same aggregate Stock
Purchase Price the total number, class and kind of shares as he would have owned
had the Warrant been exercised prior to the event and had he continued to hold
such shares until after the event requiring adjustment.
4. Issue Tax. The issuance of certificates for shares of Common Stock
upon the exercise of the Warrant shall be made without charge to the Holder of
the Warrant for any issue tax (other than any applicable income taxes) in
respect thereof; provided, however, that the Company shall not be required to
pay any tax which may be payable in respect of any transfer involved in the
issuance and delivery of any certificate in a name other than that of the then
Holder of the Warrant being exercised.
5. Closing of Books. The Company will at no time close its transfer
books against the transfer of any warrant or of any shares of Common Stock
issued or issuable upon the exercise of any warrant in any manner which
interferes with the timely exercise of this Warrant.
6. No Voting or Dividend Rights; Limitation of Liability. Nothing
contained in this Warrant shall be construed as conferring upon the holder
hereof the right to vote or to consent or to receive notice as a shareholder of
the Company or any other matters or any rights whatsoever as a shareholder of
the Company. No dividends or interest shall be payable or accrued in respect of
this Warrant or the interest represented hereby or the shares purchasable
hereunder until, and only to the extent that, this Warrant shall have been
exercised. No provisions hereof, in the absence of affirmative action by the
holder to purchase shares of Common Stock, and no mere enumeration herein of the
rights or privileges of the holder hereof, shall give rise to any liability of
such holder for the Stock Purchase Price or as a shareholder of the Company,
whether such liability is asserted by the Company or by its creditors.
7. Registration Rights Agreement. The registration rights of the Holder
(including Holders' successors) with respect to the stock underlying this
Warrant will be the same as
6.
<PAGE> 7
granted to the holders of the Company's Common Stock under that certain
Investors' Rights Agreement of even date herewith (the "Investors' Rights
Agreement").
8. Warrants Transferable. Subject to compliance with applicable federal
and state securities laws and the transfer restrictions set forth in the
Investors' Rights Agreement, this Warrant and all rights hereunder are
transferable, in whole or in part, without charge to the holder hereof (except
for transfer taxes), upon surrender of this Warrant properly endorsed and
compliance with the provisions of the Investors' Rights Agreement. Each taker
and holder of this Warrant, by taking or holding the same, consents and agrees
that this Warrant, when endorsed in blank, shall be deemed negotiable, and that
the holder hereof, when this Warrant shall have been so endorsed, may be treated
by the Company, at the Company's option, and all other persons dealing with this
Warrant as the absolute owner hereof for any purpose and as the person entitled
to exercise the rights represented by this Warrant, or to the transfer hereof on
the books of the Company any notice to the contrary notwithstanding; but until
such transfer on such books, the Company may treat the registered owner hereof
as the owner for all purposes.
9. Rights and Obligations Survive Exercise of Warrant. The rights and
obligations of the Company, of the holder of this Warrant and of the holder of
shares of Common Stock issued upon exercise of this Warrant, referred to in
Sections 7 and 8 shall survive the exercise of this Warrant.
10. Modification and Waiver. This Warrant and any provision hereof may
be changed, waived, discharged or terminated only by an instrument in writing
signed by the party against which enforcement of the same is sought.
11. Notices. Any notice, request or other document required or
permitted to be given or delivered to the holder hereof or the Company shall be
delivered or shall be sent by certified mail, postage prepaid, to each such
holder at its address as shown on the books of the Company or to the Company at
the address indicated therefor in the first paragraph of this Warrant or such
other address as either may from time to time provide to the other.
12. Binding Effect on Successors. This Warrant shall be binding upon
any corporation succeeding the Company by merger, consolidation or acquisition
of all or substantially all of the Company's assets. All of the obligations of
the Company relating to the Common Stock issuable upon the exercise of this
Warrant shall survive the exercise and termination of this Warrant. All of the
covenants and agreements of the Company shall inure to the benefit of the
successors and assigns of the holder hereof.
13. Descriptive Headings and Governing Law. The description headings of
the several sections and paragraphs of this Warrant are inserted for convenience
only and do not constitute a part of this Warrant. This Warrant shall be
construed and enforced in accordance with, and the rights of the parties shall
be governed by, the laws of the State of California.
14. Lost Warrants. The Company represents and warrants to the Holder
hereof that upon receipt of evidence reasonably satisfactory to the Company of
the loss, theft, destruction,
7.
<PAGE> 8
or mutilation of this Warrant and, in the case of any such loss, theft or
destruction, upon receipt of an indemnity reasonably satisfactory to the
Company, or in the case of any such mutilation upon surrender and cancellation
of such Warrant, the Company, at its expense, will make and deliver a new
Warrant, of like tenor, in lieu of the lost, stolen, destroyed or mutilated
Warrant.
15. Fractional Shares. No fractional shares shall be issued upon
exercise of this Warrant. The Company shall, in lieu of issuing any fractional
share, pay the holder entitled to such fraction a sum in cash equal to such
fraction multiplied by the then effective Stock Purchase Price.
8.
<PAGE> 9
IN WITNESS WHEREOF, the Company has caused this Warrant to be duly
executed by its officers, thereunto duly authorized this 30th day of September,
1995.
AWARD SOFTWARE INTERNATIONAL, INC.
a California corporation
By:_____________________________________
Title:__________________________________
ATTEST:
______________________________________
Secretary
9.
<PAGE> 10
EXHIBIT A
SUBSCRIPTION FORM
Date: _________________, 19___
Award Software International, Inc.
_____________________________
_____________________________
Attn: President
Gentlemen:
/ / The undersigned hereby elects to exercise the warrant issued to it by
Award Software International, Inc. (the "Company") and dated September
30, 1995 Warrant No. W-___ (the "Warrant") and to purchase thereunder
__________________________________ shares of the Common Stock of the
Company (the "Shares") at a purchase price of Fifty Cents ($.50) per
Share or an aggregate purchase price of
__________________________________ Dollars ($__________) (the "Purchase
Price").
/ / The undersigned hereby elects to convert _______________________
percent (____%) of the value of the Warrant pursuant to the provisions
of Section 1.2 of the Warrant.
Pursuant to the terms of the Warrant the undersigned has delivered the
Purchase Price herewith in full in cash or by certified check or wire transfer.
The undersigned also makes the representations set forth on the attached Exhibit
B of the Warrant.
Very truly yours,
________________________________________
By:_____________________________________
Title:__________________________________
1.
<PAGE> 11
EXHIBIT B
INVESTMENT REPRESENTATIONS
THIS AGREEMENT MUST BE COMPLETED, SIGNED AND RETURNED TO _______________ ALONG
WITH THE SUBSCRIPTION FORM BEFORE THE COMMON STOCK ISSUABLE UPON EXERCISE OF THE
WARRANT CERTIFICATE DATED SEPTEMBER 30, 1995, WILL BE ISSUED.
_____________________, 19__
Award Software International, Inc.
[ADDRESS]
_____________________________
_____________________________
Attention: President
The undersigned, _________________________ ("Purchaser"), intends to
acquire up to ______________ shares of the Common Stock (the "Common Stock") of
Award Software International, Inc. (the "Company") from the Company pursuant to
the exercise or conversion of certain Warrants to purchase Common Stock held by
Purchaser. The Common Stock will be issued to Purchaser in a transaction not
involving a public offering and pursuant to an exemption from registration under
the Securities Act of 1933, as amended (the "1933 Act") and applicable state
securities laws. In connection with such purchase and in order to comply with
the exemptions from registration relied upon by the Company, Purchaser
represents, warrants and agrees as follows:
Purchaser is acquiring the Common Stock for its own account, to hold
for investment, and Purchaser shall not make any sale, transfer or other
disposition of the Common Stock in violation of the 1933 Act or the General
Rules and Regulations promulgated thereunder by the Securities and Exchange
Commission (the "SEC") or in violation of any applicable state securities law.
Purchaser has been advised that the Common Stock has not been
registered under the 1933 Act or state securities laws on the ground that this
transaction is exempt from registration, and that reliance by the Company on
such exemptions is predicated in part on Purchaser's representations set forth
in this letter.
Purchaser has been informed that under the 1933 Act, the Common Stock
must be held indefinitely unless it is subsequently registered under the 1933
Act or unless an exemption from such registration (such as Rule 144) is
available with respect to any proposed transfer or disposition by Purchaser of
the Common Stock. Purchaser further agrees that the Company may refuse to permit
Purchaser to sell, transfer or dispose of the Common Stock (except as permitted
<PAGE> 12
under Rule 144) unless there is in effect a registration statement under the
1933 Act and any applicable state securities laws covering such transfer, or
unless Purchaser furnishes an opinion of counsel reasonably satisfactory to
counsel for the Company, to the effect that such registration is not required.
Purchaser also understands and agrees that there will be placed on the
certificate(s) for the Common Stock, or any substitutions therefor, a legend
stating in substance:
"The shares represented by this certificate have not been
registered under the Securities Act of 1933, as amended (the
"Securities Act"), or any state securities laws. These shares have been
acquired for investment and may not be sold or otherwise transferred in
the absence of an effective registration statement for these shares
under the Securities Act and applicable state securities laws, or an
opinion of counsel satisfactory to the Company that registration is not
required and that an applicable exemption is available."
Purchaser has carefully read this letter and has discussed its
requirements and other applicable limitations upon Purchaser's resale of the
Common Stock with Purchaser's counsel.
Very truly yours,
_______________________________
By:_____________________________________
2.
<PAGE> 1
EXHIBIT 10.15
No. W-8
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR INVESTMENT
AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR ANY STATE
SECURITIES LAWS. SUCH SECURITIES MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE
OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER SAID ACT AND ANY APPLICABLE
STATE SECURITIES LAWS.
WARRANT TO PURCHASE A MAXIMUM OF
70,000 SHARES OF COMMON STOCK OF
AWARD SOFTWARE INTERNATIONAL, INC.
(Void after September 30, 2000)
This certifies that WALDEN CAPITAL PARTNERS II, L.P. (the "Holder"), or
assigns, for payment of one cent ($0.01), is entitled to purchase from AWARD
SOFTWARE INTERNATIONAL, INC., a California corporation (the "Company"), having a
place of business at 777 East Middlefield Road, Mountain View, CA 94043-4023, a
maximum of Seventy Thousand (70,000) fully paid and nonassessable shares of the
Company's Common Stock ("Common Stock") for cash at a price of fifty cents
($0.50) per share (the "Stock Purchase Price") at any time or from time to time
up to and including the earlier of (i) the closing of the Company's initial
public offering of its Common Stock, of which the aggregate offering price and
per share price to the public are at least $10,000,000 and $6.80, respectively,
pursuant to a registration statement under the Securities Act of 1933, as
amended, or (ii) 5:00 p.m. (Pacific time) on September 30, 2000, such earlier
day being referred to herein as the "Expiration Date", upon surrender to the
Company at its principal office (or at such other location as the Company may
advise the Holder in writing) of this Warrant properly endorsed with the Form of
Subscription attached hereto duly filled in and signed and, if applicable, upon
payment in cash or by check of the aggregate Stock Purchase Price for the number
of shares for which this Warrant is being exercised determined in accordance
with the provisions hereof. The Stock Purchase Price and the number of shares
purchasable hereunder are subject to adjustment as provided in Section 3 of this
Warrant.
This Warrant is subject to the following terms and conditions:
1. Exercise; Issuance of Certificates; Payment for Shares.
1.1 General. This Warrant is exercisable at the option of the
holder of record hereof, at any time or from time to time, up to the Expiration
Date for all or any part of the shares of Common Stock (but not for a fraction
of a share) which may be purchased hereunder. The Company agrees that the shares
of Common Stock purchased under this Warrant shall be and are deemed to be
issued to the Holder hereof as the record owner of such shares as of the close
of business on the date on which this Warrant shall have been surrendered,
properly endorsed, the completed, executed Form of Subscription delivered and
payment made for such
1.
<PAGE> 2
shares. Certificates for the shares of Common Stock so purchased, together with
any other securities or property to which the Holder hereof is entitled upon
such exercise, shall be delivered to the Holder hereof by the Company at the
Company's expense within a reasonable time after the rights represented by this
Warrant have been so exercised. In case of a purchase of less than all the
shares which may be purchased under this Warrant, the Company shall cancel this
Warrant and execute and deliver a new Warrant or Warrants of like tenor for the
balance of the shares purchasable under the Warrant surrendered upon such
purchase to the Holder hereof within a reasonable time. Each stock certificate
so delivered shall be in such denominations of Common Stock as may be requested
by the Holder hereof and shall be registered in the name of such Holder.
1.2 Net Issue Exercise. Notwithstanding any provisions herein
to the contrary, in lieu of exercising this Warrant for cash, the Holder may
elect to receive shares equal to the value (as determined below) of this Warrant
(or the portion thereof being canceled) by surrender of this Warrant at the
principal office of the Company together with the properly endorsed Form of
Subscription and notice of such election in which event the Company shall issue
to the Holder a number of shares of Common Stock computed using the following
formula:
X = Y (A-B)
-------
A
Where X = the number of shares of Common Stock to be
issued to the Holder
Y = the number of shares of Common Stock
purchasable under the Warrant or, if only a
portion of the Warrant is being exercised, the
portion of the Warrant being canceled (at the
date of such calculation)
A = the fair market value of one share of the
Company's Common Stock (at the date of such
calculation)
B = Stock Purchase Price (as adjusted to the date
of such calculation)
For purposes of the above calculation, fair market value of one share of Common
Stock shall be determined by the Company's Board of Directors in good faith;
provided, however, that in the event the Company makes an initial public
offering of its Common Stock the fair market value per share shall be the
average of the closing prices of such security's sales on all domestic
securities exchanges on which such security may at the time be listed, or, if
there have been no sales on any such exchange on any day, the average of the
highest bid and lowest asked prices on all such exchanges at the end of such
day, or, if on any day such security is not so listed, the average of the
representative bid and asked prices quoted in the NASDAQ System as of 4:00 P.M.,
New York time, on such day, or, if on any day such security is not quoted in the
NASDAQ system, the average of the highest bid and lowest asked prices on such
day in the domestic over-the-counter market as reported by the National
Quotation Bureau, Incorporation, or any similar successor organization, in each
such case averaged over a period of 21 days consisting of the day as of which
"fair market value" is being determined and the 20 consecutive
2.
<PAGE> 3
business days prior to such day; provided that if such security is listed on any
domestic securities exchange the term "business days" as used in this sentence
means business days on which such exchange is open for trading.
2. Shares to be Fully Paid; Reservation of Shares. The Company
covenants and agrees that all shares of Common Stock which may be issued upon
the exercise of the rights represented by this Warrant will, upon issuance, be
duly authorized, validly issued, fully paid and nonassessable and free from all
preemptive rights of any shareholder and free of all taxes, liens and charges
with respect to the issue thereof. The Company further covenants and agrees that
during the period within which the rights represented by this Warrant may be
exercised, the Company will at all times have authorized and reserved, for the
purpose of issue or transfer upon exercise of the subscription rights evidenced
by this Warrant, a sufficient number of shares of authorized but unissued Common
Stock, or other securities and property, when and as required to provide for the
exercise of the rights represented by this Warrant. The Company will take all
such action as may be necessary to assure that such shares of Common Stock may
be issued as provided herein without violation of any applicable law or
regulation, or of any requirements of any domestic securities exchange upon
which the Common Stock may be listed; provided, however, that the Company shall
not be required to effect a registration under Federal or State securities laws
with respect to such exercise. The Company will not take any action which would
result in any adjustment of the Stock Purchase Price (as defined in Section 3
hereof) (i) if the total number of shares of Common Stock issuable after such
action upon exercise of all outstanding warrants, together with all shares of
Common Stock then outstanding and all shares of Common Stock then issuable upon
exercise of all options and upon the conversion of all convertible securities
then outstanding, would exceed the total number of shares of Common Stock then
authorized by the Company's Articles of Incorporation, or (ii) if the total
number of shares of Common Stock issuable after such action upon the conversion
of all such shares of Common Stock, together with all shares of Common Stock
then issuable upon exercise of all options and upon the conversion of all such
shares of Common Stock, together with all shares of Common Stock then
outstanding and all shares of Common Stock then issuable upon exercise of all
options and upon the conversion of all convertible securities then outstanding
would exceed the total number of shares of Common Stock then authorized by the
Company's Articles of Incorporation.
3. Adjustment of Stock Purchase Price and Number of Shares. The Stock
Purchase Price and the number of shares purchasable upon the exercise of this
Warrant shall be subject to adjustment from time to time upon the occurrence of
certain events described in this Section 3. Upon each adjustment of the Stock
Purchase Price, the Holder of this Warrant shall thereafter be entitled to
purchase, at the Stock Purchase Price resulting from such adjustment, the number
of shares obtained by multiplying the Stock Purchase Price in effect immediately
prior to such adjustment by the number of shares purchasable pursuant hereto
immediately prior to such adjustment, and dividing the product thereof by the
Stock Purchase Price resulting from such adjustment.
3.1 Subdivision or Combination of Stock. In case the Company
shall at any time subdivide its outstanding shares of Common Stock into a
greater number of shares, the Stock Purchase Price in effect immediately prior
to such subdivision shall be proportionately
3.
<PAGE> 4
reduced, and conversely, in case the outstanding shares of Common Stock of the
Company shall be combined into a smaller number of shares, the Stock Purchase
Price in effect immediately prior to such combination shall be proportionately
increased.
3.2 Dividends in Common Stock, Other Stock, Property,
Reclassification. If at any time or from time to time the Holders of Common
Stock (or any shares of stock or other securities at the time receivable upon
the exercise of this Warrant) shall have received or become entitled to receive,
without payment therefor,
(A) Common Stock or any shares of stock or other
securities which are at any time directly or indirectly convertible into or
exchangeable for Common Stock, or any rights or options to subscribe for,
purchase or otherwise acquire any of the foregoing by way of dividend or other
distribution,
(B) any cash paid or payable otherwise than as a cash
dividend, or
(C) Common Stock or additional stock or other
securities or property (including cash) by way of spinoff, split-up,
reclassification, combination of shares or similar corporate rearrangement,
(other than (i) shares of Common Stock issued as a stock split, adjustments in
respect of which shall be covered by the terms of Section 3.1 above or (ii) an
event for which adjustment is otherwise made pursuant to Section 3.4 below),
then and in each such case, the Holder hereof shall, upon the exercise of this
Warrant, be entitled to receive, in addition to the number of shares of Common
Stock receivable thereupon, and without payment of any additional consideration
therefor, the amount of stock and other securities and property (including cash
in the cases referred to in clauses (B) and (C) above) which such Holder would
hold on the date of such exercise had he been the holder of record of such
Common Stock as of the date on which holders of Common Stock received or became
entitled to receive such shares or all other additional stock and other
securities and property.
3.3 Reorganization, Reclassification, Consolidation, Merger or
Sale. If any capital reorganization of the capital stock of the Company, or any
consolidation or merger of the Company with another corporation, or the sale of
all or substantially all of its assets to another corporation shall be effected
in such a way that holders of Common Stock shall be entitled to receive stock,
securities, or other assets or property, then, as a condition of such
reorganization, reclassification, consolidation, merger or sale, lawful and
adequate provisions shall be made whereby the holder hereof shall thereafter
have the right to purchase and receive (in lieu of the shares of the Common
Stock of the Company immediately theretofore purchasable and receivable upon the
exercise of the rights represented hereby) such shares of stock, securities or
other assets or property as may be issued or payable with respect to or in
exchange for a number of outstanding shares of such Common Stock equal to the
number of shares of such stock immediately theretofore purchasable and
receivable upon the exercise of the rights represented hereby. In any
reorganization described above, appropriate provision shall be made with respect
to the rights and interests of the Holder of this Warrant to the end that the
provisions hereof (including, without limitation, provisions for adjustments of
the Stock Purchase Price and of the number of shares purchasable and receivable
upon the exercise of this Warrant) shall thereafter be applicable, as nearly as
may be, in relation to any shares of stock, securities
4.
<PAGE> 5
or assets thereafter deliverable upon the exercise hereof. The Company will not
effect any such consolidation, merger or sale unless, prior to the consummation
thereof, the successor corporation (if other than the Company) resulting from
such consolidation or the corporation purchasing such assets shall assume by
written instrument, executed and mailed or delivered to the registered Holder
hereof at the last address of such Holder appearing on the books of the Company,
the obligation to deliver to such Holder such shares of stock, securities or
assets as, in accordance with the foregoing provisions, such Holder may be
entitled to purchase.
3.4 Other Notices. If at any time:
(1) the Company shall declare any cash dividend upon
its Common Stock;
(2) the Company shall declare any dividend upon its
Common Stock payable in stock or make any special dividend or other distribution
to the holders of its Common Stock;
(3) the Company shall offer for subscription pro rata
to the holders of its Common Stock any additional shares of stock of any class
or other rights;
(4) there shall be any capital reorganization or
reclassification of the capital stock of the Company; or consolidation or merger
of the Company with, or sale of all or substantially all of its assets to,
another corporation;
(5) there shall be a voluntary or involuntary
dissolution, liquidation or winding-up of the Company; or
(6) there shall be an initial public offering of
Company securities;
then, in any one or more of said cases, the Company shall give, by first class
mail, postage prepaid, addressed to the Holder of this Warrant at the address of
such Holder as shown on the books of the Company, (a) at least thirty (30) days'
prior written notice of the date on which the books of the Company shall close
or a record shall be taken for such dividend, distribution or subscription
rights or for determining rights to vote in respect of any such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation or
winding-up, and (b) in the case of any such reorganization, reclassification,
consolidation, merger, sale, dissolution, liquidation, winding-up or public
offering, at least thirty (30) days' prior written notice of the date when the
same shall take place; provided, however, that the Holder shall make a best
efforts attempt to respond to such notice as early as possible after the receipt
thereof. Any notice given in accordance with the foregoing clause (a) shall also
specify, in the case of any such dividend, distribution or subscription rights,
the date on which the holders of Common Stock shall be entitled thereto. Any
notice given in accordance with the foregoing clause (b) shall also specify the
date on which the holders of Common Stock shall be entitled to exchange their
Common Stock for securities or other property deliverable upon such
reorganization, reclassification, consolidation, merger, sale, dissolution,
liquidation, winding-up, conversion or public offering, as the case may be.
5.
<PAGE> 6
3.5 Certain Events. If any change in the outstanding Common
Stock of the Company or any other event occurs as to which the other provisions
of this Section 3 are not strictly applicable or if strictly applicable would
not fairly protect the purchase rights of the Holder of the Warrant in
accordance with such provisions, then the Board of Directors of the Company
shall make an adjustment in the number and class of shares available under the
Warrant, the Stock Purchase Price or the application of such provisions, so as
to protect such purchase rights as aforesaid. The adjustment shall be such as
will give the Holder of the Warrant upon exercise for the same aggregate Stock
Purchase Price the total number, class and kind of shares as he would have owned
had the Warrant been exercised prior to the event and had he continued to hold
such shares until after the event requiring adjustment.
4. Issue Tax. The issuance of certificates for shares of Common Stock
upon the exercise of the Warrant shall be made without charge to the Holder of
the Warrant for any issue tax (other than any applicable income taxes) in
respect thereof; provided, however, that the Company shall not be required to
pay any tax which may be payable in respect of any transfer involved in the
issuance and delivery of any certificate in a name other than that of the then
Holder of the Warrant being exercised.
5. Closing of Books. The Company will at no time close its transfer
books against the transfer of any warrant or of any shares of Common Stock
issued or issuable upon the exercise of any warrant in any manner which
interferes with the timely exercise of this Warrant.
6. No Voting or Dividend Rights; Limitation of Liability. Nothing
contained in this Warrant shall be construed as conferring upon the holder
hereof the right to vote or to consent or to receive notice as a shareholder of
the Company or any other matters or any rights whatsoever as a shareholder of
the Company. No dividends or interest shall be payable or accrued in respect of
this Warrant or the interest represented hereby or the shares purchasable
hereunder until, and only to the extent that, this Warrant shall have been
exercised. No provisions hereof, in the absence of affirmative action by the
holder to purchase shares of Common Stock, and no mere enumeration herein of the
rights or privileges of the holder hereof, shall give rise to any liability of
such holder for the Stock Purchase Price or as a shareholder of the Company,
whether such liability is asserted by the Company or by its creditors.
7. Registration Rights Agreement. The registration rights of the Holder
(including Holders' successors) with respect to the stock underlying this
Warrant will be the same as granted to the holders of the Company's Common Stock
under that certain Investors' Rights Agreement of even date herewith (the
"Investors' Rights Agreement").
8. Warrants Transferable. Subject to compliance with applicable federal
and state securities laws and the transfer restrictions set forth in the
Investors' Rights Agreement, this Warrant and all rights hereunder are
transferable, in whole or in part, without charge to the holder hereof (except
for transfer taxes), upon surrender of this Warrant properly endorsed and
compliance with the provisions of the Investors' Rights Agreement. Each taker
and holder of this Warrant, by taking or holding the same, consents and agrees
that this Warrant, when endorsed in blank, shall be deemed negotiable, and that
the holder hereof, when this Warrant shall have been so endorsed, may be treated
by the Company, at the Company's option, and all
6.
<PAGE> 7
other persons dealing with this Warrant as the absolute owner hereof for any
purpose and as the person entitled to exercise the rights represented by this
Warrant, or to the transfer hereof on the books of the Company any notice to the
contrary notwithstanding; but until such transfer on such books, the Company may
treat the registered owner hereof as the owner for all purposes.
9. Rights and Obligations Survive Exercise of Warrant. The rights and
obligations of the Company, of the holder of this Warrant and of the holder of
shares of Common Stock issued upon exercise of this Warrant, referred to in
Sections 7 and 8 shall survive the exercise of this Warrant.
10. Modification and Waiver. This Warrant and any provision hereof may
be changed, waived, discharged or terminated only by an instrument in writing
signed by the party against which enforcement of the same is sought.
11. Notices. Any notice, request or other document required or
permitted to be given or delivered to the holder hereof or the Company shall be
delivered or shall be sent by certified mail, postage prepaid, to each such
holder at its address as shown on the books of the Company or to the Company at
the address indicated therefor in the first paragraph of this Warrant or such
other address as either may from time to time provide to the other.
12. Binding Effect on Successors. This Warrant shall be binding upon
any corporation succeeding the Company by merger, consolidation or acquisition
of all or substantially all of the Company's assets. All of the obligations of
the Company relating to the Common Stock issuable upon the exercise of this
Warrant shall survive the exercise and termination of this Warrant. All of the
covenants and agreements of the Company shall inure to the benefit of the
successors and assigns of the holder hereof.
13. Descriptive Headings and Governing Law. The description headings of
the several sections and paragraphs of this Warrant are inserted for convenience
only and do not constitute a part of this Warrant. This Warrant shall be
construed and enforced in accordance with, and the rights of the parties shall
be governed by, the laws of the State of California.
14. Lost Warrants. The Company represents and warrants to the Holder
hereof that upon receipt of evidence reasonably satisfactory to the Company of
the loss, theft, destruction, or mutilation of this Warrant and, in the case of
any such loss, theft or destruction, upon receipt of an indemnity reasonably
satisfactory to the Company, or in the case of any such mutilation upon
surrender and cancellation of such Warrant, the Company, at its expense, will
make and deliver a new Warrant, of like tenor, in lieu of the lost, stolen,
destroyed or mutilated Warrant.
15. Fractional Shares. No fractional shares shall be issued upon
exercise of this Warrant. The Company shall, in lieu of issuing any fractional
share, pay the holder entitled to such fraction a sum in cash equal to such
fraction multiplied by the then effective Stock Purchase Price.
7.
<PAGE> 8
IN WITNESS WHEREOF, the Company has caused this Warrant to be duly
executed by its officers, thereunto duly authorized this 30th day of September,
1995.
AWARD SOFTWARE INTERNATIONAL, INC.
a California corporation
By:_____________________________________
Title:__________________________________
ATTEST:
______________________________________
Secretary
8.
<PAGE> 9
EXHIBIT A
SUBSCRIPTION FORM
Date: _________________, 19___
Award Software International, Inc.
_____________________________
_____________________________
Attn: President
Gentlemen:
/ / The undersigned hereby elects to exercise the warrant issued to it by
Award Software International, Inc. (the "Company") and dated September
30, 1995 Warrant No. W-___ (the "Warrant") and to purchase thereunder
__________________________________ shares of the Common Stock of the
Company (the "Shares") at a purchase price of Fifty Cents ($.50) per
Share or an aggregate purchase price of
__________________________________ Dollars ($__________) (the "Purchase
Price").
/ / The undersigned hereby elects to convert _______________________
percent (____%) of the value of the Warrant pursuant to the provisions
of Section 1.2 of the Warrant.
Pursuant to the terms of the Warrant the undersigned has delivered the
Purchase Price herewith in full in cash or by certified check or wire transfer.
The undersigned also makes the representations set forth on the attached Exhibit
B of the Warrant.
Very truly yours,
________________________________________
By:_____________________________________
Title:__________________________________
1.
<PAGE> 10
EXHIBIT B
INVESTMENT REPRESENTATIONS
THIS AGREEMENT MUST BE COMPLETED, SIGNED AND RETURNED TO _______________ ALONG
WITH THE SUBSCRIPTION FORM BEFORE THE COMMON STOCK ISSUABLE UPON EXERCISE OF THE
WARRANT CERTIFICATE DATED SEPTEMBER 30, 1995, WILL BE ISSUED.
_____________________, 19__
Award Software International, Inc.
[ADDRESS]
_____________________________
_____________________________
Attention: President
The undersigned, _________________________ ("Purchaser"), intends to
acquire up to ______________ shares of the Common Stock (the "Common Stock") of
Award Software International, Inc. (the "Company") from the Company pursuant to
the exercise or conversion of certain Warrants to purchase Common Stock held by
Purchaser. The Common Stock will be issued to Purchaser in a transaction not
involving a public offering and pursuant to an exemption from registration under
the Securities Act of 1933, as amended (the "1933 Act") and applicable state
securities laws. In connection with such purchase and in order to comply with
the exemptions from registration relied upon by the Company, Purchaser
represents, warrants and agrees as follows:
Purchaser is acquiring the Common Stock for its own account, to hold
for investment, and Purchaser shall not make any sale, transfer or other
disposition of the Common Stock in violation of the 1933 Act or the General
Rules and Regulations promulgated thereunder by the Securities and Exchange
Commission (the "SEC") or in violation of any applicable state securities law.
Purchaser has been advised that the Common Stock has not been
registered under the 1933 Act or state securities laws on the ground that this
transaction is exempt from registration, and that reliance by the Company on
such exemptions is predicated in part on Purchaser's representations set forth
in this letter.
Purchaser has been informed that under the 1933 Act, the Common Stock
must be held indefinitely unless it is subsequently registered under the 1933
Act or unless an exemption from such registration (such as Rule 144) is
available with respect to any proposed transfer or disposition by Purchaser of
the Common Stock. Purchaser further agrees that the Company may refuse to permit
Purchaser to sell, transfer or dispose of the Common Stock (except as permitted
under Rule 144) unless there is in effect a registration statement under the
1933 Act and any
<PAGE> 11
applicable state securities laws covering such transfer, or unless Purchaser
furnishes an opinion of counsel reasonably satisfactory to counsel for the
Company, to the effect that such registration is not required.
Purchaser also understands and agrees that there will be placed on the
certificate(s) for the Common Stock, or any substitutions therefor, a legend
stating in substance:
"The shares represented by this certificate have not been
registered under the Securities Act of 1933, as amended (the
"Securities Act"), or any state securities laws. These shares have been
acquired for investment and may not be sold or otherwise transferred in
the absence of an effective registration statement for these shares
under the Securities Act and applicable state securities laws, or an
opinion of counsel satisfactory to the Company that registration is not
required and that an applicable exemption is available."
Purchaser has carefully read this letter and has discussed its
requirements and other applicable limitations upon Purchaser's resale of the
Common Stock with Purchaser's counsel.
Very truly yours,
_______________________________
By:_____________________________________
2.
<PAGE> 1
EXHIBIT 10.16
No. W-9
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR INVESTMENT
AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR ANY STATE
SECURITIES LAWS. SUCH SECURITIES MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE
OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER SAID ACT AND ANY APPLICABLE
STATE SECURITIES LAWS.
WARRANT TO PURCHASE A MAXIMUM OF
10,000 SHARES OF COMMON STOCK OF
AWARD SOFTWARE INTERNATIONAL, INC.
(Void after September 30, 2000)
This certifies that WALDEN TECHNOLOGY VENTURES II, L.P. (the "Holder"),
or assigns, for payment of one cent ($0.01), is entitled to purchase from AWARD
SOFTWARE INTERNATIONAL, INC., a California corporation (the "Company"), having a
place of business at 777 East Middlefield Road, Mountain View, CA 94043-4023, a
maximum of Ten Thousand (10,000) fully paid and nonassessable shares of the
Company's Common Stock ("Common Stock") for cash at a price of fifty cents
($0.50) per share (the "Stock Purchase Price") at any time or from time to time
up to and including the earlier of (i) the closing of the Company's initial
public offering of its Common Stock, of which the aggregate offering price and
per share price to the public are at least $10,000,000 and $6.80, respectively,
pursuant to a registration statement under the Securities Act of 1933, as
amended, or (ii) 5:00 p.m. (Pacific time) on September 30, 2000, such earlier
day being referred to herein as the "Expiration Date", upon surrender to the
Company at its principal office (or at such other location as the Company may
advise the Holder in writing) of this Warrant properly endorsed with the Form of
Subscription attached hereto duly filled in and signed and, if applicable, upon
payment in cash or by check of the aggregate Stock Purchase Price for the number
of shares for which this Warrant is being exercised determined in accordance
with the provisions hereof. The Stock Purchase Price and the number of shares
purchasable hereunder are subject to adjustment as provided in Section 3 of this
Warrant.
This Warrant is subject to the following terms and conditions:
1. Exercise; Issuance of Certificates; Payment for Shares.
1.1 General. This Warrant is exercisable at the option of the
holder of record hereof, at any time or from time to time, up to the Expiration
Date for all or any part of the shares of Common Stock (but not for a fraction
of a share) which may be purchased hereunder. The Company agrees that the shares
of Common Stock purchased under this Warrant shall be and are deemed to be
issued to the Holder hereof as the record owner of such shares as of the close
of business on the date on which this Warrant shall have been surrendered,
properly
1.
<PAGE> 2
endorsed, the completed, executed Form of Subscription delivered and payment
made for such shares. Certificates for the shares of Common Stock so purchased,
together with any other securities or property to which the Holder hereof is
entitled upon such exercise, shall be delivered to the Holder hereof by the
Company at the Company's expense within a reasonable time after the rights
represented by this Warrant have been so exercised. In case of a purchase of
less than all the shares which may be purchased under this Warrant, the Company
shall cancel this Warrant and execute and deliver a new Warrant or Warrants of
like tenor for the balance of the shares purchasable under the Warrant
surrendered upon such purchase to the Holder hereof within a reasonable time.
Each stock certificate so delivered shall be in such denominations of Common
Stock as may be requested by the Holder hereof and shall be registered in the
name of such Holder.
1.2 Net Issue Exercise. Notwithstanding any provisions herein
to the contrary, in lieu of exercising this Warrant for cash, the Holder may
elect to receive shares equal to the value (as determined below) of this Warrant
(or the portion thereof being canceled) by surrender of this Warrant at the
principal office of the Company together with the properly endorsed Form of
Subscription and notice of such election in which event the Company shall issue
to the Holder a number of shares of Common Stock computed using the following
formula:
X = Y (A-B)
-------
A
Where X = the number of shares of Common Stock to be issued to the
Holder
Y = the number of shares of Common Stock purchasable under the
Warrant or, if only a portion of the Warrant is being
exercised, the portion of the Warrant being canceled (at
the date of such calculation)
A = the fair market value of one share of the Company's Common
Stock (at the date of such calculation)
B = Stock Purchase Price (as adjusted to the date of such
calculation)
For purposes of the above calculation, fair market value of one share of Common
Stock shall be determined by the Company's Board of Directors in good faith;
provided, however, that in the event the Company makes an initial public
offering of its Common Stock the fair market value per share shall be the
average of the closing prices of such security's sales on all domestic
securities exchanges on which such security may at the time be listed, or, if
there have been no sales on any such exchange on any day, the average of the
highest bid and lowest asked prices on all such exchanges at the end of such
day, or, if on any day such security is not so listed, the average of the
representative bid and asked prices quoted in the NASDAQ System as of 4:00 P.M.,
New York time, on such day, or, if on any day such security is not quoted in the
NASDAQ system, the average of the highest bid and lowest asked prices on such
day in the domestic over-the-counter market as reported by the National
Quotation Bureau, Incorporation, or any similar successor organization, in each
such case averaged over a period of 21 days
2.
<PAGE> 3
consisting of the day as of which "fair market value" is being determined and
the 20 consecutive business days prior to such day; provided that if such
security is listed on any domestic securities exchange the term "business days"
as used in this sentence means business days on which such exchange is open for
trading.
2. Shares to be Fully Paid; Reservation of Shares. The Company
covenants and agrees that all shares of Common Stock which may be issued upon
the exercise of the rights represented by this Warrant will, upon issuance, be
duly authorized, validly issued, fully paid and nonassessable and free from all
preemptive rights of any shareholder and free of all taxes, liens and charges
with respect to the issue thereof. The Company further covenants and agrees that
during the period within which the rights represented by this Warrant may be
exercised, the Company will at all times have authorized and reserved, for the
purpose of issue or transfer upon exercise of the subscription rights evidenced
by this Warrant, a sufficient number of shares of authorized but unissued Common
Stock, or other securities and property, when and as required to provide for the
exercise of the rights represented by this Warrant. The Company will take all
such action as may be necessary to assure that such shares of Common Stock may
be issued as provided herein without violation of any applicable law or
regulation, or of any requirements of any domestic securities exchange upon
which the Common Stock may be listed; provided, however, that the Company shall
not be required to effect a registration under Federal or State securities laws
with respect to such exercise. The Company will not take any action which would
result in any adjustment of the Stock Purchase Price (as defined in Section 3
hereof) (i) if the total number of shares of Common Stock issuable after such
action upon exercise of all outstanding warrants, together with all shares of
Common Stock then outstanding and all shares of Common Stock then issuable upon
exercise of all options and upon the conversion of all convertible securities
then outstanding, would exceed the total number of shares of Common Stock then
authorized by the Company's Articles of Incorporation, or (ii) if the total
number of shares of Common Stock issuable after such action upon the conversion
of all such shares of Common Stock, together with all shares of Common Stock
then issuable upon exercise of all options and upon the conversion of all such
shares of Common Stock, together with all shares of Common Stock then
outstanding and all shares of Common Stock then issuable upon exercise of all
options and upon the conversion of all convertible securities then outstanding
would exceed the total number of shares of Common Stock then authorized by the
Company's Articles of Incorporation.
3. Adjustment of Stock Purchase Price and Number of Shares. The
Stock Purchase Price and the number of shares purchasable upon the exercise of
this Warrant shall be subject to adjustment from time to time upon the
occurrence of certain events described in this Section 3. Upon each adjustment
of the Stock Purchase Price, the Holder of this Warrant shall thereafter be
entitled to purchase, at the Stock Purchase Price resulting from such
adjustment, the number of shares obtained by multiplying the Stock Purchase
Price in effect immediately prior to such adjustment by the number of shares
purchasable pursuant hereto immediately prior to such adjustment, and dividing
the product thereof by the Stock Purchase Price resulting from such adjustment.
3.1 Subdivision or Combination of Stock. In case the Company
shall at any time subdivide its outstanding shares of Common Stock into a
greater number of shares, the
3.
<PAGE> 4
Stock Purchase Price in effect immediately prior to such subdivision shall be
proportionately reduced, and conversely, in case the outstanding shares of
Common Stock of the Company shall be combined into a smaller number of shares,
the Stock Purchase Price in effect immediately prior to such combination shall
be proportionately increased.
3.2 Dividends in Common Stock, Other Stock, Property,
Reclassification. If at any time or from time to time the Holders of Common
Stock (or any shares of stock or other securities at the time receivable upon
the exercise of this Warrant) shall have received or become entitled to receive,
without payment therefor,
(A) Common Stock or any shares of stock or other
securities which are at any time directly or indirectly convertible into or
exchangeable for Common Stock, or any rights or options to subscribe for,
purchase or otherwise acquire any of the foregoing by way of dividend or other
distribution,
(B) any cash paid or payable otherwise than as a cash
dividend, or
(C) Common Stock or additional stock or other
securities or property (including cash) by way of spinoff, split-up,
reclassification, combination of shares or similar corporate rearrangement,
(other than (i) shares of Common Stock issued as a stock split, adjustments in
respect of which shall be covered by the terms of Section 3.1 above or (ii) an
event for which adjustment is otherwise made pursuant to Section 3.4 below),
then and in each such case, the Holder hereof shall, upon the exercise of this
Warrant, be entitled to receive, in addition to the number of shares of Common
Stock receivable thereupon, and without payment of any additional consideration
therefor, the amount of stock and other securities and property (including cash
in the cases referred to in clauses (B) and (C) above) which such Holder would
hold on the date of such exercise had he been the holder of record of such
Common Stock as of the date on which holders of Common Stock received or became
entitled to receive such shares or all other additional stock and other
securities and property.
3.3 Reorganization, Reclassification, Consolidation, Merger or
Sale. If any capital reorganization of the capital stock of the Company, or any
consolidation or merger of the Company with another corporation, or the sale of
all or substantially all of its assets to another corporation shall be effected
in such a way that holders of Common Stock shall be entitled to receive stock,
securities, or other assets or property, then, as a condition of such
reorganization, reclassification, consolidation, merger or sale, lawful and
adequate provisions shall be made whereby the holder hereof shall thereafter
have the right to purchase and receive (in lieu of the shares of the Common
Stock of the Company immediately theretofore purchasable and receivable upon the
exercise of the rights represented hereby) such shares of stock, securities or
other assets or property as may be issued or payable with respect to or in
exchange for a number of outstanding shares of such Common Stock equal to the
number of shares of such stock immediately theretofore purchasable and
receivable upon the exercise of the rights represented hereby. In any
reorganization described above, appropriate provision shall be made with respect
to the rights and interests of the Holder of this Warrant to the end that the
provisions hereof (including, without limitation, provisions for adjustments of
the Stock Purchase Price and of the number of shares purchasable and receivable
upon the exercise of this Warrant)
4.
<PAGE> 5
shall thereafter be applicable, as nearly as may be, in relation to any shares
of stock, securities or assets thereafter deliverable upon the exercise hereof.
The Company will not effect any such consolidation, merger or sale unless, prior
to the consummation thereof, the successor corporation (if other than the
Company) resulting from such consolidation or the corporation purchasing such
assets shall assume by written instrument, executed and mailed or delivered to
the registered Holder hereof at the last address of such Holder appearing on the
books of the Company, the obligation to deliver to such Holder such shares of
stock, securities or assets as, in accordance with the foregoing provisions,
such Holder may be entitled to purchase.
3.4 Other Notices. If at any time:
(1) the Company shall declare any cash dividend upon
its Common Stock;
(2) the Company shall declare any dividend upon its
Common Stock payable in stock or make any special dividend or other distribution
to the holders of its Common Stock;
(3) the Company shall offer for subscription pro rata
to the holders of its Common Stock any additional shares of stock of any class
or other rights;
(4) there shall be any capital reorganization or
reclassification of the capital stock of the Company; or consolidation or merger
of the Company with, or sale of all or substantially all of its assets to,
another corporation;
(5) there shall be a voluntary or involuntary
dissolution, liquidation or winding-up of the Company; or
(6) there shall be an initial public offering of
Company securities;
then, in any one or more of said cases, the Company shall give, by first class
mail, postage prepaid, addressed to the Holder of this Warrant at the address of
such Holder as shown on the books of the Company, (a) at least thirty (30) days'
prior written notice of the date on which the books of the Company shall close
or a record shall be taken for such dividend, distribution or subscription
rights or for determining rights to vote in respect of any such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation or
winding-up, and (b) in the case of any such reorganization, reclassification,
consolidation, merger, sale, dissolution, liquidation, winding-up or public
offering, at least thirty (30) days' prior written notice of the date when the
same shall take place; provided, however, that the Holder shall make a best
efforts attempt to respond to such notice as early as possible after the receipt
thereof. Any notice given in accordance with the foregoing clause (a) shall also
specify, in the case of any such dividend, distribution or subscription rights,
the date on which the holders of Common Stock shall be entitled thereto. Any
notice given in accordance with the foregoing clause (b) shall also specify the
date on which the holders of Common Stock shall be entitled to exchange
5.
<PAGE> 6
their Common Stock for securities or other property deliverable upon such
reorganization, reclassification, consolidation, merger, sale, dissolution,
liquidation, winding-up, conversion or public offering, as the case may be.
3.5 Certain Events. If any change in the outstanding Common
Stock of the Company or any other event occurs as to which the other provisions
of this Section 3 are not strictly applicable or if strictly applicable would
not fairly protect the purchase rights of the Holder of the Warrant in
accordance with such provisions, then the Board of Directors of the Company
shall make an adjustment in the number and class of shares available under the
Warrant, the Stock Purchase Price or the application of such provisions, so as
to protect such purchase rights as aforesaid. The adjustment shall be such as
will give the Holder of the Warrant upon exercise for the same aggregate Stock
Purchase Price the total number, class and kind of shares as he would have owned
had the Warrant been exercised prior to the event and had he continued to hold
such shares until after the event requiring adjustment.
4. Issue Tax. The issuance of certificates for shares of Common
Stock upon the exercise of the Warrant shall be made without charge to the
Holder of the Warrant for any issue tax (other than any applicable income taxes)
in respect thereof; provided, however, that the Company shall not be required to
pay any tax which may be payable in respect of any transfer involved in the
issuance and delivery of any certificate in a name other than that of the then
Holder of the Warrant being exercised.
5. Closing of Books. The Company will at no time close its transfer
books against the transfer of any warrant or of any shares of Common Stock
issued or issuable upon the exercise of any warrant in any manner which
interferes with the timely exercise of this Warrant.
6. No Voting or Dividend Rights; Limitation of Liability. Nothing
contained in this Warrant shall be construed as conferring upon the holder
hereof the right to vote or to consent or to receive notice as a shareholder of
the Company or any other matters or any rights whatsoever as a shareholder of
the Company. No dividends or interest shall be payable or accrued in respect of
this Warrant or the interest represented hereby or the shares purchasable
hereunder until, and only to the extent that, this Warrant shall have been
exercised. No provisions hereof, in the absence of affirmative action by the
holder to purchase shares of Common Stock, and no mere enumeration herein of the
rights or privileges of the holder hereof, shall give rise to any liability of
such holder for the Stock Purchase Price or as a shareholder of the Company,
whether such liability is asserted by the Company or by its creditors.
7. Registration Rights Agreement. The registration rights of the
Holder (including Holders' successors) with respect to the stock underlying this
Warrant will be the same as granted to the holders of the Company's Common Stock
under that certain Investors' Rights Agreement of even date herewith (the
"Investors' Rights Agreement").
8. Warrants Transferable. Subject to compliance with applicable
federal and state securities laws and the transfer restrictions set forth in the
Investors' Rights Agreement, this Warrant and all rights hereunder are
transferable, in whole or in part, without charge to the holder hereof (except
for transfer taxes), upon surrender of this Warrant properly endorsed and
6.
<PAGE> 7
compliance with the provisions of the Investors' Rights Agreement. Each taker
and holder of this Warrant, by taking or holding the same, consents and agrees
that this Warrant, when endorsed in blank, shall be deemed negotiable, and that
the holder hereof, when this Warrant shall have been so endorsed, may be treated
by the Company, at the Company's option, and all other persons dealing with this
Warrant as the absolute owner hereof for any purpose and as the person entitled
to exercise the rights represented by this Warrant, or to the transfer hereof on
the books of the Company any notice to the contrary notwithstanding; but until
such transfer on such books, the Company may treat the registered owner hereof
as the owner for all purposes.
9. Rights and Obligations Survive Exercise of Warrant. The rights
and obligations of the Company, of the holder of this Warrant and of the holder
of shares of Common Stock issued upon exercise of this Warrant, referred to in
Sections 7 and 8 shall survive the exercise of this Warrant.
10. Modification and Waiver. This Warrant and any provision hereof
may be changed, waived, discharged or terminated only by an instrument in
writing signed by the party against which enforcement of the same is sought.
11. Notices. Any notice, request or other document required or
permitted to be given or delivered to the holder hereof or the Company shall be
delivered or shall be sent by certified mail, postage prepaid, to each such
holder at its address as shown on the books of the Company or to the Company at
the address indicated therefor in the first paragraph of this Warrant or such
other address as either may from time to time provide to the other.
12. Binding Effect on Successors. This Warrant shall be binding upon
any corporation succeeding the Company by merger, consolidation or acquisition
of all or substantially all of the Company's assets. All of the obligations of
the Company relating to the Common Stock issuable upon the exercise of this
Warrant shall survive the exercise and termination of this Warrant. All of the
covenants and agreements of the Company shall inure to the benefit of the
successors and assigns of the holder hereof.
13. Descriptive Headings and Governing Law. The description headings
of the several sections and paragraphs of this Warrant are inserted for
convenience only and do not constitute a part of this Warrant. This Warrant
shall be construed and enforced in accordance with, and the rights of the
parties shall be governed by, the laws of the State of California.
14. Lost Warrants. The Company represents and warrants to the Holder
hereof that upon receipt of evidence reasonably satisfactory to the Company of
the loss, theft, destruction, or mutilation of this Warrant and, in the case of
any such loss, theft or destruction, upon receipt of an indemnity reasonably
satisfactory to the Company, or in the case of any such mutilation upon
surrender and cancellation of such Warrant, the Company, at its expense, will
make and deliver a new Warrant, of like tenor, in lieu of the lost, stolen,
destroyed or mutilated Warrant.
7.
<PAGE> 8
15. Fractional Shares. No fractional shares shall be issued upon
exercise of this Warrant. The Company shall, in lieu of issuing any fractional
share, pay the holder entitled to such fraction a sum in cash equal to such
fraction multiplied by the then effective Stock Purchase Price.
8.
<PAGE> 9
IN WITNESS WHEREOF, the Company has caused this Warrant to be duly
executed by its officers, thereunto duly authorized this 30th day of September,
1995.
AWARD SOFTWARE INTERNATIONAL, INC.
a California corporation
By:
---------------------------------
Title:
------------------------------
ATTEST:
- -----------------------------------
Secretary
9.
<PAGE> 10
EXHIBIT A
SUBSCRIPTION FORM
Date: , 19
Award Software International, Inc.
- ----------------------------------
- ----------------------------------
Attn: President
Gentlemen:
/ / The undersigned hereby elects to exercise the warrant issued to it by
Award Software International, Inc. (the "Company") and dated September
30, 1995 Warrant No. W- (the "Warrant") and to purchase thereunder
shares of the Common Stock of the
Company (the "Shares") at a purchase price of Fifty Cents ($.50) per
Share or an aggregate purchase price of
Dollars ($ ) (the "Purchase
Price").
/ / The undersigned hereby elects to convert
percent ( %) of the value of the Warrant pursuant to the provisions
of Section 1.2 of the Warrant.
Pursuant to the terms of the Warrant the undersigned has delivered the
Purchase Price herewith in full in cash or by certified check or wire transfer.
The undersigned also makes the representations set forth on the attached Exhibit
B of the Warrant.
Very truly yours,
------------------------------------
By
---------------------------------
Title
-------------------------------
1.
<PAGE> 11
EXHIBIT B
INVESTMENT REPRESENTATIONS
THIS AGREEMENT MUST BE COMPLETED, SIGNED AND RETURNED TO ALONG
WITH THE SUBSCRIPTION FORM BEFORE THE COMMON STOCK ISSUABLE UPON EXERCISE OF THE
WARRANT CERTIFICATE DATED SEPTEMBER 30, 1995, WILL BE ISSUED.
, 19
Award Software International, Inc.
[ADDRESS]
- ----------------------------------
- ----------------------------------
Attention: President
The undersigned, ("Purchaser"), intends to
acquire up to shares of the Common Stock (the "Common Stock") of
Award Software International, Inc. (the "Company") from the Company pursuant to
the exercise or conversion of certain Warrants to purchase Common Stock held by
Purchaser. The Common Stock will be issued to Purchaser in a transaction not
involving a public offering and pursuant to an exemption from registration under
the Securities Act of 1933, as amended (the "1933 Act") and applicable state
securities laws. In connection with such purchase and in order to comply with
the exemptions from registration relied upon by the Company, Purchaser
represents, warrants and agrees as follows:
Purchaser is acquiring the Common Stock for its own account, to hold
for investment, and Purchaser shall not make any sale, transfer or other
disposition of the Common Stock in violation of the 1933 Act or the General
Rules and Regulations promulgated thereunder by the Securities and Exchange
Commission (the "SEC") or in violation of any applicable state securities law.
Purchaser has been advised that the Common Stock has not been
registered under the 1933 Act or state securities laws on the ground that this
transaction is exempt from registration, and that reliance by the Company on
such exemptions is predicated in part on Purchaser's representations set forth
in this letter.
Purchaser has been informed that under the 1933 Act, the Common Stock
must be held indefinitely unless it is subsequently registered under the 1933
Act or unless an exemption from such registration (such as Rule 144) is
available with respect to any proposed transfer or disposition by Purchaser of
the Common Stock. Purchaser further agrees that the Company may refuse to permit
Purchaser to sell, transfer or dispose of the Common Stock (except as permitted
under Rule 144) unless there is in effect a registration statement under the
1933 Act and any
<PAGE> 12
applicable state securities laws covering such transfer, or unless Purchaser
furnishes an opinion of counsel reasonably satisfactory to counsel for the
Company, to the effect that such registration is not required.
Purchaser also understands and agrees that there will be placed on the
certificate(s) for the Common Stock, or any substitutions therefor, a legend
stating in substance:
"The shares represented by this certificate have not been
registered under the Securities Act of 1933, as amended (the
"Securities Act"), or any state securities laws. These shares have been
acquired for investment and may not be sold or otherwise transferred in
the absence of an effective registration statement for these shares
under the Securities Act and applicable state securities laws, or an
opinion of counsel satisfactory to the Company that registration is not
required and that an applicable exemption is available."
Purchaser has carefully read this letter and has discussed its
requirements and other applicable limitations upon Purchaser's resale of the
Common Stock with Purchaser's counsel.
Very truly yours,
------------------------------------
By:
---------------------------------
2.
<PAGE> 1
EXHIBIT 11.1
AWARD SOFTWARE INTERNATIONAL, INC.
STATEMENT REGARDING COMPUTATION OF NET INCOME (LOSS) PER SHARE
<TABLE>
<CAPTION>
---------------------------------------------------------------------
THREE MONTH
YEAR ENDED PERIOD ENDED
DECEMBER 31, MARCH 31, 1995 THREE MONTH
SIX MONTHS ENDED --------------- -------------- PERIOD ENDED
In thousands, except per share data DECEMBER 31, 1993 1994 1995 MARCH 31, 1996
----------------- ------ ------ --------------
(Unaudited)
<S> <C> <C> <C> <C> <C>
Net income (loss) $(1,178) $1,258 $1,165 $ 316 $ 386
----------------- ------ ------ -------------- --------------
Weighted average number of shares of
common stock outstanding
Common stock 3,841 3,841 3,611 3,841 3,097
Number of common stock equivalents
as a result of stock
options/warrants outstanding
using the treasury stock method -- -- 423 315 484
Number of common stock issued and
stock options and warrants
granted in accordance with SAB
No. 83 2,466 2,466 2,466 2,466 2,466
----------------- ------ ------ -------------- --------------
Total 6,307 6,307 6,500 6,622 6,047
================= ====== ====== ============== ==============
Net income (loss) per share $ (0.19) $ 0.20 $ 0.18 $ 0.05 $ 0.06
================= ====== ====== ============== ==============
</TABLE>
Net Income (Loss) per Share
Net income (loss) per share is computed using the weighted average number of
common and common equivalent shares, when dilutive, from stock options and
warrants (using the treasury stock method). Pursuant to a Securities and
Exchange Commission Staff Accounting Bulletin, common and common equivalent
shares (using the treasury stock method and the assumed public offering price)
issued by the Company within 12 months prior to the Company's initial public
offering have been included in the calculation as if they were outstanding for
all periods presented.
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<CASH> $6,498,000
<SECURITIES> 0
<RECEIVABLES> 1,921,000
<ALLOWANCES> (79,000)
<INVENTORY> 0
<CURRENT-ASSETS> 8,556,000
<PP&E> 454,000
<DEPRECIATION> (178,000)
<TOTAL-ASSETS> 9,083,000
<CURRENT-LIABILITIES> 1,914,000
<BONDS> 0
0
0
<COMMON> 6,215,000
<OTHER-SE> 954,000
<TOTAL-LIABILITY-AND-EQUITY> 9,083,000
<SALES> 9,130,000
<TOTAL-REVENUES> 9,130,000
<CGS> 636,000
<TOTAL-COSTS> 636,000
<OTHER-EXPENSES> 6,633,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 9,000
<INCOME-PRETAX> 1,957,000
<INCOME-TAX> 792,000
<INCOME-CONTINUING> 1,165,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,165,000
<EPS-PRIMARY> $0.18
<EPS-DILUTED> 0
</TABLE>
