<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 16, 1996
REGISTRATION NO. 333-4613
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
PRE-EFFECTIVE AMENDMENT NO. 3
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
XIONICS DOCUMENT TECHNOLOGIES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
DELAWARE 5008 04-3186685
(I.R.S. EMPLOYER IDENTIFICATION
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL NO.)
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER)
</TABLE>
70 BLANCHARD ROAD
BURLINGTON, MA 01803
(617) 229-7000
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------
ROBERT E. GILKES
PRESIDENT AND
CHIEF EXECUTIVE OFFICER
XIONICS DOCUMENT TECHNOLOGIES, INC.
70 BLANCHARD ROAD
BURLINGTON, MA 01803
(617) 229-7000
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
------------------------
COPIES OF ALL COMMUNICATIONS TO:
<TABLE>
<S> <C> <C>
MICHAEL P. O'BRIEN, ESQ. CAROLYN E. RAMM, ESQ. PAUL V. ROGERS, ESQ.
BINGHAM, DANA & GOULD LLP XIONICS DOCUMENT TECHNOLOGIES, INC. HALE AND DORR
150 FEDERAL STREET 70 BLANCHARD ROAD 60 STATE STREET
BOSTON, MA 02110 BURLINGTON, MA 01803 BOSTON, MA 02109
(617) 951-8000 (617) 229-7000 (617) 526-6000
</TABLE>
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after this Registration Statement is declared effective.
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, as amended, check the following box. / /
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / / __________________
If this form is a post-effective amendment filed pursuant to Rule 462(b)
under the Securities Act, please check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. / / __________________
If delivery of the Prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
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<PAGE> 2
XIONICS DOCUMENT TECHNOLOGIES, INC.
CROSS REFERENCE SHEET
Pursuant to Item 501(b) of Regulation S-K Showing Location
in Prospectus of Part I Items of Form S-1
<TABLE>
<CAPTION>
REGISTRATION STATEMENT
ITEM NUMBER AND CAPTION LOCATION IN PROSPECTUS
------------------------------------- -----------------------------------------------
<C> <S> <C>
1. Forepart of the Registration
Statement and Outside Front Cover
Page of Prospectus................... Outside Front Cover Page
2. Inside Front and Outside Back Cover
Pages of Prospectus.................. Inside Front Cover Page; Reports to
Stockholders; Additional Information; Outside
Back Cover Page
3. Summary Information, Risk Factors and
Ratio of Earnings to Fixed Charges... Prospectus Summary; Risk Factors; The Company
4. Use of Proceeds...................... Prospectus Summary; Risk Factors; Use of
Proceeds
5. Determination of Offering Price...... Outside Front Cover Page; Underwriting
6. Dilution............................. Dilution
7. Selling Security Holders............. Principal and Selling Stockholders
8. Plan of Distribution................. Outside and Inside Front Cover Pages;
Underwriting; Outside Back Cover Page
9. Description of Securities to be
Registered........................... Prospectus Summary; Capitalization; Dividend
Policy; Description of Capital Stock
10. Interests of Named Experts and
Counsel.............................. Not applicable
11. Information with Respect to
Registrant........................... Outside and Inside Front Cover Pages;
Prospectus Summary; Risk Factors; The Company;
Use of Proceeds; Dividend Policy;
Capitalization; Dilution; Selected Consolidated
Financial Data; Management's Discussion and
Analysis of Financial Condition and Results of
Operations; Business; Management; Certain
Transactions; Principal and Selling
Stockholders; Description of Capital Stock;
Shares Eligible for Future Sale; Consolidated
Financial Statements
12. Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities.......................... Not applicable
</TABLE>
<PAGE> 3
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY, NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED JULY , 1996
3,000,000 SHARES
[XIONICS LOGO]
COMMON STOCK
------------------------
Of the 3,000,000 shares of Common Stock being offered hereby, 2,500,000
shares are being sold by the Company and 500,000 shares are being sold by the
Selling Stockholder. See "Principal and Selling Stockholders." The Company will
not receive any of the proceeds from the sale of shares by the Selling
Stockholder.
Prior to this offering, there has been no public market for the Common
Stock of the Company. It is currently estimated that the initial public offering
price will be between $10.00 and $12.00 per share. See "Underwriting" for a
discussion of the factors to be considered in determining the initial public
offering price. The Company intends to apply for quotation and trading of the
Common Stock on the Nasdaq National Market under the symbol "XION."
SEE "RISK FACTORS" COMMENCING ON PAGE 6 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE COMMON STOCK OFFERED
HEREBY.
------------------------
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.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRICE UNDERWRITING PROCEEDS PROCEEDS
TO DISCOUNTS AND TO TO SELLING
PUBLIC COMMISSIONS (1) COMPANY (2) STOCKHOLDER
<S> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------
Per Share............ $ $ $ $
- -----------------------------------------------------------------------------------------------------
Total (3)............ $ $ $ $
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(1) The Company and the Selling Stockholder have agreed to indemnify the
Underwriters against certain liabilities under the Securities Act of 1933,
as amended. See "Underwriting."
(2) Before deducting expenses payable by the Company, estimated at $800,000.
(3) The Company and the Selling Stockholder have granted to the Underwriters a
30-day option to purchase up to 450,000 additional shares of Common Stock
solely to cover over-allotments, if any. If such option is exercised in
full, the total Price to Public, Underwriting Discounts and Commissions,
Proceeds to Company and Proceeds to Selling Stockholder will be $ ,
$ , $ and $ , respectively. See "Underwriting."
------------------------
The shares of Common Stock are offered by the several Underwriters, subject
to receipt and acceptance by them and to their right to reject any order in
whole or in part. It is expected that delivery of the shares of Common Stock
will be made at the offices of Adams, Harkness & Hill, Inc., Boston,
Massachusetts, on or about , 1996.
ADAMS, HARKNESS & HILL, INC. SOUNDVIEW FINANCIAL GROUP, INC.
The date of this Prospectus is , 1996.
<PAGE> 4
[PICTURES]
INTELLIGENT PERIPHERAL SYSTEM
XIONICS DOCUMENT
TECHNOLOGIES, INC.
The information age has created large quantities of complex electronics
documents that must be distributed and printed throughout an organization and
beyond. Xionics' Intelligent Peripheral System provides core page rendering and
processing technologies that OEMs incorporate into the printers they sell into
the office device market.
Internet Network Computer
Intelligent Peripheral System (IPS)
Dataflow Applications Xionics' IPS is designed to
Page Description Languages allow OEMs to improve printer
price/performance, increase
product differentiation and
Core Services meet increasingly short product
IPS Dataflow Operating System development cycles.
OEM Hardware
Documents
Paper
Digital Scanning
The artwork shows the Company's Intelligent Peripheral System interfacing
between documents and complex graphics and the Internet, corporate networks
and individual PC's.
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK OF
THE COMPANY 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.
2
<PAGE> 5
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and the Consolidated Financial Statements and Notes thereto
appearing elsewhere in this Prospectus. Investors should carefully consider the
risk factors related to the purchase of Common Stock of the Company. See "Risk
Factors."
THE COMPANY
Xionics Document Technologies, Inc. ("Xionics" or the "Company") designs,
develops and markets advanced embedded systems technology for use in mainstream
office devices such as printers, copiers and scanners. The Company offers
integrated, modular software products, along with firmware and silicon
technology products, that enable the high-speed capture, processing, printing,
copying and display of complex electronic documents both locally and across
networks. Xionics provides standards-based technology around which its customers
can design, develop and market differentiated products in a timely manner.
Electronic devices for handling paper -- printers, copiers, scanners and
fax machines -- are ubiquitous in the office environment today. According to
Giga Information Group, United States sales of these office devices exceeded $28
billion in 1995 and are expected to grow to more than $32 billion by 1998. End
users are demanding greater speed and throughput, higher-quality output, color
capability and network connectivity, all at lower costs. In addition,
manufacturers of office devices have an increasing need to meet de facto
industry standards in areas such as page rendering, networking and Internet
protocols. In order to meet user demands and comply with industry standards
within a fiercely competitive market, the Company believes that these OEMs
increasingly rely on outside suppliers to provide core, enabling software and
hardware technologies around which the OEMs can develop differentiated products.
Currently, the Company markets both printer software and image accelerator
products. The Company's IPS-Print software products allow printers to convert
commands generated by a software application such as a word-processing program
into marks on the printed page; this page description language software is
compatible with the industry's PostScript and PCL standards. IPS-Print provides
the Company's OEM customers with a number of key benefits including improved
price/performance, reduced time and risk to market and architectural
efficiencies. In addition to IPS-Print, Xionics markets a family of scan,
display and print accelerators. These products incorporate imaging technologies
such as data compression/decompression, digital signal processing and digital
image enhancement, and are used to accelerate the high-volume scanning, display
and printing of business transaction records. See "Business -- The Xionics
Solution."
Building on its core competencies in the areas of print and imaging and on
its existing relationships with office device manufacturers, the Company is
developing an expanded version of IPS into what it believes will be an advanced
comprehensive solution that meets design requirements for higher-performance and
cost-effective controllers for multifunction peripheral devices ("MFPs"). MFPs
combine several paper-handling functions (e.g. printing, copying, scanning
and/or faxing) in one device. Currently, the market for MFP devices has been
limited by the technical inability of OEMs to produce a device meeting
mainstream office requirements for price, performance and quality.
The Company markets and sells its products worldwide primarily through a
direct sales force and through value-added resellers and distributors. As of May
1, 1996, the Company had licensed its printer software products to over 35 OEMs
including Hewlett-Packard Company, Seiko Epson Corporation, Sharp Corporation
and Xerox Corporation, and had more than 20 distributors of its imaging
products. In March 1996, the Company agreed to expand its relationship with
Hewlett-Packard by licensing certain of its page description technology to
Hewlett-Packard. The Company will continue to cultivate relationships with other
major OEMs in an effort to leverage the OEMs' ability to bring significant
investment and marketing resources to the distribution of new products. As of
May 1, 1996 the Company had 162 full-time employees, including 101 in product
development. See "Business -- Sales and Marketing," "-- Customers" and "--
Employees."
3
<PAGE> 6
THE OFFERING
<TABLE>
<S> <C>
Common Stock offered by:
The Company ................................. 2,500,000 shares
The Selling Stockholder ..................... 500,000 shares
Common Stock to be outstanding after the
offering........................................ 10,043,675 shares(1)(2)
Use of proceeds................................... Net proceeds to the Company estimated to
be approximately $24.8 million, to be
used to repay certain indebtedness of the
Company, for working capital and other
general corporate purposes. See "Use of
Proceeds."
Proposed Nasdaq National Market symbol............ XION
</TABLE>
- ---------------
(1) Based on the number of shares of Common Stock outstanding as of May 31,
1996. Excludes 3,819,038 shares of Common Stock reserved for issuance under
the Company's stock option and purchase plans, of which 2,514,537 shares
were subject to outstanding options as of May 31, 1996 at a weighted average
exercise price of $0.56 per share. See "Capitalization" and
"Management -- Stock Option Plans."
(2) Reflects the conversion, upon the completion of this offering, of all
outstanding shares of the Company's Convertible Preferred Stock into
5,904,666 shares of Common Stock.
SUMMARY CONSOLIDATED FINANCIAL INFORMATION
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED JUNE 30, MARCH 31,
------------------------------------ -----------------------
1992 1993 1994 1995 1995 1996
------- ------- ------ ------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
(IN THOUSANDS, EXCEPT PER SHARE DATA)
STATEMENT OF OPERATIONS DATA:
Net revenue.............................. $ 8,078 $ 8,691 $9,131 $15,577 $ 10,760 $ 15,536
Cost of revenue.......................... 3,615 3,895 2,896 4,681 3,176 4,281
------- ------ ------ ------- ------- -------
Gross profit............................. 4,463 4,796 6,235 10,896 7,584 11,255
Operating expenses:
Research and development............... 682 958 1,308 6,235 4,365 6,347
Selling, general and administrative.... 5,700 3,755 4,674 6,901 4,876 7,032
Charge for purchased research and
development......................... -- -- -- 3,492 3,492 --
------- ------ ------ ------- ------- -------
Income (loss) from operations............ (1,919) 83 252 (5,733) (5,149) (2,124)
Other income (expense), net.............. 346 5 (9) (292) (192) (152)
------- ------ ------ ------- ------- -------
Net income (loss)........................ $(1,573) $ 88 $ 243 $(6,025) $ (5,341) $ (2,276)
======= ====== ====== ======= ======= =======
Pro forma net loss per common and common
equivalent share(1).................... $ (0.27)
=======
Pro forma weighted average number of
common and common equivalent shares
outstanding............................ 8,317
=======
Supplemental pro forma net loss per
common and common equivalent
share(2)............................... $ (0.25)
=======
Supplemental pro forma weighted average
number of common and common equivalent
shares outstanding..................... 8,534
=======
</TABLE>
RECENT OPERATING RESULTS:
The Company's net revenue increased 71.6% to $8.3 million for the three
months ended June 30, 1996 compared to $4.8 million for the three months ended
June 30, 1995. Net income was $743,000 for the three months ended June 30, 1996
compared to a net loss of $684,000 for the three months ended June 30, 1995.
4
<PAGE> 7
<TABLE>
<CAPTION>
MARCH 31, 1996
-------------------------------------------
PRO FORMA
ACTUAL PRO FORMA(3) AS ADJUSTED(4)
------- ------------ --------------
<S> <C> <C> <C>
(IN THOUSANDS)
BALANCE SHEET DATA:
Cash and cash equivalents............................ $10,057 $ 5,257 $ 27,845
Working capital...................................... 6,254 1,454 24,090
Total assets......................................... 16,819 12,019 34,607
Long-term debt, net of current maturities............ 3,014 2,374 280
Redeemable preferred stock........................... 12,600 -- --
Stockholders' equity (deficit)....................... (7,525) 915 25,690
</TABLE>
(1) Computed on the basis described in Note 1 of Notes to Consolidated Financial
Statements included elsewhere in this Prospectus.
(2) Computed on the basis described in Note 1 of Notes to Consolidated Financial
Statements, adjusted for the increase in the number of shares of Common
Stock issued pursuant to the proposed offering sufficient to generate
proceeds for the payment of $2.1 million of a secured promissory note
payable upon the consummation of the offering.
(3) Adjusted to give effect to the transactions and events described in the last
paragraph of this Prospectus Summary. In addition, the pro forma statements
reflect the credit to additional paid-in capital of all accumulated
dividends on the Class C Redeemable Convertible Preferred Stock and the
Class D Preferred Stock. See "Certain Transactions."
(4) Adjusted to give effect to the sale of 2,500,000 shares of Common Stock by
the Company offered hereby at an assumed initial public offering price of
$11.00 per share and the application of the estimated net proceeds therefrom
to the repayment of $2.1 million in principal amount and $93,000 of accrued
interest payable on the secured promissory note payable to Phoenix
Technologies Ltd. See "Use of Proceeds" and "Capitalization."
----------------------------
Except as otherwise noted, all information in this Prospectus (i) assumes
no exercise of the Underwriters' over-allotment option, (ii) reflects the
conversion of $340,000 in principal amount of the secured promissory note
payable to Phoenix Technologies Ltd. into 116,979 shares of Class C Redeemable
Convertible Preferred Stock and the repayment of an additional $300,000 in
principal amount of such note, each of which occurred in May 1996, (iii) assumes
the conversion of all issued Class A Convertible Preferred Stock, Class C
Redeemable Convertible Preferred Stock and Class B Common Stock of the Company
into Class A Common Stock, (iv) reflects the redesignation of all shares of
Class A Common Stock as "Common Stock," (v) reflects the repurchase of 1,000,000
shares of Class D Preferred Stock of the Company from Adobe Systems Incorporated
at a repurchase price of $4.5 million, and (vi) has been adjusted to give effect
to the amendment and restatement of the Company's Certificate of Incorporation
effective immediately prior to the closing of this offering. See
"Capitalization," "Description of Capital Stock," "Underwriting" and "Certain
Transactions."
5
<PAGE> 8
RISK FACTORS
The following risk factors should be considered carefully in addition to
the other information in this Prospectus before purchasing the Common Stock
offered by this Prospectus.
Operating Losses; Accumulated Deficit. The Company reported net losses of
approximately $6.0 million for the fiscal year ended June 30, 1995 and
approximately $2.3 million for the nine months ended March 31, 1996, although it
reported net income of approximately $243,000 for the fiscal year ended June 30,
1994. Losses have resulted in an accumulated deficit of approximately $12.1
million as of March 31, 1996. There can be no assurance that the Company will
achieve profitability on a quarterly or annual basis in the future. See
"Selected Consolidated Financial Data" and "Management's Discussion and Analysis
of Financial Condition and Results of Operations."
Potential Fluctuations in Quarterly Results. The Company has in the past
experienced, and may in the future experience, significant fluctuations in
quarterly operating results, which have been and may be caused by many factors,
including: the timing of introductions of new products or product enhancements
by the Company, its original equipment manufacturer ("OEM") customers or its
competitors; personnel changes; the size and timing of individual orders;
product returns from the Company's distribution channels; the types of products
sold and the range of gross margins attributable to each type of product;
software bugs or other product quality problems; competition and pricing;
customer order deferrals in anticipation of new products or product
enhancements; changes in operating expenses; and general economic conditions. A
substantial portion of the Company's operating expenses are related to
personnel, development of new products, facilities and marketing programs. The
level of spending for such expenses cannot be adjusted quickly and is based, in
significant part, on the Company's expectations of future revenue. If actual
revenue levels are below management's expectations, the Company's business,
results of operations and financial condition may be materially adversely
affected. Furthermore, the Company has often recognized a substantial portion of
its revenue in the last month of a quarter, with such revenue frequently
concentrated in the last weeks or days of a quarter. As a result, because one or
more key orders that are scheduled to be booked and shipped at the end of a
quarter may be delayed until the beginning of the next quarter, revenue for
future quarters is not predictable with any significant degree of accuracy. For
these reasons, the Company believes that period-to-period comparisons of its
results of operations 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."
Relationship with Hewlett-Packard; Right of First Refusal. Since September
1994, the Company has had a significant relationship with Hewlett-Packard
Company ("Hewlett-Packard") pursuant to which the Company supplies printer
software and related technology and support. For the three fiscal quarters ended
September 30, 1995, December 31, 1995 and March 31, 1996, revenue from the
Company's licensing and support arrangements with Hewlett-Packard accounted for
5.6%, 4.6% and 34.1%, respectively, of the Company's net revenue. The Company
expects that revenue from its relationship with Hewlett-Packard will continue to
represent a material percentage of the Company's net revenue for the foreseeable
future. Any termination or material deterioration of the Company's relationship
with Hewlett-Packard would have a material adverse effect on the business,
results of operations and financial condition of the Company. See
"Business -- Customers."
In March 1996, the Company entered into an amendment of its preexisting
development and license agreement with Hewlett-Packard. Under the amended
agreement (the "HP Agreement"), the Company licensed certain of its page
description technology to Hewlett-Packard. Payments under the HP Agreement
include the Company's charges for source code access, engineering services,
software license rights and ongoing maintenance and support. Future payments
under the HP Agreement are contingent on the satisfaction of performance
milestones by the Company. There can be no assurance that the Company will meet
these performance milestones. Hewlett-Packard has the right to terminate the HP
Agreement upon a failure by the Company to comply with any of the provisions of
the HP Agreement that is not cured within 30 days, and upon the commencement of
certain bankruptcy or insolvency proceedings involving the Company. Any material
failure by the Company to meet the performance milestones or any termination of
6
<PAGE> 9
the HP Agreement by Hewlett-Packard would have a material adverse effect on the
business, results of operations and financial condition of the Company. See
"Business -- Customers" and "Management's Discussion and Analysis of Financial
Condition and Results of Operations."
Pursuant to the HP Agreement, the Company has granted to Hewlett-Packard a
right of first refusal if the Company proposes to enter into or participate in a
"control transaction" with a third party. "Control transactions" include, among
other things, certain mergers or consolidations, sales or exclusive licenses of
certain assets or intellectual property of the Company, and sales of stock,
share exchanges or other transactions that constitute a change in control of the
Company. The right of first refusal will expire on the earlier of the first
anniversary of the effective date of the Registration Statement of which this
Prospectus is a part or September 30, 1998. The existence of the right of first
refusal may discourage third parties from entering into "control transactions"
with the Company, and may have a negative impact on the trading price of the
Common Stock. See "Business -- Customers."
Dependence on Market Success of Third Parties; Significant Customers. A
material portion of the Company's customers are, and the Company expects that a
material portion of its customers will continue to be, OEMs. The Company's
revenue is dependent, among other things, upon the ability of these customers to
develop and sell products to end users. Factors affecting the ability of the
Company's OEM customers to develop and sell their products include competition,
their ability to develop products that meet user requirements at acceptable
prices, patent and other intellectual property issues, and overall economic
conditions. The Company's business, results of operations and financial
condition could be materially adversely affected if its OEM customers are
unsuccessful in developing and/or selling their products. There are certain
additional risks associated with OEM relationships, including whether sufficient
priority will be given by the Company's OEM partners to marketing products which
incorporate the Company's products and whether such OEM partners will continue
to offer such products. The loss of one or more of the Company's OEM partners or
the inability to establish additional relationships with OEM partners could have
a material adverse effect on the Company's business, results of operations and
financial condition. Lexmark International Group, Inc. ("Lexmark"), royalty
payments from which accounted for 9.5% of the Company's net revenue for the nine
months ended March 31, 1996, is not required to include the Company's printer
software products in its printers after December 31, 1996. The Company has
received no indication that the Company will receive royalties from Lexmark
after that date. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and "Business -- Customers."
Sales to the Company's three largest OEM customers, Hewlett-Packard,
Lexmark and Xerox, accounted for approximately 20.8% of the Company's net
revenue for the fiscal year ended June 30, 1995, and approximately 35.3% of the
Company's net revenue for the nine months ended March 31, 1996. There can be no
assurance that the Company's major customers will place additional orders of
similar magnitude in future quarters, or that the Company will obtain orders of
similar magnitude from other customers. The Company's business, results of
operations and financial condition could be materially adversely affected if any
present or future OEM customer were to reduce its level of orders, were to
experience financial, operational or other difficulties that resulted in a
reduction of orders to the Company or were to delay paying or fail to pay
amounts due the Company from such customer. See "Business -- Customers."
Technological Change; Difficulties and Risks Associated with New Product
Development and Introduction. Since its inception, the Company has derived
substantially all of its revenue from the sale of software, hardware and related
technologies that enable the printing and imaging of complex electronic
documents. Such products (including those currently under development) are
expected to continue to account for all or a substantial portion of the
Company's future revenue. The Company expects that revenue from sales of its
imaging products will decrease as a percentage of total revenue over time.
The market for the Company's products is characterized by rapidly changing
technology, evolving industry standards and frequent new product introductions.
The Company's near-term success and future growth are substantially dependent
upon continuing market acceptance of its existing products, and on the Company's
ability to develop new products to meet changing customer requirements and
emerging
7
<PAGE> 10
industry standards. In addition, there can be no assurance that products or
technologies of the Company's competitors will not render the Company's products
or technologies noncompetitive or obsolete.
The Company's future success is dependent to a significant degree on its
ability to develop its embedded technology for multifunction peripheral devices
("MFPs") in the time frame required by its OEM customers, and to develop such
technology to provide the quality, throughput, speed and data handling
capability required by its OEM customers. To date, the Company has not completed
development of its embedded MFP technology, which will require the Company to
complete development of an advanced core application-specific integrated
circuit, or ASIC. The required advanced core ASIC is a significantly more
complex ASIC than those previously developed by the Company. There can be no
assurance that the Company will be successful in developing such technology,
that unanticipated problems or delays in future development and production will
not be encountered or that, once developed, the Company's embedded MFP
technology will meet its performance specifications under all conditions or for
all anticipated applications. The market success of entities providing embedded
software products for paper handling devices has historically been largely
determined by their success in becoming one of the industry standards. This has
often been accomplished by being one of the first companies to successfully
market a particular product. Management believes that the Company's ability to
be one of the first companies to successfully develop MFP technologies will
largely determine its future success in the MFP market. Therefore, any failure
by the Company to be one of the first companies to successfully market its MFP
technology could have a material adverse effect on the business, results of
operations and financial condition of the Company. See "Business -- Strategy."
Significance of Developing Market. The market for MFPs is new and rapidly
evolving. The Company's future success is dependent to a significant degree upon
broad market acceptance of the type of MFP products on which the Company is
focusing its development efforts. This success will be dependent in part on the
ability of the Company's OEM customers to develop MFP products that provide the
functionality, performance, speed and network connectivity demanded by the
market at acceptable price points, and to convince end users to adopt MFP
products for office and desktop use. There can be no assurance that the market
for MFP products will develop, that the Company's OEM customers will be
successful in developing MFP products that gain market acceptance, that the
Company will be able to offer in a timely manner, if at all, its MFP technology
or that the Company's OEM customers will choose the Company's products for use
in their MFP products. The failure of any of these events to occur would have a
material adverse effect on the business, results of operations and financial
condition of the Company. See "Business -- Developing Market for Multifunction
Peripheral Devices."
Competition. The market for embedded systems technology for office devices
is highly competitive. The Company has numerous competitors whose products
compete with one or more of the Company's products. The embedded printer systems
software products of Adobe Systems Incorporated ("Adobe"), which is
significantly larger than the Company and has significantly greater resources
and name recognition than the Company, compete directly against certain of the
products of the Company in the market for embedded printer systems software. In
addition, the Company's document imaging acceleration products compete with
similar products sold by a small number of competitors. As the Company enters
new markets, including the market for embedded MFP technologies, it expects to
encounter competition from additional competitors, many of whom may also have
greater resources and name recognition than the Company. In addition, the
rapidly evolving nature of the markets in which the Company currently competes
and expects to compete in the future may attract other entrants as they perceive
opportunities, and the Company's competitors may foresee the course of market
developments more accurately than the Company. Increased or unanticipated
competition may result in price reductions, reduced profit margins or loss of
market share, any of which could materially adversely affect the Company's
business, results of operations and financial condition. There can be no
assurance that the Company will be able to compete successfully against current
or future competitors, or that competitive pressures faced by the Company will
not have a material adverse effect on the business, results of operations and
financial condition of the Company. See "Business -- Competition."
8
<PAGE> 11
Termination of Relationship with Adobe; Increased Competition. On May 16,
1996, the Company and Adobe terminated an agreement pursuant to which Adobe and
the Company were collaborating to incorporate certain Adobe software products
into the Company's embedded MFP technology under development. The relationship
was terminated by mutual agreement of the parties after it became apparent that
the two companies' strategic directions had diverged, and that competition
between them in the embedded printer software market had intensified. In
addition, on May 16, 1996, the Company redeemed all of the stock of the Company
held by Adobe that had been acquired by Adobe in December 1995 in connection
with such agreement. Adobe, which competes with the Company in the sale of
certain of the Company's core software products, is significantly larger than
the Company and has significantly greater resources and name recognition than
the Company. As a result of the termination of the technology and investment
arrangements between Adobe and the Company, Adobe may compete more directly with
the Company, and may enter into one or more arrangements with competitors of the
Company to develop products to compete with the Company's proposed MFP products.
There can be no assurance that Adobe will not be able to develop a product that
competes with, or is more competitive than, the Company's embedded systems
technology for MFP devices, or that Adobe will not be able to develop such a
product in a shorter time frame. Because of Adobe's greater resources and name
recognition, there can be no assurance that the Company will be able to compete
effectively with Adobe. The potential increased competition in the development
of embedded systems technology for MFP devices as well as in the Company's
existing printer software business could have a material adverse effect on the
business, results of operations and financial condition of the Company. See
"Business -- Competition" and "Certain Transactions."
Effect of Rapid Growth on Existing Resources. The Company has grown
rapidly in recent years. A continuing period of rapid growth could place a
significant strain on the Company's management, operations and other resources.
The Company's ability to manage its growth will require it to continue to invest
in its operational, financial and management information systems, and to
attract, retain, motivate and effectively manage its employees. The inability of
the Company's management to manage growth effectively would have a material
adverse effect on the business, results of operations and financial condition of
the Company.
Proprietary Technology and Product Protection. The Company's success
depends on its ability to maintain the proprietary and confidential aspects of
its products as they are released. The Company seeks to use a combination of
patents, copyrights, employee non-disclosure agreements and other means to
establish and protect its proprietary rights. The Company holds two patents,
which will expire in 2011 and 2013, respectively. There can, however, be no
assurance that the precautions taken by the Company adequately protect the
Company's technology. In addition, many of the Company's competitors have
obtained or developed, and may be expected to obtain or develop in the future,
patents, copyrights or other proprietary rights that cover or affect products
that perform functions similar to those performed by products offered by the
Company. The inability of the Company for any reason to protect existing
technology or otherwise acquire necessary technology could prevent distribution
or licensing of the Company's products, which would have a material adverse
effect on the business, results of operations and financial condition of the
Company. See "Business -- Intellectual Property."
Potential Infringement of Proprietary Technology. Although the Company
believes that its products do not infringe patents or other proprietary rights
of third parties, there can be no assurance that the Company is aware of all
patents or other proprietary rights that may be infringed by the Company's
products, that any infringement does not exist or that infringement may not be
alleged by third parties in the future. If infringement is alleged, there can be
no assurance that the necessary licenses would be available on acceptable terms,
if at all, or that the Company would prevail in any related litigation. Patent
litigation can be extremely protracted and expensive even if the Company
ultimately prevails, and involvement in such litigation could have a material
adverse effect on the business, results of operations and financial condition of
the Company. See "Business -- Intellectual Property."
Dependence on Distributors. The Company has derived a material portion of
its revenue from sales of its scan, display and print accelerator products
through independent distributors. The Company expects
9
<PAGE> 12
that sales of these products through its distributors will continue to account
for a substantial portion of its revenue for the foreseeable future. The Company
currently maintains distribution agreements with, among others, Law Cypress
Distributing Co. ("Law Cypress") and Tech Data Corporation. Sales to these two
distributors accounted for 17.0% and 16.7% of the Company's net revenue in
fiscal 1995 and in the nine months ended March 31, 1996, respectively. Each of
the Company's distributors can cease marketing the Company's products with
limited notice and with little or no penalty. There can be no assurance that the
Company's independent distributors will continue to offer the Company's products
or that the Company will be able to recruit additional or replacement
distributors. The loss of one or more of the Company's major distributors could
have a material adverse effect on the Company's business, operating results and
financial condition. Many of the Company's distributors offer competitive
products manufactured by third parties. There can be no assurance that the
Company's distributors will give priority to the marketing of the Company's
products as compared to competitors' products. Any reduction or delay in sales
of the Company's products by its distributors would have a material adverse
effect on the business, results of operations and financial condition of the
Company. See "Business -- Customers."
Dependence on Outside Suppliers. The Company relies on various suppliers
of components for its products. Many of these components are standard and
generally available from multiple sources. However, there can be no assurance
that alternative sources of such components will be available at acceptable
prices or in a timely manner. Any shortages or interruptions in the supply of
any of the components used in the Company's products, or the inability of the
Company to procure these components from alternate sources on acceptable terms,
would have a material adverse effect upon the Company's business, operating
results and financial condition. In addition, the ASIC technology for the
Company's embedded systems technology for MFP devices, which is being developed
by the Company in cooperation with IBM Microelectronics Division ("IBM
Microelectronics"), will be available only from IBM Microelectronics. Although
the Company believes it could develop other sources for this custom component,
no alternative source currently exists and the process could take several months
or longer. Therefore, the inability or refusal of IBM Microelectronics to
continue to supply this component could have a material adverse effect on the
business, results of operations and financial condition of the Company. See
"Business -- Operations."
Dependence on Key Personnel. The Company is largely dependent upon the
skills and efforts of its senior management and other officers and key
employees. The Company does not have employment agreements with any of its
officers or key employees providing for their employment for any specific term.
The loss of key personnel or the inability to hire or retain qualified personnel
could have a material adverse effect on the business, results of operations and
financial condition of the Company. See "Management."
International Activities. Revenue from sales to the Company's customers
outside the United States accounted for 42.1%, 43.2% and 28.0% of the Company's
net revenue for the fiscal years ended June 30, 1994 and June 30, 1995 and the
nine months ended March 31, 1996, respectively. The Company expects sales to
customers located outside the United States to increase in significance as it
expands its international marketing and distribution efforts for its OEM
products. The international market for products such as those produced and
proposed to be produced by the Company is highly competitive and the Company
expects to face substantial competition in this market from established and
emerging companies. Risks inherent in the Company's international business
activities also include currency restrictions and fluctuations, the imposition
of government controls, export license requirements, restrictions on the export
of critical technology, political and economic instability, tailoring of
products to local requirements, trade restrictions, changes in tariffs and
taxes, difficulties in staffing and managing international operations, longer
accounts receivable payment cycles and the burdens of complying with a wide
variety of foreign laws and regulations. There can be no assurance that any of
these factors will not have a material adverse effect on the business, results
of operations and financial condition of the Company.
No Prior Public Market; Determination of Public Offering Price; Possible
Volatility of Stock Price. Before this offering, there was no public market for
the Common Stock, and there can be no assurance that an active trading market
will develop or be sustained. The initial public offering price will be
determined by negotiation between the Company and the representatives of the
Underwriters based on several factors,
10
<PAGE> 13
including prevailing market conditions and recent operating results of the
Company, and may not be indicative of the market price of the Common Stock after
this offering. The trading price of the Common Stock could also be subject to
significant fluctuations in response to variations in quarterly results of
operations, announcements of new products by the Company or its competitors,
other developments or disputes with respect to proprietary rights, general
trends in the industry, overall market conditions and other factors. In
addition, the stock market historically has experienced extreme price and volume
fluctuations which have particularly affected the market price of securities of
many high technology companies, and which have sometimes been unrelated to the
operating performance of such companies. These market fluctuations may adversely
affect the market price of the Common Stock. See "Underwriting."
Shares Eligible for Future Sale. Sales of substantial amounts of shares of
the Company's Common Stock in the public market following this offering could
adversely affect the market price of the Common Stock. On the date of this
Prospectus, only the 3,000,000 shares offered hereby will be eligible for sale
in the public market and no additional shares will be eligible for immediate
sale in the public market pursuant to Rule 144(k) under the Securities Act of
1933, as amended (the "Securities Act"). Approximately 90,154 additional shares
of Common Stock, which are not subject to 180-day lock-up agreements (the
"Lock-up Agreements") with the representatives of the Underwriters or the
Company, will be eligible for sale in the public market in accordance with Rule
144 or Rule 701 under the Securities Act beginning 90 days after the date of
this Prospectus. Upon expiration of the Lock-up Agreements 180 days after the
date of this Prospectus, approximately 4,224,430 shares of Common Stock will be
eligible for sale in the public market, subject to the provisions of Rule 144
under the Securities Act. In addition, promptly upon expiration of the Lock-up
Agreements, the Company intends to register approximately 3,819,038 shares of
Common Stock issuable under its employee and director stock option plans and
employee stock purchase plan. At May 31, 1996, 1,867,870 shares of Common Stock
were issuable pursuant to vested options under the Company's employee stock
option plans. In addition, the holders of approximately 6,407,204 shares of
Common Stock will have certain rights to registration of these shares under the
Securities Act. See "Shares Eligible for Future Sale" and "Underwriting."
Unspecified Use of Proceeds. The principal purposes of this offering are
to increase the Company's working capital and financial flexibility, to
facilitate future access by the Company to public equity markets and to provide
increased visibility, credibility and name recognition for the Company in a
marketplace where many of its competitors are publicly held companies. The
Company intends to use the net proceeds to repay certain indebtedness and for
working capital and other general corporate purposes. A portion of the proceeds
may be used for the acquisition and/or development of complementary products,
technologies and/or businesses. The Company has not as yet identified specific
uses for a majority of the net proceeds, and, pending such uses, the Company
expects that it will invest such net proceeds in short-term, interest-bearing
investment-grade securities. Accordingly, the Company's management will have
broad discretion as to the use of such net proceeds without any action or
approval of the Company's stockholders. See "Use of Proceeds."
Control by Existing Stockholders. Upon the completion of this offering,
the current officers, directors and principal stockholders of the Company will
beneficially own approximately 59.4% of the outstanding shares of the Common
Stock of the Company. Accordingly, such persons, if they act together, will have
effective control over the Company through their ability to control the election
of directors and all other matters that require action by the Company's
stockholders, irrespective of how other stockholders may vote. Such persons
could prevent or delay a change in control of the Company which may be favored
by a majority of the remaining stockholders. Such ability to prevent or delay
such a change in control of the Company also may have an adverse effect on the
market price of Common Stock. See "Management -- Executive Officers and
Directors," "Principal Stockholders" and "Description of Capital Stock."
Dividends. The Company intends to retain all available funds for use in
the operation and expansion of its business and therefore does not anticipate
that any cash dividends will be declared or paid in the
11
<PAGE> 14
foreseeable future. Under the terms of the Company's working capital and term
loan credit facilities, the Company is prohibited from declaring or paying
dividends on its Common Stock. See "Dividend Policy" and "Management's
Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources."
Effect of Anti-takeover Provisions. Certain provisions of the Company's
Amended and Restated Certificate of Incorporation (the "Charter") and Amended
and Restated By-laws (the "By-laws") and of Delaware law could have the effect
of making it more difficult for a third party to acquire, or of discouraging a
third party from attempting to acquire, control of the Company. Such provisions
could limit the price that investors might be willing to pay in the future for
Common Stock. These provisions will require that the Company have a Board of
Directors comprised of three classes of directors with staggered terms of
office, provide for the issuance of "blank check" preferred stock by the Board
of Directors without stockholder approval, require super-majority approval to
amend certain provisions in the Charter and By-laws, require that all
stockholder actions be taken at duly called annual or special meetings and not
by written consent, and impose various procedural and other requirements that
could make it more difficult for stockholders to effect certain corporate
actions. Furthermore, the Company is subject to the anti-takeover provisions of
Section 203 of the Delaware General Corporation Law, which prohibits the Company
from engaging in a "business combination" with an "interested stockholder" for a
period of three years after the date of the transaction in which the person
first becomes an "interested stockholder," unless the business combination is
approved in a prescribed manner. The application of Section 203 could also have
the effect of delaying or preventing a change of control of the Company. See
"Description of Capital Stock."
Dilution. Purchasers of Common Stock in the offering will experience
immediate and substantial dilution of $8.46 per share, assuming an initial
public offering price of $11.00 per share, in net tangible book value per share
of Common Stock from the initial public offering. See "Dilution."
12
<PAGE> 15
THE COMPANY
The Company was incorporated in Delaware on December 30, 1992 under the
name Xionics International Holdings, Inc., although a predecessor to the Company
was formed prior to 1985. In May 1995, the Company changed its name to Xionics
Document Technologies, Inc. Unless the context otherwise requires, references
herein to the "Company" refer to Xionics Document Technologies, Inc. and its
wholly-owned subsidiaries. The Company's executive offices are at 70 Blanchard
Road, Burlington, Massachusetts 01803. Its telephone number is 617-229-7000.
The following are trademarks of the Company: Xionics(R), Intelligent
Peripheral System, Lightning, PeripheralPower, PowerLightning, PowerTools,
XipApp, XipChannel, XipChip, XipPower, XipPrint(R) and XipView(R). This
Prospectus also includes trademarks and trade names of companies other than
Xionics. PostScript(TM) is a trademark of Adobe Systems Incorporated which may
be registered in certain jurisdictions. All other company or product names are
trademarks or registered trademarks of their respective owners.
USE OF PROCEEDS
The net proceeds to the Company from the sale of the 2,500,000 shares of
Common Stock offered by the Company hereby at an assumed initial public offering
price of $11.00 per share, after deducting the underwriting discount and
estimated offering expenses payable by the Company, are estimated to be
approximately $24.8 million. The principal purposes of this offering are to
increase the Company's working capital and financial flexibility, to facilitate
future access by the Company to public equity markets, and to provide increased
visibility, credibility and name recognition for the Company in a marketplace
where many of its competitors are publicly held companies. The Company will not
receive any of the proceeds from the sale of shares by Phoenix Technologies Ltd.
(the "Selling Stockholder"). See "Principal and Selling Stockholders."
The Company expects to use approximately $2.2 million of the net proceeds
to prepay the outstanding indebtedness, including accrued interest payable, of
the Company to the Selling Stockholder under a promissory note issued in
connection with the purchase by the Company of certain assets of the Peripherals
Division of the Selling Stockholder in October 1994. The promissory note bears
interest at a rate of 8.0% per annum, payable quarterly, and will mature on
October 15, 2001. The Company plans to use the remaining proceeds of this
offering for working capital and other general corporate purposes, including the
possible acquisition and/or development of complementary products, technologies
and/or businesses. While the Company continually evaluates potential
acquisitions, the Company has no present agreements or commitments with respect
to any acquisitions, nor are any negotiations regarding any acquisitions
currently ongoing. Pending such uses, the net proceeds of this offering will be
invested in short-term, interest-bearing investment-grade securities. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources."
DIVIDEND POLICY
The Company has never declared or paid any cash dividends on Common Stock.
The Company currently intends to retain future earnings, if any, to fund the
development and growth of its business and does not anticipate paying any cash
dividends on Common Stock in the foreseeable future. The Board of Directors of
the Company intends to review this policy from time to time, after taking into
account various factors such as the Company's financial condition, results of
operations, current and anticipated cash needs and plans for expansion. Under
the terms of the Company's working capital and term loan credit facilities, the
Company is currently prohibited from paying dividends on Common Stock.
13
<PAGE> 16
CAPITALIZATION
The following table sets forth the capitalization of the Company as of
March 31, 1996 on an actual, pro forma and pro forma as adjusted basis to
reflect the application of the estimated net proceeds from the sale of 2,500,000
shares of Common Stock offered by the Company hereby at an assumed initial
public offering price of $11.00 per share. The capitalization information set
forth in the table below is qualified by the more detailed Consolidated
Financial Statements and Notes thereto included elsewhere in this Prospectus,
and should be read in conjunction with such Consolidated Financial Statements
and Notes.
<TABLE>
<CAPTION>
MARCH 31, 1996
----------------------------------------
PRO FORMA
ACTUAL PRO FORMA(1) AS ADJUSTED(2)
-------- ------------ --------------
(IN THOUSANDS)
<S> <C> <C> <C>
Equipment line of credit, current portion.................................. $ 161 $ 161 $ 161
======= ======= =======
Equipment line of credit, net of current portion........................... $ 280 $ 280 $ 280
Secured promissory note payable to stockholder, net of current portion..... 2,734 2,094 --
Redeemable convertible preferred stock:
Class B redeemable preferred stock, $.01 par value --
Authorized, issued and outstanding -- none (no shares pro forma or pro
forma as adjusted)..................................................... -- -- --
Class C redeemable convertible preferred stock, $.01 par value --
Authorized -- 2,779,615 shares
Issued and outstanding -- 2,662,636 shares, stated at liquidation
value, at March 31, 1996 (no shares pro forma or pro forma as
adjusted).............................................................. 8,010 -- --
Class D preferred stock, $.01 par value --
Authorized -- 1,100,000 shares
Issued and outstanding -- 1,000,000 shares, stated at liquidation
value, at March 31, 1996 (no shares pro forma or pro forma as
adjusted).............................................................. 4,590 -- --
Stockholders' equity (deficit):
Preferred stock, $.01 par value --
Authorized -- 10,000,000 shares
Issued and outstanding -- none (no shares pro forma or pro forma as
adjusted).............................................................. -- -- --
Class A convertible preferred stock, $.01 par value --
Authorized -- 3,603,305 shares
Issued and outstanding -- 3,125,051 shares at March 31, 1996 (no shares
pro forma or pro forma as adjusted).................................... 3,607 -- --
Common stock, $.01 par value --
Authorized -- 40,000,000 shares
Issued and outstanding -- no shares at March 31, 1996, (7,768,986
shares pro forma and 10,268,986 shares pro forma as adjusted).......... -- 78 103
Common stock, class A --
Authorized -- 20,000,000 shares
Issued -- 1,386,066 at March 31, 1996
Outstanding -- 1,147,943 at March 31, 1996
(no shares pro forma or pro forma as adjusted)......................... 13 -- --
Common stock, class B --
Authorized -- 10,000,000 shares
Issued and outstanding -- 478,254 shares at March 31, 1996 (no shares
pro forma or pro forma as adjusted).................................... 5 -- --
Additional paid-in capital............................................... 1,111 13,098 37,848
Accumulated deficit...................................................... (12,100) (12,100) (12,100)
Treasury stock, 238,123 shares of common stock........................... (161) (161) (161)
------- ------- -------
Total stockholders' equity (deficit).............................. (7,525) 915 25,690
------- ------- -------
Total capitalization.............................................. $ 8,089 $ 3,289 $ 25,970
======= ======= =======
</TABLE>
- ---------------
(1) Adjusted to give effect to (i) the repurchase of 1,000,000 shares of Class D
Preferred Stock at a repurchase price of $4.50 per share, (ii) the
conversion of $340,000 in principal amount of the secured promissory note
payable to Phoenix Technologies Ltd. into 116,979 shares of Class C
Redeemable Convertible Preferred Stock and the repayment of an additional
$300,000 in principal amount of such note, (iii) the automatic conversion of
the Class C Redeemable Convertible Preferred Stock and the Class A
Convertible Preferred Stock into 5,904,666 shares of Class A Common Stock,
(iv) the automatic conversion of all outstanding shares of Class B Common
Stock into 478,254 shares of Class A Common Stock and (v) the redesignation
of all shares of Class A Common Stock as "Common Stock." In addition, the
pro forma statements reflect the credit to additional paid-in capital of all
accumulated dividends on the Class C Redeemable Convertible Preferred Stock
and the Class D Preferred Stock.
(2) Adjusted to give effect to the sale of 2,500,000 shares of Common Stock by
the Company offered hereby at an assumed initial public offering price of
$11.00 per share and the application of the estimated net proceeds therefrom
and to the repayment of $2,094,000 of principal and $93,000 of accrued
interest payable on a secured promissory note payable to Phoenix
Technologies Ltd.
14
<PAGE> 17
DILUTION
The pro forma net tangible book value of the Company's Common Stock as of
March 31, 1996 was approximately $690,000 or $0.09 per share. The pro forma net
tangible book value per share represents the Company's total tangible assets
less total liabilities, divided by the total number of shares of Common Stock
outstanding after giving effect to (i) the repurchase of 1,000,000 shares of
Class D Preferred Stock at a purchase price of $4.50 per share, (ii) the
conversion of $340,000 in principal amount of the secured promissory note
payable to Phoenix Technologies Ltd. into 116,979 shares of Class C Redeemable
Convertible Preferred Stock and the repayment of an additional $300,000 in
principal amount of such note, (iii) the automatic conversion of the Class C
Redeemable Convertible Preferred Stock, the Class A Convertible Preferred Stock
and the Class B Common Stock into shares of Class A Common Stock, and (iv) the
redesignation of all shares of Class A Common Stock as "Common Stock." In
addition, the pro forma net tangible book value per share reflects the credit to
additional paid-in capital of all accumulated dividends on the Class C
Redeemable Convertible Preferred Stock and the Class D Preferred Stock.
After giving effect to the sale by the Company of the 2,500,000 shares of
Common Stock offered hereby at an assumed initial public offering price of
$11.00 per share, and the receipt of the net proceeds therefrom, the as adjusted
pro forma net tangible book value of the Company as of March 31, 1996 would have
been approximately $25.5 million or $2.54 per share. This represents an
immediate increase in pro forma net tangible book value of $2.45 per share to
existing stockholders and an immediate dilution in net tangible book value of
$8.46 per share to purchasers of Common Stock in this offering, as illustrated
in the following table:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share............................ $11.00
Pro forma net tangible book value per share as of March 31, 1996......... $0.09
Increase per share attributable to new stockholders...................... 2.45
-----
As adjusted pro forma net tangible book value per share at March 31, 1996
after offering........................................................... 2.54
------
Dilution per share to new stockholders..................................... $ 8.46
======
</TABLE>
The following table summarizes, as of May 31, 1996, after giving effect to
the transactions described in the first paragraph above, the number of shares of
Common Stock purchased from the Company, the total consideration paid and the
average price per share paid by existing stockholders and by new stockholders:
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION AVERAGE
--------------------- ---------------------- PRICE PAID
NUMBER PERCENT AMOUNT PERCENT PER SHARE
---------- ------- ----------- ------- ----------
<S> <C> <C> <C> <C> <C>
Existing stockholders................. 7,543,675 75.1% $12,531,821 31.3% $ 1.66
New stockholders...................... 2,500,000 24.9 27,500,000 68.7 11.00
--------- ----- ----------- -----
Total....................... 10,043,675 100.0% $40,031,821 100.0%
========= ===== =========== =====
</TABLE>
The foregoing table assumes no exercise of any stock options. As of May 31,
1996, an aggregate of 3,269,038 shares of Common Stock were reserved but
unissued under the Company's stock option plans and options to purchase an
aggregate of 2,514,537 shares at a weighted average exercise price of $0.56 per
share were outstanding. To the extent such options are exercised, there will be
further dilution to new stockholders.
The sale of shares by the Selling Stockholder in this offering will reduce
the number of shares held by existing stockholders to 7,043,675 shares or
approximately 70.1% of the Company's outstanding Common Stock immediately after
the offering (66.9% if the Underwriters' over-allotment option is exercised in
full), and will increase the number of shares held by new stockholders to
3,000,000 shares or 29.9% of the Company's outstanding Common Stock immediately
after the offering (3,450,000 shares or 33.1% if the Underwriters'
over-allotment option is exercised in full). See "Principal and Selling
Stockholders."
15
<PAGE> 18
SELECTED CONSOLIDATED FINANCIAL DATA
The Selected Consolidated Financial Data set forth below with respect to the
Balance Sheet Data at June 30, 1995 and March 31, 1996 and the Statement of
Operations Data for each of the two years in the period ended June 30, 1995 and
for the nine months ended March 31, 1996, respectively, have been derived from
the Consolidated Financial Statements of the Company included elsewhere in this
Prospectus that have been audited by Arthur Andersen LLP, independent certified
public accountants, as indicated by their report thereon contained elsewhere
herein. The Balance Sheet Data as of June 30, 1993 and 1994 has been derived
from consolidated financial statements of the Company not included in this
Prospectus that have been audited by Arthur Andersen LLP, independent certified
public accountants. The Statement of Operations Data for the two fiscal years
ended June 30, 1992 and 1993 and the Balance Sheet Data as of June 30, 1992 are
derived from the Company's unaudited Consolidated Financial Statements not
included herein. The Statement of Operations Data for the nine months ended
March 31, 1995 are derived from unaudited Consolidated Financial Statements
included elsewhere in this Prospectus. Operating results for the nine months
ended March 31, 1996 are not necessarily indicative of the results that may be
expected for the entire fiscal year ending June 30, 1996. The Selected
Consolidated Financial Data should be read in conjunction with the Consolidated
Financial Statements and Notes thereto and "Management's Discussion and Analysis
of Financial Condition and Results of Operations" included elsewhere in this
Prospectus.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED JUNE 30, MARCH 31,
-------------------------------------- ------------------
1992 1993 1994 1995 1995 1996
------- ------ ------ ------- ------- -------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net revenue.................................................... $ 8,078 $8,691 $9,131 $15,577 $10,760 $15,536
Cost of revenue................................................ 3,615 3,895 2,896 4,681 3,176 4,281
------- ----- ----- ------- ------- -------
Gross profit................................................... 4,463 4,796 6,235 10,896 7,584 11,255
Operating expenses:
Research and development..................................... 682 958 1,308 6,235 4,365 6,347
Selling, general and administrative.......................... 5,700 3,755 4,674 6,901 4,876 7,032
Charge for purchased research and development................ -- -- -- 3,492 3,492 --
------- ----- ----- ------- ------- -------
Income (loss) from operations.................................. (1,919) 83 252 (5,733) (5,149) (2,124)
Other income (expense), net.................................... 346 5 (9) (292) (192) (152)
------- ----- ----- ------- ------- -------
Net income (loss).............................................. $(1,573) $ 88 $ 243 $(6,025) $(5,341) $(2,276)
======= ===== ===== ======= ======= =======
Pro forma net loss per common and common equivalent
share(1)(2).................................................. $ (0.27)
=======
Pro forma weighted average number of common and common
equivalent shares outstanding(2)............................. 8,317
=======
Supplemental pro forma net loss per common and common
equivalent share(3).......................................... $ (0.25)
Supplemental pro forma weighted average number of common and
common equivalent shares outstanding......................... 8,534
</TABLE>
<TABLE>
<CAPTION>
MARCH 31, 1996
JUNE 30, ----------------------
------------------------------------- PRO
1992 1993 1994 1995 ACTUAL FORMA(4)
------ ------ ------ ------- ------- -----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents..................................... $1,344 $ 408 $ 851 $ 1,226 $10,057 $ 5,257
Working capital............................................... 528 (508) (493) 517 6,254 1,454
Total assets.................................................. 2,888 1,808 2,639 7,179 16,819 12,019
Long-term debt, net of current maturities..................... -- 184 -- 4,849 3,014 2,374
Redeemable preferred stock.................................... -- 1,868 2,055 2,276 12,600 --
Stockholders' equity (deficit)................................ 307 (367) (122) (5,377) (7,525) 915
</TABLE>
- ---------------
(1) Reflects the conversion, upon the completion of this offering, of all
outstanding shares of the Company's Convertible Preferred Stock into
5,904,666 shares of Common Stock.
(2) Computed on the basis described in Note 1 of Notes to Consolidated Financial
Statements included elsewhere in this Prospectus.
(3) Computed on the basis described in Note 1 of Notes to Consolidated Financial
Statements, adjusted for the increase in the number of shares of Common
Stock issued pursuant to the proposed offering sufficient to generate
proceeds for the payment of $2.1 million of a secured promissory note
payable upon the consummation of the offering.
(4) Adjusted to give effect to the transactions and events described in the last
paragraph of the Prospectus Summary. In addition, the pro forma statements
reflect the credit to additional paid-in capital of all accumulated
dividends on the Class C Redeemable Convertible Preferred Stock and the
Class D Preferred Stock. See "Certain Transactions."
16
<PAGE> 19
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
Xionics Document Technologies, Inc. designs, develops and markets advanced
embedded systems technology for use in mainstream office devices such as
printers, copiers and scanners. The Company began in the late 1980's to develop
and introduce new document imaging technology used to accelerate the high-volume
capture, display and printing of business records. In October 1994, the Company
acquired certain assets of the Peripherals Division of Phoenix Technologies Ltd.
("Phoenix"), including page description language interpreters, printer operating
systems software, network connectivity solutions and other core printer
technologies (the "Acquisition"). The Acquisition was accounted for as a
purchase in accordance with Accounting Principles Board Opinion No. 16.
Approximately $3.5 million of the purchase price was allocated to the purchase
of incomplete research and development projects and was charged to expense as of
the Acquisition date.
The Company derives its revenue primarily from sales of its printer
software products, which include revenue from software licenses, royalties,
engineering services and maintenance, and from sales of its image acceleration
products. Software license revenue consists of the Company's charges for
licensed source code, which generally includes initial non-refundable fees which
are recognized as revenue upon the shipment of the source code, provided there
are no significant vendor obligations. Royalty revenue is generally earned as a
percentage of net revenue from unit sales by licensees of products that
incorporate the Company's software, and is generally recognized as earned in the
Company's financial statements in the quarter in which amounts due to the
Company have been determined using estimates based upon historical payments.
Engineering services revenue is derived from fees paid for porting of the
Company's software to customer-specific printer controllers. Payments under
maintenance contracts are due at the beginning of the contract; however, revenue
is recognized ratably over the term of the contract, which is typically twelve
months.
The Company generates a significant portion of its revenue from customers
located outside of the United States. Such revenue accounted for 42.1%, 43.2%
and 28.0% of the Company's revenue for the fiscal years ended June 30, 1994 and
1995 and the nine months ended March 31, 1996, respectively. While revenue from
customers outside the United States increased, as a result of revenue from
customers in the United States increasing at a faster rate, the proportion of
total revenue from customers outside of the United States declined. The
Company's export revenue is primarily denominated and collected in United States
dollars.
In March 1996, the Company entered into an amendment of its preexisting
development and license agreement with Hewlett-Packard. Under the amended
agreement (the "HP Agreement"), the Company licensed certain of its page
description technology to Hewlett-Packard. Revenue from the HP Agreement will be
recognized by the Company over three years using percentage of completion
contract accounting. Payments under the HP Agreement include the Company's
charges for source code access, engineering services, license rights and ongoing
maintenance and support. Upon execution of the HP Agreement, the Company
received a $6.0 million non-refundable initial payment, of which approximately
$2.0 million was recorded as revenue in the quarter ended March 31, 1996. The
remaining future payments under the HP Agreement are contingent upon the
satisfaction of performance milestones by the Company. There can be no assurance
that the Company will meet these performance milestones. Hewlett-Packard has the
right to terminate the HP Agreement upon a failure by the Company to comply with
any of the provisions of the HP Agreement that is not cured within 30 days, and
upon the commencement of certain bankruptcy or insolvency proceedings involving
the Company.
A substantial portion of the Company's operating expenses are related to
research and development. In addition to expenses for the ongoing development of
printer systems products, the Company has committed significant resources to the
development of multifunction peripheral technology from which the Company does
not expect to recognize any material revenue in the short term. The Company
intends
17
<PAGE> 20
to continue to increase the amount of its research and development, and selling,
general and administrative expenses.
The Company had no provision for income taxes for fiscal 1995 or the nine
months ended March 31, 1996 due to net losses incurred in those periods. As of
March 31, 1996, the Company had available net operating loss carryforwards of
approximately $4.2 million for federal income tax reporting purposes, expiring
at various dates beginning in 2001. In addition, the Company had available net
operating loss carryforwards of approximately $1.7 million for foreign income
tax reporting purposes. These carryforwards may be used to offset future taxable
income, if any.
RESULTS OF OPERATIONS
The following table summarizes the Company's significant operating results
as a percentage of net revenue for each of the periods indicated.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED JUNE 30, MARCH 31,
------------------- -------------------
1994 1995 1995 1996
----- ----- ----- -----
<S> <C> <C> <C> <C>
Net revenue.................................. 100.0% 100.0% 100.0% 100.0%
Cost of revenue.............................. 31.7 30.1 29.5 27.6
------ ------ ------ ------
Gross profit................................. 68.3 69.9 70.5 72.4
Operating expenses:
Research and development................... 14.3 40.0 40.6 40.9
Selling, general and administrative........ 51.2 44.3 45.3 45.3
Charge for purchased research and
development............................. -- 22.4 32.5 --
------ ------ ------ ------
Income (loss) from operations................ 2.8 (36.8) (47.9) (13.7)
Other expense, net........................... 0.1 1.9 1.7 1.0
------ ------ ------ ------
Net income (loss)............................ 2.7% (38.7)% (49.6)% (14.7)%
====== ====== ====== ======
</TABLE>
NINE MONTHS ENDED MARCH 31, 1996 AND MARCH 31, 1995
Revenue. Revenue increased 44.4% to $15.5 million for the nine months
ended March 31, 1996 compared to $10.8 million for the nine months ended March
31, 1995. This increase resulted primarily from growth in sales of the Company's
printer software products, including approximately $2.0 million of revenue
recognized under the HP Agreement, and a small increase in sales of the
Company's image acceleration products. In addition, revenue from sales of the
Company's printer software products was included for the entire nine-month
period ended March 31, 1996, compared to only six months during the prior period
because of the date of the Acquisition, accounting for an increase of
approximately $2.3 million.
Gross Profit. Cost of revenue consists primarily of costs associated with
components, subcontracted manufacturing, labor and overhead for quality
assurance, warehousing and shipping of the Company's imaging products, and costs
associated with non-recurring engineering services. In addition, cost of revenue
includes amortization of acquired intangibles and the cost of providing services
and maintenance. Gross profit increased 48.4% to $11.3 million for the nine
months ended March 31, 1996 from $7.6 million in the comparable prior period.
Gross margin increased to 72.4% for the nine months ended March 31, 1996
compared to 70.5% in the comparable prior period. These increases were
attributable primarily to increased sales of higher-margin Intelligent
Peripheral System ("IPS") products and related engineering services, partially
offset by a reduction in gross margin attributable to the Company's image
acceleration products.
Research and Development. Research and development expenses consist
primarily of personnel costs, costs of engineering contractors and outside
consultants, engineering supplies, computer equipment depreciation and overhead
costs, all of which are associated with development of the Company's IPS, MFP
18
<PAGE> 21
and imaging technologies. Research and development expenses increased 45.4% to
$6.3 million for the nine months ended March 31, 1996 from $4.4 million in the
comparable prior period. The higher expense level resulted primarily from
increased expenditures relating to the Company's MFP technology, which is
currently in development, partially offset by a small reduction in expenditures
relating to the Company's image acceleration products. In addition, research and
development expenses for the Company's IPS products were included for the entire
nine-month period ended March 31, 1996 compared to only six months during the
prior fiscal period because of the date of the Acquisition. As a percentage of
revenue, research and development expenses increased to 40.9% for the nine
months ended March 31, 1996 from 40.6% in the comparable prior period.
Selling, General and Administrative. Selling, general and administrative
expenses include personnel and related overhead costs for sales, marketing,
finance, human resources and general management. Selling, general and
administrative expenses increased 44.2% to $7.0 million for the nine months
ended March 31, 1996 from $4.9 million in the comparable prior period. The
higher expense level resulted primarily from increased staffing and additional
expenses attributable to rent, overhead and professional fees. In addition,
selling, general and administrative expenses for the Company's IPS products were
included for the entire nine-month period ended March 31, 1996 compared to only
six months during the prior period because of the date of the Acquisition. As a
percentage of revenue, selling, general and administrative expenses remained
constant at 45.3% for both the nine months ended March 31, 1996 and the
comparable prior period.
Charge for Purchased Research and Development. Purchased research and
development expense relating to the Acquisition totaled approximately $3.5
million and was charged to expense as of the Acquisition date. This expense
represents the estimated fair value related to the incomplete research and
development projects determined by independent appraisal. The development of
these projects had not yet reached technological feasibility and the technology
had no alternative future use. The technology acquired in the Acquisition has
required substantial additional development by the Company.
Other Expense, Net. Other expense, net is comprised primarily of interest
expense attributable to the interest payable on the Company's indebtedness,
interest income earned on cash and cash equivalents, gains and losses on foreign
currency translation and transactions. Other expense, net decreased 21.2% to
$152,000 for the nine months ended March 31, 1996 from $193,000 in the
comparable prior period. This decrease resulted primarily from an increase in
interest and other income and a decrease in losses from foreign currency
translation and transactions partially offset by an increase in interest
expense.
FISCAL YEARS ENDED JUNE 30, 1995 AND JUNE 30, 1994
Revenue. Revenue increased 70.6% to $15.6 million for fiscal 1995 compared
to $9.1 million for fiscal 1994. This increase resulted, in part, from a small
increase in sales of the Company's XipPrint product line included in its
document image acceleration products. In addition, revenue from sales of the
Company's printer software products, which commenced upon completion of the
Acquisition in October 1994, were included in fiscal 1995 and not in fiscal
1994.
Gross Profit. Gross profit increased 74.8% to $10.9 million for fiscal
1995 from $6.2 million for fiscal 1994. Gross margin increased to 69.9% for
fiscal 1995 compared to 68.3% for fiscal 1994. This increase was attributable
primarily to sales of the Company's higher-margin IPS products and related
engineering services, all of which commenced upon completion of the Acquisition
in October 1994. This was offset, in part, by a reduction in gross margin
attributable to the Company's image acceleration products.
Research and Development. Research and development expenses increased
376.5% to $6.2 million for fiscal 1995 from $1.3 million for fiscal 1994. The
higher expense level resulted primarily from research and development
expenditures relating to the Company's IPS product line acquired as part of the
Acquisition and to the Company's MFP technology which is currently in
development. This increase was partially offset by a small reduction in
expenditures attributable to the Company's image acceleration products. As a
percentage of revenue, research and development expenses increased to 40.0% for
fiscal 1995 from 14.3% for fiscal 1994.
19
<PAGE> 22
Selling, General and Administrative. Selling, general and administrative
expenses increased 47.6% to $6.9 million for fiscal 1995 from $4.7 million for
fiscal 1994. The higher expense level resulted primarily from increased staffing
upon completion of the Acquisition in October 1994, and additional expenses
attributable to rent, overhead and professional fees. As a percentage of
revenue, selling, general and administrative expenses decreased to 44.3% for
fiscal 1995 from 51.2% for fiscal 1994.
Charge for Purchased Research and Development. Purchased incomplete
research and development expense relating to the Acquisition totaled
approximately $3.5 million and was charged to expense as of the Acquisition
date.
Other Expense, Net. Other expense, net increased to $292,000 for fiscal
1995 from $9,000 for fiscal 1994. This increase resulted primarily from interest
expense on the promissory note issued in October 1994 by the Company to Phoenix
in connection with the Acquisition.
SELECTED QUARTERLY RESULTS OF OPERATIONS
Recent Operating Results
The Company's net revenue increased 71.6% to $8.3 million for the three
months ended June 30, 1996 compared to $4.8 million for the three months ended
June 30, 1995. Net income was $743,000 for the three months ended June 30, 1996
compared to a net loss of $684,000 for the three months ended June 30, 1995.
The following table sets forth certain unaudited quarterly operating
information for each of the seven quarters ending with the quarter ended March
31, 1996. In the opinion of management, this information has been prepared on
the same basis as the audited consolidated financial statements of the Company
and reflects all adjustments, consisting only of normal recurring adjustments,
necessary for a fair presentation of this information in accordance with
generally accepted accounting principles. This information should be read in
conjunction with the Company's Consolidated Financial Statements and Notes
thereto appearing elsewhere in this Prospectus. The results of operations for
any quarter are not necessarily indicative of the results to be expected for any
future period.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
----------------------------------------------------------------------------------
SEPT. 30, DEC. 31, MAR. 31, JUNE 30, SEPT. 30, DEC. 31, MAR. 31,
1994 1994 1995 1995 1995 1995 1996
--------- -------- -------- -------- --------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net revenue..................... $ 2,153 $ 4,213 $4,394 $4,818 $ 3,999 $ 4,874 $6,663
Cost of revenue................. 756 1,101 1,319 1,506 1,164 1,481 1,637
------ ------- ------ ------ ------- ------- ------
Gross profit.................... 1,397 3,112 3,075 3,312 2,835 3,393 5,026
Operating expenses:
Research and development...... 562 1,974 1,828 1,871 1,960 2,133 2,254
Selling, general and
administrative.............. 996 2,041 1,839 2,025 2,356 2,273 2,403
Charge for purchased research
and development............. -- 3,492 -- -- -- -- --
------ ------- ------ ------ ------- ------- ------
Income (loss) from operations... (161) (4,395) (592) (584) (1,481) (1,013) 369
Other expense, net.............. 25 26 142 100 125 8 19
------ ------- ------ ------ ------- ------- ------
Net income (loss)............... $ (186) $(4,421) $ (734) $ (684) $(1,606) $(1,021) $ 350
====== ======= ====== ====== ======= ======= ======
</TABLE>
20
<PAGE> 23
The following table sets forth certain unaudited quarterly results of
operations expressed as a percentage of net revenue for each of the seven
quarters ending with the quarter ended March 31, 1996.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
----------------------------------------------------------------------------------
SEPT. 30, DEC. 31, MAR. 31, JUNE 30, SEPT. 30, DEC. 31, MAR. 31,
1994 1994 1995 1995 1995 1995 1996
--------- -------- -------- -------- --------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
AS A PERCENTAGE OF NET REVENUE:
Net revenue..................... 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of revenue................. 35.1 26.1 30.0 31.3 29.1 30.4 24.6
----- ------ ----- ----- ----- ----- -----
Gross profit.................... 64.9 73.9 70.0 68.7 70.9 69.6 75.4
Operating expenses:
Research and development...... 26.1 46.9 41.6 38.8 49.0 43.8 33.8
Selling, general and
administrative.............. 46.3 48.4 41.9 42.0 58.9 46.6 36.1
Charge for purchased research
and development............. -- 82.9 -- -- -- -- --
----- ------ ----- ----- ----- ----- -----
Income (loss) from operations... (7.5) (104.3) (13.5) (12.1) (37.0) (20.8) 5.5
Other expense, net.............. 1.2 0.6 3.2 2.1 3.1 0.1 0.3
----- ------ ----- ----- ----- ----- -----
Net income (loss)............... (8.7)% (104.9)% (16.7)% (14.2)% (40.1)% (20.9)% 5.2%
===== ====== ===== ===== ===== ===== =====
</TABLE>
The Company has in the past experienced, and may in the future experience,
significant fluctuations in quarterly operating results, which have been and may
be caused by many factors, including: the timing of introductions of new
products or product enhancements by the Company, its OEM customers or its
competitors; personnel changes; seasonal fluctuations in purchasing patterns;
the size and timing of individual orders; product returns from the Company's
distribution channels; the types of products sold and the range of gross margins
attributable to each type of product; software bugs or other product quality
problems; competition and pricing; customer order deferrals in anticipation of
new products or product enhancements; changes in operating expenses; and general
economic conditions. A substantial portion of the Company's operating expenses
are related to personnel, development of new products, facilities and marketing
programs. The level of spending for such expenses cannot be adjusted quickly and
is based, in significant part, on the Company's expectations of future revenue.
Consequently, operating results for a given period could be disproportionately
affected by any shortfall in expected revenue. In addition, fluctuations in
revenue from quarter to quarter will likely have significant impact on the
Company's results of operations.
LIQUIDITY AND CAPITAL RESOURCES
The Company has financed its operations to date principally through cash
flows from operating activities, private placements of debt and equity
securities and proceeds from borrowings under an equipment line of credit.
As of March 31, 1996, the Company had cash and cash equivalents of $10.1
million, an increase of $8.8 million from the $1.2 million of cash and cash
equivalents held at June 30, 1995. During the nine months ended March 31, 1996,
the Company's principal sources of cash were private placements of equity
securities and an initial nonrefundable $6.0 million payment under the HP
Agreement. On December 22, 1995, the Company issued 1,000,000 shares of the
Company's Class D Preferred Stock to Adobe for an aggregate purchase price of
$4.5 million. The principal uses of cash during the nine months ended March 31,
1996 were expenditures to fund engineering development and purchases of
computers, furniture and equipment and to repurchase shares of Common Stock from
a former executive. On May 17, 1996, the Company repurchased all of the
outstanding shares of capital stock of the Company held by Adobe. The
consideration for the repurchase included $4.5 million in cash, the original
price paid by Adobe for such capital stock.
At present, the Company has available a $2.0 million working capital
revolving line of credit and a $1.0 million term loan facility with a bank, both
of which are secured by substantially all assets of the Company. The working
capital line of credit terminates on December 31, 1996, and no term loan will be
21
<PAGE> 24
made after December 1, 1996. Each term loan under the term loan facility is
required to be repaid over 36 months from the date such term loan is funded.
Under the loan facilities, the Company is required to comply with certain
restrictive covenants, including debt to worth, capital base, quick ratio and
profitability. The interest rate for the working capital line of credit is the
bank's prime rate plus 0.5%; the interest rate for the term loan facility is the
bank's prime rate plus 1.0%. As of March 31, 1996, the outstanding borrowings
under the working capital line of credit and term loan facility were $0 and
$441,000, respectively. Under the terms of the working capital and term loan
facilities, the Company is prohibited from declaring or paying dividends on its
Common Stock. The Company was in compliance with or had received a waiver of
non-compliance of all covenants of the working capital and term loan facilities
as of March 31, 1996. As of May 1, 1996, the Company had no material capital
commitments. While the Company may in the future use private placements of its
securities as a source of liquidity, it has no present intention to do so.
The Company believes that the net proceeds of this offering, together with
its existing cash and cash equivalent balances, funds generated from operations
and available borrowings under its lines of credit will be sufficient to finance
the Company's operations for at least the next 12 months. In the event the
Company acquires one or more businesses or products, the Company's capital
requirements could increase substantially, and there can be no assurance that
additional capital will be available on terms acceptable to the Company, if at
all.
22
<PAGE> 25
BUSINESS
Xionics Document Technologies, Inc. ("Xionics" or the "Company") designs,
develops and markets advanced embedded systems technology for use in mainstream
office devices such as printers, copiers and scanners. The Company offers
integrated, modular software products, along with firmware and silicon
technology products, that enable the high-speed capture, processing, printing,
copying and display of complex electronic documents both locally and across
networks. Xionics provides standards-based technology around which its customers
can design, develop and market differentiated products in a timely manner.
INDUSTRY BACKGROUND
General Market
Electronic devices for handling paper -- printers, copiers, scanners and
fax machines -- are ubiquitous in the office environment today. According to
Giga Information Group, United States sales of these office devices exceeded $28
billion in 1995 and are expected to grow to more than $32 billion by 1998.
Growth and change within this market are driven by several factors.
Technology-driven changes in the way work is performed in the office tend to
increase demand for some types of devices, while decreasing demand for others.
For example, as electronic mail becomes more widespread, documents are
increasingly distributed electronically and then printed, rather than printed,
copied or faxed and then manually distributed. These trends may account for
increased market share for printers, especially high-speed laser, color and
networked printers, compared to other office devices. In addition, users are
demanding greater speed and throughput, higher-quality output, color capability
and network connectivity, all at lower costs. Furthermore, manufacturers of
office devices have an increasing need to meet de facto industry standards in
areas such as page rendering technology, networking and Internet protocols.
These market trends put office device manufacturers under constant pressure to
improve and innovate in order to gain and hold market share.
A few large international companies with worldwide product distribution,
such as Canon, Hewlett-Packard, Kodak, Panasonic and Xerox, dominate the market
for office devices that handle paper. Hewlett-Packard, for example, supplied 61%
of laser printers sold in the United States in 1995, according to International
Data Corporation ("IDC"). These original equipment manufacturers ("OEMs")
compete fiercely with one another both within and across product categories. In
order to meet user demand for improved and lower-cost office devices, these
companies must continually try to reduce their product cost and time to market
while adding features and functions that differentiate their products from those
of competitors. The Company believes that these OEMs increasingly rely on
outside suppliers to provide core, enabling software and hardware technologies
around which the OEMs can develop these differentiated products.
Among these core, enabling technologies are print and imaging technologies.
Print technologies include page rendering techniques and system-level embedded
software, which are critical in the printer marketplace and useful in other
product categories. Imaging technologies include digital image acceleration,
processing and enhancement, which are critical in the market for copiers,
scanners and fax machines. Printer vendors are increasingly driven by
competition and market forces (including competition for the very profitable
aftermarket for consumable supplies such as paper and toner) to add traditional
copier features such as paper handling and onboard scanners to their devices.
For similar reasons, copier manufacturers are adding printer-like features such
as network connectivity and page rendering applications. As a result, the
markets for products in these two categories are converging.
Printer Market
Printer manufacturers must differentiate their products while still
adhering to industry standards for applications interfaces and communications
protocols. In particular, printer OEMs must incorporate industry-standard
page-rendering techniques. Page rendering is the process by which a printer
converts commands generated by a software application such as a word-processing
program into marks on a printed page. This process is carried out by a software
program known as a page description language interpreter, which is usually
embedded in the printer controller. This software interprets a set of
instructions from the
23
<PAGE> 26
application that describe the electronic appearance of a page (including
detailed information about the placement of each character, line, curve or
image), and then instructs the print engine exactly where to mark the page. The
format in which these instructions are given is known as a page description
language ("PDL").
Two industry standards for PDLs, each with particular strengths, have
become firmly established over the past decade and continue to evolve. The PCL
language was developed by Hewlett-Packard for use in its own printers. The
PostScript language was originated by Adobe, which does not itself manufacture
printers but licenses its PostScript software to printer OEMs. Other companies
have implemented compatible versions of both of these standard PDLs. The main
strength of the PCL language is the rendering of text-intensive documents at
high speeds using comparatively little memory, while the main benefit of the
PostScript language is the rendering of pages containing both text and complex
graphic images with high mathematical precision. The PostScript language has
thus traditionally been used primarily in graphic arts and desktop publishing
applications, with comparatively low penetration of the broader office market.
PCL, on the other hand, is widely used in offices for printing text-intensive
business documents. According to IDC, PCL or PCL-compatible languages were the
primary languages used in approximately 70% of all laser printers sold in the
United States in 1995, while PostScript or PostScript-compatible languages were
the primary languages used in approximately 25% of all laser printers sold in
the United States in 1995. Certain printer OEMs are including
PostScript-compatible capability without significant extra cost in devices that
traditionally have used only PCL in response to users' increasing desire to
print business documents rich in graphical content such as complex fonts,
photographs and other scanned or digitized images.
A number of other trends are also driving growth in the printer market. The
desire for color in documents has produced a corresponding demand for color
laser printers, which must be able to handle much more data than monochrome
printers. Furthermore, users continually demand improvements in speed and output
resolution. Only four years ago, office printers typically printed in a range of
6 to 8 pages per minute at an output resolution of 300 dots per inch; acceptable
speeds today are in the range of 12 to 30 pages per minute, and acceptable
output resolution is generally considered to be 600 dots per inch. Finally, the
number of network-connected printers has increased and is expected to continue
to grow. According to IDC, 62% of laser printers sold in the United States in
1995 were connected to local or external computer networks. This percentage is
expected to increase to 78% by 1999, according to IDC.
All of these trends present significant technological challenges to printer
OEMs that in many cases lie outside the OEMs' primary area of expertise. To meet
such challenges, the Company believes that these OEMs are increasingly turning
to third parties to provide system-level printer software technologies including
PDL interpreters.
Imaging Market
Manufacturers of copiers, scanners and fax machines are also continually
subject to user demand for better output quality and higher speeds. The OEMs
that manufacture these devices are responding by deploying imaging technologies
such as acceleration through data compression, digital image processing and
digital image enhancement to improve performance and quality. These technologies
are evolving from methods first employed by the dedicated scanner and display
systems used in back-office document imaging applications such as credit card
voucher clearing and check truncation, and increasingly are being deployed in
mainstream office imaging devices. Xerox, for example, has introduced a line of
digital copiers that use these technologies to produce image-enhanced copies,
rather than the photography-based techniques of traditional analog copiers. The
Company believes that, as these imaging technologies advance, copier OEMs, much
like printer OEMs, rely on third parties to provide many of the relevant core
technologies around which these manufacturers can build special or
differentiated features.
24
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Developing Market for Multifunction Peripheral Devices
The convergence in features of printers and copiers and advancements in
image processing technologies have set the stage for another change in the
market for office devices. This market has long consisted of a variety of
devices performing a single dedicated function. A market is now emerging for
multifunctional peripheral devices ("MFPs") which combine several paper-handling
functions (e.g. printing, copying, scanning, and/or faxing) in one device and
thus offer advantages such as increases in productivity and reductions in
capital and operating expenses. These devices also generally offer the network
connectivity which is frequently absent from traditional single-function
devices. Giga Information Group projects that the United States market for MFPs
will grow from 923,000 units in 1995 to approximately 6 million units in 1998.
To date, OEMs have generally introduced two kinds of MFPs: low-end devices
priced below $1,500, and higher-end devices priced at over $9,000. The
lower-priced devices use a single device controller which is shared by the
device's processing functions, can only perform one function at a time and
yields correspondingly low performance and output quality. Although these
devices are becoming accepted in the home and small-office market, which
tolerates slow speeds and low resolutions, they are not capable of meeting the
requirements of the office market. At the other end of the market, higher-priced
MFPs contain several expensive device controllers, one for each separate
function. These devices are considered too expensive to be sold in volume into
the office market, which generally expects a price range of about $3,000 to
$8,000 for office devices with these types of functions. The Company believes
that no currently available MFP device priced less than $8,000 meets office
users' requirements for performance and quality.
To meet MFP performance requirements at price points appropriate for the
office market, the Company believes that OEMs must solve a central technological
problem: how to achieve concurrent functioning (for example, receiving a fax and
making a copy at the same time) on a single device controller. Critical design
obstacles to solving this problem include providing sufficient bandwidth to
support concurrent functions at an affordable cost, maximizing image processing
speed on the single device controller and managing data flow through the device
so that separate functions will not interfere with one another. A single device
controller providing concurrent multiple functions must be designed to meet
performance requirements without exceeding acceptable prices.
THE XIONICS SOLUTION
Xionics provides advanced embedded systems technology for mainstream office
devices such as printers, copiers and scanners. The Company's products enable
the high-speed capture, processing, printing, copying and display of complex
electronic documents both locally and across networks. The Company has existing
relationships with more than 35 OEM customers, including Hewlett-Packard, Sharp
and Xerox. Xionics believes that it meets OEMs' needs by providing
standards-based enabling technology that helps these OEMs bring differentiated
products to market quickly.
The Company markets its printer software products as an integrated,
scalable, modular device controller architecture called the Xionics Intelligent
Peripheral System ("IPS"). IPS is comprised of Xionics' embedded printer
software, which includes compatible implementations of PostScript and PCL page
description language interpreters, as well as a printer operating system and
device management services. IPS provides OEMs with sophisticated embedded
software solutions for a broad spectrum of monochrome and color printer
products.
IPS provides the Company's OEM customers with the following key benefits:
- Improved price/performance. With the IPS printer architecture and its
industry-standard PDL components, OEMs are able to increase their
printers' performance at a reasonable cost by reducing memory
requirements and adding functions such as PostScript capability.
- Reduced time and risk to market. With the pre-integrated PDL
interpreters, image processing, device services and other components
provided in IPS, OEMs are able to rapidly combine IPS with
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their devices. Further, Xionics' technology allows OEMs to avoid
expensive in-house development work and, accordingly, reduces time to
market.
- Product differentiation. With Xionics' IPS application programming
interface ("API"), OEMs can readily customize their products with such
features as differentiated front panel controls and paper handling and
finishing capabilities. Xionics also provides OEMs with a source code
license for its printer software, further facilitating customization and
the addition of product-differentiating features.
- Efficiencies associated with scalable, modular, extensible
architecture. With the scalable, modular, extensible IPS architecture,
OEMs can use IPS in whole families of monochrome and color printers with
a range of price and performance targets.
In addition to IPS, Xionics markets a family of scan, display and print
accelerators for document imaging systems. These products incorporate advanced
imaging technologies, such as compression/decompression, digital signal
processing and digital image enhancement, to provide sophisticated image
accelerator products at attractive prices.
Building on its core competencies in the areas of print and imaging, the
Company is developing an expanded version of IPS into what it believes will be a
comprehensive solution that will meet design requirements for higher-performance
and cost-effective controllers for MFPs. The Company's IPS technology is being
expanded to include an enhanced software dataflow engine to allow true
concurrent operation of multiple functions on a single device controller,
industry-standard network software and a specially-designed ASIC which will
provide a reduced-instruction-set-computing ("RISC") processor core and the
hardware assist necessary to achieve the very high speed and bandwidth that MFP
devices require. The IPS technology is also being expanded to include an
enhanced API which will enable OEMs to customize the print, copy, scan and fax
core services that will be provided by IPS.
STRATEGY
Xionics' objective is to become the world's leading supplier of embedded
systems technology for single-function and multifunction office devices. Key
elements of the Company's strategy to achieve this objective are:
Attain Leadership in the Printer Software Market. The Company believes it
has become a leader in developing core PDL technologies and believes it can
extend that leadership position through continued investment in its IPS printer
architecture and through developing and enhancing new and existing relationships
with market-leading OEMs. In addition, the Company believes its position in the
embedded printer systems market has been reinforced by its ongoing relationship
with Hewlett-Packard. The Company intends to enhance the IPS embedded printer
architecture and its various software components as needed to meet evolving
industry standards.
Leverage and Expand Core Technologies. The Company believes it has certain
core competencies in printer software and imaging technologies. Xionics has
invested and is continuing to invest significant resources in development
activities aimed at extending its printer software products. These printer
software products, along with the Company's imaging technologies, are the main
building blocks for the MFP-specific extensions to IPS currently under
development. The Company is developing its IPS architecture to include functions
that enable the use of printers and MFPs as peripherals attached to the World
Wide Web and to corporate intranets.
Expand OEM Customer Relationships. The Company markets its IPS products
primarily to OEMs, which allows Xionics to leverage OEMs' ability to bring
significant investment and marketing resources to the distribution of products
with wide market acceptance. The Company believes that the sharing of
marketplace and technology vision between the Company and its OEM customers
facilitates mutual innovation. Additionally, close cooperation in the
integration and testing cycles for new products promotes timely market entry for
OEMs' devices.
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<PAGE> 29
Foster Product Development Partnerships. In order to supply competitive
product offerings while remaining focused on its core competencies, the Company
obtains certain components through strategic relationships with partners that
possess complementary technologies. For example, the Company secures digital
font technology through relationships with the AGFA Division of Bayer Corp.,
Bitstream Inc. and others. Xionics is also participating in IBM
Microelectronics' core-plus-ASIC program, in which the parties are working
jointly to develop and produce, to Xionics' proprietary design, a family of
microcontroller chips designed specifically for the processing needs of MFPs.
The Company also expects to offer NEST technology from Novell, Inc. ("Novell")
to assure full integration with Novell's widely used Netware network operating
system.
Develop MFP Technology. Building on its base of existing printer and
imaging technology, the Company will seek to establish its MFP product,
currently in development, as a leading integrated, scalable, ASIC-assisted
software technology for MFPs. The IPS architecture, as the Company will extend
it for MFPs, is designed to provide the massive image data throughput required
for MFPs, at price points available only with high levels of ASIC support. The
Company intends to capitalize on its existing relationships with major printer
and imaging OEMs, which are also expected to be leading manufacturers in the MFP
market, to establish IPS as the preferred core technology solution for MFPs.
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CORE TECHNOLOGIES AND PRODUCTS
Core Technologies. Xionics offers integrated, modular software products,
along with firmware and silicon technology products, that enable the high-speed
capture, processing, printing, copying and display of complex electronic
documents both locally and across networks. These products are licensed to major
OEMs that incorporate Xionics' products in their office devices sold to end
users. The products incorporate relevant industry standards and include an API
that enables OEMs to create the applications and features necessary to
differentiate their products in a competitive marketplace. The following chart
shows the Company's core technologies and products, including products under
development:
[GRAPHIC]
The artwork shows the Company's core technologies currently employed in two
product areas (print embedded products and document imaging products) and being
further utilized to result in additional, enhanced products currently under
development.
Intelligent Peripheral System. The Intelligent Peripheral System consists
of a modular, layered software system based on Xionics' dataflow architecture
for providing processing and control of printers. The dataflow architecture
permits the direction of multiple parallel data streams through a system of
software-defined and hardware-executed pipelines. The central element is a
realtime, multitasking core services system which controls conventional RISC
processors in printer-only configurations. The Company's MFP-oriented IPS
offering under development will include an expanded core services system that
will control the XipChip parallel image data processing ASIC being developed by
the Company. XipChip, when completed, is expected to provide the massive
bandwidth required to drive advanced
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MFPs. In addition, the Company is developing its IPS architecture to include
functions that enable the use of printers and MFPs as peripherals attached to
the World Wide Web and to corporate intranets.
IPS, delivered as a series of software developer packages, includes an
embedded applications layer for providing one or more of the four standard
functions of print, scan, copy and fax. The embedded applications control the
core services through the XipPower API. OEMs may modify the applications
provided with IPS or incorporate their own value-added applications through the
XipPower API interface and access to certain source code.
IPS-PRINT ARCHITECTURE
[GRAPHIC]
The artwork shows a schematic diagram of the Company's IPS-Print architecture
with dataflow applications (top box) and core services (next box down) together
comprising the Intelligent Peripheral System. Under these boxes OEM hardware is
shown using the Company's IPS to interface between Internet, Intranet, Network
and Host.
IPS-Print. IPS-Print is a software developer package that contains page
rendering application components and supporting embedded system service
components needed to build printer controllers. The package includes Xionics'
compatible implementations of software interpreters for the PostScript and PCL
page description languages. Each Xionics PDL interpreter can render color and
Asian-font pages as well as standard monochrome output. IPS-Print includes a
patented method for significantly reducing the amount of printer memory
necessary for rendering complex pages.
Sales of printer software products are generally based upon negotiated
non-exclusive license agreements. Typical terms include a one-time source code
license fee, royalties based on published prices for units sold by the OEM and
non-recurring engineering fees.
IPS-MFP Products Under Development. IPS-MFP is being developed as a
software developer package that includes all of the components of IPS-Print plus
additional components, including the Company's XipChip ASIC, that are being
designed to allow OEMs to build high-performance, cost-effective controllers for
multifunction peripheral devices. The additional software components being
developed will include embedded applications for copy, scan and fax functions
plus the extended core system services needed to support the concurrent
operation of MFP applications. When completed, IPS-MFP is expected to include
XipChannel, a built-in device driver system which, without modification, will
permit existing single-
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function personal computer applications to work with MFP devices and to
communicate with them through a single cable. IPS-MFP is being designed to
include XipApp, an image and document management software development toolkit,
that would allow OEMs to create their own MFP product extensions and
enhancements.
IPS-MFP, when completed, will be available with the Company's XipChip ASIC.
XipChip, currently under development, is designed as an advanced core ASIC which
contains an industry standard RISC processor to run supervisor and embedded
application tasks, a high-speed parallel data cache, a high-speed memory access
controller, and seven parallel processing channels to handle image data input,
processing, output, device control, compression/decompression, memory to memory
operations and onboard peripheral device interfaces. XipChip is intended to
provide sustained, aggregate image data bandwidth in excess of 240 megabytes per
second through its seven concurrently operating processing channels.
The Company believes that its IPS-MFP products under development will be
shipped in OEM customer products near the end of the second calendar quarter of
1997. However, there can be no assurance that the Company will be successful in
developing IPS-MFP or XipChip, that unanticipated problems or delays in future
development and production will not be encountered, or that, once completed,
IPS-MFP or XipChip will meet their performance specifications under all
conditions or for all anticipated applications.
Document Imaging Products. In addition to IPS, Xionics markets a family of
scan, display and print accelerators to providers of turnkey document imaging
systems. These products incorporate imaging technologies such as data
compression/decompression, digital image processing and digital image
enhancement, and are used to accelerate the high-volume capture, display and
printing of business transaction records in compressed form for applications
such as credit card voucher clearing and check truncation.
Xionics' family of Turbo, Lightning and PowerLightning scan accelerator
boards plug into standard PC bus slots. They drive high performance dual-sided
production scanners for converting scanned data to enhanced, network-resident
image files for use in document imaging applications. These scan accelerator
products range in list price from $895 to $5,395.
Xionics' XipView family of display accelerators plug into standard PC bus
slots and drive high resolution, large diagonal, fast refresh display devices.
XipView allows virtually simultaneous display and manipulation of complex
images, thereby increasing user productivity and decreasing user fatigue. These
display accelerator products range in list price from $895 to $2,821.
Xionics' XipPrint II family of plug-in accelerators allows Hewlett-Packard
printers to decompress, rotate and print complex image files at the full rated
speed of the printer. This technology will also be built into the IPS-MFP
product under development. The list price of XipPrint II is $795.
The Company expects that revenue from sales of its imaging products will
decrease as a percentage of total revenue over time.
SALES AND MARKETING
The Company markets and sells its products worldwide to OEMs, value-added
resellers ("VARs") and distributors. The Company maintains separate sales forces
for its printer software and imaging product lines. As of May 1, 1996, the
direct OEM sales force had a staff of 11 people, and the direct imaging sales
force had a staff of eight people. Both sales forces are based at the Company's
headquarters in Burlington, Massachusetts. The Company maintains additional
sales offices in Tokyo, Japan, and Maidenhead, England.
OEM Sales. The Company seeks to enhance its relationships with existing
OEM accounts and to obtain new customers through a dedicated account management
program and through worldwide new business development efforts. Sales account
executives each work with a limited number of OEM customers to focus on
partnership building. Due to the technical nature of the Company's products,
each account executive is assigned an applications engineer, who works with the
customer's engineering team
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to promote the adoption of the Company's products. Additionally, senior Company
executives are active participants in all significant OEM relationships.
OEM product marketing and business development is provided by a staff of
seven people based at the Company's headquarters in Burlington, Massachusetts.
To support the Company's sales efforts, an active events marketing program is
maintained with dedicated symposiums in the United States and Japan and trade
show participation. In addition, the Company's marketing communications group
manages public relations efforts, produces and distributes marketing and product
support materials and maintains a World Wide Web site.
Document Imaging Product Sales. The Company's document imaging products
are primarily sold by distributors. The Company's sales force provides training,
pricing and product information to distributors, and will also make direct
customer calls to large volume purchasers. The sales force encourages
independent software vendors and system integrators to support Xionics'
products. Marketing activities include key trade show attendance, direct
telephone response and selective advertising.
CUSTOMERS
The Company's customers include OEMs that manufacture laser printers,
copiers and scanners as well as distributors and VARs of document imaging
products and certain direct imaging end users. As of May 1, 1996, the Company
had licensed its products for office devices to over 35 OEMs, and had over 20
distributors of its document imaging products. In the fiscal year ended June 30,
1995, Xerox and Law Cypress accounted for approximately 12.3% and 8.8%,
respectively, of the Company's net revenue. For the nine months ended March 31,
1996, Hewlett-Packard accounted for approximately 17.5% of the Company's net
revenue.
Since September 1994, the Company has had a significant relationship with
Hewlett-Packard to supply printer software and related technology and support.
For the three fiscal quarters ended September 30, 1995, December 31, 1995, and
March 31, 1996, revenue from Hewlett-Packard accounted for 5.6%, 4.6% and 34.1%,
respectively, of the Company's net revenue. The Company expects that revenue
from its relationship with Hewlett-Packard will continue to represent a material
percentage of the Company's total revenue for the foreseeable future. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
In March 1996, the Company entered into an amendment of its preexisting
agreement with Hewlett-Packard. Under the amended agreement (the "HP
Agreement"), the Company licensed certain of its page description technology to
Hewlett-Packard. Payments under the HP Agreement include the Company's charges
for source code access, engineering services, license rights and ongoing
maintenance and support. Future payments under the HP Agreement are contingent
upon the satisfaction of performance milestones by the Company. There can be no
assurance that the Company will meet these performance milestones.
Hewlett-Packard has the right to terminate the HP Agreement upon a failure by
the Company to comply with any of the provisions of the HP Agreement that is not
cured within 30 days, and upon the commencement of certain bankruptcy or
insolvency proceedings.
Pursuant to the HP Agreement, the Company has granted to Hewlett-Packard a
right of first refusal if the Company proposes to enter into or participate in a
"control transaction" with a third party. "Control transactions" include, among
other things, certain mergers or consolidations, sales or exclusive licenses of
certain assets or intellectual property of the Company, and sales of stock,
share exchanges or other transactions that constitute a change in control of the
Company. The right of first refusal will expire on the earlier of the first
anniversary of the effective date of the Registration Statement of which this
Prospectus is a part or September 30, 1998.
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A representative list of the Company's customers follows. In the Company's
1994 and 1995 fiscal years and for the nine months ended March 31, 1996,
aggregate net revenue recorded by the Company from these listed customers
represented 50.5%, 54.1% and 67.7%, respectively, of the Company's net revenue.
<TABLE>
<S> <C>
OEM CUSTOMERS VARS AND DISTRIBUTORS
Canon Inc. Appropriate Technology plc (Aptec)
Fuji Xerox Co., Ltd. Bell & Howell Ltd.
Hewlett-Packard Company Computer Technology Deutschland
IBM Printer Systems, Inc. GmbH (C-2000)
Kyushu Matsushita Electric Co., Ltd. Cranel, Inc.
(Panasonic) Dicom AG
Lexmark International Group, Inc. Law Cypress Distributing Co.
Nihon Unisys Corporation Tech Data Corporation
Oce Printing System GmbH Papelaco Telematica
Olivetti Lexicon S.p.A.
Ricoh Corporation END USERS
Seiko Epson Corporation Abbey National plc
Sharp Corporation Defense Finance and Accounting Service
Xerox Corporation Mackenzie Financial Corporation
</TABLE>
For the nine months ended March 31, 1996, Lexmark accounted for 9.5% of the
Company's net revenue. Under Lexmark's existing agreement with the Company,
Lexmark is not required to include the Company's printer software products in
its printers after December 31, 1996. The Company has received no indication
that the Company will receive royalties from Lexmark after that date.
The Company provides ongoing maintenance and support of its products on a
contract basis. Maintenance service includes updates of the licensed software
and support is provided in the form of telephonic and electronic mail response
to customer questions. Engineering services are available for a fee either on a
project-specific or general as-needed basis.
RESEARCH AND DEVELOPMENT
The Company's principal research and development activities are located at
the Company's headquarters in Burlington, Massachusetts. As of May 1, 1996, the
Company employed 101 software and hardware design engineers, project managers
and support staff. The primary activities of these employees are new product
development, enhancement of existing products, product testing and technical
documentation development. A substantial majority of the Company's expenses for
research and development are allocated to ongoing development of the Company's
IPS printer software products and the enhanced systems technology for MFP
products. A portion of the development staff is engaged in future technology
development in such areas as Internet and corporate intranet applications,
advanced color imaging and next-generation ASICs. The Company has developed
significant tools and methodologies for the automation of testing, bug tracking
and technical document management. The Company's total research and development
expense for fiscal years 1994, 1995 and the nine months ended March 31, 1996 was
$1.3 million, $6.2 million and $6.3 million, respectively. The Company
anticipates that it will continue to commit substantial resources to research
and development.
Through Xionics Document Technologies GmbH ("Xionics GmbH"), a wholly owned
subsidiary located in Dortmund, Germany, the Company has a dedicated ASIC design
staff working in conjunction with the Heinz Nixdorf Institute of the University
of Paderborn, Germany, to produce the XipChip ASIC technology. In 1995, the
Company acquired this entity in order to gain access to the experience of its
principal in the design, development and deployment of complex silicon
technology to be used in products under development. The Company is
participating in IBM Microelectronics' core-plus-ASIC program. The parties are
working jointly to produce, to Xionics' proprietary design, a family of
microcontroller chips designed specifically for the processing needs of MFPs.
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COMPETITION
The market for the Company's products is highly competitive, and many of
the Company's competitors have significantly more resources than the Company.
Principal competitive factors include brand identity, features, price,
performance, ease of integration, service and time to market.
In the market for embedded printer system software, the Company has one
primary competitor, Adobe, which has significantly greater resources than the
Company. Adobe was the developer of the PostScript page description language,
which acquired a significant brand name image. Recently Adobe announced that its
largest customer for its page description language, Hewlett-Packard, will
discontinue the use of Adobe PostScript in some of its future printer products.
A few other competitors also exist in this area. In addition, certain large OEMs
develop their own proprietary PDL components as an alternative to purchasing
commercially available products such as those sold by the Company.
The Company has recently terminated an agreement with Adobe pursuant to
which Adobe and the Company were collaborating to incorporate certain Adobe
software products into the Company's MFP technology under development. The
Company believes that Adobe, which has significantly greater resources than the
Company, may compete directly with the Company in the development of MFP
products, and may enter into one or more arrangements for developing MFP
products with the Company's competitors. There can be no assurance that Adobe
will not be able to develop a product that competes with, or is more competitive
than, the Company's embedded systems technology for MFP devices, or that Adobe
will not be able to develop such a product in a shorter time frame. See "Risk
Factors -- Termination of Relationship with Adobe; Increased Competition."
The market for a comprehensive MFP controller solution is in the
development stage. The Company has a number of potential competitors for its
IPS-MFP product in development, many with significantly greater resources than
the Company, including Adobe. Specifically, it is expected that one of the
leading solution-oriented ASIC foundries, such as LSI Logic Corporation or
Integrated Device Technology, Inc., will attempt to formulate a solution. Other
companies reportedly are or could be developing MFP systems solutions. The OEMs
now in the market with MFP products have developed much of their base MFP
technology internally, and the Company expects to continue to compete with these
in-house development groups.
The Company's document image acceleration products compete with similar
products sold by a small number of competitors.
INTELLECTUAL PROPERTY
The Company possesses two United States patents. The United States Patent
and Trademark Office has allowed two additional patent applications of the
Company, on which patents are expected to issue within the next several months.
In addition to its patents, the Company also relies on a combination of
copyright, trademark and trade secret laws, employee and third-party
non-disclosure agreements, and license agreements for the protection of its
intellectual property. The source code for the Company's products is protected
as an unpublished work under the copyright laws as they currently exist. Despite
these precautions unauthorized third parties may be able to copy or
reverse-engineer all or portions of the Company's products.
The Company believes that neither its existing products nor those under
development infringe any existing patents. There can be no assurance, however,
that the Company is aware of all patents that might be infringed by its
products, or that third parties will not claim such infringement by the Company
with respect to current or future products. If infringement is alleged, the
Company may seek to obtain a license to use the subject technology. There can be
no assurance that the necessary licenses will be available to the Company on
acceptable terms, if at all, or that the Company would prevail in any related
legal proceeding.
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OPERATIONS
The Company's operations consist primarily of materials planning and
procurement, quality control and final product configuration and testing. The
Company designs the significant hardware subassemblies for certain of its
products and uses several independent third-party contract assembly companies to
perform printed circuit board assembly. The Company configures and tests the
hardware and software in combinations to meet a wide variety of customer
requirements. For other products, independent third-party subcontractors perform
complete turnkey manufacturing. The Company has an in-house software duplication
facility which reproduces the Company's OEM software products on magnetic tape
or other media for delivery to OEMs.
The Company expects IBM Microelectronics to be its sole source of supply
for its XipChip ASIC. Although the Company believes it could develop other
sources for this custom component, no alternative source currently exists, and
identifying an alternative source and obtaining such components from the
alternative source could take several months or longer.
EMPLOYEES
As of May 1, 1996, Xionics had 162 full-time employees. The Company employs
101 people in product development, 26 in sales and marketing, 18 in
manufacturing and operations, and 17 in accounting and administrative functions.
The Company hires temporary employees on an as-needed basis to meet development
goals. None of the employees is represented by a labor union or is subject to a
collective bargaining agreement. The Company believes that its employee
relations are good.
FACILITIES
The Company's principal administrative, sales, marketing and research and
development facility is located in a leased facility with approximately 62,000
square feet of space in Burlington, Massachusetts. This facility is leased
through December 1999. Xionics' European sales activities are conducted from a
leased facility in Maidenhead, England and its Japanese sales activities are
conducted from a leased office in Tokyo, Japan. The Company conducts certain of
its research and development activities at a leased facility in Dortmund,
Germany. The Company believes that its facilities are adequate for its current
needs and for its future needs at least through the end of its 1998 fiscal year.
LEGAL PROCEEDINGS
As of the date of this Prospectus, the Company is not a party to any legal
proceedings the outcome of which, in the opinion of management, is likely to
have a material adverse effect on the Company's business, results of operations
or financial condition.
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MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The executive officers and directors of the Company are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ------------------------------------------ --- -------------------------------------------
<S> <C> <C>
Robert E. Gilkes.......................... 57 Chairman of the Board, Chief Executive
Officer and President
Robert Downs.............................. 48 Chief Operating Officer -- Imaging
Gerard T. Feeney.......................... 38 Vice President -- Finance, Chief Financial
Officer, Treasurer and Secretary
Gary Ambrosino............................ 40 Vice President -- Product Marketing
John W. Devine, III....................... 53 Vice President -- Human Resources
Rosemary E. Grande........................ 38 Vice President -- Product Development
Edward B. Mallen.......................... 47 Vice President -- Worldwide Sales
Frank P. Monaco........................... 49 Vice President -- Research and Development
Richard A. D'Amore........................ 42 Director
Ronald D. Fisher.......................... 48 Director
Paul R. Low............................... 63 Director
David R. Skok............................. 40 Director
Thomas A. St. Germain..................... 58 Director
</TABLE>
Mr. Gilkes has served as a Director of the Company since November 1994 and
as President and Chief Executive Officer of the Company since January 1995. He
was elected Chairman of the Board of the Company in April 1996. From September
1986 until September 1993, Mr. Gilkes served as Chairman and Chief Executive
Officer of Tadpole Technology plc, a manufacturer of portable workstations. Mr.
Gilkes has over 30 years of experience in the high technology industry,
including over 20 years in senior management.
Mr. Downs has served as Chief Operating Officer -- Imaging of the Company
since June 1996. From January 1996 until June 1996, he served as Chief Operating
Officer of the Company; from January 1995 until January 1996, he served as Vice
President -- Operations of the Company; from November 1994 through June 1995 he
served as Chief Operating Officer of the Company; and from November 1993 until
November 1994, he served as President and Chief Operating Officer of the
Company. From March 1989 until August 1993, Mr. Downs was Vice President and
General Manager of the Peripherals Division of Phoenix Technologies Ltd.
("Phoenix"). Mr. Downs has over 25 years of experience in the high technology
industry.
Mr. Feeney has served as Vice President -- Finance, Chief Financial
Officer, Treasurer and Secretary of the Company since June 1993. From October
1991 until June 1993, Mr. Feeney served as Vice President -- Finance and
Operations. From September 1986 until April 1991, Mr. Feeney served as Chief
Financial Officer at IMG, Inc., a software company, and prior to that held
various positions with Analog Devices, Inc., an integrated circuit manufacturer.
Mr. Feeney has over 17 years of experience in the high technology industry.
Mr. Ambrosino has served as Vice President -- Product Marketing of the
Company since May 1996. From January 1995 until May 1996, Mr. Ambrosino served
as Vice President -- Multifunction Products of the Company and from March 1994
until January 1995 as Director of OEM Sales. From November 1992 until March
1994, Mr. Ambrosino was a private high technology consultant and from September
1991 to November 1992 he was President and Chief Executive Officer of
Symbiotics, Inc., a designer of network-oriented programming tools. From
September 1988 to September 1991, he was President of The Instruction Set
International, Inc., a software services company. Mr. Ambrosino has over 17
years of experience in the high technology industry.
35
<PAGE> 38
Mr. Devine has served as Vice President -- Human Resources of the Company
since July 1995 and as Director of Human Resources from January 1995 until July
1995. From January 1991 until January 1995, Mr. Devine served as principal of a
human resources consulting company, Devine & Associates.
Ms. Grande has served as Vice President -- Product Development of the
Company since July 1995. From November 1994 until June 1995, she served as
General Manager of the Company's printer software division. From August 1993
until November 1994, Ms. Grande served as General Manager of the Peripherals
Division of Phoenix and from April 1992 until July 1993 she served as Senior
Director of Marketing at Phoenix. From April 1989 until April 1992, she held
other marketing positions at Phoenix. Ms. Grande has over 15 years of experience
in the high technology industry.
Mr. Mallen has served as Vice President -- Worldwide Sales of the Company
since July 1995. From August 1993 until November 1994, he served as Vice
President -- Imaging Sales and from November 1994 until June 1995 as General
Manager -- Imaging. From August 1991 until August 1993, Mr. Mallen served as
Vice President of Software Products at Xerox Imaging Systems, a manufacturer of
optical character recognition hardware and software products, and from August
1988 until August 1991 as Vice President of U.S. Sales for Interleaf
Corporation, a supplier of integrated document management software for business
solutions. Mr. Mallen has over 20 years of experience in the high technology
industry.
Mr. Monaco has served as Vice President -- Research and Development of the
Company since January 1996. From November 1994 until January 1996, he served as
Vice President -- Engineering of the Company. From November 1988 until November
1994, Mr. Monaco served as Senior Director of Engineering of the Peripherals
Division of Phoenix. Mr. Monaco has over 22 years of experience in the high
technology industry.
Mr. D'Amore has served as a Director of the Company since June 1993. Mr.
D'Amore has been a general partner of North Bridge Venture Partners since 1992
and of Hambro International Venture Funds since 1982, both venture capital
investing firms. Mr. D'Amore is also a director of Math Soft, Inc., Solectron
Corporation and Veeco Instruments, Inc.
Mr. Fisher has served as a Director of the Company since November 1994. Mr.
Fisher has been Vice Chairman of SOFTBANK Holdings Inc., a global technology
infrastructure provider, since October 1995. From January 1990 until June 1994,
Mr. Fisher was President and Chief Executive Officer of Phoenix. Since June
1994, Mr. Fisher has served as Chairman of the Board of Phoenix. Mr. Fisher is a
director of MICOM Communications Corp., Black Box Corporation, MicroTouch
Systems, Inc., and Phoenix Technologies Ltd.
Dr. Low has served as a Director of the Company since October 1995. Dr. Low
has been President and Chief Executive Officer of PRL Associates, a technology
consulting company, since June 1992. Previously, Dr. Low was Vice President and
General Manager of IBM Microelectronics, IBM's silicon design and fabrication
division, and a member of IBM's Management Board from June 1990 to June 1992.
Dr. Low is a director of Applied Materials, Inc., Integrated Packaging Assembly
Corp., Network Computing Devices, Inc., Number Nine Visual Technology
Corporation, Solectron Corporation, and Veeco Instruments, Inc.
Mr. Skok has served as a Director of the Company since November 1995. Mr.
Skok was President and Chief Executive Officer of Watermark Software, Inc., an
imaging software company, from January 1993 until June 1996. From September 1990
until December 1992, Mr. Skok was Chairman of the Board and Chief Executive
Officer of the Company.
Mr. St. Germain has served as a Director of the Company since March 1996.
Mr. St. Germain has served as Senior Vice President, Chief Financial Officer and
Treasurer of Summa Four, Inc., a telecommunications company, since May 1993.
From August 1984 until April 1993, Mr. St. Germain was Senior Vice President,
Chief Financial Officer, Treasurer and Secretary of Vicor Corporation, a power
systems manufacturing company.
The Board of Directors has established an Audit Committee and a
Compensation Committee. The Audit Committee reviews the Company's accounting
practices, internal accounting controls and financial results and oversees the
engagement of the Company's independent auditors. The members of the
36
<PAGE> 39
Audit Committee are Mr. D'Amore and Dr. Low. The Compensation Committee reviews
and recommends to the Board of Directors the salaries, bonuses and other forms
of compensation for executive officers of the Company and administers various
compensation and benefit plans. The members of the Compensation Committee are
Messrs. D'Amore and Fisher. None of the members of the Audit Committee or the
Compensation Committee is a past or current officer or employee of the Company.
The Board of Directors does not maintain a nominating committee or a committee
performing similar functions.
The Company's Charter will provide that the Board of Directors be
classified into three classes, with the members of the respective classes
serving for staggered three-year terms. The first class will consist of Messrs.
Gilkes and St. Germain, the second of Messrs. Skok and Fisher and the third of
Mr. D'Amore and Dr. Low, with the initial terms of the directors comprising the
classes expiring upon the election and qualification of directors at the annual
meetings of stockholders held following the fiscal years of the Company ending
June 30, 1997, 1998 and 1999, respectively. At each annual meeting of
stockholders, directors will be re-elected or elected for full three-year terms.
See "Description of Capital Stock -- Certain Provisions of the Company's Amended
and Restated Certificate of Incorporation and By-Laws."
The current and continuing directors of the Company were nominated and
elected in accordance with the Second Amended and Restated Shareholder
Agreement, dated as of August 25, 1995, which will terminate upon the closing of
this offering.
Executive officers of the Company are appointed by the Board of Directors
on an annual basis and serve until their successors have been duly elected and
qualified. There are no family relationships among any of the executive officers
or directors of the Company.
DIRECTOR COMPENSATION
The Company does not compensate its directors for attendance at meetings or
reimburse their expenses in connection therewith. The Company has granted
options to purchase 30,000 shares of Common Stock under the 1995 Stock Option
Plan to each of Mr. D'Amore, Mr. Fisher and Dr. Low, and an option to purchase
10,000 shares of Common Stock under the 1996 Stock Option Plan to Mr. St.
Germain.
The Company has also entered into a consulting agreement dated as of March
25, 1996 with Mr. St. Germain pursuant to which Mr. St. Germain has agreed to
provide investor relations services in exchange for compensation consisting of
$1,000 per consulting day and the option referred to above. The Agreement is
terminable by either party upon 90 days notice, and by the Company without
notice subject to a $15,000 termination payment.
37
<PAGE> 40
EXECUTIVE COMPENSATION
The following table sets forth certain information regarding each of the
two individuals who served as the Company's Chief Executive Officer and each of
the four most highly compensated other executive officers (the "Named Executive
Officers") during the fiscal year ended June 30, 1995, except as otherwise
indicated.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
------------
NUMBER OF
SHARES
UNDERLYING
OPTIONS ALL OTHER
NAME AND PRINCIPAL POSITION SALARY GRANTED(#) COMPENSATION
- ---------------------------------------- ------------------- ------------ ---------------
<S> <C> <C> <C>
Robert E. Gilkes........................ $ 150,000 340,000(2) $ --
Chairman of the Board, Chief Executive
Officer and President(1)
Robert Downs............................ 125,000 59,299 1,875(3)
Chief Operating Officer -- Imaging
Gerard T. Feeney........................ 121,500 15,418 3,075(4)
Vice President -- Finance, Chief
Financial Officer, Treasurer and
Secretary
Gary Ambrosino.......................... 112,500 140,000(5) --
Vice President -- Product Marketing
Edward B. Mallen........................ 125,000 104,367 1,875(6)
Vice President -- Worldwide Sales
Peter Santeusanio(7).................... 89,917 -- 58,950
Former Chairman of the Board,
President and Chief Executive Officer
</TABLE>
- ---------------
(1) Mr. Gilkes became President and Chief Executive Officer of the Company in
January 1995.
(2) Includes options to purchase 300,000 shares of Common Stock which were
granted to Mr. Gilkes as of October 3, 1995.
(3) Consists of Company contributions made on Mr. Downs' behalf to the 401(k)
Plan in fiscal 1995.
(4) Consists of Company contributions made on Mr. Feeney's behalf to the 401(k)
Plan in fiscal 1995.
(5) Includes options to purchase 100,000 shares of Common Stock which were
granted to Mr. Ambrosino as of October 3, 1995.
(6) Consists of Company contributions made on Mr. Mallen's behalf to the 401(k)
Plan in fiscal 1995.
(7) Mr. Santeusanio was Chairman of the Board until his resignation in February
1995, and had been President and Chief Executive Officer of the Company
until January 1995. The terms of Mr. Santeusanio's resignation were governed
by a Severance Agreement, dated March 23, 1995, between Mr. Santeusanio and
the Company. A total of $148,867 was paid to Mr. Santeusanio during fiscal
1995, $89,917 while he was employed by the Company (included in column
headed "Salary") and $58,950 as post-termination salary and benefits
pursuant to the terms of the Severance Agreement (included in column headed
"All Other Compensation").
38
<PAGE> 41
Options granted to the Named Executive Officers during the fiscal year
ended June 30, 1995 are set forth in the following table. For disclosure
regarding the terms of stock options, see "Management -- Stock Option Plans." No
stock appreciation rights ("SARs") were granted during fiscal 1995.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
---------------------------------------------------------
NUMBER OF PERCENT OF
SHARES TOTAL OPTIONS
UNDERLYING GRANTED TO EXERCISE
OPTIONS EMPLOYEES PRICE EXPIRATION
NAME GRANTED(#) IN FISCAL 1995 ($/SHARE) DATE
- -------------------------------------------- ---------- -------------- -------- ----------
<S> <C> <C> <C> <C>
Robert E. Gilkes(1)......................... 40,000 3.3% $ 0.20 2005
Robert Downs................................ 59,299 4.8 0.20 2005
Gerard T. Feeney............................ 15,418 1.3 0.20 2005
Gary Ambrosino(2)........................... 40,000 3.3 0.20 2005
Edward B. Mallen............................ 104,367 8.5 0.20 2005
</TABLE>
- ---------------
(1) As of October 3, 1995, the Company granted Mr. Gilkes options to purchase an
additional 300,000 shares of Common Stock at an exercise price of $0.68 per
share.
(2) As of October 3, 1995, the Company granted to Mr. Ambrosino options to
purchase an additional 100,000 shares of Common Stock at an exercise price
of $0.68 per share.
No stock options were exercised by the Named Executive Officers during
fiscal 1995. Mr. Ambrosino exercised stock options for 1,000 shares of Common
Stock in July 1996, then transferred those shares by gift to a person for whom
beneficial ownership is not attributable to Mr. Ambrosino. There were no SARs
outstanding during fiscal 1995 or subsequently thereafter. The following table
sets forth certain information regarding unexercised options held by each of the
Named Executive Officers as of June 30, 1995:
FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
AGGREGATED FISCAL YEAR-END OPTION VALUES
------------------------------------------------------------------
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT IN-THE-MONEY OPTIONS
FISCAL YEAR-END(#) AT FISCAL YEAR-END(1)
-------------------------------- -----------------------------
NAME EXERCISABLE(2) UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ------------------------------------ -------------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Robert E. Gilkes.................... 5,120 34,880 $ 55,296 $ 376,704
Robert Downs........................ 91,354 191,667 986,623 2,070,004
Gerard T. Feeney.................... 75,021 23,416 810,227 252,893
Gary Ambrosino...................... 5,120 34,880 55,296 376,704
Edward B. Mallen.................... 64,944 158,021 701,395 1,706,627
</TABLE>
- ---------------
(1) There was no public trading market for Common Stock on June 30, 1995.
Accordingly, solely for purposes of this table, the values in these columns
have been calculated on the basis of the assumed initial public offering
price of $11.00 per share (rather than a determination of the fair market
value of Common Stock on June 30, 1995), less the applicable option exercise
price.
(2) All stock options granted by the Company during fiscal 1995 automatically
become immediately exercisable upon completion by the Company of the public
offering of Common Stock contemplated hereby.
STOCK OPTION PLANS
1996 Stock Option Plan. The Company's 1996 Stock Option Plan (the "1996
Plan") was approved by the Board of Directors on February 14, 1996 and is
expected to be adopted by the Company's stockholders prior to the closing date
of this offering. The aggregate number of shares of Common Stock available for
awards under the 1996 Plan is 950,000 shares. The 1996 Plan provides for the
grant or award of stock options ("Stock Options") to purchase shares of Common
Stock of the Company. Stock Options granted under the 1996 Plan may be incentive
stock options or non-statutory options. The purpose of the
39
<PAGE> 42
1996 Plan is to attract and retain outstanding employees through the incentives
of stock ownership. Any employee of the Company (including officers), and any
consultant to and any director of the Company, is eligible to receive Stock
Options under the 1996 Plan. As of May 31, 1996, 197,500 of the 950,000 shares
reserved for issuance under the 1996 Plan were subject to outstanding Stock
Options at a weighted average exercise price of $3.20 per share.
The 1996 Plan is administered by the Board of Directors. Subject to the
provisions of the 1996 Plan, the Board of Directors has the authority to
designate participants and to determine whether Stock Options granted are
incentive stock options or not, the number of shares to be covered by each Stock
Option, the price of the exercise of the Stock Option, the time at which Stock
Options are exercisable or may be settled, the method of payment and any other
terms and conditions of the awards. All Stock Options are evidenced by Stock
Option Agreements between the Company and the participant.
While the Board of Directors determines the prices at which Stock Options
may be exercised under the 1996 Plan, the exercise price of an incentive Stock
Option under the 1996 Plan shall be at least 100% of the fair market value (as
determined under the terms of the 1996 Plan) (or 110% of the fair market value
if the grantee is deemed to own 10% or more of the outstanding voting stock of
the Company) of a share of Common Stock on the date of grant. Stock Options must
be exercised by the tenth anniversary of the date of grant, or if the grantee
owns 10% or more of the outstanding voting stock of the Company, by the fifth
anniversary of the date of grant.
1995 Stock Option Plan. The Company's 1995 Stock Option Plan (the "1995
Plan"), effective January 1, 1995, was approved by the Board of Directors on
June 1, 1995 and adopted by the Company's stockholders in December 1995. The
1995 Plan provides for the grant or award of Stock Options, which may be
incentive stock options or non-statutory stock options. The 1995 Plan contains
substantially identical terms to those contained in the 1996 Plan. As of May 31,
1996, 1,715,063 of the 1,758,843 shares of Common Stock reserved for issuance
under the 1995 Plan were subject to outstanding Stock Options at a weighted
average exercise price of $0.38 per share. The Board of Directors also
administers the 1995 Plan.
1993 Stock Option Plan. The Company's 1993 Stock Option Plan (the "1993
Plan") was approved by the Company's Board of Directors and stockholders on
August 27, 1993. The 1993 Plan provided for the grant or award of Stock Options,
which may be either incentive stock options or non-statutory options. The 1993
Plan contains substantially identical terms to those contained in the 1996 and
1995 Plans. As of May 31, 1996, 601,974 of the 734,397 shares of Common Stock
reserved for issuance under the 1993 Plan were subject to outstanding stock
options at a weighted average exercise price of $0.20 per share. The Board of
Directors also administers the 1993 Plan.
Director Stock Option Plan. The Company's 1996 Director Stock Option Plan
(the "Directors' Plan") was approved by the Board of Directors on July 12, 1996.
The Directors' Plan will be administered by the Compensation Committee of the
Board. Under the Directors' Plan, on the business day immediately following each
annual meeting of the stockholders of the Company, commencing with the first
annual meeting of stockholders after June 30, 1997, each person who is then a
non-employee director of the Company will be eligible to receive an option to
purchase such number of shares of Common Stock as determined by the Compensation
Committee at an exercise price equal to the fair market value of the Common
Stock on the date the option is granted. The aggregate number of shares reserved
for issuance under the Directors' Plan is 350,000. The Directors' Plan is
intended to attract and retain non-employee directors on the Company's Board of
Directors. The Directors' Plan will be submitted to the stockholders of the
Company for their approval prior to the closing date of this offering.
1996 Employee Stock Purchase Plan. The Company's Board of Directors
approved the 1996 Employee Stock Purchase Plan (the "Stock Purchase Plan") on
July 12, 1996. The Stock Purchase Plan will be administered by the Compensation
Committee of the Board. The Stock Purchase Plan is intended to qualify as an
"employee stock purchase plan" under Section 423 of the Internal Revenue Code of
1986, as amended. The Compensation Committee may grant options to purchase
shares of Common Stock to employees eligible under the Stock Purchase Plan who
may acquire shares of the Company's Common Stock through payroll deductions. The
purchase price for the Company's Common Stock purchased under
40
<PAGE> 43
the Stock Purchase Plan is 85% of the lesser of the fair market value of the
shares on the date the option was granted or the date the option is exercised. A
total of 200,000 shares of Common Stock have been reserved for issuance under
the Stock Purchase Plan, the purpose of which is to attract and retain
outstanding employees through the incentives of stock ownership. The Stock
Purchase Plan will be submitted to the stockholders of the Company for their
approval prior to the closing date of this offering.
401(k) Plan. Effective as of January 1, 1992, the Company adopted the
401(k) Plan, an employee profit-sharing plan pursuant to Section 401(k) of the
Internal Revenue Code of 1986, as amended (the "Code"), which plan was amended
and restated effective as of January 1, 1995. Under the 401(k) Plan, as amended
in 1995, eligible participants may defer portions of their salaries for future
receipt and the Company may match up to 50% of the deferral contribution made by
such participant up to a maximum of 6% of a participant's compensation during
the previous fiscal year. The Board of Directors establishes the amount of the
Company's matching contribution for each fiscal year after the close of the
fiscal year, within the limits imposed by the 401(k) Plan.
41
<PAGE> 44
CERTAIN TRANSACTIONS
On August 25, 1995, the Company issued an aggregate of 2,662,636 shares of
its Class C Redeemable Convertible Preferred Stock for aggregate consideration
of $7,748,270 (including par value of converted preferred stock and cancelled
indebtedness) at a purchase price of $2.91 per share (the "Class C Preferred
Stock Financing"). The following 5% or greater stockholders were purchasers of
the Class C Redeemable Convertible Preferred Stock in the amounts indicated:
Hambro International Venture Fund II (766,078 shares); Hambro International
Venture Fund Offshore II (156,908 shares); Monument Trust Company (122,585
shares); and Phoenix Technologies Ltd. (653,707 shares). The consideration for
the Class C Redeemable Convertible Preferred Stock included cash, cancellation
of indebtedness and conversion of the Company's Class B Redeemable Preferred
Stock. The automatic conversion of each share of Class C Redeemable Convertible
Preferred Stock into one share of Class A Common Stock will occur immediately
prior to the closing of this offering. Pursuant to the Class C Preferred Stock
Financing, Phoenix received an option to convert $340,000 of the principal
amount of a secured promissory note, dated August 25, 1995, into 116,979 shares
of Class C Redeemable Convertible Preferred Stock of the Company at a conversion
price of $2.91 per share. On May 9, 1996, Phoenix exercised the foregoing option
and the Company issued an additional 116,979 shares of Class C Redeemable
Convertible Preferred Stock to Phoenix. Upon completion of this offering, the
2,779,615 shares of Class C Redeemable Convertible Preferred Stock outstanding
as of May 31, 1996 will convert into 2,779,615 shares of Common Stock, or 27.7%
of the outstanding Common Stock of the Company.
On February 1, 1996, the Company settled an indemnification claim against
Phoenix arising under the Asset Purchase Agreement, dated September 30, 1994,
pursuant to which the Company purchased the Peripherals Division of Phoenix
("Asset Purchase Agreement"). Pursuant to the settlement arrangement, Phoenix
agreed to cancel $565,000 of indebtedness under the promissory note issued by
the Company to Phoenix in connection with the Asset Purchase Agreement. The
promissory note was restated effective January 1, 1996 to reflect the reduction.
On May 24, 1996, the Company settled an additional indemnification claim
against Phoenix relating to a third party patent infringement claim against
certain technology acquired by the Company under the Asset Purchase Agreement.
Pursuant to the settlement agreement, Phoenix agreed to pay a portion of the fee
for a license under the subject patent and the Company agreed to release Phoenix
from any additional indemnification obligations relating to that claim.
Pursuant to an Amended and Restated Registration Rights Agreement, dated as
of December 22, 1995, the Company granted registration rights to certain
stockholders of the Company, including Hambro International Venture Fund II,
Hambro International Venture Fund Offshore II, Monument Trust Company, Phoenix
Technologies Ltd., Mytech Funds, L.P., PUSH Incorporated, ADD Venture
Associates, L.P., and ADD Venture Associates II, L.P. See "Shares Eligible for
Future Sale -- Registration Rights."
Peter Santeusanio, the former Chairman of the Board, President and Chief
Executive Officer of the Company, resigned from the Company as of February 15,
1995. Pursuant to a Severance Agreement, dated as of March 23, 1995, the Company
agreed to pay Mr. Santeusanio's salary and certain benefits for the period from
that date through February 15, 1996, to provide continuing health, dental and
life insurance coverage through February 15, 1997, and to provide Mr.
Santeusanio certain periodic financial information regarding the Company. On
August 28, 1995, the Company repurchased from Mr. Santeusanio 370,370 shares of
Class A Common Stock at a price of $0.68 per share, for an aggregate repurchase
price of $250,000.
On May 16, 1996, the Company terminated a technology agreement with Adobe
and repurchased from Adobe 1,000,000 shares of Class D Preferred Stock for
consideration that included $4.5 million in cash, which was the amount initially
paid for the shares by Adobe. The technology and stock ownership arrangements
between the Company and Adobe had been entered into as of December 22, 1995.
As of May 31, 1996, the Company had two classes of Preferred Stock
outstanding: 3,125,051 shares of Class A Convertible Preferred Stock and
2,779,615 shares of Class C Redeemable Convertible Preferred Stock. The
automatic conversion of each share of Class A Convertible Preferred Stock and
Class C Redeemable Convertible Preferred Stock into one share of Class A Common
Stock will occur immediately
42
<PAGE> 45
prior to the closing of this offering. As of May 31, 1996, the Company had two
classes of common stock outstanding: 1,160,755 shares of Class A Common Stock
and 478,254 shares of Class B Common Stock. The automatic conversion of each
share of Class B Common Stock into one share of Class A Common Stock will occur
immediately prior to the closing of this offering. Upon the closing of this
offering, all shares of Class A Common Stock will be redesignated as "Common
Stock."
The Company has adopted a policy that all future transactions between the
Company and its officers, directors and affiliates must be on terms no less
favorable to the Company than those that could be obtained from unrelated third
parties, and must be approved by a majority of the disinterested members of the
Company's Board of Directors.
43
<PAGE> 46
PRINCIPAL AND SELLING STOCKHOLDERS
The following table sets forth, as of May 31, 1996, and as adjusted to
reflect the sale by the Company of 2,500,000 shares of Common Stock in this
offering, certain information with respect to the beneficial ownership of the
Common Stock by: (i) each person known by the company to beneficially own more
than 5% of the Common Stock; (ii) each director of the Company; (iii) each of
the Named Executive Officers; and (iv) all directors and executive officers of
the Company as a group. The Company believes that the beneficial owners of the
Common Stock listed below, based on information furnished by such owners, have
sole voting and investment power with respect to such shares, except as noted
below.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY SHARES BENEFICIALLY
OWNED PRIOR TO OWNED AFTER THE
OFFERING(1)(2) NUMBER OFFERING(2)
---------------------- OF SHARES --------------------
NAME AND ADDRESS OF 5% STOCKHOLDERS NUMBER PERCENT OFFERED NUMBER PERCENT
- ---------------------------------------- ------------ ------- ---------- --------- --------
<S> <C> <C> <C> <C> <C>
Hambro International.................... 2,539,087(3) 33.7% -- 2,539,087 25.3%
Venture Fund II
404 Wyman Street -- Suite 365
Waltham, MA 02154
Hambro International.................... 520,054(4) 6.8 -- 520,054 5.2
Venture Fund Offshore II
404 Wyman Street -- Suite 365
Waltham, MA 02154
Monument Trust Company.................. 929,324 12.3 -- 929,324 9.3
14 New Street
St. Peter Port
Guernsey, Channel Islands, U.K.
Phoenix Technologies Ltd................ 1,955,381 26.0 500,000 1,455,381 14.5
2770 De La Cruz Boulevard
Santa Clara, CA 95050
Mytech Funds, L.P....................... 516,085 6.8 -- 516,085 5.1
c/o Mr. and Mrs. Frank C. Pao
Penthouse No. 1
10 Rowes Wharf
Boston, MA 02110
DIRECTORS AND NAMED EXECUTIVE OFFICERS
- --------------------------------------
Robert E. Gilkes........................ 145,000(5) 1.9% -- 145,000 1.4%
Robert Downs............................ 283,021(5) 3.6 -- 283,021 2.7
Gerard T. Feeney........................ 98,437(5) 1.3 -- 98,437 1.0
Gary Ambrosino.......................... 58,750(5) * -- 58,750 *
Edward B. Mallen........................ 222,965(5) 2.9 -- 222,965 2.2
Richard A. D'Amore(6)................... 3,064,766(5) 40.6 -- 3,064,766 30.5
Ronald D. Fisher(7)..................... 1,961,006(5) 26.0 -- 1,461,066 14.5
Paul R. Low............................. 5,625(5) * -- 5,625 *
Thomas A. St. Germain................... 5,000(5) * -- 5,000 *
David R. Skok (8)....................... 929,324 12.3 -- 929,324 9.3
Peter Santeusanio....................... 150,967 2.0 -- 150,967 1.5
All directors and executive officers as
a group (13 persons)(9)............... 7,043,894 81.5 -- 6,543,894 58.7
</TABLE>
- ---------------
* Less than 1%
(1) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission and includes voting or investment power
with respect to the shares. Shares of Common Stock subject to options
currently exercisable or exercisable within 60 days following May 31, 1996,
are deemed outstanding for computing the share ownership and percentage of
the person holding such options, but are not deemed outstanding for
computing the percentage of any other person.
44
<PAGE> 47
(2) The number of shares of Common Stock deemed outstanding prior to this
offering includes (i) 1,160,755 shares of Common Stock outstanding as of May
31, 1996; (ii) an aggregate of 5,404,666 shares of Common Stock issuable
upon the conversion of Class A Convertible Preferred Stock and Class C
Redeemable Convertible Preferred Stock (including the 116,979 shares of
Class C Redeemable Convertible Preferred Stock issued to Phoenix
Technologies Ltd. pursuant to the exercise by Phoenix of an option to
purchase such shares); (iii) an aggregate of 478,254 shares of Common Stock
issuable upon the conversion of Class B Common Stock; (iv) 500,000 shares to
be sold by the Selling Stockholder in this offering; and (v) 1,867,870
shares issuable pursuant to options held by persons which may be exercised
within 60 days after May 31, 1996 or which become immediately exercisable
upon completion of this offering. The number of shares of Common Stock
deemed outstanding after this offering includes an additional 2,500,000
shares of Common Stock that are being offered for sale by the Company in
this offering.
(3) Does not include 520,054 shares held by Hambro International Venture Fund
Offshore II, which is under common control, or 5,625 shares which Richard A.
D'Amore, general partner of Hambro International Venture Fund II, may
acquire upon the exercise of stock options granted to him by the Company.
(4) Does not include 2,539,087 shares held by Hambro International Venture Fund
II, which is under common control, or 5,625 shares which Richard A. D'Amore,
general partner of Hambro International Venture Fund Offshore II, may
acquire upon the exercise of stock options granted to him by the Company.
(5) Includes shares of Common Stock subject to options which were exercisable as
of May 31, 1996, options which become immediately exercisable upon
completion of this offering and options which will be exercisable within 60
days of May 31, 1996.
(6) Includes 2,539,087 shares held by Hambro International Venture Fund II and
520,054 shares held by Hambro International Venture Fund Offshore II. Mr.
D'Amore is a general partner of Hambro International Venture Fund II and
Hambro International Venture Fund Offshore II and as such may be deemed to
beneficially own all such shares. Mr. D'Amore disclaims beneficial ownership
of all such shares held by Hambro International Venture Fund II and Hambro
International Venture Fund Offshore II.
(7) Includes 1,955,381 shares held by Phoenix Technologies Ltd. Mr. Fisher is
Chairman of the Board of Phoenix Technologies Ltd. and as such may be deemed
to beneficially own all such shares. Mr. Fisher disclaims beneficial
ownership of such shares held by Phoenix Technologies Ltd.
(8) Includes 929,324 shares held by Monument Trust Company. Mr. Skok is
beneficiary under a trust agreement of which Monument Trust Company is the
trustee, and as such Mr. Skok may be deemed the beneficial owner of all
shares held by Monument Trust Company. Mr. Skok disclaims beneficial
ownership of all such shares.
(9) Does not include shares owned by Mr. Santeusanio.
45
<PAGE> 48
DESCRIPTION OF CAPITAL STOCK
Upon the closing of this offering, the authorized capital stock of the
Company will consist of 40,000,000 shares of Common Stock, par value $.01 per
share, and 10,000,000 shares of Preferred Stock, par value $.01 per share.
COMMON STOCK
As of May 31, 1996, a total of 1,639,009 shares of Class A Common Stock and
Class B Common Stock were outstanding. Based upon the number of shares
outstanding as of that date and giving effect to the issuance of the shares of
Common Stock offered by the Company pursuant to this offering, the conversion of
all Class A Convertible Preferred Stock and Class C Redeemable Convertible
Preferred Stock into Class A Common Stock, the conversion of all Class B Common
Stock into Class A Common Stock, and the redesignation of Class A Common Stock
as "Common Stock," there will be 10,043,675 shares of Common Stock outstanding
upon the closing of the offering. After this offering, the Company will cease to
have the authority to issue any shares of Class B Common Stock.
Holders of Common Stock are entitled to one vote for each share held on all
matters submitted to a vote of stockholders. Holders of Common Stock do not have
cumulative voting rights. Accordingly, holders of a majority of the shares of
Common Stock entitled to vote in any election of directors may elect all of the
directors standing for election. Holders of Common Stock are entitled to receive
ratably such dividends, if any, as may be declared by the Board of Directors out
of funds legally available therefor, subject to any preferential dividend rights
of any outstanding Preferred Stock. Upon the liquidation, dissolution or winding
up of the Company, the holders of Common Stock are entitled to receive ratably
the net assets of the Company available after the payment of all debts and other
liabilities and subject to the prior rights of any outstanding Preferred Stock.
Holders of Common Stock have no preemptive, subscription, redemption or
conversion rights. The outstanding shares of Common Stock are, and the shares
offered by the Company in this offering will be, when issued and paid for,
validly issued, fully paid and nonassessable. The rights, preferences and
privileges of holders of Common Stock are subject to, and may be adversely
affected by, the rights of the holders of shares of any series of Preferred
Stock which the Company may designate and issue in the future. Upon the closing
of this offering, there will be no shares of Preferred Stock outstanding.
PREFERRED STOCK
The Board of Directors will be authorized, subject to certain limitations
prescribed by law, without further stockholder approval, to issue from time to
time up to an aggregate of 10,000,000 shares of Preferred Stock in one or more
series and to fix or alter the designations, preferences, rights and any
qualifications, limitations or restrictions on the shares of each such series
thereof, including the dividend rights, dividend rates, conversion rights,
voting rights, terms of redemption (including sinking fund provisions),
redemption price or prices, liquidation preferences and the number of shares
constituting any series or designations of such series. The issuance of
Preferred Stock may have the effect of delaying, deferring or preventing a
change of control of the Company. The rights, preferences and privileges of
holders of the Common Stock are subject to, and may be adversely affected by,
the rights of the holders of shares of any series of Preferred Stock which the
Company may designate and issue in the future. The Company has no current plan
to issue any shares of Preferred Stock.
DELAWARE LAW AND CERTAIN CHARTER AND BY-LAW PROVISIONS
The Amended and Restated Certificate of Incorporation of the Company (the
"Charter") provides for the division of the Board of Directors into three
classes as nearly equal in size as practicable with staggered three-year terms,
effective upon consummation of this offering. See "Management -- Board of
Directors." A director may be removed only for cause and then only by the vote
of a majority of the shares entitled to vote for the election of directors.
The Charter empowers the Board of Directors, when considering a tender
offer or merger or acquisition proposal, to take into account factors in
addition to potential economic benefits to stockholders. Such factors may
include (i) comparison of the proposed consideration to be received by
stockholders in relation to the then current market price of the Company's
capital stock, the estimated
46
<PAGE> 49
current value of the Company in a freely negotiated transaction or the estimated
future value of the Company as an independent entity and (ii) the impact of such
a transaction on the employees, suppliers and customers of the Company and its
effect on the communities in which the Company operates.
The Charter and the Amended and Restated By-laws ("By-laws") provide that,
effective upon consummation of the offering, any action required or permitted to
be taken by the stockholders of the Company may be taken only at a duly called
annual or special meeting of the stockholders and that special meetings may be
called only by the Chairman of the Board of Directors, the President or a
majority of the entire Board of Directors of the Company. These provisions could
have the effect of delaying until the next annual stockholders meeting
stockholder actions which are favored by the holders of a majority of the
outstanding voting securities of the Company, including actions to remove
directors. These provisions may also discourage another person or entity from
making a tender offer for the Company's Common Stock, because such person or
entity, even if it acquired all or a majority of the outstanding voting
securities of the Company, would be able to take action as a stockholder (such
as electing new directors or approving a merger) only at a duly called
stockholders meeting, and not by written consent.
The Delaware General Corporation Law ("DGCL") provides generally that the
affirmative vote of a majority of the shares entitled to vote on any matter is
required to amend a corporation's certificate of incorporation or by-laws,
unless a corporation's certificate of incorporation or by-laws, as the case may
be, requires a greater percentage. The Charter requires the affirmative vote of
a majority of the entire Board of Directors or the holders of at least 66 2/3%
of the outstanding voting stock of the Company to amend or repeal any of the
foregoing Charter provisions or to reduce the number of authorized shares of
Common Stock and Preferred Stock. A 66 2/3% vote is also required to amend or
repeal the Company's By-Laws. Such stockholder vote would in either case be in
addition to any separate class vote that might in the future be required
pursuant to the terms of any Preferred Stock that might be outstanding at the
time any such amendments are submitted to stockholders. The By-Laws may also be
amended or repealed by a majority vote of the Board of Directors.
The By-Laws provide that for nominations for the Board of Directors or for
other business to be properly brought by a stockholder before an annual meeting
of stockholders, the stockholder must first have given timely notice thereof in
writing to the Secretary of the Company. To be timely, a stockholder's notice
generally must be delivered not later than 120 days in advance of the first
anniversary of the date that the Company's proxy statement to stockholders is
delivered in connection with the prior year's annual meeting of stockholders or
90 days prior to the date of the meeting if no such proxy statement was
delivered to the stockholders. The notice must contain, among other things,
certain information about the stockholder delivering the notice and, as
applicable, background information about each nominee or a description of the
proposed business to be brought before the meeting. Business transacted at a
special meeting is limited to the purposes for which the meeting is called.
The foregoing provisions could have the effect of making it more difficult
for a third party to acquire, or of discouraging a third party from attempting
to acquire, control of the Company. See "Risk Factors--Effect of Anti-takeover
Provisions."
The Charter contains certain provisions permitted under the DGCL relating
to the liability of directors. These provisions eliminate a director's liability
for monetary damages for a breach of fiduciary duty, except in certain
circumstances involving certain wrongful acts, such as the breach of a
director's duty of loyalty or acts or omissions which involve intentional
misconduct or a knowing violation of law. The Charter and By-laws also contain
provisions indemnifying the directors and officers of the Company to the fullest
extent permitted by the DGCL. The Company expects to obtain, prior to the
consummation of the offering, a directors and officers liability insurance
policy which provides for indemnification of its directors and officers against
certain liabilities incurred in their capacities as such, which may include
liabilities under the Securities Act of 1933, as amended (the "Securities Act").
The Company believes that these provisions will assist the Company in attracting
and retaining qualified individuals to serve as directors.
The Company is subject to the provisions of Section 203 of the DGCL.
Subject to certain exceptions, Section 203 prohibits a publicly held Delaware
corporation from engaging in a "business combination"
47
<PAGE> 50
with an "interested stockholder" for a period of three years after the date of
the transaction in which the person became an interested stockholder, unless the
interested stockholder attained such status with the approval of the Board of
Directors or unless the business combination is approved in a prescribed manner.
A "business combination" includes certain mergers, asset sales and other
transactions resulting in a financial benefit to the interested stockholder.
Subject to certain exceptions, an "interested stockholder" is a person who,
together with his or her affiliates and associates, owns, or owned within three
years prior, 15% or more of the corporation's voting stock.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the Common Stock is The First National
Bank of Boston.
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of this offering, the Company will have 10,043,675 shares
of Common Stock outstanding (assuming no exercise of outstanding options). Of
these shares, the 3,000,000 shares sold in the offering made by this Prospectus
will be freely tradeable without restriction or further registration under the
Securities Act, except that any shares purchased by "affiliates" of the Company,
as that term is defined in Rule 144 ("Rule 144") under the Securities Act
("Affiliates"), may generally be sold only in compliance with the limitations of
Rule 144 described below.
LOCK-UP AGREEMENTS
As of the closing of this offering, certain security holders, all executive
officers and directors and virtually all employees of the Company, who in the
aggregate hold, following the offering, 6,953,521 shares of Common Stock and
options to purchase 2,465,777 shares of Common Stock, have agreed, pursuant to
lock-up agreements (the "Lock-up Agreements"), that they will not, without the
prior written consent of the representatives of the Underwriters, offer, sell,
contract to sell or otherwise dispose of any shares of Common Stock beneficially
owned by them for a period of 180 days after the date of this Prospectus.
SALES OF RESTRICTED SHARES
The 7,043,675 shares of outstanding Common Stock which are not being sold
in this offering are deemed "Restricted Shares" under Rule 144. Of the
Restricted Shares, 422,639 shares may be eligible for sale in the public market
immediately after this offering pursuant to Rule 144(k) under the Securities
Act; all of these shares are subject to Lock-up Agreements. Approximately
3,117,096 additional Restricted Shares may be eligible for sale in the public
market in accordance with Rule 144 or Rule 701 under the Securities Act
beginning 90 days after the date of this Prospectus; all except 90,154 of these
shares are subject to Lock-up Agreements. Upon expiration of the Lock-up
Agreements, approximately 4,224,430 shares of Common Stock, including those
shares previously described in this paragraph, will be available for sale in the
public market, subject to the provisions of Rule 144 or 144(k) under the
Securities Act. The remaining 2,819,245 Restricted Shares will be eligible for
sale in the public market in accordance with Rule 144 at various dates
thereafter.
In general, under Rule 144 as currently in effect, a person (or persons
whose shares are aggregated), including an Affiliate, who has beneficially owned
Restricted Shares for at least two years is entitled to sell, within any
three-month period, a number of such shares that does not exceed the greater of
(i) one percent of the then outstanding shares of Common Stock (approximately
100,437 shares immediately after this offering) or (ii) the average weekly
trading volume in the Common Stock in the over-the-counter market during the
four calendar weeks preceding the date on which notice of such sale is filed. In
addition, under Rule 144(k), a person who is not an Affiliate and has not been
an Affiliate for at least three months prior to the sale and who has
beneficially owned Restricted Shares for at least three years may resell such
shares without compliance with the foregoing requirements. In meeting the two-
and three-year holding periods
48
<PAGE> 51
described above, a holder of Restricted Shares can include the holding periods
of a prior owner who was not an Affiliate.
Rule 701 under the Securities Act provides that shares of Common Stock
acquired on the exercise of employee stock options may be resold by persons
other than Affiliates beginning 90 days after the date of this Prospectus,
subject only to the manner of sale provisions of Rule 144, and by Affiliates
under Rule 144 without compliance with its two-year minimum holding period,
subject to certain limitations.
OPTIONS
As of May 31, 1996, options to purchase a total of 2,514,537 shares of
Common Stock were outstanding (of which options to purchase 1,867,870 shares are
exercisable upon the completion of the offering pursuant to the stock option
agreements under which they were granted); 2,459,777 of the total shares
issuable pursuant to such options are subject to Lock-up Agreements. See
"Management -- Stock Option Plans." As of May 31, 1996, an additional 754,501
shares were available for future issuance under the 1996, 1995 and 1993 Stock
Option Plans.
The Company intends to file one or more registration statements on Form S-8
under the Securities Act to register all shares of Common Stock subject to
outstanding stock options as well as Common Stock reserved for issuance under
the 1993 Stock Option Plan, the 1995 Stock Option Plan, the 1996 Stock Option
Plan, the 1996 Director Stock Option Plan and the 1996 Employee Stock Purchase
Plan. The Company presently intends to file these registration statements
promptly upon the expiration of the Lock-up Agreements, and such registration
statements are expected to become effective upon the filing thereof. Shares
covered by these registration statements will thereupon be eligible for sale in
the public markets.
REGISTRATION RIGHTS
The holders (the "Rightsholders") of approximately 6,407,204 shares of
Common Stock (the "Registrable Shares") have certain rights with respect to the
registration of such shares for sale under the Securities Act under the terms of
an Amended and Restated Registration Rights Agreement among the Company and the
Rightsholders (the "Registration Rights Agreement"). The Registration Rights
Agreement provides that in the event the Company proposes to register any of its
securities under the Securities Act at any time or times, the Rightsholders,
subject to certain exceptions, shall be entitled to include Registrable Shares
in such registration. However, the managing underwriter of any such offering
that is underwritten may exclude for marketing reasons some or all of such
Registrable Shares from such registration. The Rightsholders have, subject to
certain conditions and limitations, additional rights to require the Company to
prepare and file a registration statement under the Securities Act with respect
to their Registrable Shares if Rightsholders holding not less than 50% of the
Registrable Shares then outstanding so request. The Company is generally
required to bear the expenses of all such registrations, except underwriting
discounts and commissions.
49
<PAGE> 52
UNDERWRITING
Subject to the terms and conditions of the Underwriting Agreement, the
Company and the Selling Stockholder have agreed to sell to each of the
Underwriters named below, and each of such Underwriters, for whom Adams,
Harkness & Hill, Inc. and SoundView Financial Group, Inc., are acting as
representatives (the "Representatives"), has severally agreed to purchase from
the Company and the Selling Stockholder the respective numbers of shares of
Common Stock set forth opposite each Underwriter's name below:
<TABLE>
<CAPTION>
NUMBER OF
SHARES OF
UNDERWRITER COMMON STOCK
- ------------------------------------------------------------------------------ ------------
<S> <C>
Adams, Harkness & Hill, Inc. .................................................
SoundView Financial Group, Inc. ..............................................
----------
Total.................................................................... 3,000,000
==========
</TABLE>
Under the terms and conditions of the Underwriting Agreement, the
Underwriters are committed to take and pay for all shares offered hereby, if any
are taken.
The Underwriters propose to offer the shares of Common Stock in part
directly to the public at the initial public offering price set forth on the
cover page of this Prospectus, and in part to certain securities dealers at such
price less a concession not in excess of $ per share. The Underwriters
may allow, and such dealers may reallow, a concession not in excess of
$ per share to certain brokers and dealers. After the shares of Common
Stock are released for sale to the public, the offering price and other selling
terms may from time to time be varied by the Representatives.
The Company and the Selling Stockholder have granted the Underwriters an
option exercisable for 30 days after the date of this Prospectus to purchase up
to an aggregate of 450,000 additional shares of Common Stock to cover
over-allotments, if any. If the Underwriters exercise their over-allotment
option, the Underwriters have severally agreed, subject to certain conditions,
to purchase approximately the same percentage thereof that the number of shares
to be purchased by each of them, as shown in the foregoing table, bears to the
3,000,000 shares of Common Stock offered hereby. The Underwriters may exercise
such option only to cover over-allotments in connection with the sale of the
3,000,000 shares of Common Stock offered hereby.
The Company has agreed not to offer, sell, contract 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 the Representatives, except
for the shares of Common Stock offered hereby and except that the Company may
issue securities pursuant to the Company's stock option plans. The Company's
officers, directors and certain other holders of Common Stock, including the
Selling Stockholder, who will hold in the aggregate 6,953,521 shares of Common
Stock following the offering, have agreed with the Underwriters or the Company
not to offer, sell, contract to sell or otherwise dispose of any shares of
Common Stock owned beneficially by them, other than as a bona fide gift or gifts
to or in trust for a person or entity who or which agrees in writing to be bound
by the foregoing restrictions for a period of 180 days after the date of this
Prospectus, without the prior written consent of the Representatives.
The Representatives have advised the Company that the Underwriters do not
intend to confirm sales to any account over which they exercise discretionary
authority.
Prior to this offering, there has been no public market for the Common
Stock. The initial public offering price will be negotiated among the Company
and the Representatives. Among the factors to be considered in determining the
initial public offering price of the Common Stock, in addition to prevailing
market conditions, are the Company's historical performance, estimates of the
business potential and
50
<PAGE> 53
earnings prospects of the Company, an assessment of the Company's management and
the consideration of the above factors in relation to market valuation of
companies in related businesses.
The Company intends to apply for quotation and trading of its Common Stock
on the Nasdaq National Market under the symbol XION.
The Company and the Selling Stockholder have agreed to indemnify the
several Underwriters against or contribute to losses arising out of certain
liabilities, including liabilities under the Securities Act.
LEGAL MATTERS
The validity of the shares of Common Stock offered hereby will be passed
upon for the Company by Bingham, Dana & Gould LLP, Boston, Massachusetts.
Certain legal matters will be passed upon for the Underwriters by Hale and Dorr,
Boston, Massachusetts.
EXPERTS
The Consolidated Financial Statements and related schedule of the Company
and its subsidiaries included in this Prospectus and elsewhere in this
Registration Statement have been audited by Arthur Andersen LLP, independent
public accountants, as indicated in their reports with respect thereto, and are
included herein in reliance upon the authority of said firm as experts in giving
said reports.
REPORTS TO STOCKHOLDERS
The Company intends to furnish its stockholders with annual reports
containing audited financial statements and to furnish or make available
quarterly reports for the first three fiscal quarters of each fiscal year
containing certain unaudited interim financial information.
ADDITIONAL INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement on Form S-1 (the "Registration
Statement") under the Securities Act with respect to the Common Stock offered
hereby. This Prospectus, which constitutes part of the Registration Statement,
omits certain of the information contained in the Registration Statement and the
exhibits and schedules thereto on file with the Commission pursuant to the
Securities Act and the rules and regulations of the Commission thereunder. The
Registration Statement, including exhibits and schedules thereto, may be
inspected and copied at the public reference facilities maintained by the
Commission at Room 1024, 450 Fifth Street, N.W., Washington, DC 20549, and at
the Commission's regional offices at Seven World Trade Center, 13th Floor, New
York, New York 10048 and Citicorp Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661, and copies may be obtained at prescribed rates from the
Public Reference Section of the Commission at its principal office in
Washington, D.C. Statements contained in this Prospectus as to the contents of
any contract or other document 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.
51
<PAGE> 54
XIONICS DOCUMENT TECHNOLOGIES, INC. AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Xionics Document Technologies, Inc. and Subsidiaries:
Report of Independent Public Accountants......................................... F-2
Consolidated Balance Sheets as of June 30, 1995, March 31, 1996 and Pro forma
March 31, 1996 (unaudited)...................................................... F-3
Consolidated Statements of Operations for the Years Ended June 30, 1994 and 1995
and for the Nine Months Ended March 31, 1995 (unaudited) and 1996............... F-4
Consolidated Statements of Redeemable Preferred Stock and Stockholders' Equity
(Deficit) for the Years Ended June 30, 1994 and 1995 and for the Nine Months
Ended March 31, 1996 and Pro forma March 31, 1996 (unaudited)................... F-5
Consolidated Statements of Cash Flows for the Years Ended June 30, 1994 and 1995
and for the Nine Months Ended March 31, 1995 (unaudited) and 1996............... F-8
Notes to Consolidated Financial Statements....................................... F-9
The Peripherals Division of Phoenix Technologies Ltd.:
Report of Independent Public Accountants......................................... F-21
Condensed Statements of Revenue and Direct Costs for the Years Ended September
30, 1994 and 1993............................................................... F-22
Notes to Condensed Financial Statements.......................................... F-23
</TABLE>
F-1
<PAGE> 55
After the shareholder approval of the amendment and restatement of the
Company's Certificate of Incorporation, we expect to be in the position to
render the following audit report.
ARTHUR ANDERSEN LLP
Boston, Massachusetts
May 17, 1996
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Xionics Document Technologies, Inc. and Subsidiaries:
We have audited the accompanying consolidated balance sheets of Xionics
Document Technologies, Inc. (a Delaware corporation) and subsidiaries as of June
30, 1995 and March 31, 1996, and the related consolidated statements of
operations, redeemable preferred stock and stockholders' equity (deficit) and
cash flows for the years ended June 30, 1994 and 1995 and for the nine months
ended March 31, 1996. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Xionics Document
Technologies, Inc. and subsidiaries as of June 30, 1995 and March 31, 1996, and
the results of their operations and their cash flows for the years ended June
30, 1994 and 1995 and the nine months ended March 31, 1996, in conformity with
generally accepted accounting principles.
We have also audited in accordance with generally accepted auditing
standards, the consolidated balance sheets as of June 30, 1993 and 1994 (neither
of which are presented herein) and have expressed an unqualified opinion on
those financial statements. In our opinion the information set forth in the
selected consolidated financial data for each of the two years in the period
ended June 30, 1995 and the nine month period ended March 31, 1996, appearing in
this Prospectus, is fairly stated, in all material respects, in relation to the
financial statements from which it has been derived.
F-2
<PAGE> 56
XIONICS DOCUMENT TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
PRO FORMA
JUNE 30, MARCH 31, MARCH 31,
1995 1996 1996
------------ ------------ ------------
(UNAUDITED)
(NOTE 1)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents........................................... $ 1,226,364 $ 10,056,575 $ 5,256,575
Accounts receivable, less reserves of approximately $204,000 at June
30, 1995 and $165,000 at March 31, 1996........................... 3,534,404 3,633,566 3,633,566
Inventories......................................................... 908,039 1,018,005 1,018,005
Prepaid expenses and other current assets........................... 278,722 275,364 275,364
------------ ------------ ------------
Total current assets.......................................... 5,947,529 14,983,510 10,183,510
------------ ------------ ------------
Property and equipment, net........................................... 720,051 1,573,166 1,573,166
Acquired Intangibles, net of accumulated amortization of approximately
$326,500 at June 30, 1995 and $575,000 at March 31, 1996............ 473,500 225,000 225,000
Other assets.......................................................... 37,500 37,500 37,500
------------ ------------ ------------
$ 7,178,580 $ 16,819,176 $12,019,176
============ ============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Equipment line of credit, current portion........................... $ -- $ 160,667 $ 160,667
Accounts payable.................................................... 1,786,832 1,560,484 1,560,484
Other accrued expenses.............................................. 1,236,762 1,032,580 1,032,580
Accrued payroll..................................................... 345,427 527,773 527,773
Deferred revenue.................................................... 1,483,173 5,448,173 5,448,173
Secured promissory note payable to a stockholder, current portion... 350,000 -- --
Senior subordinated promissory notes payable to stockholders........ 228,355 -- --
------------ ------------ ------------
Total current liabilities..................................... 5,430,549 8,729,677 8,729,677
Equipment line of credit, net of current portion...................... -- 280,333 280,333
Secured promissory note payable to a stockholder, net of current
portion............................................................. 4,849,000 2,734,000 2,094,000
------------ ------------ ------------
Commitments
Redeemable preferred stock:
Class B redeemable preferred stock, $.01 par value--
Authorized, issued and outstanding--1,867,877 shares, stated at
liquidation value, at June 30, 1995. None authorized, issued or
outstanding at March 31, 1996 (no shares pro forma)............. 2,275,827 -- --
Class C redeemable convertible preferred stock, $.01 par value--
Authorized--2,779,615 shares
Issued and outstanding--2,662,636 shares, stated at liquidation
value, at March 31, 1996 (no shares pro forma).................. -- 8,009,814 --
Class D preferred stock (redeemable), $.01 par value--
Authorized--1,100,000 shares
Issued and outstanding--1,000,000 shares, stated at liquidation
value, at March 31, 1996 (no shares pro forma).................. -- 4,590,000 --
Stockholders' equity (deficit):
Preferred stock, $.01 par value--
Authorized--10,000,000 shares (no shares pro forma)
Issued and outstanding--none...................................... -- -- --
Class A convertible preferred stock, $.01 par value--
Authorized--3,603,305 shares
Issued and outstanding-- 3,125,051 shares at June 30, 1995 and
March 31, 1996, respectively (no shares pro forma).............. 4,835,771 3,606,658 --
Common stock, $.01 par value--
Authorized--40,000,000 shares
Issued--7,768,986 shares pro forma................................ -- -- 77,690
Common stock, class A--
Authorized--20,000,000 shares
Issued--1,327,293 shares at June 30, 1995 and 1,386,066 shares at
March 31, 1996 outstanding--1,327,293 shares at June 30, 1995
and 1,147,943 at March 31, 1996 (no shares pro forma)........... 13,273 13,861 --
Common stock, class B--
Authorized--10,000,000 shares
Issued and outstanding--none at June 30, 1995 and 478,254 shares
at March 31, 1996 (no shares pro forma)......................... -- 4,783 --
Additional paid-in capital.......................................... (401,487) 1,110,986 13,098,412
Accumulated deficit................................................. (9,824,353) (12,100,200) (12,100,200 )
Treasury stock, 238,123 shares of class A common stock at March 31,
1996 (238,123 shares pro forma)................................... -- (160,736) (160,736 )
------------ ------------ ------------
Total stockholders' equity (deficit).......................... (5,376,796) (7,524,648) 915,166
------------ ------------ ------------
$ 7,178,580 $ 16,819,176 $12,019,176
============ ============ ============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-3
<PAGE> 57
XIONICS DOCUMENT TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE YEARS ENDED FOR THE NINE MONTHS ENDED
JUNE 30, MARCH 31,
-------------------------- ---------------------------
1994 1995 1996
---------- ----------- 1995 -----------
-----------
(UNAUDITED)
<S> <C> <C> <C> <C>
Net revenue............................ $9,130,824 $15,577,249 $10,759,706 $15,535,616
Cost of revenue........................ 2,896,009 4,681,539 3,175,842 4,280,734
---------- ----------- ----------- -----------
Gross profit...................... 6,234,815 10,895,710 7,583,864 11,254,882
Operating expenses:
Research and development............. 1,308,402 6,235,034 4,364,519 6,347,205
Selling, general and
administrative.................... 4,674,313 6,901,394 4,876,026 7,031,658
Charge for purchased research and
development....................... -- 3,492,000 3,492,000 --
---------- ----------- ----------- -----------
Income (loss) from operations..... 252,100 (5,732,718) (5,148,681) (2,123,981)
Other income (expense):
Interest expense..................... (16,817) (312,881) (184,840) (226,337)
Interest income...................... -- 35,789 12,211 52,867
Other income (expense)............... 7,778 (15,115) (20,100) 21,604
---------- ----------- ----------- -----------
Net income (loss)................. $ 243,061 $(6,024,925) $(5,341,410) $(2,275,847)
========== =========== =========== ===========
Pro forma net loss per common and
common equivalent share.............. $ (0.27)
===========
Pro forma weighted average number of
common and common equivalent shares
outstanding.......................... 8,316,543
===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-4
<PAGE> 58
XIONICS DOCUMENT TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF REDEEMABLE PREFERRED STOCK
AND STOCKHOLDERS' EQUITY (DEFICIT)
<TABLE>
<CAPTION>
REDEEMABLE PREFERRED STOCK
------------------------------------------------------------------------------------------
CLASS C
CLASS B REDEEMABLE CLASS D
REDEEMABLE CONVERTIBLE (REDEEMABLE)
-------------------------- -------------------------- --------------------------
NUMBER LIQUIDATION NUMBER LIQUIDATION NUMBER LIQUIDATION
OF SHARES VALUE OF SHARES VALUE OF SHARES VALUE
---------- ----------- ---------- ----------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
Balance, June 30, 1993............ 1,867,877 $1,867,877 -- $ -- -- $ --
Issuance of common stock........ -- -- -- -- -- --
Accretion of class B redeemable
preferred stock dividend...... -- 186,788 -- -- -- --
Net income...................... -- -- -- -- -- --
--------- ---------- --------- ---------- --------- ----------
Balance, June 30, 1994............ 1,867,877 2,054,665 -- -- -- --
Issuance of class A convertible
preferred stock............... -- -- -- -- -- --
Accretion of class B redeemable
preferred stock dividend...... -- 221,162 -- -- -- --
Net loss........................ -- -- -- -- -- --
--------- ---------- --------- ---------- --------- ----------
Balance, June 30, 1995............ 1,867,877 2,275,827 -- -- -- --
Accretion of class B redeemable
preferred stock dividend...... -- 34,769 -- -- -- --
Issuance of class C convertible
redeemable preferred stock,
net of issuance costs of
$25,651....................... (1,867,877) (2,310,596 ) 2,662,636 7,738,951 -- --
Conversion of class A
convertible preferred stock to
class B common stock.......... -- -- -- -- -- --
Stock repurchase................ -- -- -- -- -- --
Issuance of class D preferred
stock......................... -- -- -- -- 1,000,000 4,500,000
Exercise of stock options....... -- -- -- -- -- --
Exercise of stock options,
issued from treasury.......... -- -- -- -- -- --
Noncash compensation charge for
stock options................. -- -- -- -- -- --
Issuance of treasury stock...... -- -- -- -- -- --
Related party forgiveness of
debt.......................... -- -- -- -- -- --
Accretion of class C redeemable
convertible and class D
preferred stock dividend...... -- -- -- 270,863 -- 90,000
Net loss........................ -- -- -- -- -- --
--------- ---------- --------- ---------- --------- ----------
Balance, March 31, 1996........... -- -- 2,662,636 8,009,814 1,000,000 4,590,000
========= ========== ========= ========== ========= ==========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-5
<PAGE> 59
XIONICS DOCUMENT TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF REDEEMABLE PREFERRED STOCK AND
STOCKHOLDERS' EQUITY (DEFICIT) -- (CONTINUED)
<TABLE>
<CAPTION>
------------------------------------------------------------
CLASS A CLASS A
CONVERTIBLE COMMON STOCK
--------------------------- -------------------------
NUMBER LIQUIDATION NUMBER $.01
OF SHARES VALUE OF SHARES PAR VALUE
---------- ----------- ---------- ---------
<S> <C> <C> <C> <C>
Balance, June 30, 1993..................................... 2,418,610 $1,789,771 1,317,293 $ 13,173
Issuance of common stock............................... -- -- 10,000 100
Accretion of class B redeemable preferred stock
dividend............................................. -- -- -- --
Net income................................................. -- -- -- --
---------- ----------- ---------- --------
Balance, June 30, 1994..................................... 2,418,610 1,789,771 1,327,293 13,273
Issuance of class A convertible preferred stock............ 1,184,695 3,046,000 -- --
Accretion of class B redeemable preferred stock dividend... -- -- -- --
Net loss................................................... -- -- -- --
---------- ----------- ---------- --------
Balance, June 30, 1995..................................... 3,603,305 4,835,771 1,327,293 13,273
Accretion of class B redeemable preferred stock dividend... -- -- -- --
Issuance of class C redeemable convertible preferred stock,
net of issuance costs of $25,651......................... -- -- -- --
Conversion of class A convertible preferred stock to class
B common stock........................................... (478,254) (1,229,113 ) -- --
Stock repurchase........................................... -- -- -- --
Issuance of class D preferred stock........................ -- -- -- --
Exercise of stock options.................................. -- -- 58,773 588
Exercise of stock options, issued from treasury............ -- -- -- --
Noncash compensation charge for stock options.............. -- -- -- --
Issuance of treasury stock................................. -- -- -- --
Related party forgiveness to debt.......................... -- -- -- --
Accretion of class C redeemable convertible and class D
preferred stock dividend................................. -- -- -- --
Net loss................................................... -- -- -- --
---------- ----------- ---------- --------
Balance, March 31, 1996.................................... 3,125,051 3,606,658 1,386,066 13,861
========== =========== ========== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-6
<PAGE> 60
<TABLE>
<CAPTION>
STOCKHOLDERS' EQUITY (DEFICIT)
- ----------------------------------------------------------------------------------------------------------------------------------
CLASS B
COMMON STOCK COMMON STOCK TREASURY STOCK TOTAL
- ----------------------- ----------------------- ADDITIONAL ----------------------- STOCKHOLDERS'
NUMBER $.01 NUMBER $.01 PAID-IN ACCUMULATED NUMBER EQUITY
OF SHARES PAR VALUE OF SHARES PAR VALUE CAPITAL DEFICIT OF SHARES COST (DEFICIT)
- --------- --------- --------- --------- ----------- ------------ --------- --------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
-- $ -- -- $ -- $ 4,565 $(4,042,489) -- $ -- $(2,234,980)
-- -- -- -- 1,898 -- -- -- 1,998
-- -- -- -- (186,788) -- -- -- (186,788)
-- -- -- -- -- 243,061 -- -- 243,061
- -------- ------- -------- -------- ---------- ----------- ----------- ------------ -----------
-- -- -- -- (180,325) (3,799,428) -- -- (2,176,709)
-- -- -- -- -- -- -- -- 3,046,000
-- -- -- -- (221,162) -- -- -- (221,162)
-- -- -- -- -- (6,024,925) -- -- (6,024,925)
- -------- ------- -------- -------- ---------- ----------- ----------- ------------ -----------
-- -- -- -- (401,487) (9,824,353) -- -- (5,376,796)
-- -- -- -- (34,769) -- -- -- (34,769)
-- -- -- -- (25,651) -- -- -- (25,651)
478,254 4,783 -- -- 1,224,330 -- -- -- --
-- -- -- -- -- -- 370,370 (250,000) (250,000)
-- -- -- -- -- -- -- -- --
-- -- -- -- 11,169 -- -- -- 11,757
-- -- -- -- (48,743) -- (102,671) 69,264 20,521
-- -- -- -- 182,000 -- -- -- 182,000
-- -- -- -- -- -- (29,630) 20,000 20,000
-- -- -- -- 565,000 -- -- -- 565,000
-- -- -- -- (360,863) -- -- -- (360,863)
-- -- -- -- -- (2,275,847) -- -- (2,275,847)
- -------- ------- -------- -------- ---------- ----------- ----------- ------------ -----------
478,254 4,783 -- -- 1,110,986 (12,100,200) 238,123 (160,736) (7,524,648)
======== ======= ======== ======== ========== =========== =========== ============ ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-7
<PAGE> 61
XIONICS DOCUMENT TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE YEARS ENDED FOR THE NINE MONTHS ENDED
JUNE 30, MARCH 31,
------------------------ --------------------------
1994 1995 1996
--------- ----------- 1995 -----------
-----------
(UNAUDITED)
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net income (loss)........................ $ 243,061 $(6,024,925) $(5,341,410) $(2,275,847)
Adjustments to reconcile net income
(loss) to net cash provided by (used
in) operating activities--
Charge for purchased research and
development......................... -- 3,492,000 3,492,000 --
Depreciation and amortization......... 132,236 408,030 363,107 555,440
Noncash charge........................ -- -- -- 182,000
Loss on disposal of property and
equipment........................... -- 10,429 10,429 --
Changes in assets and liabilities--
Accounts receivable................. (223,969) 203,032 (263,440) (99,162)
Inventories......................... (115,246) (720,087) (595,082) (109,966)
Prepaid expenses and other current
assets........................... (3,277) (176,912) (152,375) 3,358
Accounts payable.................... (175,199) 1,017,315 750,554 (226,348)
Other accrued expenses.............. 558,313 199,949 465,779 (204,182)
Accrued payroll..................... 205,320 140,107 (21,851) 182,346
Deferred revenue.................... (67,184) 982,961 793,083 3,965,000
--------- ----------- ----------- -----------
Net cash provided by (used in)
operating activities........... 554,055 (468,101) (499,206) 1,972,639
--------- ----------- ----------- -----------
Cash flows from investing activities:
Increase in other assets................. -- (37,500) (37,500) --
Net cash acquired in connection with the
Peripherals Division acquisition...... -- 197,000 197,000 --
Proceeds from sale of property and
equipment............................. -- 23,866 23,866 --
Acquisition of property and equipment.... (176,077) (419,018) (407,220) (678,055)
--------- ----------- ----------- -----------
Net cash used in investing
activities..................... (176,077) (235,652) (223,854) (678,055)
--------- ----------- ----------- -----------
Cash flows from financing activities:
Issuance of class A convertible preferred
stock................................. -- 750,000 750,000 --
Issuance of class C redeemable
convertible preferred stock, net of
issuance costs........................ -- -- -- 3,274,349
Issuance of class D preferred stock...... -- -- -- 4,500,000
Issuance of treasury stock............... -- -- -- 20,000
Repayment of equipment line of credit.... -- -- -- (41,000)
Borrowings (repayments) of senior
subordinated promissory notes payable
to stockholders....................... 64,850 (20,759) (20,759) --
Proceeds from secured promissory notes
payable............................... -- 350,000 -- --
Stock repurchase......................... -- -- -- (250,000)
Proceeds from exercise of stock
options............................... -- -- -- 32,278
--------- ----------- ----------- -----------
Net cash provided by financing
activities..................... 64,850 1,079,241 729,241 7,535,627
--------- ----------- ----------- -----------
Net increase in cash and cash
equivalents.............................. 442,828 375,488 6,181 8,830,211
Cash and cash equivalents, beginning of
period................................... 408,048 850,876 850,876 1,226,364
--------- ----------- ----------- -----------
Cash and cash equivalents, end of period... $ 850,876 $ 1,226,364 $ 857,057 $10,056,575
========= =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-8
<PAGE> 62
XIONICS DOCUMENT TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(INCLUDING DATA APPLICABLE TO UNAUDITED PERIOD)
(1) OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Xionics Document Technologies, Inc. and subsidiaries (the "Company")
designs, develops and markets advanced embedded systems technology for use in
mainstream office devices such as printers, copiers, and scanners. The Company's
products enable the high-speed capture, processing, printing, copying and
display of complex electronic documents, both locally and across networks.
The Company is subject to a number of risks common to companies in similar
stages of development, including dependence on key individuals, competition from
substitute products and larger companies, the need for adequate financing to
fund future operations, and the continued successful development and marketing
of its products and services.
The accompanying consolidated financial statements reflect the application
of certain significant accounting policies as described below and elsewhere in
the notes to consolidated financial statements.
(a) Principles of Consolidation
The accompanying consolidated financial statements include the accounts of
the Company and its wholly owned subsidiaries, Xionics Holdings Limited
("Limited"), Xionics Document Technologies GmbH and Xionics Kabushiki Kaisha.
Xionics International Limited ("Xionics UK") is a wholly owned subsidiary of
Limited. All material intercompany accounts and transactions of the consolidated
companies have been eliminated in consolidation.
(b) Revenue Recognition
Net revenue includes software license fees, hardware products, services,
software maintenance and royalty revenue. Revenue from software and hardware
product sales is recognized upon shipment of the product to customers, provided
there are no significant obligations remaining and collectibility of the revenue
is probable. The Company provides for the estimated hardware products returns
upon shipment of the hardware products. The Company recognizes revenue from
software license fees, services and maintenance in accordance with the
provisions of Statement of Position No. 91-1 (SOP 91-1), Software Revenue
Recognition. Revenue from software maintenance contracts is recognized ratably
as it is earned over the term of the contract, generally one year. Unearned
software maintenance revenue is included in deferred revenue. In addition,
deferred revenue includes certain prepaid royalties and advanced billings under
software development contracts for services not yet performed. Service revenue
and royalty revenue are recognized as the service is performed and the royalty
earned. The Company recognizes revenue under software development contracts as
services are provided for per diem contracts or by using the percentage-
of-completion method of accounting based on the ratio of hours incurred to the
total estimated hours for individual fixed-price contracts. Provisions for any
estimated losses on uncompleted contracts are made in the period in which such
losses become probable. There were no contract loss provisions at June 30, 1995
or March 31, 1996.
(c) Warranty Costs
The Company provides a one-year warranty with the sale of its hardware
products. The Company estimates and accrues for the costs of providing these
warranties upon shipment of the products.
(d) Research and Development Costs
Research and development costs are charged to operations as incurred.
Statement of Financial Accounting Standards (SFAS) No. 86, Accounting for the
Costs of Computer Software To Be Sold, Leased or Otherwise Marketed, requires
capitalization of certain software development costs subsequent to the
establishment of technological feasibility. Based on the Company's product
development process, technological feasibility is established upon completion of
a working model. Costs incurred by the
F-9
<PAGE> 63
XIONICS DOCUMENT TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INCLUDING DATA APPLICABLE TO UNAUDITED PERIOD)
Company between completion of the working model and the point at which the
product is ready for general release have not been material. Through March 31,
1996, all research and development costs have been expensed.
(e) Cash and Cash Equivalents
The Company considers all highly liquid investments with original
maturities of three months or less at the time of purchase to be cash
equivalents. Cash equivalents consist primarily of United States Government
obligations. In accordance with SFAS No. 115, Accounting for Investments in
Certain Debt and Equity Securities, the Company has the positive intent and
ability to hold its cash equivalents to maturity; therefore, cash equivalents
are recorded at amortized cost, which approximates market value.
(f) Inventories
Inventories, which include material, labor and manufacturing overhead, are
stated at the lower of cost (first-in, first-out) or market and consist of the
following:
<TABLE>
<CAPTION>
JUNE 30, MARCH 31,
1995 1996
-------- ----------
<S> <C> <C>
Raw materials........................................................ $602,706 $ 613,895
Finished goods....................................................... 305,333 404,110
-------- ----------
$908,039 $1,018,005
======== ==========
</TABLE>
(g) Property and Equipment
The Company records property and equipment at cost and provides for
depreciation and amortization on a straight-line basis over the estimated useful
lives of the assets, as follows:
<TABLE>
<CAPTION>
ESTIMATED JUNE 30, MARCH 31,
USEFUL LIFE 1995 1996
----------- ---------- ----------
<S> <C> <C> <C>
Computer equipment...................................... 3-5 Years $ 801,503 $1,818,030
Furniture and fixtures.................................. 3-7 Years 369,704 504,201
Machinery and equipment................................. 3-5 Years 42,567 52,377
---------- ----------
1,213,774 2,374,608
Less--Accumulated depreciation and amortization......... 493,723 801,442
---------- ----------
$ 720,051 $1,573,166
========== ==========
</TABLE>
(h) Foreign Currency Translation
The Company follows the translation principles established by SFAS No. 52,
Foreign Currency Translation. Changes in exchange rate gains and losses relating
to the remeasurement of financial statements of the Company's subsidiaries,
whose functional currency is the United States dollar, are included in other
income (expense) in the consolidated statements of operations.
(i) Concentration of Credit Risk
SFAS No. 105, Disclosure of Information about Financial Instruments with
Off-Balance-Sheet Risk and Financial Instruments with Concentrations of Credit
Risk, requires disclosures of any significant off-balance-sheet and credit risk
concentrations. The Company has no significant off-balance-sheet concentration
of credit risk such as foreign exchange contracts, option contracts or other
foreign hedging arrangements. The Company maintains the majority of cash
balances with one financial institution. The
F-10
<PAGE> 64
XIONICS DOCUMENT TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INCLUDING DATA APPLICABLE TO UNAUDITED PERIOD)
Company's accounts receivable credit risk is not concentrated within any
geographic area. As of March 31, 1996, one customer accounted for approximately
16.5% of accounts receivable.
The following summarizes significant customers:
<TABLE>
<CAPTION>
NUMBER OF PERCENTAGE OF
CUSTOMERS NET REVENUES
--------- -------------
<S> <C> <C>
Fiscal year ended
June 30, 1994................................ 2 17.1%, 11.3%
June 30, 1995................................ 1 12.3
Nine months ended
March 31, 1995............................... -- --
March 31, 1996............................... 1 17.5
</TABLE>
(j) Unaudited Pro Forma Presentation
The unaudited pro forma consolidated balance sheet and unaudited
consolidated statement of pro forma redeemable preferred stock and stockholders'
equity (deficit) as of March 31, 1996 reflects: (1) the repurchase of 1,000,000
shares of Class D Preferred Stock at a purchase price of $4.50 per share, for an
aggregate purchase price of $4,500,000; (2) the conversion of $340,000 in
principal amount of the secured promissory note payable to Phoenix Technologies
Ltd. into 116,979 shares of Class C Redeemable Convertible Preferred Stock and
the repayment of an additional $300,000 in principal amount of such note; (3)
the automatic conversion of the Class C Redeemable Convertible Preferred Stock
and the Class A Convertible Preferred Stock into 5,904,666 shares of Class A
Common Stock; and (4) the conversion of all issued shares of Class B into Class
A Common Stock and the redesignation of all shares of Class A Common Stock as
"Common Stock" upon the closing of the Company's proposed initial public
offering. In addition, the pro forma statements reflect the accumulated
dividends related to the Class C Redeemable Convertible Preferred Stock and
Class D Preferred Stock being credited to additional paid-in capital because
upon the automatic conversion of the Class C and Class D Preferred Stock, the
accumulated dividends are not converted or paid to the preferred stockholders.
(k) Pro Forma Net Loss
For the nine-month period ended March 31, 1996, pro forma net loss per
common and common equivalent share was based on the weighted average number of
common and common equivalent shares outstanding during the period, computed in
accordance with the treasury stock method. The pro forma weighted average number
of common and common equivalent shares assumes that all series of preferred
stock had been converted into common stock as of the original issuance dates and
that common stock options issued subsequent to May 24, 1995 have been
outstanding for the period presented, computed in accordance with the treasury
stock method. Historical net income (loss) per share data has not been
presented, as such information is not considered to be relevant or meaningful.
(l) 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
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
(m) Interim Financial Statements
The accompanying consolidated statements of operations and cash flows for
the nine-month period ended March 31, 1995 are unaudited but, in the opinion of
management, include all adjustments (consisting only of normal, recurring
adjustments) necessary for a fair presentation of results for this interim
period.
F-11
<PAGE> 65
XIONICS DOCUMENT TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INCLUDING DATA APPLICABLE TO UNAUDITED PERIOD)
(n) Postretirement Benefits
The Company has no obligations under SFAS No. 106, Employers' Accounting
for Postretirement Benefits Other Than Pensions, as it does not currently offer
such benefits.
(o) New Accounting Standards
During March 1995, the Financial Accounting Standards Board (FASB) issued
SFAS No. 121, Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets To Be Disposed Of, which is effective for fiscal years
beginning after December 15, 1995. The Company elected early adoption of SFAS
No. 121 in the nine-month period ended March 31, 1996. The adoption of this
standard did not have a material effect on its financial position or results of
operations.
In October 1995, the FASB issued SFAS No. 123, Accounting for Stock-Based
Compensation. The Company has determined that it will continue to account for
stock-based compensation under Accounting Principles Board No. 25 and elect the
disclosure-only alternative under SFAS No. 123. The Company will be required to
disclose the pro forma net income or loss and per share amounts in the notes to
the consolidated financial statements using the fair-value-based method
beginning in the year ending June 30, 1997, with comparable disclosures for the
year ending June 30, 1996. The Company has not determined the impact of these
pro forma adjustments.
(p) Noncash Investing and Financing Activities
The following table summarizes the supplemental disclosure of the noncash
transactions for the periods indicated.
<TABLE>
<CAPTION>
YEARS ENDED NINE MONTHS ENDED
JUNE 30, MARCH 31,
------------------------ --------------------------
1994 1995 1995 1996
-------- ----------- ----------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C>
Supplemental Disclosure of Noncash
Transactions:
Issuance of common stock................ $ 1,998 $ -- $ -- $ --
======== =========== =========== ==========
Dividend accretion on preferred stock... $186,788 $ 221,162 $ 165,873 $ 395,632
======== =========== =========== ==========
Conversion of class A convertible
preferred stock to class B common
stock................................ $ -- $ -- $ -- $1,229,113
======== =========== =========== ==========
Forgiveness of secured promissory note
payable to a stockholder............. $ -- $ -- $ -- $ 565,000
======== =========== =========== ==========
Acquisition of property and equipment
under capital lease.................. $ -- $ -- $ -- $ 482,000
======== =========== =========== ==========
In connection with the issuance of class
C redeemable convertible preferred stock
(Note 7(b)), the following were
converted to class C redeemable
convertible preferred stock--
Class B redeemable preferred stock... $ -- $ -- $ -- $2,310,596
Senior subordinated promissory notes
payable to stockholders............ -- -- -- 228,355
Secured promissory notes payable..... -- -- -- 1,900,000
-------- ----------- ----------- ----------
Total noncash conversion........ $ -- $ -- $ -- $4,438,951
======== =========== =========== ==========
</TABLE>
F-12
<PAGE> 66
XIONICS DOCUMENT TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INCLUDING DATA APPLICABLE TO UNAUDITED PERIOD)
<TABLE>
<CAPTION>
YEARS ENDED NINE MONTHS ENDED
JUNE 30, MARCH 31,
------------------------ --------------------------
1994 1995 1995 1996
-------- ----------- ----------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C>
In connection with the acquisition of
Peripherals Division in fiscal 1995
(Note 2), the following noncash
transactions occurred--
Fair value of assets acquired........ $ -- $(6,948,000) $(6,948,000) $ --
Issuance of Class A convertible
preferred stock.................... -- 2,296,000 2,296,000 --
Issuance of secured promissory notes
payable................................. -- 4,849,000 4,849,000 --
-------- ----------- ----------- ----------
Cash acquired, net of $53,000
paid for direct costs of
acquisition................... $ -- $ 197,000 $ 197,000 $ --
======== =========== =========== ==========
Supplemental Disclosure of Cash Flow Information:
Cash paid for interest.................. $ 14,605 $ 185,320 $ 88,706 $ 171,617
======== =========== =========== ==========
Cash paid for income taxes.............. $ 3,184 $ 5,955 $ 5,955 $ --
======== =========== =========== ==========
</TABLE>
(2) ACQUISITION OF THE PERIPHERALS DIVISION
In October 1994, the Company acquired the Peripherals Division of Phoenix
Technologies Ltd. This acquisition was accounted for as a purchase, in
accordance with Accounting Principles Board Opinion No. 16. To fund the
purchase, the Company issued a $4,849,000 secured promissory note payable to
Phoenix Technologies Ltd. ("Phoenix"), with principal payable quarterly, as
defined, beginning in January 1997. Interest is payable at an annual rate of
8.0%, payable quarterly, beginning in January 1995. The note matures on October
15, 2001. In addition, the Company issued 892,986 shares of Class A Convertible
Preferred Stock to Phoenix, valued at $2.57 per share, representing
approximately 15% of the fully diluted common stock of the Company. In addition
to this acquisition, the Company simultaneously sold to Phoenix in a separate
sale of stock 291,709 shares of Class A Convertible Preferred Stock at $2.57 per
share for total proceeds of $750,000, representing an additional approximate
4.9% of the fully diluted common stock of the Company. The aggregate purchase
price of approximately $7,198,000 (which consisted of a $4,849,000 note payable,
$2,296,000 of stock and $53,000 of direct acquisition costs) was allocated based
on the fair value of the tangible and intangible assets acquired as follows:
<TABLE>
<S> <C>
Cash......................................................... $ 250,000
Current assets............................................... 2,610,000
Property and equipment....................................... 46,000
Acquired intangibles......................................... 800,000
Purchased incomplete research and development................ 3,492,000
----------
$7,198,000
==========
</TABLE>
In connection with the purchase price allocation, the Company obtained an
independent appraisal of the intangible assets acquired. The Company did not
acquire any liabilities in connection with this asset acquisition. Acquired
intangibles include acquired technology consisting of acquired software source
code, royalty agreements and an assembled work force. These intangibles are
being amortized over their estimated useful lives of 15 to 84 months. The
portion of the purchase price allocated to the purchased incomplete research and
development projects that had not yet reached technological feasibility and did
not have a future alternative use, totaling $3,492,000, was charged to expense
as of the acquisition date. The amount allocated to the purchased incomplete
research and development projects represents the estimated fair value related to
these projects determined by an independent appraisal. Proven valuation
procedures and techniques were utilized in determining the fair market value of
each intangible asset. To
F-13
<PAGE> 67
XIONICS DOCUMENT TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INCLUDING DATA APPLICABLE TO UNAUDITED PERIOD)
bring these projects to technological feasibility, high risk developmental and
testing issues needed to be resolved which required substantial additional
effort and testing.
The accompanying unaudited pro forma consolidated condensed statements of
operations for the years ended June 30, 1995 and 1994 reflect the results of
operations of the Company as though the Peripherals Division of Phoenix
Technologies Ltd. had been acquired on the first day of each of the years
presented and had been accounted for as a purchase. The pro forma consolidated
condensed financial information presented is not necessarily indicative of
either the results of operations that would have occurred had the acquisition
taken place at the beginning of each of the periods presented or of future
results of operations of the combined operations.
PRO FORMA CONSOLIDATED CONDENSED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED JUNE 30, 1995
(UNAUDITED)
<TABLE>
<CAPTION>
HISTORICAL (UNAUDITED)
--------------------------------------------
XIONICS PERIPHERALS PRO FORMA
DOCUMENT DIVISION OF PHOENIX ----------------------------
TECHNOLOGIES, INC. TECHNOLOGIES LTD. (A) ADJUSTMENTS CONSOLIDATED
------------------ --------------------- ----------- ------------
<S> <C> <C> <C> <C>
Net revenue................ $ 15,577,249 $ 2,097,411 $ -- $ 17,674,660
Cost of revenue............ 4,681,539 128,212 108,833(b) 4,918,584
------------------ --------------------- ----------- ------------
Gross profit............... 10,895,710 1,969,199 (108,833) 12,756,076
Operating expenses......... 16,628,428 -- 1,929,000(c) 18,557,428
------------------ --------------------- ----------- ------------
Income (loss) from
operations............... (5,732,718) 1,969,199 (2,037,833) (5,801,352)
Interest expense........... (312,881) -- (96,980)(d) (409,861)
Interest income............ 35,789 -- -- 35,789
Other income (expense)..... (15,115) -- -- (15,115)
------------------ --------------------- ----------- ------------
Net income (loss).......... $ (6,024,925) $ 1,969,199 $(2,134,813) $ 6,190,539)
============== ================ =========== ===========
Pro forma net loss per
common and common
equivalent share......... $ (0.74)
===========
Pro forma weighted average
common and common
equivalent share......... 8,316,543
===========
</TABLE>
- ---------------
(a) Represents three months ended September 30, 1994.
(b) A pro forma adjustment is made to cost of revenue to record additional
amortization expense on the intangibles acquired in connection with the
acquisition of the Peripherals Division as if the acquisition had occurred
at the beginning of the period presented.
(c) A pro forma adjustment is made to record the estimated operating expenses
for the three months ended September 30, 1994, calculated using a monthly
rate of $643,000.
(d) A pro forma adjustment is made to record additional interest expense for the
three months ended September 30, 1994, as if the debt issued to Phoenix in
connection with the acquisition of the Peripherals Division was issued at
the beginning of the period presented.
F-14
<PAGE> 68
XIONICS DOCUMENT TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INCLUDING DATA APPLICABLE TO UNAUDITED PERIOD)
PRO FORMA CONSOLIDATED CONDENSED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED JUNE 30, 1994
(UNAUDITED)
<TABLE>
<CAPTION>
HISTORICAL (UNAUDITED)
--------------------------------------------
XIONICS PERIPHERALS PRO FORMA
DOCUMENT DIVISION OF PHOENIX ----------------------------
TECHNOLOGIES, INC. TECHNOLOGIES LTD. (A) ADJUSTMENTS CONSOLIDATED
------------------ --------------------- ----------- ------------
<S> <C> <C> <C> <C>
Net revenue................ $ 9,130,824 $ 8,846,481 $ -- $ 17,977,305
Income (loss) from
operations............... 252,100 8,331,264 (8,862,284)(b) (278,920)
Other income (expense)..... (9,039) -- 387,920(c) 378,881
------------------ --------------------- ----------- ------------
Net income (loss).......... $ 243,061 $ 8,331,264 $(8,474,364) $ 99,961
============== ================ =========== ===========
</TABLE>
- ---------------
(a) Represents the 12 months ended June 30, 1994.
(b) A pro forma adjustment is made to income (loss) from operations, to record
estimated operating expenses for the 12 months ended June 30, 1994, plus
additional amortization expense of $435,332 related to the intangibles
acquired in connection with the acquisition of the Peripherals Division as
if the acquisition had occurred at the beginning of the period presented.
(c) A pro forma adjustment is made to record additional interest expense for the
12 months ended June 30, 1994, as if the debt issued to Phoenix in
connection with the acquisition of the Peripherals Division was issued at
the beginning of the period presented.
(3) INCOME TAXES
The Company accounts for income taxes in accordance with SFAS No. 109,
Accounting for Income Taxes. Under SFAS No. 109, deferred taxes are determined
based on the difference between the financial statement and tax bases of assets
and liabilities, as measured by the current tax rates. The principal differences
between assets and liabilities for financial reporting and tax return purposes
result primarily from the timing of certain expenditures for income tax
purposes. There was no effect on net income or the financial position of the
Company as a result of adopting the provisions of SFAS No.109 as of the date of
the adoption or for the periods presented.
At March 31, 1996, the Company had available net operating loss
carryforwards of approximately $4,200,000 for United States federal income tax
reporting purposes, expiring at various dates beginning in 2001.
The Company's subsidiaries, and various predecessor companies have
available net operating loss carryforwards of approximately $1,737,000 for
foreign income tax reporting purposes at the subsidiary level. These
carryforwards may be used to offset future taxable income, if any.
The Tax Reform Act of 1986 (the Reform Act) limits the amount of domestic
net operating loss and credit carryforwards that companies may utilize in any
one year in the event of cumulative changes in ownership over a three-year
period in excess of 50%. The Company has completed several financings since the
effective date of the Reform Act and does not believe that its ability to
utilize its domestic net operating loss carryforwards (NOLs) is limited as of
March 31, 1996, however, that conclusion is subject to review by the Internal
Revenue Service. In the event a change has occurred, the Company does not
believe the change will have a material impact on its ability to fully utilize
its NOL carryforward.
F-15
<PAGE> 69
XIONICS DOCUMENT TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INCLUDING DATA APPLICABLE TO UNAUDITED PERIOD)
The components of deferred income tax assets and liabilities and the
valuation allowance are as follows:
<TABLE>
<CAPTION>
JUNE 30, MARCH 31,
1995 1996
----------- -----------
<S> <C> <C>
Assets --
Operating loss carryforwards.................................... $ 1,556,653 $ 2,400,082
Temporary differences --
Intangibles and incomplete research and development.......... 1,492,960 1,414,840
Allowance for doubtful accounts.............................. 81,600 34,558
Inventory valuation allowance................................ 92,748 185,608
Allowance for sales returns.................................. 80,000 106,002
Other........................................................ 284,901 281,140
----------- -----------
Total gross deferred tax asset.......................... 3,588,862 4,422,230
Less -- valuation allowance..................................... (3,588,862) (4,422,230)
----------- -----------
Net deferred tax asset.......................................... $ -- $ --
=========== ===========
</TABLE>
The Reform Act also expanded the corporate alternative minimum tax ("AMT").
Under the Reform Act, the Company's federal tax liability is the greater of its
regular tax or AMT liability. The Company has recorded no income tax provision
for any period presented due to the utilization of NOL's in the year ended June
30, 1994 and the NOL incurred in all other periods presented. Because the level
of future taxable income is uncertain, the Company has recorded a valuation
allowance equal to the net deferred tax asset. The valuation allowance increased
approximately $2,776,000 and $833,000 as of June 30, 1995 and March 31, 1996.
(4) SENIOR SUBORDINATED PROMISSORY NOTES PAYABLE TO STOCKHOLDERS
Senior subordinated promissory notes payable issued to various stockholders
represent subordinated promissory notes, payable in 12 equal monthly
installments beginning in July 1994, with interest payments at 10% annually
beginning in December 1993. At June 30, 1995, $228,355 remained outstanding
under the notes. This amount was converted to Class C Redeemable Convertible
Preferred Stock on August 25, 1995 (see Note 7(b)).
(5) SECURED PROMISSORY NOTE PAYABLE TO A STOCKHOLDER
In connection with the acquisition of the Peripherals Division of Phoenix
Technologies Ltd., the Company issued a $4,849,000 secured promissory note
payable to Phoenix (see Note 2). Additionally, in April 1995, the Company issued
a $350,000 secured promissory note payable to Phoenix. Interest was payable
quarterly at an annual rate of 10.0%, beginning in July 1995, and the principal
balance is payable on March 31, 1996. As discussed in Note 7(b), $1,550,000 of
the original note payable and the $350,000 additional note payable were
converted to Class C Redeemable Convertible Preferred Stock on August 25, 1995.
On August 25, 1995 the Company issued a $3,299,000 new secured promissory
note payable to Phoenix. Interest was payable quarterly at an annual rate of
8.0% beginning in October 1995, and the principal balance will be due commencing
with the calendar quarter ending December 31, 1996, continuing for the next 19
successive calendar quarters, in various amounts as defined. The maturity date
of this note is October 15, 2001. Phoenix converted $340,000 of the principal
amount of this note to shares of the Class C Preferred Stock at a price of $2.91
by giving written notice to the Company on May 9, 1996.
On January 1, 1996, the above note for $3,299,000 was canceled and a new
secured promissory note payable to Phoenix was entered into by the Company for
$2,734,000. The Company reduced the principal
F-16
<PAGE> 70
XIONICS DOCUMENT TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INCLUDING DATA APPLICABLE TO UNAUDITED PERIOD)
with Phoenix (a related party) by $565,000 and recorded the reduction as
additional paid-in capital. Interest is payable quarterly at an annual rate of
8.0% beginning in April 1996, and the principal balance will be due in 12
quarterly installments beginning in September 1998 in amounts as defined. The
maturity date of this note is October 15, 2001. This note also has the right to
convert up to $340,000 of principal into Class C Preferred Stock. At March 31,
1996, $2,734,000 is outstanding under this note. This balance was reduced by
$340,000 of principal which was converted to 116,979 shares of Class C
Redeemable Convertible Preferred Stock on May 9, 1996. The balance after this
conversion will be paid upon the completion of the Company's proposed initial
public offering.
(6) REVOLVING LINE OF CREDIT AND TERM LOAN FACILITY
On September 27, 1995, the Company entered into a $2,000,000 revolving line
of credit (the "Line") and a $1,000,000 term loan facility with a bank.
Borrowings under the revolving line of credit bear interest at the prime rate
(8.25% at March 31, 1996) plus 0.5%. The revolving line of credit expires on
December 31, 1996. The term loan facility enables the Company to borrow up to
$1,000,000 at the prime rate (8.25% at March 31, 1996) plus 1.0% for qualified
equipment purchases, as defined. Each term loan is repayable over 36 months, and
no term loan will be made after December 1, 1996. At March 31, 1996, the Company
has borrowed a total of $482,000 under three term loans. Borrowings under the
revolving line of credit and term loan facility are secured by substantially all
assets of the Company. The Company is restricted in the payment of any dividends
under the Line. In addition, the Company is required to comply with certain
restrictive covenants, including debt to worth, capital base, quick ratio and
profitability. The Company was in compliance with or had received a waiver of
non-compliance of all covenants as of March 31, 1996. The outstanding borrowings
under the revolving line of credit and term loan facility are $0 and $441,000,
respectively, as of March 31, 1996.
(7) REDEEMABLE CONVERTIBLE PREFERRED STOCK
(a) Rights and Privileges
The holders of the preferred stock are entitled to the following rights,
privileges and preferences.
CONVERSION
All classes of the preferred stock are convertible into common stock at the
rate of one share of common stock for each share of Convertible Preferred Stock,
adjustable for certain dilutive events. Conversion is at the option of the
preferred stockholder and is also required by the Company upon the closing of an
initial public offering of the Company's common stock with gross proceeds to the
Company of at least $15,000,000.
All shares of Class C Redeemable Convertible Preferred Stock shall
automatically be converted into common stock immediately upon conversion of at
least 60% of the original Class C Redeemable Convertible Preferred Stock
outstanding as of the original issue date, as defined, for Class C Redeemable
Convertible Preferred Stock and subject to a minimum price per share, as
defined.
VOTING RIGHTS
The holders of all classes of the preferred stock are entitled to vote on
all matters and are entitled to the number of votes equal to the number of
shares of common stock into which the preferred stock is convertible.
In addition, holders of the Class A Convertible Preferred Stock and Class C
Redeemable Convertible Preferred Stock have the right to consent to certain
corporate transactions. The holders of the Class C Redeemable Convertible
Preferred Stock and Class D Preferred Stock have special voting rights together
as a single, separate class, as a requirement for the merger or consolidation,
or sale of other disposition of all
F-17
<PAGE> 71
XIONICS DOCUMENT TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INCLUDING DATA APPLICABLE TO UNAUDITED PERIOD)
or any substantial part of the assets of the corporation, and for the
liquidation, dissolution or winding up of the corporation.
The holders of the Class D Preferred Stock have special voting rights as a
single, separate class, as a requirement for any amendment to or waiver of any
provisions of the Certificate of Incorporation or By-laws of the Corporation
that affect the Class D holders, as defined.
DIVIDENDS
Class D Preferred Stockholders are entitled to dividends of 8.0% per annum.
Class C Redeemable Convertible Preferred Stockholders are entitled to dividends
of 6.0% per annum.
The Class B Preferred Stockholders were entitled to receive cumulative
dividends, which accrued daily on each share of Class B Preferred Stock at a
rate of 10.0% per annum. The dividend accretion totaled $442,719 as of August
25, 1995 when all shares of Class B Preferred Stock were converted to Class C
Preferred Stock.
LIQUIDATION PREFERENCE
Upon a liquidation, dissolution or winding up of the Company, the holders
of each share of Class D Preferred Stock will be entitled to receive, prior to
the distribution of assets to the holders of Class A and C Preferred Stock or
Class A and Class B Common Stock, $1.59 per share plus any unpaid dividends.
After full payment to the Class D stockholders, as described above, each holder
of Class C and Class D Preferred Stock will be entitled to $2.91 per share plus
any unpaid dividend.
After payment to the Class C and Class D Preferred Stockholders, the
holders of the Class A Preferred Stock, Class A and Class B Common Stock shall
be entitled to share, ratably, in all remaining distributable assets of the
Company.
REDEMPTION
The holders of the Class C and Class D Preferred Stock have a redemption
right that requires the Company to repurchase outstanding shares of the
preferred stock. The Class C stockholders may require the Company to repurchase
up to 25% of the shares outstanding per year, during the election period, as
defined, beginning on September 1, 1998, with the redemption date on March 31,
1999. If redemption occurs in 1999, the Class C Preferred Stockholders may
require the Company to repurchase no more than 50% of the outstanding shares as
of the first redemption date. If the redemption date occurs in 2000 or any year
thereafter, up to 100% of all shares of Class C Preferred Stock outstanding may
be required to be repurchased.
The Class C and Class D Preferred stockholders may require the Company to
repurchase up to 25% of the shares outstanding per year, during the election
period, as defined, beginning on September 1, 2000 with the redemption date on
March 31, 2001. If redemption occurs in 2001, the Class C and Class D Preferred
Stockholders may require the Company to repurchase no more than 50% of the
outstanding shares as of the first redemption date. If the redemption date
occurs in 2002 or any year thereafter up to 100% of all shares of Class C and
Class D Preferred Stock outstanding may be required to be repurchased. The
redemption price per share shall be equal to $2.91 and $4.50 for each share of
Class C and Class D Preferred Stock, respectively, plus all accrued dividends.
(b) Issuance of Class C Redeemable Convertible Preferred Stock
In August 1995, the Company authorized 2,779,615 shares of Class C
Redeemable Convertible Preferred Stock. The Company issued 2,662,636 shares of
Class C Redeemable Convertible Preferred Stock at $2.91 per share for total
consideration of $7,738,951. The consideration consisted of $3,300,000 in cash,
conversion of $1,900,000 of the Phoenix Technologies Ltd. notes, conversion of
the senior subordinated
F-18
<PAGE> 72
XIONICS DOCUMENT TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INCLUDING DATA APPLICABLE TO UNAUDITED PERIOD)
promissory note payable to stockholders of $228,355 and the surrender of
1,867,877 shares of the Class B Redeemable Preferred Stock with a liquidation
preference of $2,310,596. The Class B Redeemable Preferred Stock was canceled
promptly after this transaction was completed.
(c) Issuance of Class D Preferred Stock
In December 1995, the Company issued 1,000,000 shares of Class D Preferred
Stock to Adobe Systems Incorporated at $4.50 per share, for total proceeds of
$4,500,000. On May 17, 1996, the Company repurchased from Adobe Systems
Incorporated 1,000,000 shares of Class D Preferred Stock at a purchase price of
$4.50 per share for an aggregate purchase price of $4.5 million.
(8) STOCKHOLDERS' EQUITY (DEFICIT)
(a) Authorized Capital Stock
During the nine months ended March 31, 1996, the Board of Directors adopted
an amendment to the Company's Certificate of Incorporation to authorize the
issuance of 37,482,920 shares of stock, consisting of 3,603,305 shares of Class
A Convertible Preferred Stock, $.01 par value; 2,779,615 shares of Class C
Redeemable Convertible Preferred Stock, $.01 par value; 1,100,000 shares of
Class D Preferred Stock, $.01 par value; 20,000,000 shares of Class A Common
Stock, $.01 par value; and 10,000,000 shares of Class B Common Stock, $.01 par
value.
(b) Common Stock
At March 31, 1996, 11,125,664 shares of common stock were reserved for the
conversion of the Company's preferred stock based on a conversion ratio of one
share of Convertible Preferred Stock in exchange for one share of common stock
and the exercise of stock options.
(c) Restricted Common Stock
As of March 31, 1996, all restrictions have lapsed under the restricted
stock purchase agreement. In August 1995, the Company repurchased 370,370 shares
of Class A Common Stock from a former officer at $0.68 per share for an
aggregate purchase price of $250,000.
(d) Stock Options
In fiscal 1994, the Company established the 1993 Stock Option Plan (the
"1993 Plan"), and in 1995, the Company established the 1995 Stock Option Plan
(the "1995 Plan"). The plans provide for the grant of incentive stock options
and nonqualified stock options. Options granted under the plans vest over
various periods and expire no later than 10 years from the date of grant. All of
the shares of common stock reserved for issuance under the 1993 Plan and 1995
Plan are subject to outstanding stock options at March 31, 1996.
The Company's 1996 Stock Option Plan was approved by the Board of Directors
in February 1996, and is expected to be adopted by the Company's stockholders
prior to the closing date of the offering. The 1996 Stock Option Plan provides
for the grant or award of stock options, restricted stock and other performance
awards which may or may not be denominated in shares of common stock or other
securities (collectively, the "Awards"). Stock options granted under the 1996
Stock Option Plan may be either incentive stock options or nonqualified options.
The purpose of the 1996 Stock Option Plan is to attract and retain outstanding
employees through the incentives of stock ownership. Any employee of the
Company, including officers and directors, is eligible to receive Awards.
The 1996 Stock Option Plan has been and will be administered by the Board
of Directors (the Board). Subject to the provisions of the 1996 Stock Option
Plan, the Board has the authority to designate
F-19
<PAGE> 73
XIONICS DOCUMENT TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INCLUDING DATA APPLICABLE TO UNAUDITED PERIOD)
participants, determine the types of Awards to be granted, the number of shares
to be covered by each Award, the time at which each Award is exercisable or may
be settled, the method of payment and any other terms and conditions of the
Awards. All Awards shall be evidenced by an Award Agreement between the Company
and the participant.
While the Board determines the prices at which options and other Awards may
be exercised under the 1996 Stock Option Plan, the exercise price of an option
shall be at least 100% of the fair market value (as determined under the terms
of the 1996 Stock Option Plan) of a share of common stock on the date of grant.
The aggregate number of shares of common stock available for awards under the
1996 Stock Option Plan is 950,000.
Stock option activity is summarized as follows:
<TABLE>
<CAPTION>
NUMBER EXERCISE PRICE
OF SHARES PER SHARE
--------- --------------
<S> <C> <C>
Options granted, fiscal 1994................. 1,051,084 $ 0.20
--------- ----------
Outstanding, June 30, 1994................... 1,051,084 0.20
Granted................................. 1,375,302 0.20
Terminated.............................. (506,236) 0.20
--------- ----------
Outstanding, June 30, 1995................... 1,920,150 0.20
Granted................................. 841,000 0.20-1.84
Terminated.............................. (129,660) 0.20-1.84
Exercised............................... (161,390) 0.20
--------- ----------
Outstanding, March 31, 1996.................. 2,470,100 $ 0.20-$1.84
========= ==========
Exercisable, March 31, 1996.................. 860,827 $ 0.20-$1.84
========= ==========
</TABLE>
(9) OPERATING LEASE COMMITMENTS
The Company leases office facilities and equipment under operating leases
which expire at various dates through June 2000. Rent expense for all operating
leases charged to operations was approximately $218,000, $532,000, $309,000 and
$583,000 for the years ended June 30, 1994 and 1995 and the nine months ended
March 31, 1995 and 1996, respectively.
The approximate minimum rental payments under the lease agreements for
respective years ending at March 31 are as follows:
<TABLE>
<S> <C>
1997......................................................... $ 841,000
1998......................................................... 820,000
1999......................................................... 779,000
2000......................................................... 605,000
2001......................................................... 24,000
Thereafter................................................... --
----------
Total minimum payments.................................. $3,069,000
==========
</TABLE>
(10) RETIREMENT PLAN
Effective January 1992, Xionics, Inc., a subsidiary of the Company, adopted
the Xionics 401(k) Retirement Plan (the "Plan"). The Company has elected, at its
discretion, to contribute 50% of the first 6% of pay contributed to the Plan.
Contributions to the Plan were approximately $33,000, $91,000 and $53,000 for
the years ended June 30, 1994 and 1995 and for the nine months ended March 31,
1995, respectively. There was no contribution in the nine months ended March 31,
1996.
F-20
<PAGE> 74
XIONICS DOCUMENT TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INCLUDING DATA APPLICABLE TO UNAUDITED PERIOD)
(11) REVENUES BY GEOGRAPHIC DESTINATION AND SIGNIFICANT CUSTOMERS
Revenues by geographic destination and as a percentage of total revenues
are as follows:
<TABLE>
<CAPTION>
FOR THE NINE
FOR THE YEAR ENDED MONTHS ENDED
JUNE 30, MARCH 31,
---------------------------- -----------------------------
1994 1995 1995 1996
---------- ----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C>
United States................... $5,288,382 $ 8,849,901 $ 5,499,987 $11,141,456
Europe.......................... 3,589,081 4,328,967 2,960,110 2,611,845
Asia............................ 193,694 2,184,291 1,577,156 1,378,066
Other........................... 59,667 214,090 722,453 355,950
---------- ----------- ----------- -----------
$9,130,824 $15,577,249 $10,759,706 $15,535,616
========== =========== =========== ===========
United States................... 57.9% 56.8% 51.1% 72.0%
Europe.......................... 39.3 27.8 27.5 16.8
Asia............................ 2.1 14.0 14.7 8.9
Other........................... 0.7 1.4 6.7 2.3
----- ----- ----- -----
100.0% 100.0% 100.0% 100.0%
===== ===== ===== =====
</TABLE>
F-21
<PAGE> 75
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Xionics Document Technologies, Inc.:
We have audited the accompanying condensed statements of revenue and direct
costs of the Peripherals Division of Phoenix Technologies Ltd. (the "Division")
for the years ended September 30, 1993 and 1994. These condensed financial
statements are the responsibility of the Division's management. Our
responsibility is to express an opinion on these condensed financial statements
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the condensed statements referred to above present fairly,
in all material respects, the net revenue and direct costs of the Division's
operations for the years ended September 30, 1993 and 1994 in conformity with
generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Boston, Massachusetts
May 17, 1996
F-22
<PAGE> 76
PERIPHERALS DIVISION OF PHOENIX TECHNOLOGIES LTD.
CONDENSED STATEMENTS OF REVENUE AND DIRECT COSTS
FOR THE YEARS ENDED SEPTEMBER 30, 1993 AND 1994
<TABLE>
<CAPTION>
1993 1994
---------- ----------
<S> <C> <C>
Net revenue $9,748,000 $9,384,000
---------- ----------
Direct costs:
Nonpayroll cost of revenue................................... 570,000 567,000
Payroll costs................................................ 6,018,000 6,081,000
---------- ----------
Total direct costs...................................... 6,588,000 6,648,000
---------- ----------
Net excess of revenue over direct costs................. $3,160,000 $2,736,000
========== ==========
</TABLE>
The accompanying auditors' report and condensed notes should
be read in conjunction with these condensed financial statements.
F-23
<PAGE> 77
PERIPHERALS DIVISION OF PHOENIX TECHNOLOGIES LTD.
NOTES TO CONDENSED FINANCIAL STATEMENTS OF REVENUE AND DIRECT COSTS
FOR THE YEARS ENDED SEPTEMBER 30, 1994 AND 1993
(1) NATURE OF OPERATIONS
The Division designs, develops and supplies printer emulation software,
page description languages and controller hardware designs for the printer
industry. The Division imaging software architecture enables original equipment
manufacturers ("OEMs") to design and manufacture printers that can support
multiple page description languages, printer emulations and font technologies.
(2) BASIS OF PRESENTATION
The condensed statements of revenues and direct costs have been prepared
for the Division from the accounting records of Phoenix which historically did
not break out the business of the Division. The condensed statements of revenue
and direct costs include the revenue and costs directly attributable to the
business of the Division. Full historical financial statements, including
certain general and administrative expenses and other indirect expenses,
interest expense and income taxes, have not been presented due to the fact that
management believes it is not practicable to determine that portion which is
attributable to the Division. Management of the acquirer (see Note 6) believes
the basis of reporting all other expenses in the condensed statements of revenue
and direct costs to be reasonable; however, the amounts could differ from
amounts that would be determined if the Division business were operated on a
stand-alone basis. In addition, centralized cash accounts for the majority of
cash disbursements were not reflected in the Division's accounting records. As a
result, only limited statement of cash flow information was available (see Note
5). Certain financial statements and information including notes required in
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted because no separate accounting records
were maintained for the Division. The Company believes that the disclosures made
are adequate to make the information presented not misleading.
(3) REVENUE RECOGNITION
The Division recognizes revenue in accordance with the American Institute
of Certified Public Accountants' Statement of Position 91-1, Software Revenue
Recognition, as follows:
- Software Source Code -- When a customer licenses source code (the
"Product"), revenue is recognized upon shipment of the Product to the
customer, provided there are no significant obligations remaining and
collectibility of the revenue is probable.
- Royalty Revenue -- Once the purchased source code is incorporated into a
customer's product, a per unit royalty is received by the Division.
Revenue is recognized as earned based on customer units shipped.
- Nonrecurring Engineering Services -- When the Division engineers
customize the Product to customer specifications, revenue is recognized
using the percentage-of-completion method or as the services are
rendered, depending on the length of time required for the customization.
- Maintenance Revenue -- Revenue from software maintenance agreements is
recognized ratably over the life of the maintenance agreement, which is
generally one year.
(4) DIRECT COSTS
Nonpayroll Cost of Revenue
Non payroll cost of revenue consists of royalty payments that the Division
is required to make to certain vendors who sold certain technology to the
Division.
F-24
<PAGE> 78
PERIPHERALS DIVISION OF PHOENIX TECHNOLOGIES LTD.
NOTES TO CONDENSED FINANCIAL STATEMENTS OF REVENUE AND DIRECT COSTS
FOR THE YEARS ENDED SEPTEMBER 30, 1994 AND 1993--(CONTINUED)
Payroll Costs
As discussed in Note 2, during the years presented in the condensed
statements of revenue and direct costs, the Division was a division of Phoenix.
Phoenix kept records of all costs (other than royalty payments made included in
non payroll cost of revenue and direct payroll costs) at the corporate level
only. Therefore, amounts related to other indirect costs are not available.
(5) SUPPLEMENTAL STATEMENT OF CASH FLOW INFORMATION FOR THE YEAR ENDED SEPTEMBER
30, 1994
<TABLE>
<S> <C>
Cash received from customers.............................. $ 8,826,000
Cash paid for direct costs................................ 6,250,000
Cash paid for property and equipment...................... --
</TABLE>
(6) SALE OF THE DIVISION TO XIONICS DOCUMENT TECHNOLOGIES, INC.
In October 1994, substantially all of the assets of the Division were
acquired by Xionics Document Technologies, Inc.
F-25
<PAGE> 79
GLOSSARY
In this Prospectus, the following terms have the meanings indicated below,
unless the context otherwise requires.
Application-Specific Integrated Circuit, or ASIC: A custom-designed
semiconductor chip which performs hardware functions dedicated to carrying out a
specific application.
Controllers: Printed circuit boards containing all of the circuitry,
ASIC's and embedded systems software necessary to enable a computer peripheral
device to interpret and execute instructions sent to it by the computer to which
it is connected.
Integrated Controller Architecture: A controller design in which the
software modules that control the device are integrated with one another,
meaning that they are designed to work together.
Intelligent Peripheral System, or IPS: The Company's product which
provides an integrated, modular, scalable architecture for controllers for
computer peripheral devices.
Modular Controller Architecture: A controller design in which the software
programs that control the device are organized into modules, which may operate
either independently or jointly.
Reduced-Instruction-Set Computing ("RISC") Processor Core: A form of
central processing unit architecture utilized in high-performance workstations
and personal computers.
Scalable Controller Architecture: A controller design which may be scaled
up or down, through the addition or deletion of software modules, to handle the
control of more or less complex devices.
System-Level Embedded Software or System Software: Computer program
instructions that direct the basic functioning of a computer or computer
peripheral device.
G-1
<PAGE> 80
XIONICS' IPS ARCHITECTURE KEY OEM BENEFITS
REDUCED TIME-TO-MARKET EXTENSIBLE SOFTWARE
ARCHITECTURE FACILITATES
OEM
PARTNERS DIFFERENTIATED PRODUCTS
OEM MAINSTREAM OFFICE QUALITY
PRODUCTS AND PERFORMANCE
SHORTEN PRODUCTION CYCLE NETWORK CONNECTIVITY
INTEGRATED SOLUTION SPEEDS
TIME-TO-MARKET
- -------------------------------------------------------------------------------
TRADITIONAL OFFICE PRINTERS HAVE UNDERGONE A GRADUAL TRANSFORMATION FROM
SIMPLE, PRINT-ONLY PRODUCTS TO MORE ADVANCED, PRODUCTIVITY-ORIENTED DEVICES
SUPPORTING A RANGE OF DOCUMENT FINISHING OPTIONS. XIONICS' IPS IS A KEY
ENABLING TECHNOLOGY THAT IS BEING DESIGNED TO FACILITATE THE CONTINUED
EVOLUTION OF THESE PRODUCTS INTO NETWORK-CONNECTED PERIPHERALS WITH INTEGRATED
PRINT, COPY, SCAN AND FAX CAPABILITIES.
- -------------------------------------------------------------------------------
SCALABLE
TECHNOLOGIES
[ARTWORK]
The artwork shows a semicircle graph indicating the transition in the office
device market from basic printers and standalone copiers to multifunction
peripherals.
CAPABILITY
MULTIFUNCTION PERIPHERALS
<PAGE> 81
================================================================================
NO PERSON HAS BEEN AUTHORIZED IN CONNECTION WITH THE OFFERING MADE HEREBY
TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS
PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE
RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY UNDERWRITER. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF ANY OFFER
TO BUY ANY OF THE SECURITIES OFFERED HEREBY TO ANY PERSON OR BY ANYONE IN ANY
JURISDICTION IN WHICH IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER
THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS
CORRECT AS OF ANY DATE SUBSEQUENT TO THE DATE HEREOF.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary.................... 3
Risk Factors.......................... 6
The Company........................... 13
Use of Proceeds....................... 13
Dividend Policy....................... 13
Capitalization........................ 14
Dilution.............................. 15
Selected Consolidated Financial
Data................................ 16
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 17
Business.............................. 23
Management............................ 35
Certain Transactions.................. 42
Principal and Selling Stockholders.... 44
Description of Capital Stock.......... 46
Shares Eligible for Future Sale....... 48
Underwriting.......................... 50
Legal Matters......................... 51
Experts............................... 51
Reports to Stockholders............... 51
Additional Information................ 51
Index to Consolidated Financial
Statements.......................... F-1
Glossary.............................. G-1
</TABLE>
------------------------
UNTIL , 1996 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL
DEALERS EFFECTING TRANSACTIONS IN THE COMMON STOCK OFFERED HEREBY, WHETHER OR
NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN
ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.
3,000,000 SHARES
[XIONICS LOGO]
COMMON STOCK
------------------
PROSPECTUS
------------------
ADAMS, HARKNESS & HILL, INC.
SOUNDVIEW FINANCIAL GROUP, INC.
, 1996
================================================================================
<PAGE> 82
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
Expenses of the Registrant in connection with the issuance and distribution
of the securities being registered, other than the underwriting discount, are
estimated as follows:
<TABLE>
<S> <C>
SEC Registration Fee.............................................. $ 14,276
NASD Fees......................................................... $ 4,640
Nasdaq National Market Listing Fees............................... $ 45,777
Printing and Engraving Expenses................................... $ *
Legal Fees and Expenses........................................... $ *
Accountants' Fees and Expenses.................................... $ *
Expenses of Qualification Under State Securities Laws, Including
Attorneys' Fees................................................. $ 20,000
Transfer Agent and Registrar's Fees............................... $ *
Miscellaneous Costs............................................... $ *
-------
Total........................................................... $800,000
=======
</TABLE>
- ---------------
* To be provided by amendment.
ITEM 14. INDEMNIFICATION OF DIRECTORS, OFFICERS AND EMPLOYEES
Section 145 of the Delaware General Corporation Law empowers a Delaware
corporation to indemnify its officers and directors and certain other persons to
the extent and under the circumstances set forth therein.
The Amended and Restated Certificate of Incorporation of the Company and
the Amended and Restated By-Laws of the Company, copies of which are filed
herein as Exhibits 3.1 and 3.2, provide for indemnification of officers and
directors of the Company and certain other persons against liabilities and
expenses incurred by any of them in certain stated proceedings and under certain
stated conditions.
The Company intends to maintain insurance for the benefit of its directors
and officers insuring such persons against certain liabilities, including
liabilities under the securities laws.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
On June 30, 1993, in connection with the reorganization of the Registrant,
the Registrant entered into a Stock Purchase and Exchange Agreement dated as of
such date (the "Agreement") with certain of the stockholders of Xionics
Holdings, Limited ("Limited"). Pursuant to the terms of this Agreement, the
Registrant issued shares of its capital stock to the following stockholders for
the consideration described herein. The Registrant issued 1,773,009 shares of
Class A Convertible Preferred Stock and 1,311,276 shares of Class B Redeemable
Preferred Stock to Hambro International Venture Fund II ("HIVF II"). In
consideration for such shares, HIVF II exchanged 288,384 common shares and
827,117 preference shares of Limited, and agreed to cancel $1,797,831.92 in
certain indebtedness of Limited to HIVF II. Under the Agreement, the Registrant
also issued 363,146 shares of Class A Convertible Preferred Stock and 268,525
shares of Class B Redeemable Preferred Stock to Hambro International Venture
Fund Offshore II ("HIVFO II"). HIVFO II exchanged 59,066 common shares and
169,409 preference shares of Limited, and agreed to cancel $368,231.52 in
certain indebtedness of Limited to HIVFO II. The Registrant also issued 524,284
shares of Class A Common Stock, 86,622 shares of Class A Convertible Preferred
Stock and 288,026 shares of Class B Redeemable Preferred Stock to Monument Trust
Company ("MTC"). Pursuant to the terms of the Agreement, MTC exchanged 416,735
common shares and 195,833 preference shares of Limited, and agreed to cancel
indebtedness in the amount of $374,635.58 of Limited to MTC. Pursuant to the
II-1
<PAGE> 83
Agreement, the Registrant also issued 17,045 shares of Common Stock to Peter
Santeusanio, 69,626 shares of Common Stock to Ian Richardson and 1,268 shares of
Common Stock to Keith Miller in exchange for an equal number of common shares of
Limited held by each individual.
On June 30, 1993, the Registrant issued 504,292 shares of Common Stock to
Peter Santeusanio pursuant to a restricted stock purchase agreement between the
Registrant and Mr. Santeusanio for an aggregate consideration of $5,043.
On June 30, 1993, the Registrant issued 200,778 shares of Common Stock to
Ian Richardson for an aggregate consideration of $2,008.
On November 9, 1994, the Registrant issued 1,184,695 shares of Class A
Convertible Preferred Stock to Phoenix Technologies Ltd. ("Phoenix") for an
aggregate consideration of $750,000 in cash and certain assets of Phoenix having
an approximate value of $2,300,000.
On August 25, 1995, the Registrant entered into a Class C Preferred Stock
Purchase Agreement with certain of its existing stockholders and certain new
investors (the "Class C Preferred Stock Financing") pursuant to which the
Registrant issued shares of its Class C Redeemable Convertible Preferred Stock.
The Registrant issued 653,707 shares of Class C Redeemable Convertible Preferred
Stock to Phoenix for an aggregate consideration consisting of $1,900,000,
consisting of the cancellation of indebtedness of the Registrant to Phoenix in
that amount. The Registrant also issued 766,078 shares of Class C Redeemable
Convertible Preferred Stock to HIVF II for an aggregate consideration of
$2,261,605, consisting of $415,000 cash, and the surrender for cancellation of
shares of Class B Redeemable Preferred Stock and promissory notes of the
Registrant having an aggregate value of $1,811,605. The Registrant also issued
161,934 shares of Class C Redeemable Convertible Preferred Stock to HIVFO II for
an aggregate consideration of $456,053, consisting of $85,000 in cash and the
surrender for cancellation of shares of Class B Redeemable Preferred Stock and
promissory notes of the Registrant having a value of $371,053. Under the Class C
Preferred Stock Financing, the Registrant also issued 122,585 shares of Class C
Redeemable Convertible Preferred Stock to MTC for an aggregate consideration of
$356,923, consisting of the surrender of shares of Class B Redeemable Preferred
Stock of the Registrant with a value of $356,293. The Registrant issued 516,085
shares of Class C Redeemable Convertible Preferred Stock to Mytech Funds, L.P.
for an aggregate consideration of $1,500,000 in cash. The Registrant also issued
344,056 shares of Class C Redeemable Convertible Preferred Stock to PUSH
Incorporated for an aggregate consideration of $1,000,000 in cash, and 68,811
shares of Class C Redeemable Convertible Preferred Stock to ADD Venture
Associates, L.P. and 34,406 shares of Class C Redeemable Convertible Preferred
Stock to ADD Venture Associates II, L.P. for an aggregate consideration of
$200,000 and $100,000, respectively, in cash.
On September 29, 1995, the Registrant issued 10,000 shares of Common Stock
to John Pearce for an aggregate consideration of $2,000, in cash.
On November 7, 1995, the Registrant issued 29,630 shares of Common Stock to
Karl Marks in exchange for 25% of the equity of HiBRIC Technology Gesellschaft
fur Mikroelektronik mbH, subsequently renamed Xionics Document Technologies
GmbH.
On December 22, 1995, the Registrant issued 1,000,000 shares of Class D
Preferred Stock to Adobe Systems Incorporated for an aggregate consideration of
$4,500,000 in cash.
On May 9, 1996, the Registrant issued 116,979 shares of Class C Redeemable
Convertible Preferred Stock to Phoenix pursuant to an option granted to Phoenix
by the Registrant in connection with the Class C Preferred Stock Financing.
The Registrant has, from time to time, issued an aggregate of 174,202
shares of restricted Common Stock to various former employees and former
directors upon the exercise of options granted pursuant to the Company's 1993
Stock Option Plan and 1995 Stock Option Plan for an aggregate consideration of
$35,197 at an exercise price of $0.20 per share.
No underwriters were involved in the foregoing sales of securities. Such
sales were made in reliance upon an exemption from the registration provisions
of the Securities Act set forth in Section 4(2) thereof
II-2
<PAGE> 84
relative to sales by an issuer not involving any public offering or the rules
and regulations thereunder, or, in the case of certain restricted shares,
options to purchase Common Stock and shares issuable upon the exercise of such
options, Rule 701 of the Act. All of the foregoing securities are deemed
restricted securities for purposes of the Act.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) The following is a list of exhibits filed as a part of this
registration statement:
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- ------ -----------------------------------------------------------------------------------
<C> <S>
1.1 Form of Underwriting Agreement by and among Registrant, the Selling Stockholder and
the Underwriters.
3.1 Form of Amended and Restated Certificate of Incorporation of the Registrant
(previously filed).
3.2 Form of Amended and Restated By-Laws of Registrant (previously filed).
4.1 Specimen Certificate for Shares of the Registrant's Common Stock, $.01 par value.
5.1 Opinion of Bingham, Dana & Gould LLP with respect to the legality of the shares
being registered.
10.1 1996 Stock Option Plan and related form of stock option agreement (previously
filed).
10.2 1995 Stock Option Plan and related form of stock option agreement (previously
filed).
10.3 1993 Stock Option Plan and related form of stock option agreement (previously
filed).
10.4 1996 Director Stock Option Plan.
10.5 1996 Employee Stock Purchase Plan.
10.6 Class C Preferred Stock Purchase Agreement dated August 25, 1995 (previously
filed).
10.7 Second Amended and Restated Shareholder Agreement, dated December 22, 1995
(previously filed).
10.8 Credit Agreement, dated September 25, 1995, between the Company and Fleet Bank of
Massachusetts, N.A. (previously filed).
10.9 Asset Purchase Agreement by and between Phoenix Technologies Ltd. and Xionics
International Holdings, Inc., dated September 30, 1994 (previously filed).
10.10 Computer Technology License Agreement between Phoenix Technologies Ltd. and
Hewlett-Packard Company for PhoenixPage Software Products dated September 30, 1994
as amended (including amended and restated Amendment No. 1 between the Registrant
and Hewlett-Packard, effective as of March 8, 1996) (previously filed).*
10.11 Lease by and between the Registrant and E & F Realty Associates Limited Partnership
of Property at One Twenty Eight Corporate Center, 70 Blanchard Road, Burlington,
Massachusetts, dated November 29, 1994, including First Amendment to Lease, dated
August 9, 1995 (previously filed).
10.12 Adobe Repurchase Agreement (together with related General Release Agreements),
dated May 17, 1996 (previously filed).
10.13 Stock Option Agreement between the Company and Robert E. Gilkes (previously filed).
10.14 Consulting Services Agreement between the Company and Thomas A. St. Germain
(previously filed).
10.15 Severance Agreement between the Company and Peter M. Santeusanio (previously
filed).
10.16 Form of Invention and Nondisclosure Agreement (previously filed).
10.17 Amended and Restated Registration Rights Agreement (previously filed).
10.18 Distributor Contract between Tech Data Corporation and the Registrant dated as of
July 1, 1994.
10.19 Distribution Agreement by and between Law Cypress Distributing Co. and the
Registrant dated as of November 22, 1991.
11.1 Computation of Per Share Earnings (previously filed).
21.1 Subsidiaries of Registrant (previously filed).
23.1 Consent of Arthur Andersen LLP.
</TABLE>
II-3
<PAGE> 85
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- ------ -----------------------------------------------------------------------------------
<C> <S>
23.2 Consent of Bingham, Dana & Gould LLP, counsel to Registrant (included in Exhibit
5.1).
24.1 Power of Attorney (included in signature page to Registration Statement as
originally filed).
24.2 Power of Attorney executed by Ronald D. Fisher (previously filed).
</TABLE>
- ---------------
* Confidential treatment has been requested for certain portions of this
exhibit.
(b) Financial Statement Schedules
<TABLE>
<CAPTION>
SCHEDULE NO. DESCRIPTION
------------------------------------- -------------------------------------
<S> <C>
Schedule II Valuation and Qualifying Accounts
</TABLE>
ITEM 17. UNDERTAKINGS
Insofar as indemnification for liabilities arising under the Securities Act
of 1933, as amended ("Securities Act") may be permitted to directors, officers
and controlling persons of the registrant pursuant to the provisions described
in Item 14 hereof, or otherwise, the registrant has been advised that in the
opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the registrant of expenses incurred or
paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, 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 Securities Act and will be governed by the final
adjudication of such issue.
The undersigned registrant hereby undertakes:
(1) 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.
(2) That for purposes of determining any liability under the
Securities Act, the information omitted from the form of prospectus filed
as part of this registration statement in reliance upon Rule 430A and
contained in a form of prospectus filed by the registrant pursuant to Rule
424(b)(1) or (4) or Rule 497(h) under the Securities Act shall be deemed to
be part of this registration statement as of the time it was declared
effective.
(3) That for the purpose of determining any liability under the
Securities Act, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
II-4
<PAGE> 86
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment No. 3 to the Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Burlington, Commonwealth of Massachusetts, on this 15 day of July, 1996.
Xionics Document Technologies, Inc.
By: /s/ Gerard T. Feeney
--------------------------------
Gerard T. Feeney
Vice President, Chief Financial
Officer and Treasurer
POWER OF ATTORNEY AND SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 3 to the Registration Statement has been signed below by the following
persons in the capacities and on the dates indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ---------------------------------------- -------------------------------------- --------------
<S> <C> <C>
/s/ Robert E. Gilkes* President and Chief Executive Officer; July 15, 1996
- ---------------------------------------- Director (principal executive officer)
Robert E. Gilkes
/s/ Richard A. D'Amore* Director July 15, 1996
- ----------------------------------------
Richard A. D'Amore
/s/ Ronald D. Fisher* Director July 15, 1996
- ----------------------------------------
Ronald D. Fisher*
/s/ David R. Skok* Director July 15, 1996
- ----------------------------------------
David R. Skok
/s/ Paul R. Low* Director July 15, 1996
- ----------------------------------------
Paul R. Low
/s/ Thomas A. St. Germain* Director July 15, 1996
- ----------------------------------------
Thomas A. St. Germain
/s/ Gerard T. Feeney Vice President-Finance, Chief July 15, 1996
- ---------------------------------------- Financial Officer, Treasurer
Gerard T. Feeney (principal financial and accounting
officer)
</TABLE>
*By /s/ Gerard T. Feeney
-----------------------------
GERARD T. FEENEY
AS ATTORNEY-IN-FACT
II-5
<PAGE> 87
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ON SCHEDULE
TO XIONICS DOCUMENT TECHNOLOGIES, INC. AND SUBSIDIARIES
We have audited, in accordance with generally accepted auditing standards,
the consolidated balance sheets of Xionics Document Technologies, Inc. and
subsidiaries as of June 30, 1995 and March 31, 1996 and the related statements
of operations, redeemable preferred stock and stockholders' equity (deficit) and
cash flows for the years ended June 30, 1994 and 1995 and the nine months ended
March 31, 1996, included in this Registration Statement, and have issued our
report thereon dated May 17, 1996. Our audits were made for the purpose of
forming an opinion on the basic financial statements taken as a whole. The
schedule listed in S-2 is the responsibility of the Company's management and is
presented for the purposes of complying with the Securities and Exchange
Commission's rules and is not part of the basic financial statements. This
schedule has been subjected to the auditing procedures applied in our audits of
the basic financial statements and, in our opinion, fairly states in all
material respects, the financial data required to be set forth therein in
relation to the basic financial statements taken as a whole.
ARTHUR ANDERSEN LLP
Boston, Massachusetts
May 17, 1996
S-1
<PAGE> 88
VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED JUNE 30, 1994, 1995 AND FOR THE NINE MONTHS
ENDED MARCH 31, 1996
<TABLE>
<CAPTION>
BALANCE,
BEGINNING OF CHARGED BALANCE,
ALLOWANCE FOR DOUBTFUL ACCOUNTS YEAR TO EXPENSE WRITE-OFFS END OF YEAR
- --------------------------------------------- ------------ ---------- ---------- -----------
<S> <C> <C> <C> <C>
Year ended June 30, 1994..................... $136,000 $ 25,000 $ (4,000) $ 157,000
Year ended June 30, 1995..................... 157,000 63,000 (16,000) 204,000
Nine Months ended March 31, 1996............. 204,000 -- (39,000) 165,000
</TABLE>
<TABLE>
<CAPTION>
BALANCE,
BEGINNING OF CHARGED BALANCE,
INVENTORY RESERVE ACCOUNT ACTIVITY YEAR TO EXPENSE WRITE-OFFS END OF YEAR
- --------------------------------------------- ------------ ---------- ---------- -----------
<S> <C> <C> <C> <C>
Year ended June 30, 1994..................... $ 60,000 $ -- $ -- $ 60,000
Year ended June 30, 1995..................... 60,000 171,869 -- 231,869
Nine months ended March 31, 1996............. 231,869 197,000 35,152 464,021
</TABLE>
S-2
<PAGE> 89
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT PAGE
- ------ ----------------------------------------------------------------------------- -----
<C> <S> <C>
1.1 Form of Underwriting Agreement by and among Registrant, the Selling
Stockholder and the Underwriters.
3.1 Form of Amended and Restated Certificate of Incorporation of the Registrant
(previously filed).
3.2 Form of Amended and Restated By-Laws of Registrant (previously filed).
4.1 Specimen Certificate for Shares of the Registrant's Common Stock, $.01 par
value.
5.1 Opinion of Bingham, Dana & Gould LLP with respect to the legality of the
shares being registered.
10.1 1996 Stock Option Plan and related form of stock option agreement (previously
filed).
10.2 1995 Stock Option Plan and related form of stock option agreement (previously
filed).
10.3 1993 Stock Option Plan and related form of stock option agreement (previously
filed).
10.4 1996 Directors' Stock Option Plan.
10.5 1996 Employee Stock Purchase Plan.
10.6 Class C Preferred Stock Purchase Agreement dated August 25, 1995 (previously
filed).
10.7 Second Amended and Restated Shareholder Agreement, dated December 22, 1995
(previously filed).
10.8 Credit Agreement, dated September 25, 1995, between the Company and Fleet
Bank of Massachusetts, N.A. (previously filed).
10.9 Asset Purchase Agreement by and between Phoenix Technologies Ltd. and Xionics
International Holdings, Inc., dated September 30, 1994 (previously filed).
10.10 Computer Technology License Agreement between Phoenix Technologies Ltd. and
Hewlett-Packard Company for PhoenixPage Software Products dated September 30,
1994 as amended (including amended and restated Amendment No. 1 between the
Registrant and Hewlett-Packard, effective as of March 8, 1996) (previously
filed).*
10.11 Lease by and between the Registrant and E & F Realty Associates Limited
Partnership of Property at One Twenty Eight Corporate Center, 70 Blanchard
Road, Burlington, Massachusetts, dated November 29, 1994, including First
Amendment to Lease, dated August 9, 1995 (previously filed).
10.12 Adobe Repurchase Agreement (together with related General Release
Agreements), dated May 17, 1996 (previously filed).
10.13 Stock Option Agreement between the Company and Robert E. Gilkes (previously
filed).
10.14 Consulting Services Agreement between the Company and Thomas A. St. Germain
(previously filed).
10.15 Severance Agreement between the Company and Peter M. Santeusanio (previously
filed).
10.16 Form of Invention and Nondisclosure Agreement (previously filed).
10.17 Amended and Restated Registration Rights Agreement (previously filed).
10.18 Distributor Contract between Tech Data Corporation and the Registrant dated
as of July 1, 1994.
10.19 Distribution Agreement by and between Law Cypress Distributing Co. and the
Registrant dated as of November 22, 1991.
11.1 Computation of Per Share Earnings (previously filed).
21.1 Subsidiaries of Registrant (previously filed).
23.1 Consent of Arthur Andersen LLP.
</TABLE>
<PAGE> 1
Exhibit 1.1
DRAFT 7/10/96
XIONICS DOCUMENT TECHNOLOGIES, INC.
3,000,000 Shares(1)
Common Stock
(par value $.01 per share)
--------------
Underwriting Agreement
, 1996
Adams, Harkness & Hill, Inc.
SoundView Financial Group, Inc.
As representatives of the several
Underwriters named in Schedule I hereto,
c/o Adams, Harkness & Hill, Inc.
60 State Street
Boston, Massachusetts 02109
Dear Sirs:
Xionics Document Technologies, Inc., a Delaware corporation (the
"Company"), proposes, subject to the terms and conditions stated herein, to
issue and sell to you and the several Underwriters named in Schedule I hereto
(collectively, the "Underwriters"), for whom you are acting as representatives
(the "Representatives") an aggregate of 2,500,000 shares (the "Company Firm
Shares") and, at the election of the Underwriters, up to 375,000 additional
shares (the "Company Optional Shares") of common stock of the Company, $.01 par
value per share ("Common Stock"), and Phoenix Technologies Ltd. (the "Selling
Stockholder"), proposes, subject to the terms and conditions stated herein, to
sell to the Underwriters an aggregate of 500,000 shares (the "Selling
Stockholder Firm Shares", and together with the Company Firm Shares, the "Firm
Shares") and at the election of the Underwriters, up to an additional 75,000
shares (the "Selling Stockholder Optional Shares", and together with the Company
Optional Shares, the "Optional Shares") of
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(1) Includes 450,000 shares subject to an option to purchase additional shares
to cover over-allotments.
<PAGE> 2
Common Stock. The Firm Shares and the Optional Shares which the Underwriters
elect to purchase pursuant to Section 3 hereof are herein collectively called
the "Shares".
1. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company represents
and warrants to, and agrees with, each of the Underwriters that:
(a) A registration statement on Form S-1 (File No. 333-04613) (the
"Initial Registration Statement") in respect of the Shares has been filed
with the Securities and Exchange Commission (the "Commission"); the Initial
Registration Statement including any pre-effective amendments thereto and
any post-effective amendment thereto, each in the form heretofore delivered
to you, and, excluding exhibits thereto, to you for each of the other
Underwriters, have been declared effective by the Commission in such form;
other than a registration statement, if any, increasing the size of the
offering (a "Rule 462(b) Registration Statement"), filed pursuant to Rule
462(b) under the Securities Act of 1933, as amended (the "Act"), which
became effective upon filing, no other document with respect to the Initial
Registration Statement has heretofore been filed with the Commission; and
no stop order suspending the effectiveness of the Initial Registration
Statement, any post-effective amendment thereto or the Rule 462(b)
Registration Statement, if any, has been issued and no proceeding for that
purpose has been initiated or, to the Company's knowledge, threatened by
the Commission (any preliminary prospectus included in the Initial
Registration Statement and incorporated by reference in the Rule 462(b)
Registration Statement, if any, or filed with the Commission pursuant to
Rule 424(a) of the rules and regulations of the Commission under the Act is
hereinafter called a "Preliminary Prospectus"; the various parts of the
Initial Registration Statement and the Rule 462(b) Registration Statement,
if any, including all exhibits thereto and including the information
contained in the form of final prospectus filed with the Commission
pursuant to Rule 424(b) under the Act in accordance with Section 6(a)
hereof and deemed by virtue of Rule 430A under the Act to be part of the
Initial Registration Statement at the time it was declared effective or the
Rule 462(b) Registration Statement, if any, at the time it became
effective, each as amended at the time such part of such registration
statement became effective, are hereinafter collectively called the
"Registration Statement"; and such final prospectus, in the form first
filed pursuant to Rule 424(b) under the Act, is hereinafter called the
"Prospectus");
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<PAGE> 3
(b) No order preventing or suspending the use of any Preliminary
Prospectus has been issued by the Commission, and each Preliminary
Prospectus, at the time of filing thereof, conformed in all respects to the
requirements of the Act and the rules and regulations of the Commission
thereunder, and did not contain an untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to
make the statements therein, in the light of the circumstances under which
they were made, not misleading; provided, however, that this representation
and warranty shall not apply to any statements or omissions made in
reliance upon and in conformity with information furnished in writing to
the Company by an Underwriter through you expressly for use therein. The
Company acknowledges that the statements set forth under the heading
"Underwriting" in the Prospectus constitute the only information relating
to any Underwriter furnished in writing to the Company by the
Representatives specifically for inclusion in the Registration Statement;
(c) The Registration Statement conforms, and the Prospectus and any
further amendments or supplements to the Registration Statement or the
Prospectus will conform, in all respects to the requirements of the Act and
the rules and regulations of the Commission thereunder and do not and will
not, as of the applicable effective date as to the Registration Statement
and any amendment thereto and as of the applicable filing date as to the
Prospectus and any amendment or supplement thereto, contain an untrue
statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein, in the light
of the circumstances under which they were made, not misleading; provided,
however, that this representation and warranty shall not apply to any
statements or omissions made in reliance upon and in conformity with
information furnished in writing to the Company by an Underwriter through
you expressly for use therein;
(d) There are no contracts or other documents required to be described
in the Registration Statement or to be filed as exhibits to the
Registration Statement by the Act or by the rules and regulations
thereunder which have not been described or filed as required; the
contracts so described in the Prospectus to which the Company or any of its
subsidiaries is a party have been duly authorized, executed and delivered
by the Company or its subsidiaries, constitute valid and binding agreements
of the Company or its subsidiaries and are enforceable against and by the
Company
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<PAGE> 4
or its subsidiaries in accordance with their respective terms, and are in
full force and effect on the date hereof; and neither the Company nor any
of its subsidiaries, nor, to the best of the Company's knowledge, any other
party is in breach of or default under any of such contracts;
(e) Neither the Company nor any of its subsidiaries has sustained
since the date of the latest audited financial statements included in the
Prospectus any material loss or interference with its business from fire,
explosion, flood or other calamity, whether or not covered by insurance, or
from any labor dispute or court or governmental action, order or decree,
otherwise than as set forth or contemplated in the Prospectus; and, since
the respective dates as of which information is given in the Registration
Statement and the Prospectus, there has not been any change in the capital
stock or long-term debt of the Company or any of its subsidiaries or any
material adverse change, or any development involving a prospective
material adverse change, in or affecting the general affairs, prospects,
management, financial position, stockholders' equity or results of
operations of the Company and its subsidiaries, otherwise than as set forth
or contemplated in the Prospectus;
(f) Neither the Company nor any subsidiary of the Company owns any
real property; any real property and buildings held under lease by the
Company are held by it under valid, subsisting and enforceable leases with
such exceptions as are not material and do not interfere with the use made
and proposed to be made of such property and buildings by the Company and
its subsidiaries; the Company owns or leases all such properties as are
necessary to its operations as now conducted or as proposed to be
conducted, except where the failure to so own or lease would not result in
a material adverse change in or affecting the general affairs, management,
financial position, stockholders' equity or results of operations of the
Company;
(g) Each of the Company and its subsidiaries has been duly
incorporated and is validly existing as a corporation in good standing
under the laws of its respective jurisdiction of organization, each with
full power and authority (corporate and otherwise) to own its properties
and conduct its business as described in the Prospectus, and each has been
duly qualified as a foreign corporation for the transaction of business and
is in good standing under the laws of each other jurisdiction in which it
owns or leases properties, or conducts any business, so as to require such
qualification, or is subject to no material
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<PAGE> 5
liability or disability by reason of the failure to be so qualified in any
such jurisdiction;
(h) The Company has an authorized capitalization as set forth in the
Prospectus, and all the issued shares of capital stock of the Company have
been duly and validly authorized and issued, are fully paid and
non-assessable and conform to the description of the Common Stock contained
in the Prospectus; all of the issued shares of capital stock of each
subsidiary of the Company have been duly and validly authorized and issued,
are fully paid and non-assessable and are owned directly by the Company,
free and clear of all liens, encumbrances, equities or claims; except as
disclosed in or contemplated by the Prospectus and the financial statements
of the Company, and the related notes thereto, included in the Prospectus,
neither the Company nor any subsidiary has outstanding any options to
purchase, or any preemptive rights or other rights to subscribe for or to
purchase any securities or obligations convertible into, or any contracts
or commitments to issue or sell, shares of its capital stock or any such
options, rights, convertible securities or obligations; and the description
of the Company's stock option and stock purchase plans and the options or
other rights granted and exercised thereunder set forth in the Prospectus
accurately and fairly presents the information required to be shown with
respect to such plans, options and rights;
(i) The unissued Shares to be issued and sold by the Company to the
Underwriters hereunder have been duly and validly authorized and, when
issued and delivered against payment therefor as provided herein, will be
duly and validly issued and fully paid and non-assessable and will conform
to the description of the Common Stock contained in the Prospectus; no
preemptive rights or other rights to subscribe for or purchase exist with
respect to the issuance and sale of the Shares by the Company pursuant to
this Agreement; no stockholder of the Company has any right which has not
been waived to require the Company to register the sale of any shares of
capital stock owned by such stockholder under the Act in the public
offering contemplated by this Agreement (except with respect to the Shares
to be sold by the Selling Stockholder pursuant to this Agreement); and no
further approval or authority of the stockholders or the Board of Directors
of the Company will be required for the issuance and sale of the Shares to
be sold by the Company as contemplated herein;
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<PAGE> 6
(j) The Company has full corporate power and authority to enter into
this Agreement, this Agreement has been duly authorized, executed and
delivered by the Company, constitutes a valid and binding obligation of the
Company and is enforceable against the Company in accordance with its
terms;
(k) The issue and sale of the Shares by the Company and the compliance
by the Company with all of the provisions of this Agreement and the
consummation of the transactions herein contemplated will not conflict with
or result in a breach or violation of any of the terms or provisions of, or
constitute a default under, any indenture, mortgage, deed of trust, loan
agreement or other agreement or instrument to which the Company or any of
its subsidiaries is a party or by which the Company or any of its
subsidiaries is bound or to which any of the property or assets of the
Company or any of its subsidiaries is subject, nor will such action result
in any violation of the provisions of the Articles of Organization or
By-laws of the Company or any statute or any order, rule or regulation of
any court or governmental agency or body having jurisdiction over the
Company or any of its subsidiaries or any of their properties; and no
consent, approval, authorization, order, registration or qualification of
or with any such court or governmental agency or body is required for the
issue and sale of the Shares or the consummation by the Company of the
transactions contemplated by this Agreement, except the registration under
the Act of the Shares and such consents, approvals, authorizations,
registrations or qualifications as may be required under state securities
or Blue Sky laws or the by-laws and rules of the National Association of
Securities Dealers, Inc. (the "NASD") in connection with the purchase and
distribution of the Shares by the Underwriters;
(l) There are no legal or governmental actions, suits or proceedings
pending or, to the best of the Company's knowledge, threatened to which the
Company or any of its subsidiaries is or may be a party or of which
property owned or leased by the Company or any of its subsidiaries is or
may be the subject, or related to environmental or discrimination matters,
which actions, suits or proceedings, might, individually or in the
aggregate, prevent or adversely affect the transactions contemplated by
this Agreement or result in a material adverse change in or affecting the
general affairs, management, financial position, stockholders' equity or
results of operations of the Company; no labor disturbance by the employees
of the Company or any of its subsidiaries exists or, to the
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<PAGE> 7
knowledge of the Company, is imminent which might be expected to affect
adversely such general affairs, management, financial position,
stockholders' equity or results of operations; and neither the Company nor
any of its subsidiaries is a party or subject to the provisions of any
material injunction, judgment, decree or order of any court, regulatory
body, administrative agency or other governmental body;
(m) The Company and its subsidiaries possess all licenses,
certificates, authorizations or permits issued by the appropriate
governmental or regulatory agencies or authorities that are necessary to
enable them to own, lease and operate their respective properties and to
carry on their respective businesses as presently conducted and which are
material to the Company and its subsidiaries, and neither the Company nor
any of its subsidiaries has received any notice of proceedings relating to
the revocation or modification of any such license, certificate, authority
or permit which, singly or in the aggregate, would be expected to
materially and adversely affect the general affairs, management, financial
position, stockholders' equity or results of operations of the Company and
its subsidiaries;
(n) Arthur Andersen LLP, who have certified certain financial
statements of the Company, are independent public accountants as required
by the Act and the rules and regulations of the Commission thereunder;
(o) The consolidated financial statements and schedules of the
Company, and the related notes thereto, included in the Registration
Statement and the Prospectus present fairly the financial position of the
Company as of the respective dates of such financial statements and
schedules, and the results of operations and cash flows of the Company for
the respective periods covered thereby; such statements, schedules and
related notes have been prepared in accordance with generally accepted
accounting principles applied on a consistent basis as certified by the
independent public accountants named in paragraph (n) above; no other
financial statements or schedules are required to be included in the
Registration Statement; and the selected financial data set forth in the
Prospectus under the captions "Capitalization" and "Selected Consolidated
Financial Data" fairly present the information set forth therein on the
basis stated in the Registration Statement;
(p) Except as disclosed in or specifically contemplated by the
Prospectus, the Company and its
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<PAGE> 8
subsidiaries have sufficient trademarks, trade names, patent rights,
copyrights, licenses, approvals and governmental authorizations to conduct
their business as now conducted; the Company has no knowledge of any
material infringement by the Company of trademark, trade name rights,
patent rights, copyrights, licenses, trade secret or other similar rights
of others; and there is no claim being made against the Company regarding
trademark, trade name, patent, copyright, license, trade secret or other
infringement which could have a material adverse effect on the general
affairs, management, financial position, stockholders' equity or results of
operations of the Company and its subsidiaries;
(q) The Company and each of its subsidiaries have filed all necessary
federal, state and foreign income and franchise tax returns and have paid
all taxes shown as due thereon; and the Company has no knowledge of any tax
deficiency which has been or might be asserted or threatened against the
Company or any of its subsidiaries which could materially and adversely
affect the general affairs, management, financial position, stockholders'
equity or results of operation of the Company;
(r) The Company is not an "investment company" or an "affiliated
person" of, or "promoter" or "principal underwriter" for, an investment
company, as such terms are defined in the Investment Company Act of 1940,
as amended (the "Investment Company Act");
(s) Each of the Company and its subsidiaries maintains insurance of
the types and in the amounts which it deems adequate for its business,
including, but not limited to, insurance covering real and personal
property owned or leased by the Company and its subsidiaries against theft,
damage, destruction, acts of vandalism and all other risks customarily
insured against, all of which insurance is in full force and effect;
(t) Neither the Company nor any of its subsidiaries has at any time
during the last five years (i) made any unlawful contribution to any
candidate for foreign office, or failed to disclose fully any contribution
in violation of law, or (ii) made any payment to any foreign, federal or
state governmental officer or official, or other person charged with
similar public or quasi-public duties, other than payments required or
permitted by the laws of the United States or any jurisdiction thereof;
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<PAGE> 9
(u) The Company has not taken and will not take, directly or
indirectly through any of its directors, officers or controlling persons,
any action which is designed to or which has constituted or which might
reasonably be expected to cause or result in stabilization or manipulation
of the price of any security of the Company to facilitate the sale or
resale of the Shares; and
(v) The Company has filed a registration statement pursuant to Section
12(g) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), to register the Common Stock, has filed an application to list the
Common Stock on the Nasdaq National Market and has received notification
that the listing has been approved, subject to notice of issuance of the
Shares.
2. REPRESENTATIONS OF THE SELLING STOCKHOLDER. The Selling Stockholder
represents and warrants to, and agrees with, each of the Underwriters that:
(a) All consents, approvals, authorizations and orders necessary for
the execution and delivery by the Selling Stockholder of this Agreement and
the Power-of-Attorney and Custody Agreement (the "Custody Agreement")
hereinafter referred to, and for the sale and delivery of the Shares to be
sold by the Selling Stockholder hereunder, have been obtained; and the
Selling Stockholder has full right, power and authority to enter into this
Agreement and the Custody Agreement and to sell, assign, transfer and
deliver the Shares to be sold by the Selling Stockholder hereunder;
(b) This Agreement and the Custody Agreement have each been duly
authorized, executed and delivered by the Selling Stockholder and each such
document constitutes a valid and binding obligation of the Selling
Stockholder, enforceable in accordance with its terms;
(c) No consent, approval, authorization or order of, or any filing or
declaration with, any court or governmental agency or body is required in
connection with the sale of the Shares by the Selling Stockholder or the
consummation by the Selling Stockholder of the transactions on its part
contemplated by this Agreement and the Custody Agreement, except such as
have been obtained under the Act or the rules and regulations thereunder
and such as may be required under state securities or Blue Sky laws or the
by-laws and rules of the NASD in connection with the purchase and
distribution by the Underwriters of the Shares;
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<PAGE> 10
(d) The sale of the Shares to be sold by the Selling Stockholder
hereunder and the performance by the Selling Stockholder of this Agreement
and the Custody Agreement and the consummation of the transactions
contemplated hereby and thereby will not result in a breach or violation of
any of the terms or provisions of, or constitute a default under, or give
any party a right to terminate any of its obligations under, or result in
the acceleration of any obligation under, any indenture, mortgage, deed of
trust, voting trust agreement, loan agreement, bond, debenture, note
agreement or other evidence of indebtedness, lease, contract or other
agreement or instrument to which the Selling Stockholder is a party or by
which the Selling Stockholder or any of its properties is bound or
affected, or violate or conflict with the Certificate of Incorporation or
By-laws of the Selling Stockholder or any judgment, ruling, decree, order,
statute, rule or regulation of any court or other governmental agency or
body applicable to the Selling Stockholder;
(e) The Selling Stockholder has, and at the Closing Date will have,
good and valid title to the Shares to be sold by the Selling Stockholder
hereunder, free and clear of all liens, encumbrances, equities or claims;
and, upon delivery of such Shares and payment therefor pursuant hereto,
good and valid title to such Shares, fee and clear of all liens,
encumbrances, equities or claims, will pass to each of the several
Underwriters who have purchased such Shares in good faith and without
notice of any such lien, encumbrance, equity or claim or any other adverse
claim within the meaning of the Uniform Commercial Code;
(f) The Selling Stockholder will not, directly or indirectly, offer,
sell or otherwise dispose of any shares of Common Stock within 180 days
after the date of the Prospectus otherwise than hereunder or with your
written consent;
(g) The Selling Stockholder has not taken and will not at any time
take, directly or indirectly, any action designed, or which might
reasonably be expected, to cause or result in, or which will constitute,
stabilization of the price of shares of Common Stock to facilitate the sale
or resale of any of the Shares;
(h) To the extent that any statements or omissions made in the
Registration Statement, any Preliminary Prospectus, the Prospectus or any
amendment or supplement thereto are made in reliance upon and in conformity
with
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<PAGE> 11
written information furnished to the Company by the Selling Stockholder
expressly for use therein, such Preliminary Prospectus and the Registration
Statement did, and the Prospectus and any further amendments or supplements
to the Registration Statement and the Prospectus will, when they become
effective or are filed with the Commission, as the case may be, conform in
all material respects to the requirements of the Act and the rules and
regulations of the Commission thereunder and not contain any untrue
statement of a material fact or omit to state any material fact required to
be stated therein or necessary to make the statements therein, in the light
of the circumstances under which they were made, not misleading; and
(i) Selling Stockholder has reviewed the Registration Statement and
Prospectus and, although such Selling Stockholder has not independently
verified the accuracy or completeness of all the information contained
therein, nothing has come to the attention of such Selling Stockholder that
would lead such Selling Stockholder to believe that on the Effective Date,
the Registration Statement contained any untrue statement of a material
fact or omitted to state any material fact required to be stated therein or
necessary in order to make the statements therein not misleading; and, on
the Effective Date the Prospectus contained and, at each Time of Delivery,
contains any untrue statement of a material fact or omitted or omits to
state any material fact necessary in order to make the statements therein,
in the light of the circumstances under which they were made, not
misleading.
In order to document the Underwriters' compliance with the reporting and
withholding provisions of the Tax Equity and Fiscal Responsibility Act of 1982
with respect to the transactions herein contemplated, the Selling Stockholder
agrees to deliver to you prior to or at the Closing Date a properly completed
and executed United States Treasury Department Form W-9 (or other applicable
form or statement specified by Treasury Department regulations in lieu thereof).
The Selling Stockholder represents and warrants that a certificate in
negotiable form representing all of the Shares to be sold by the Selling
Stockholder has been placed in custody under the Custody Agreement, in the form
heretofore furnished to you, duly executed and delivered by the Selling
Stockholder to the Custodian (as defined in the Custody Agreement), and that the
Selling Stockholder has duly executed and delivered a power-of-attorney, in the
form heretofore furnished to you and included in the Custody Agreement (the
"Power-of-Attorney"), appointing
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<PAGE> 12
Ronald D. Fisher, Scott C. Neely and Robert J. Riopel, and each of them, as the
Selling Stockholder's attorney-in-fact (the "Attorneys-in-Fact") with authority
to execute and deliver this Agreement on behalf of the Selling Stockholder, to
determine (subject to the provisions of the Custody Agreement) the purchase
price to be paid by the Underwriters to the Selling Stockholder as provided in
Section 3 hereof, to authorize the delivery of the Shares to be sold by the
Selling Stockholder hereunder and otherwise to act on behalf of the Selling
Stockholder in connection with the transactions contemplated by this Agreement
and the Custody Agreement.
The Selling Stockholder specifically agrees that the Shares represented by
the certificates held in custody for the Selling Stockholder under the Custody
Agreement are subject to the interests of the Underwriters hereunder, and that
the arrangements made by the Selling Stockholder for such custody, and the
appointment by the Selling Stockholder of the Attorneys-in-Fact by the
Power-of-Attorney, are to that extent irrevocable. The Selling Stockholder
specifically agrees that the obligations of the Selling Stockholder hereunder
shall not be terminated by operation of law, whether by the death or incapacity
of the Selling Stockholder or, in the case of an estate or trust, by the death
or incapacity of any executor or trustee or the termination of such estate or
trust, or in the case of a partnership or corporation, by the dissolution of
such partnership or corporation, or by the occurrence of any other event. If the
Selling Stockholder or any such executor or trustee should die or become
incapacitated, or if any such estate or trust should be dissolved, or if such
Corporation or partnership should be dissolved, or if any other such event
should occur, before the delivery of the Shares hereunder, certificates
representing the Shares to be sold by the Selling Stockholder shall be delivered
by or on behalf of the Selling Stockholder in accordance with the terms and
conditions of this Agreement and of the Custody Agreement, and actions taken by
the Attorneys-in-Fact pursuant to the Power-of-Attorney shall be as valid as if
such death, incapacity, termination, dissolution or other event had not
occurred, regardless of whether or not the Custodian, the Attorneys-in-Fact, or
any of them, shall have received notice of such death, incapacity, termination,
dissolution or other event.
3. SHARES SUBJECT TO SALE. (a) On the basis of the representations,
warranties and agreements of the Company and the Selling Stockholder contained
herein, and subject to the terms and conditions of this Agreement, (i) the
Company agrees to issue and sell the Company Firm Shares to the several
Underwriters, (ii) the Selling Stockholder agrees to sell the Selling
Stockholder Firm Shares to the several Underwriters, and (iii)
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<PAGE> 13
each of the Underwriters agrees, severally and not jointly, to purchase from the
Company and the Selling Stockholder, at a purchase price per share of $ , the
respective number of Firm Shares (to be adjusted by you so as to eliminate
fractional shares) determined by multiplying the aggregate number of Firm Shares
by a fraction, the numerator of which is the aggregate number of Firm Shares to
be purchased by such Underwriter as set forth opposite the name of such
Underwriter in Schedule I hereto and the denominator of which is the aggregate
number of Firm Shares to be purchased by all the Underwriters and (b) in the
event and to the extent that the Underwriters shall exercise the election to
purchase Optional Shares as provided below, (i) the Company agrees to issue and
sell the Company Optional Shares to the several Underwriters, (ii) the Selling
Stockholder agrees to sell the Selling Stockholder Optional Shares to the
several Underwriters, and (iii) each of the Underwriters agrees, severally and
not jointly, to purchase from the Company and the Selling Stockholder, at the
purchase price per share set forth in clause (a) of this Section 3, that portion
of the number of Optional Shares as to which such election shall have been
exercised (to be adjusted by you so as to eliminate fractional shares)
determined by multiplying such number of Optional Shares by a fraction the
numerator of which is the maximum number of Optional Shares which such
Underwriter is entitled to purchase as set forth opposite the name of such
Underwriter in Schedule I hereto and the denominator of which is the maximum
number of the Optional Shares which all of the Underwriters are entitled to
purchase hereunder.
The Company and the Selling Stockholder each hereby grant to the
Underwriters the right to purchase at their election up to 375,000 Company
Optional Shares and 75,000 Selling Stockholder Optional Shares, respectively, at
the purchase price per share set forth in the paragraph above, for the sole
purpose of covering overallotments in the sale of the Firm Shares. Any such
election to purchase Optional Shares shall be made in proportion to the maximum
number of Optional Shares to be sold by the Company and the Selling Stockholder.
Any such election to purchase Optional Shares may be exercised by written notice
from you to the Company and the Selling Stockholder, given within a period of 30
calendar days after the date of this Agreement and setting forth the aggregate
number of Optional Shares to be purchased and the date on which such Optional
Shares are to be delivered, as determined by you but in no event earlier than
the First Time of Delivery (as defined in Section 5 hereof) or, unless you, the
Company and the Selling Stockholder otherwise agree in writing, earlier than two
or later than three business days after the date of such notice.
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<PAGE> 14
4. OFFERING. Upon the authorization by you of the release of the Firm
Shares, the several Underwriters propose to offer the Firm Shares for sale upon
the terms and conditions set forth in the Prospectus.
5. CLOSING. Certificates in definitive form for the Shares to be purchased
by each Underwriter hereunder, and in such denominations and registered in such
names as Adams, Harkness & Hill, Inc. may request upon at least forty-eight
hours' prior notice to the Company, shall be delivered by or on behalf of the
Company to you for the account of such Underwriter, against payment by such
Underwriter or on its behalf of the purchase price therefor by certified or
official bank check or checks, payable to the order of the Company and the
Selling Stockholder, respectively, in immediately available funds, all at the
office of Adams, Harkness & Hill, Inc., 60 State Street, Boston, Massachusetts
02109. The time and date of such delivery and payment shall be, with respect to
the Firm Shares, 9:30 a.m., Boston time, on , 1996 or such other
time and date as you and the Company may agree upon in writing, and, with
respect to the Optional Shares, 9:30 a.m., Boston time, on the date specified
by you in the written notice given by you of the Underwriters' election to
purchase such Optional Shares, or at such other time and date as you and the
Company may agree upon in writing. Such time and date for delivery of the Firm
Shares is herein called the "First Time of Delivery," such time and date for
delivery of the Optional Shares, if not the First Time of Delivery, is herein
called the "Second Time of Delivery," and each such time and date for delivery
is herein called a "Time of Delivery." Such certificates will be made available
for checking and packaging at least twenty four hours prior to each Time of
Delivery at such location as you may specify.
6. COVENANTS OF THE COMPANY. The Company agrees with each of the
Underwriters:
(a) To prepare the Prospectus in a form approved by you and to file
such Prospectus pursuant to Rule 424(b) under the Act not later than
Commission's close of business on the second business day following the
execution and delivery of this Agreement, or, if applicable, such earlier
time as may be required by Rule 430A(a)(3) under the Act; to make no
further amendment or any supplement to the Registration Statement or
Prospectus which shall be disapproved by you promptly after reasonable
notice thereof; to advise you, promptly after it receives notice thereof,
of the time when the Registration Statement, or any amendment thereto, has
been filed or becomes effective or any supplement to the Prospectus or any
amended Prospectus has
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<PAGE> 15
been filed and to furnish you copies thereof; to advise you, promptly after
it receives notice thereof, of the issuance by the Commission of any stop
order or of any order preventing or suspending the use of any Preliminary
Prospectus or Prospectus, of the suspension of the qualification of the
Shares for offering or sale in any jurisdiction, of the initiation or
threatening of any proceeding for any such purpose, or of any request by
the Commission for the amending or supplementing of the Registration
Statement or Prospectus or for additional information; and, in the event of
the issuance of any stop order or of any order preventing or suspending the
use of any Preliminary Prospectus or prospectus or suspending any such
qualification, to use promptly its best efforts to obtain its withdrawal;
(b) Promptly from time to time to take such action as you may
reasonably request to qualify the Shares for offering and sale under the
securities laws of such jurisdictions as you may request and to comply with
such laws so as to permit the continuance of sales and dealings therein in
such jurisdictions for as long as may be necessary to complete the
distribution of the Shares, provided that in connection therewith the
Company shall not be required to qualify as a foreign corporation or to
file a general consent to service of process in any jurisdiction;
(c) To furnish the Underwriters with copies of the Prospectus in such
quantities as you may from time to time reasonably request, and, if the
delivery of a prospectus is required at any time prior to the expiration of
nine months after the time of issuance of the Prospectus in connection with
the offering or sale of the Shares and if at such time any events shall
have occurred as a result of which the Prospectus as then amended or
supplemented would include an untrue statement of a material fact or omit
to state any material fact necessary in order to make the statements
therein, in light of the circumstances under which they were made when such
Prospectus is delivered, not misleading, or, if for any other reason it
shall be necessary during such same period to amend or supplement the
Prospectus in order to comply with the Act, to notify you and upon your
request to prepare and furnish without charge to each Underwriter and to
any dealer in securities as many copies as you may from time to time
reasonably request of an amended Prospectus or a supplement to the
Prospectus which will correct such statement or omission or effect such
compliance, and in case any Underwriter is required to deliver a prospectus
in connection with sales of any of the
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<PAGE> 16
Shares at any time nine months or more after the time of issue of the
Prospectus, upon your request but at the expense of such Underwriter, to
prepare and deliver to such Underwriter as many copies as you may request
of an amended or supplemented Prospectus complying with Section 10(a)(3) of
the Act;
(d) To make generally available to its securityholders as soon as
practicable, but in any event not later than fifteen months after the
effective date of the Registration Statement (as defined in Rule 158(c)),
an earning statement of the Company and its subsidiaries (which need not be
audited) complying with Section 11(a) of the Act and the rules and
regulations of the Commission thereunder (including at the option of the
Company Rule 158);
(e) During the period beginning from the date hereof and continuing to
and including the date 180 days after the date of the Prospectus, not to
offer, sell, contract to sell or otherwise dispose of any securities of the
Company which are substantially similar to the Shares, without your prior
written consent, except for the issuance of shares of Common Stock upon
exercise of employee or director stock options granted prior to the date
hereof or the grant of options to acquire shares of Common Stock to
employees or directors of the Company;
(f) During a period beginning from the date hereof and continuing to
and including the date 180 days after the date of the Prospectus, not to
grant options to purchase shares of Common Stock at a price less than the
initial public offering price;
(g) To furnish to its stockholders as soon as practicable after the
end of each fiscal year an annual report (including a balance sheet and
statements of income, stockholders' equity and cash flow of the Company and
its consolidated subsidiaries certified by independent public accountants)
and, as soon as practicable after the end of each of the first three
quarters of each fiscal year (beginning with the fiscal quarter ending
after the effective date of the Registration Statement), and to furnish or
make available to its stockholders consolidated summary financial
information of the Company and its subsidiaries for such quarter in
reasonable detail (which may be the Company's Quarterly Report on Form 10-Q
for that quarter);
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<PAGE> 17
(h) During a period of five years from the effective date of the
Registration Statement, to furnish to you copies of all reports or other
communications (financial or other) furnished to stockholders generally,
and deliver to you (i) as soon as they are available, copies of any reports
and financial statements furnished to or filed with the Commission, the
Nasdaq National Market or any national securities exchange on which any
class of securities of the Company is listed; and (ii) such additional
information concerning the business and financial condition of the Company
as you may from time to time reasonably request (such financial statements
to be on a combined or consolidated basis to the extent the accounts of the
Company and its subsidiaries are combined or consolidated in reports
furnished to its stockholders generally or to the Commission);
(i) To use the net proceeds acquired by it from the sale of the Shares
in the manner specified in the Prospectus under the caption "Use of
Proceeds" and in a manner such that the Company will not become an
"investment company" as that term is defined in the Investment Company Act;
(j) To file with the Commission such reports on
Form SR as may be required by Rule 463 under the Act;
(k) Not to file with the Commission any registration statement on Form
S-8 relating to shares of its Common Stock prior to 180 days after the
effective date of the Registration Statement, except for any such
registration statement with respect to rights or options to acquire shares
of Common Stock that would not become exercisable prior to such 180th day;
and
(l) Not to accelerate the vesting of any option issued under any stock
option plan such that any such option may be exercised within 180 days from
the date of the Prospectus.
7. COVENANTS OF THE SELLING STOCKHOLDER. The Selling Stockholder agrees to
pay or cause to be paid all taxes, if any, on the transfer and sale of the
Shares to be sold by the Selling Stockholder hereunder and the fees and
expenses, if any, of counsel and accountants retained by the Selling
Stockholder. The Company agrees with the Selling Stockholder to pay all costs
and expenses incident to the performance of the obligations of the Selling
Stockholder under this Agreement (except as set forth above), including, but not
limited to, all expenses incident to the delivery of the certificates for the
Shares to be sold by the Selling Stockholder, the costs and expenses incident to
the
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<PAGE> 18
preparation, printing and filing of the Registration Statement (including all
exhibits thereto) and the Prospectus and any amendments or supplements thereto,
the expenses of qualifying the Shares to be sold by the Selling Stockholder
under the state securities or Blue Sky laws, all filing fees and the reasonable
fees and expenses of counsel for the Underwriters payable in connection with the
review of the offering of the Shares by the NASD, and the cost of furnishing to
the Underwriters the required copies of the Registration Statement and
Prospectus and any amendments or supplements thereto; PROVIDED that the Selling
Stockholder agrees to pay or cause to be paid its pro rata share (based on the
percentage which the number of Shares sold by the Selling Stockholder bears to
the total number of Shares sold) of all underwriting discounts and commissions.
8. EXPENSES. The Company covenants and agrees with the several Underwriters
that the Company will pay or cause to be paid the following: (i) the fees,
disbursements and expenses of the Company's counsel and accountants in
connection with the registration of the Shares under the Act and all other
expenses in connection with the preparation, printing and filing of the
Registration Statement, any Preliminary Prospectus and the Prospectus and
amendments and supplements thereto and the mailing and delivering of copies
thereof to the Underwriters and dealers; (ii) the cost of printing or producing
any Agreement among Underwriters, this Agreement, the Blue Sky Memoranda and any
other documents in connection with the offering, purchase, sale and delivery of
the Shares; (iii) all expenses in connection with the qualification of the
Shares for offering and sale under state securities laws as provided in Section
6(b) hereof, including the fees and disbursements of counsel for the
Underwriters in connection with such qualification and in connection with the
Blue Sky survey; (iv) the filing fees and the reasonable fees and expenses of
counsel to the Underwriters incident to securing any required review by the NASD
of the terms of the sale of the Shares; (v) the cost of preparing stock
certificates; (vi) the cost and charges of any transfer agent or registrar; and
(vii) all other costs and expenses incident to the performance of its
obligations hereunder which are not otherwise specifically provided for in this
Section. It is understood, however, that, except as provided in this Section,
Section 10 and Section 13 hereof, the Underwriters will pay all of their own
costs and expenses, including the fees of their counsel, stock transfer taxes on
resale of any of the Shares by them, and any advertising expenses connected with
any offers they may make.
9. CONDITIONS OF UNDERWRITERS' OBLIGATIONS. The obligations of the
Underwriters hereunder, as to the Shares to be delivered at each Time of
Delivery, shall be subject, in their
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<PAGE> 19
discretion, to the condition that all representations and warranties and other
statements of the Company and the Selling Stockholder herein are, at and as of
such Time of Delivery, true and correct, the condition that the Company and the
Selling Stockholder shall each have performed all of their respective
obligations hereunder theretofore to be performed, and the following additional
conditions:
(a) The Prospectus shall have been filed with the Commission pursuant
to Rule 424(b) within the applicable time period prescribed for such filing
by the rules and regulations under the Act and in accordance with Section
6(a) hereof; no stop order suspending the effectiveness of the Registration
Statement or any part thereof shall have been issued and no proceeding for
that purpose shall have been initiated or threatened by the Commission; and
all requests for additional information on the part of the Commission shall
have been complied with to your reasonable satisfaction;
(b) Hale and Dorr, counsel to the Underwriters, shall have furnished
to you such opinion or opinions, dated such Time of Delivery, with respect
to this Agreement, the Registration Statement, the Prospectus, and other
related matters as you may reasonably request, and such counsel shall have
received such papers and information as they may reasonably request to
enable them to pass upon such matters;
(c) Bingham, Dana & Gould, counsel to the Company, shall have
furnished to you their written opinion, dated such Time of Delivery, in
form and substance satisfactory to you, to the effect that:
(i) The Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the State
of Delaware, with corporate power and authority to own its properties
and conduct its business as described in the Registration Statement
and Prospectus;
(ii) The Company has an authorized capitalization as set forth in
the Prospectus, and all of the issued shares of capital stock of the
Company have been duly and validly authorized and issued, are fully
paid and non-assessable and, to the best of such counsel's knowledge,
were not issued in violation of or subject to any preemptive rights or
other rights to subscribe for or purchase any securities which have
not been waived; the Shares have been duly authorized and when
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<PAGE> 20
issued and paid for as contemplated by this Agreement will be validly
issued, fully paid and non-assessable; and the Shares conform as to
legal matters to the description of the Common Stock contained in the
Prospectus;
(iii) The Company has been duly qualified as a foreign
corporation for the transaction of business and is in good standing
under the laws of each other jurisdiction in which it owns or leases
properties, so as to require such qualification, or is subject to no
material liability or disability by reason of failure to be so
qualified in any such jurisdiction;
(iv) To the best of such counsel's knowledge and other than
as set forth in the Prospectus: (A) there are no legal or governmental
proceedings, actions or suits pending or threatened to which the
Company or any of its subsidiaries is or may be a party or of which
property owned or leased by the Company or any of its subsidiaries is
or may be the subject, or related to environmental or discrimination
matters, which actions, suits or proceedings, are reasonably likely,
individually or in the aggregate, to prevent or adversely affect the
transactions contemplated by this Agreement or result in a material
adverse change in or affecting the general affairs, management,
financial position, stockholders' equity or results of operations of
the Company; (B) no labor disturbance by the employees of the Company
or any of its subsidiaries exists or is imminent which might
reasonably be expected to affect adversely such general affairs,
management, financial position, stockholders' equity or results of
operations; and (C) neither the Company nor any of its subsidiaries is
a party or subject to the provisions of any material injunction,
judgment, decree or order of any court, regulatory body,
administrative agency or governmental body;
(v) The Company has full corporate power and authority to
enter into this Agreement and this Agreement has been duly authorized,
executed and delivered by the Company;
(vi) The issuance and sale of the Shares being delivered at
such Time of Delivery by the Company and the compliance by the Company
with all of the provisions of this Agreement and the consummation of
the transactions herein contemplated will not conflict
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<PAGE> 21
with or result in a breach or violation of any of the terms or
provisions of, or constitute a default under, any indenture, mortgage,
deed of trust, loan agreement or other agreement or instrument known
to such counsel to which the Company is a party or by which the
Company or any of its subsidiaries is a party or to which the Company
or any of its subsidiaries is bound or to which any of the property or
assets of the Company or any of its subsidiaries is subject, nor will
such action result in any violation of the provisions of the
Certificate of Incorporation or By-laws of the Company or any statute
or any order, rule or regulation known to such counsel of any court or
governmental agency or body having jurisdiction over the Company or
any of its properties;
(vii) No consent, approval, authorization, order,
registration or qualification of or with any such court or
governmental agency or body is required for the issue and sale of the
Shares or the consummation by the Company of the transactions
contemplated by this Agreement, except the registration under the Act
of the Shares, and such consents, approval, authorizations,
registrations or qualifications as may be required under state
securities or Blue Sky laws or the by-laws and rules of the NASD in
connection with the purchase and distribution of the Shares by the
Underwriters;
(viii) The statements under the captions "Risk Factors -
Dependence on Relationship with Hewlett-Packard; Right of First
Refusal", "Risk Factors - Effect of Anti-Takeover Provisions", "Risk
Factors - Shares Eligible for Future Sale", "Management - Stock Option
Plans", "Description of Capital Stock" and "Shares Eligible for Future
Sale" in the Prospectus, insofar as such statements constitute a
summary of documents referred to therein or matters of law, are, to
the best of such counsel's knowledge, accurate summaries and fairly
and correctly present, in all material respects, the information
called for with respect to such documents and matters;
(ix) The Company is not an "investment company" or an
"affiliated person" of, or "promoter" or principal underwriter" for,
an "investment company" as defined in the Investment Company Act;
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<PAGE> 22
(x) The Shares have been authorized for inclusion on the Nasdaq
National Market System, subject to notice of issuance; and
(xi) The Registration Statement and the Prospectus and any
further amendments and supplements thereto made by the Company prior
to such Time of Delivery (other than the financial statements, notes
and schedules and other financial and statistical data therein, as to
which such counsel need express no opinion) comply as to form in all
material respects with the requirements of the Act and the rules and
regulations thereunder.
Such counsel shall be entitled to rely in respect of the opinions set forth
above upon certificates of public officials, opinions of local counsel and in
respect of matters of fact upon certificates of officers of the Company or its
subsidiaries, provided that such counsel shall state that, although they have
not made any independent inquiry, no facts have come to their attention that
have caused them to believe that both you and they are not justified in relying
upon such opinions and certificates.
Such counsel shall also state that they have participated in certain
conferences with officers and other representatives of the Company,
representatives of the Underwriters and representatives of the independent
accountants of the Company, at which conferences the contents of the
Registration Statement and Prospectus and related matters were discussed and,
although such counsel are not passing upon and do not assume any responsibility
for the accuracy, completeness or fairness of the statements contained in the
Registration Statement and Prospectus, on the basis of the foregoing, no facts
have come to their attention that have caused them to believe that, as of its
effective date, the Registration Statement or any further amendment thereto made
by the Company prior to such Time of Delivery (other than the financial
statements, notes and schedules and other financial and statistical data
therein, as to which such counsel need express no view) contained an untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary to make the statements therein not misleading or
that, as of its date, the Prospectus or any further amendment or supplement
thereto made by the Company prior to such Time of Delivery (other than the
financial statements, notes and schedules and other financial and statistical
data therein, as to which such counsel need express no view) contained an untrue
statement of a material fact or omitted to state a material fact necessary to
make the statements therein, in light of the circumstances in which they were
made, not misleading or that, as of such Time of Delivery, either the
Registration Statement or
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<PAGE> 23
the Prospectus or any further amendment or supplement thereto made by the
Company prior to such Time of Delivery (other than the financial statements,
notes and schedules and other financial and statistical data therein, as to
which such counsel need express no view) contains an untrue statement of a
material fact or omits to state a material fact necessary to make the statements
therein, in light of the circumstances in which they were made, not misleading;
and they do not know of any contracts or other documents of a character required
to be filed as an exhibit to the Registration Statement or required to be
described in the Registration Statement or the Prospectus which are not filed or
described as required.
Such counsel shall also include a statement in such opinion as to the
matters set forth in this paragraph. The Registration Statement has become
effective under the Act. To the best of such counsel's knowledge, no stop order
suspending the effectiveness of the Registration Statement has been issued by
the Commission nor has any proceeding been instituted or contemplated for that
purpose under the Act. The Prospectus has been filed with the Commission
pursuant to Rule 424(b) of the Rules and Regulations under the Act within the
time period required thereby.
(d) Carolyn E. Ramm, Esq., general counsel to the Company, shall have
furnished to you her opinion, dated such Time of Delivery, in form and
substance satisfactory to you, to the effect that such counsel is familiar
with the technology used by the Company and its subsidiaries in their
businesses and the manner of its use thereof and has read the Registration
Statement and the Prospectus, including particularly the portions of the
Registration Statement and the Prospectus referring to trademarks, patents,
copyrights, licenses or trade secrets and:
(i) such counsel has no reason to believe that the Registration
Statement or the Prospectus (A) contains any untrue statement of a
material fact with respect to trademarks, patents, copyrights,
licenses or trade secrets owned or used by the Company or any of its
subsidiaries, or the manner of its use thereof, or any allegation on
the part of any person that the Company or any of its subsidiaries is
infringing any trademarks, patent rights, copyrights, licenses or
trade secrets of any such person or (B) omits to state any material
fact relating to trademarks, patents, copyrights, licenses or trade
secrets owned or used by the Company or any of its subsidiaries, or
the manner of its use thereof, or any allegation of which such counsel
has knowledge, that is required to be stated in the Registration
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<PAGE> 24
Statement or the Prospectus or is necessary to make the statements
therein not misleading;
(ii) to such counsel's knowledge and except as set forth in the
Prospectus under the captions "Risk Factors Proprietary Technology and
Product Protection", "Risk Factors - Potential Infringement of
Proprietary Technology", "Business-Intellectual Property" or
"Business-Legal Proceedings", there are no legal or governmental
proceedings pending relating to trademarks, patent rights, copyrights,
licenses or trade secrets of the Company or any of its subsidiaries
(other than proceedings relating to applications for patents and
trademarks filed in the ordinary course of business), and to such
counsel's knowledge no such proceedings are threatened or contemplated
by governmental authorities or others;
(iii) such counsel does not know of any contracts or other
documents relating to the Company's or any of its subsidiaries'
trademarks, patents, copyrights, licenses or trade secrets of a
character required to be filed as an exhibit to the Registration
Statement or required to be described in the Registration Statement or
the Prospectus that are not filed or described as required; and
(iv) to such counsel's knowledge, the Company or one of its
subsidiaries owns or possesses sufficient licenses or other rights to
use all trademarks, patents, copyrights, licenses and trade secrets
reasonably believed by the Company to be necessary to conduct the
business now being or proposed to be conducted by the Company and its
subsidiaries as described in the Prospectus.
(e) Scott C. Neely, Esq., general counsel to the Selling Stockholder,
shall have furnished to you their written opinion, dated such Time of
Delivery, in form and substance satisfactory to you, to the effect that:
(i) This Agreement and the Custody Agreement have been duly
authorized, executed and delivered by or on behalf of the Selling
Stockholder; the Custodian has been duly and validly authorized to act
as the custodian of the Shares to be sold by the Selling Stockholder;
the performance of this Agreement and the Custody Agreement and the
consummation of the transactions therein contemplated by the Selling
Stockholder does not conflict with, result in a breach of, or
constitute a default under, any indenture, mortgage, deed of trust,
voting trust agreement, loan
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<PAGE> 25
agreement, bond, debenture, note agreement or other evidence of
indebtedness, lease, contract or other agreement or instrument to
which the Selling Stockholder is a party or by which the Selling
Stockholder or any of his properties are bound or affected, or violate
or conflict with (i) the Certificate of Incorporation or By-laws of
the Selling Stockholder, (ii) any judgment, ruling, decree or order
known to such counsel or (iii) any statute, rule or regulation of any
court or other governmental agency or body applicable to the Selling
Stockholder (except that such counsel need express no opinion as to
state securities or Blue Sky laws or as to compliance with the
antifraud provisions of federal and state securities laws); and no
consent, approval, authorization or order of, or any filing or
declaration with, any court or governmental agency or body is required
for consummation by the Selling Stockholder of the transactions on its
part contemplated by this Agreement and the Custody Agreement, except
such as may be required under state securities or Blue Sky laws or the
by-laws and rules of the NASD in connection with the purchase and
distribution by the Underwriters of the Shares (as to which such
counsel need express no opinion) and such as have been obtained or
made under the Act or the rules and regulations thereunder;
(ii) The Selling Stockholder has full corporate power and
authority to enter into this Agreement and the Custody Agreement and
to sell, transfer and deliver the Shares to be sold by the Selling
Stockholder; immediately prior to the date hereof, the Selling
Stockholder was the sole registered owner of the Shares to be sold by
the Selling Stockholder on the date hereof; upon registration of the
Shares to be sold by the Selling Stockholder in the names of the
Underwriters in the stock records of the Company, assuming the
Underwriters purchased such Shares in good faith and without notice of
any adverse claim within the meaning of Section 8-302 of the
Massachusetts Uniform Commercial Code, the Underwriters will have
acquired all rights of the Selling Stockholder in such Shares free of
any adverse claim, any lien in favor of the Company and any
restrictions on transfer imposed by the Company; and
(iii) The Custody Agreement is a valid and binding agreement of
the Selling Stockholder, constitutes a valid and binding
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<PAGE> 26
obligation of the Selling Stockholder and, other than Section 6
thereof, is enforceable against the Selling Stockholder in
accordance with its terms, subject as to enforcement of remedies to
applicable bankruptcy, insolvency, reorganization or similar laws
affecting generally the enforcement of creditors' rights and subject
to a court's discretionary authority with respect to the granting of
a decree ordering specific performance or other equitable remedies.
(f) At 10:00 a.m., Boston time, on the effective date of the
Registration Statement and the effective date of the most recently filed
post-effective amendment to the Registration Statement and also at each
Time of Delivery, Arthur Andersen LLP shall have furnished to you a letter
or letters, dated the respective date of delivery thereof, in form and
substance satisfactory to you, to the effect set forth in Annex 1 hereto;
(g) (i) Neither the Company nor any of its subsidiaries have sustained
since the date of the latest audited financial statements included in the
Prospectus any loss or interference with its business from fire, explosion,
flood or other calamity, whether or not covered by insurance, or from any
labor dispute or court or governmental action, order or decree, otherwise
than as set forth or contemplated in the Prospectus, and (ii) since the
respective dates as of which information is given in the Prospectus there
shall not have been any change in the capital stock or long-term debt of
the Company or any change, or any development involving a prospective
change, in or affecting the general affairs, management, financial
position, stockholders' equity or results of operations of the Company and
its subsidiaries, otherwise than as set forth or contemplated in the
Prospectus, the effect of which, in any such case described in clause (i)
or (ii), is in your judgment so material and adverse as to make it
impracticable or inadvisable to proceed with the public offering or the
delivery of the Shares being delivered at such Time of Delivery on the
terms and in the manner contemplated in the Prospectus;
(h) On or after the date hereof there shall not have occurred any of
the following: (i) additional material governmental restrictions, not in
force and effect on the date hereof, shall have been imposed upon trading
in securities generally or minimum or maximum prices shall have been
generally established on the New York Stock Exchange or on the American
Stock Exchange or in the over the counter market by the NASD, or trading in
securities generally shall have been suspended on either such Exchange or
in the over the counter market by the NASD, or a general banking moratorium
shall have been established by federal or New York authorities, (ii) an
outbreak of major hostilities or other national or international calamity
or any substantial
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<PAGE> 27
change in political, financial or economic conditions shall have occurred
or shall have accelerated or escalated to such an extent, as, in the
judgment of the Representatives, to affect adversely the marketability of
the Shares, or (iii) there shall be any action, suit or proceeding pending
or threatened, or there shall have been any development or prospective
development involving particularly the business or properties or securities
of the Company or any of its subsidiaries or the transactions contemplated
by this Agreement, which, in the judgment of the Representatives, may
materially and adversely affect the Company's business or earnings and make
it impracticable or inadvisable to offer or sell the Shares;
(i) The Shares to be sold by the Company at such Time of Delivery
shall have been accepted for quotation, subject to notice of issuance, on
the Nasdaq National Market; and
(j) Each director, executive officer and stockholder holding more than
60,000 shares of the Company's capital stock shall have executed and
delivered to you agreements in which such holder undertakes, for 180 days
after the date of the Prospectus, not to offer, sell, contract to sell or
otherwise dispose of any shares of Common Stock, without the prior written
consent of the Representatives of the Underwriters; and
(k) The Company and the Selling Stockholder shall have furnished or
caused to be furnished to you at such Time of Delivery certificates of
officers of the Company and of the Selling Stockholder, respectively,
satisfactory to you, as to the accuracy of the representations and
warranties of the Company and of the Selling Stockholder, respectively,
herein at and as of such Time of Delivery, as to the performance by the
Company and the Selling Stockholder of all of their obligations hereunder
to be performed at or prior to such Time of Delivery, and as to such other
matters as you may reasonably request and the Company shall have furnished
or caused to be furnished certificates as to the matters set forth in
subsections (a) and (g) of this Section, and as to such other matters as
you may reasonably request.
10. INDEMNIFICATION AND CONTRIBUTION. (a) The Company and the Selling
Stockholder, jointly and severally, will indemnify and hold harmless each
Underwriter and each person, if any, who controls such Underwriter against any
losses, claims, damages or liabilities, joint or several, to which such
Underwriter or controlling person may become subject, under the Act or
otherwise, insofar as such losses, claims, damages or liabilities
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<PAGE> 28
(or actions in respect thereof) arise out of or are based upon an untrue
statement or alleged untrue statement of a material fact contained in any
Preliminary Prospectus, the Registration Statement or the Prospectus, or any
amendment or supplement thereto, or arise out of or are based upon the omission
or alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances in which they were made, not misleading, and will reimburse each
Underwriter for any legal or other expenses reasonably incurred by such
Underwriter in connection with investigating or defending any such action or
claim as such expenses are incurred; provided, however, that the Company and the
Selling Stockholder shall not be liable in any such case to the extent that (i)
any such loss, claim, damage or liability arises out of or is based upon an
untrue statement or alleged untrue statement or omission or alleged omission
made in any Preliminary Prospectus, the Registration Statement or the Prospectus
or any such amendment or supplement in reliance upon and in conformity with
written information furnished to the Company by any Underwriter through you
expressly for use therein or (ii) if such statement or omission was contained or
made in any preliminary prospectus and corrected in the Prospectus and (A) any
such loss, claim, damage or liability suffered or incurred by any Underwriter
(or any person who controls any Underwriter) results from an action, claim or
suit relating to such statement or omission by any person who purchased Shares
which are the subject thereof from such Underwriter in the offering and (B) such
Underwriter failed to deliver or provide a copy of the Prospectus to such person
at or prior to the confirmation of the sale of such Shares in any case where
such delivery is required by the Act; and, provided further, that the liability
of the Selling Stockholder under the indemnity agreement in this Section 10
shall not exceed the lesser of (i) that percentage of the total amount of such
losses, claims, damages or liabilities indemnified under this Section 10 which
equals the percentage obtained by dividing the total number of Shares sold by
the Selling Stockholder by the total number of Shares sold hereunder or (ii) the
total initial public offering price of the Shares sold by the Selling
Stockholder under this Agreement, less underwriters' discounts. The Underwriters
and the Company shall first seek to collect the amount of any loss, claim,
damage or liability covered by this Section 10 under the Company's directors and
officers insurance policy before the Underwriters shall seek to collect any
amount for which the Selling Stockholder is liable under this subsection (a).
(b) Each Underwriter will indemnify and hold harmless the Company and the
Selling Stockholder against any losses, claims, damages or liabilities to which
the Company or the Selling
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<PAGE> 29
Stockholder may become subject, under the Act or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise out
of or are based upon an untrue statement or alleged untrue statement of a
material fact contained in any Preliminary Prospectus, the Registration
Statement or the Prospectus, or any amendment or supplement thereto, or arise
out of or are based upon the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances in which they were made, not misleading,
in each case to the extent, but only to the extent, that such untrue statement
or alleged untrue statement or omission or alleged omission was made in any
Preliminary Prospectus, the Registration Statement or the Prospectus or any such
amendment or supplement in reliance upon and in conformity with written
information furnished to the Company by such Underwriter through you expressly
for use therein; and will reimburse the Company and the Selling Stockholder for
any legal or other expenses reasonably incurred by the Company or the Selling
Stockholder in connection with investigating or defending any such action or
claim as such expenses are incurred.
(c) Promptly after receipt by an indemnified party under subsection (a) or
(b) above of notice of the commencement of any action, such indemnified party
shall, if a claim in respect thereof is to be made against the indemnifying
party under such subsection, notify the indemnifying party in writing of the
commencement thereof; but the omission so to notify the indemnifying party shall
not relieve it from any liability which it may have to any indemnified party
otherwise than under such subsection. In case any such action shall be brought
against any indemnified party and it shall notify the indemnifying party of the
commencement thereof, the indemnifying party shall be entitled to participate
therein and, to the extent that it shall wish, jointly with any other
indemnifying party similarly notified, to assume the defense thereof, with
counsel satisfactory to such indemnified party (who shall not, except with the
consent of the indemnified party, be counsel to the indemnifying party), and,
after notice from the indemnifying party to such indemnified party of its
election so to assume the defense thereof, the indemnifying party shall not be
liable to such indemnified party under such subsection for any legal expenses of
other counsel or any other expenses, in each case subsequently incurred by such
indemnified party, in connection with the defense thereof other than reasonable
costs of investigation. No indemnifying party shall, without the written consent
of the indemnified party, effect the settlement or compromise of, or consent to
the entry of any judgment with
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<PAGE> 30
respect to, any pending or threatened action or claim in respect of which
indemnification or contribution may be sought hereunder (whether or not the
indemnified party is an actual or potential party to such action or claim)
unless such settlement, compromise or judgment (i) includes an unconditional
release of the indemnified party from all liability arising out of such action
or claim and (ii) does not include a statement as to or an admission of fault,
culpability or a failure to act, by or on behalf of any indemnified party.
(d) If the indemnification provided for in this Section 10 is unavailable
to or insufficient to hold harmless an indemnified party under subsection (a) or
(b) above in respect of any losses, claims, damages or liabilities (or actions
in respect thereof) referred to therein, then each indemnifying party shall
contribute to the amount paid or payable by such indemnified party as a result
of such losses, claims, damages or liabilities (or actions in respect thereof)
in such proportion as is appropriate to reflect the relative benefits severally
received by the Company, the Selling Stockholder and the Underwriters from the
offering of the Shares. If, however, the allocation provided by the immediately
preceding sentence is not permitted by applicable law or if the indemnified
party failed to give the notice required under subsection (c) above, then each
indemnifying party shall contribute to such amount paid or payable by such
indemnified party in such proportion as is appropriate to reflect not only such
relative benefits but also the relative several fault of the Company, the
Selling Stockholder and the Underwriters in connection with the statements or
omissions which resulted in such losses, claims, damages or liabilities (or
actions in respect thereof), as well as any other relevant equitable
considerations. The relative several benefits received by the Company, the
Selling Stockholder and the Underwriters shall be deemed to be in the same
proportion as the total net proceeds from the offering (before deducting
expenses) received by each of the Company and the Selling Stockholder bear to
the total underwriting discounts and commissions received by the Underwriters,
in each case as set forth in the table on the cover page of the Prospectus. The
relative fault shall be determined by reference to, among other things, whether
the untrue or alleged statement of a material fact or the omission or alleged
omission to state a material fact relates to information supplied by the
Company, the Selling Stockholder or the Underwriters and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission. The Company, the Selling Stockholder and the
Underwriters agree that it would not be just and equitable if contributions
pursuant to this subsection (d) were determined by pro rata allocation (even if
the Underwriters
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<PAGE> 31
were treated as one entity for such purpose) or by any other method of
allocation which does not take account of the equitable considerations referred
to above in this subsection (d). The amount paid or payable by an indemnified
party as a result of the losses, claims, damages or liabilities (or actions in
respect thereof) referred to above in this subsection (d) shall be deemed to
include any legal or other expenses reasonably incurred by such indemnified
party in connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this subsection (d), no Underwriter shall be
required to contribute any amount in excess of the amount by which the total
price at which the Shares underwritten by it and distributed to the public were
offered to the public exceeds the amount of any damages which such Underwriter
has otherwise been required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Act) shall be
entitled to contribution from any person who was not guilty of such fraudulent
misrepresentation. The Underwriters' obligations in this subsection (d) to
contribute are several in proportion to their respective underwriting
obligations and not joint.
(e) The obligations of the Company and the Selling Stockholder under this
Section 10 shall be in addition to any liability which the Company and the
Selling Stockholder may otherwise have and shall extend, upon the same terms and
conditions, to each person, if any, who controls any Underwriter within the
meaning of the Act; and the obligations of the Underwriter under this Section 10
shall be in addition to any liability which the respective Underwriters may
otherwise have and shall extend, upon the same terms and conditions, to each
officer and director of the Company and to each person, if any, who controls the
Company within the meaning of the Act.
11. TERMINATION. (a) If any Underwriter shall default in its obligation to
purchase the Shares which it has agreed to purchase hereunder at a Time of
Delivery, you may in your discretion arrange for you or another party or other
parties to purchase such Shares on the terms contained herein. If within
thirty-six hours after such default by any Underwriter you do not arrange for
the purchase of such Shares, then the Company shall be entitled to a further
period of thirty-six hours within which to procure another party or other
parties satisfactory to you to purchase such Shares on such terms. In the event
that, within the respective prescribed periods, you notify the Company that you
have so arranged for the purchase of such Shares, or the Company notifies you
that it has so arranged for the purchase of such Shares, you or the Company
shall have the right to postpone
-31-
<PAGE> 32
such Time of Delivery for a period of not more than seven days, in order to
effect whatever changes may thereby be made necessary in the Registration
Statement or the Prospectus, or in any other documents or arrangements, and the
Company agrees to file promptly any amendments to the Registration Statement or
the Prospectus which in your opinion may thereby be made necessary. The term
"Underwriter" as used in this Agreement shall include any person substituted
under this Section with like effect as if such person had originally been a
party to this Agreement with respect to such Shares.
(b) If, after giving effect to any arrangements for the purchase of the
Shares of a defaulting Underwriter or Underwriters by you and the Company as
provided in subsection (a) above, the aggregate number of such Shares which
remains unpurchased does not exceed one-eleventh of the aggregate number of all
the Shares to be purchased at such Time of Delivery, then the Company shall have
the right to require each non-defaulting Underwriter to purchase the number of
Shares which such Underwriter agreed to purchase hereunder at such Time of
Delivery and, in addition, to require each non-defaulting Underwriter to
purchase its pro rata share (based on the number of Shares which such
Underwriter agreed to purchase hereunder) of the Shares of such defaulting
Underwriter or Underwriters for which such arrangements have not been made; but
nothing herein shall relieve a defaulting Underwriter from liability for its
default.
(c) If, after giving effect to any arrangements for the purchase of the
Shares of a defaulting Underwriter or Underwriters by you and the Company as
provided in subsection (a) above, the aggregate number of such Shares which
remains unpurchased exceeds one-eleventh of the aggregate number of all the
Shares to be purchased at such Time of Delivery, or if the Company shall not
exercise the right described in subsection (b) above to require non-defaulting
Underwriters to purchase Shares of a defaulting Underwriter or Underwriters,
then this Agreement (or, with respect to the Second Time of Delivery, the
obligations of the Underwriters to purchase and of the Company to sell the
Optional Shares) shall thereupon terminate, without liability on the part of any
non-defaulting Underwriter or the Company, except for the expenses to be borne
by the Company and the Underwriters as provided in Section 8 hereof and the
indemnity and contribution agreements in Section 10 hereof; but nothing herein
shall relieve a defaulting Underwriter from liability for its default.
12. SURVIVAL. The respective indemnities, agreements, representations,
warranties and other statements of the Company and the several Underwriters, as
set forth in this Agreement or
-32-
<PAGE> 33
made by or on behalf of them, respectively, pursuant to this Agreement, shall
remain in full force and effect, regardless of any investigation (or any
statement as to the results thereof) made by or on behalf of any Underwriter or
any controlling person of any Underwriter, or the Company, or any officer or
director or controlling person of the Company and shall survive delivery of and
payment for the Shares.
13. EXPENSES OF TERMINATION. If this Agreement shall be terminated pursuant
to Section 11 hereof, the Company shall not then be under any liability to any
Underwriter except as provided in Section 8 and Section 10 hereof; but, if for
any other reason this Agreement is terminated, the Company will reimburse the
Underwriters through you for all out-of-pocket expenses approved in writing by
you, including fees and disbursements of counsel, reasonably incurred by the
Underwriters in making preparations for the purchase, sale and delivery of the
Shares not so delivered, but the Company shall then be under no further
liability to any Underwriter in respect of the Shares not so delivered except as
provided in Section 8 and Section 10 hereof.
14. NOTICE. In all dealings hereunder, you shall act on behalf of each of
the Underwriters, and the parties hereto shall be entitled to act and rely upon
any statement, request, notice or agreement on behalf of any Underwriter made or
given by you jointly or by Adams, Harkness & Hill, Inc. on behalf of you as the
Representatives; and in all dealing with any Selling Stockholder hereunder, you
and the Company shall be entitled to act and rely upon any statement, request,
notice or agreement on behalf of such Selling Stockholder made or given by any
or all of the Attorneys-in-Fact for such Selling Stockholder.
All statements, requests, notices and agreements hereunder shall be in
writing, and if to the Underwriters shall be delivered or sent by mail, telex or
facsimile transmission to you as the Representatives in care of Adams, Harkness
& Hill, Inc., 60 State Street, Boston, MA 02109, Attention: Joseph W. Hammer; if
to the Company shall be delivered or sent by mail, telex or facsimile
transmission to the address of the Company set forth in the Registration
Statement, Attention: President; and if to the Selling Stockholder shall be
delivered or sent by mail, telex or facsimile transmission to the Selling
Stockholder at Phoenix Technologies Ltd., 2770 De La Cruz Boulevard, Santa
Clara, CA 95050, Attention: Scott C. Neely, Esq., General Counsel; provided,
however, that any notice to an Underwriter pursuant to Section 10(d) hereof
shall be delivered or sent by mail, telex or facsimile transmission to such
Underwriter at its address set forth in its Underwriter's Questionnaire or telex
constituting such Questionnaire, which address will be supplied to the Company
-33-
<PAGE> 34
by you on request. Any such statements, requests, notices or agreements shall
take effect upon receipt thereof.
15. MISCELLANEOUS. (a) This Agreement shall be binding upon, and inure
solely to the benefit of, the Underwriters and the Company and, to the extent
provided in Sections 10 and 12 hereof, the officers and directors of the Company
and each person who controls the Company or any Underwriter, and their
respective heirs, executors, administrators, successors and assigns, and no
other person shall acquire or have any right under or by virtue of this
Agreement. No purchaser of any of the Shares from any Underwriter shall be
deemed a successor or assign by reason merely of such purchase.
(b) Time shall be of the essence of this Agreement. As used herein, the
term "business day" shall mean any day when the Commission's office in
Washington, D.C. is open for business.
(c) This Agreement shall be governed by and construed in accordance with
the laws of the Commonwealth of Massachusetts.
(d) This Agreement may be executed by any one or more of the parties hereto
in any number of counterparts, each of which shall be deemed to be an original,
but all such counterparts shall together constitute one and the same instrument.
If the foregoing is in accordance with your understanding, please sign and
return to us six counterparts hereof, and upon the acceptance hereof by you, on
behalf of each of the Underwriters, this letter and such acceptance hereof shall
constitute a binding agreement among each of the Underwriters and the Company.
It is understood that your acceptance of this letter on behalf of each of the
Underwriters is pursuant to the authority set forth in a form of Agreement among
Underwriters, the form of which shall be submitted to the Company and the
Selling Stockholder for examination, upon request, but without warranty on your
part as to the authority of the signors thereof.
-34-
<PAGE> 35
Any person executing and delivering this Agreement as Attorney-in-Fact for
the Selling Stockholder represents by so doing that he has been duly appointed
as Attorney-in-Fact by the Selling Stockholder pursuant to a validly existing
and binding Power-of-Attorney which authorizes such Attorney-in-Fact to take
such action.
Very truly yours,
XIONICS DOCUMENT TECHNOLOGIES,
INC.
By:_________________________
Name:_______________________
Title:______________________
PHOENIX TECHNOLGIES LTD.
By:_________________________
Name:_______________________
Title: Attorney-in-Fact
Accepted as of the date
hereof at Boston, Massachusetts
ADAMS, HARKNESS & HILL,INC.
SOUNDVIEW FINANCIAL GROUP, INC.
By:______________________________
(Adams, Harkness & Hill, Inc.
On behalf of each of
the Underwriters)
-35-
<PAGE> 36
SCHEDULE I
Number of
Optional
Total Shares to be
Number of Purchased if
Firm Maximum
Shares to be Option
Purchased Exercised
--------- ---------
Adams, Harkness & Hill, Inc.....
SoundView Financial Group, Inc..
Total........................ _________ _______
3,000,000 450,000
========= =======
-36-
<PAGE> 37
ANNEX I
Pursuant to Section 9(f) of the Underwriting Agreement, the accountants
shall furnish letters to the Underwriters to the effect that:
(i) They are independent certified public accountants with respect to the
Company and its subsidiaries within the meaning of the Act and the applicable
published rules and regulations thereunder;
(ii) In their opinion, the consolidated financial statements and any
supplementary financial information and schedules (and, if applicable,
prospective financial statements and/or pro forma financial information)
examined by them and included in the Prospectus or the Registration Statement
comply as to form in all material respects with the applicable accounting
requirements of the Act and the related published rules and regulations
thereunder; and, if applicable, they have made a review in accordance with
standards established by the American Institute of Certified Public Accountants
of the unaudited consolidated interim financial statements, selected
consolidated financial data, pro forma financial information, prospective
financial statements and/or condensed financial statements derived from audited
consolidated financial statements of the Company for the periods specified in
such letter, as indicated in their reports thereon, copies of which have been
furnished to the representatives of the Underwriters (the "Representatives");
(iii) The unaudited selected financial information with respect to the
consolidated results of operations and financial position of the Company for the
five most recent fiscal years included in the Prospectus agrees with the
corresponding amounts (after restatements where applicable) in the audited
consolidated financial statements for such five fiscal years;
(iv) On the basis of limited procedures, not constituting an examination in
accordance with generally accepted auditing standards, consisting of a reading
of the unaudited consolidated financial statements and other information
referred to below, a reading of the latest available interim consolidated
financial statements of the Company and its subsidiaries, inspection of the
minute books of the Company and its subsidiaries since the date of the latest
audited consolidated financial statements included in the Prospectus, inquiries
of officials of the Company and its
-37-
<PAGE> 38
subsidiaries responsible for financial and accounting matters and such other
inquiries and procedures as may be specified in such letter, nothing came to
their attention that caused them to believed that:
(A) the unaudited consolidated statements of income, consolidated
balance sheets and consolidated statements of cash flows included in the
Prospectus do not comply as to form in all material respects with the
applicable accounting requirements of the Act and the related published
rules and regulations thereunder, or are not in conformity with generally
accepted accounting principles applied on a basis substantially consistent
with the basis for the audited consolidated statements of income,
consolidated balance sheets and consolidated statements of cash flows
included in the Prospectus;
(B) any other unaudited consolidated income statement data and
consolidated balance sheet items included in the Prospectus do not agree
with the corresponding items in the unaudited consolidated financial
statements from which such data and items were derived, and any such
unaudited data and items were not determined on a basis substantially
consistent with the basis for the corresponding amounts in the audited
consolidated financial statements included in the Prospectus;
(C) the unaudited consolidated financial statements which were not
included in the Prospectus but from which were derived any unaudited
condensed consolidated financial statements referred to in Clause (A) and
any unaudited consolidated income statement data and consolidated balance
sheet items included in the Prospectus and referred to in Clause (B) were
not determined on a basis substantially consistent with the basis for the
audited consolidated financial statements included in the Prospectus;
(D) any unaudited pro forma consolidated condensed financial
statements included in the Prospectus do not comply as to form in all
material respects with the applicable accounting requirements of the Act
and the published rules and regulations thereunder or the pro forma
adjustments have not been properly applied to the historical amounts in the
compilation of those statements;
(E) as of a specified date not more than five days prior to the date
of such letter, there have been any changes in the consolidated capital
stock (other than issuances of capital stock upon exercise of options and
-38-
<PAGE> 39
stock appreciation rights, upon earn-outs of performance shares and upon
conversions of convertible securities, in each case which were outstanding
on the date of the latest financial statements included in the Prospectus)
or any increase in the combined long-term debt of the Company and its
subsidiaries, or any decreases in combined net current assets or net assets
or other items specified by the Representatives, or any increases in any
items specified by the Representatives, in each case as compared with
amounts shown in the latest balance sheet included in the Prospectus,
except in each case for changes, increases or decreases which the
Prospectus discloses have occurred or may occur or which are described in
such letter; and
(F) for the period from the date of the latest financial statements
included in the Prospectus to the specified date referred to in Clause (E)
there were any decreases in consolidated net revenues or operating profit
or the total or per share amounts of consolidated net income or other items
specified by the Representatives, or any increases in any items specified
by the Representatives, in each case as compared with the comparable period
of the preceding year and with any other period of corresponding length
specified by the Representatives, except in each case for decreases or
increases which the Prospectus discloses have occurred or may occur or
which are described in such letter; and
(v) In addition to the examination referred to in their report(s) included
in the Prospectus and the limited procedures, inspection of minute books,
inquiries and other procedures referred to in paragraphs (iii) and (iv) above,
they have carried out certain specified procedures, not constituting an
examination in accordance with generally accepted auditing standards, with
respect to certain amounts, percentages and financial information specified by
the representatives, which are derived from the general accounting records of
the Company and its subsidiaries, which appear in the Prospectus, or in Part II
of, or in exhibits and schedules to, the Registration Statement specified by the
Representatives, and have compared certain of such amounts, percentages and
financial information with the accounting records of the Company and its
subsidiaries and have found them to be in agreement.
-39-
<PAGE> 1
Exhibit 4.1
- ------------------- [LOGO] XIONICS -------------------
NUMBER DOCUMENT TECHNOLOGIES SHARES
XDT
- ------------------ -------------------
XIONICS DOCUMENT TECHNOLOGIES, INC.
SEE REVERSE FOR
INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE CERTAIN DEFINITIONS
COMMON STOCK, $.01 PAR VALUE
This certificate is transferable in Boston, Massachusetts and New York,
New York
CUSIP
- -------------------------------------------------------------------------------
THIS IS TO CERTIFY THAT
IS THE OWNER OF
- -------------------------------------------------------------------------------
FULLY-PAID AND NON-ASSESSABLE SHARES OF COMMON STOCK OF THE PAR VALUE OF ONE
CENT ($.01) EACH OF
====================== XIONICS DOCUMENT TECHNOLOGIES, INC. ====================
(Hereinafter called the "Corporation"), transferable on the books of the
Corporation by the holder in person or by duly authorized attorney upon
surrender of this certificate properly endorsed or assigned. This certificate
and the shares of Common Stock represented hereby are subject to the laws of The
State of Delaware and to the Certificate of Incorporation and By-Laws of the
Corporation, as now in effect or hereafter amended.
This certificate is not valid unless countersigned and registered by the
Transfer Agent and Registrar.
WITNESS the facsimile seal of the Corporation and the facsimile signatures
of its duly authorized officers.
Dated:
/s/ ??? /s/ ???
-------------------- -------------------
TREASURER XIONICS DOCUMENT PRESIDENT
TECHNOLOGIES, INC.
CORPORATE
SEAL
1992
DELAWARE
*
COUNTERSIGNED AND REGISTERED:
THE FIRST NATIONAL BANK OF BOSTON
TRANSFER AGENT AND REGISTRAR
BY
/S/ ???
-------------------------
AUTHORIZED SIGNATURE
--------------------------------------------
AMERICAN BANK NOTE COMPANY JULY 1, 1996 dw
3504 ATLANTIC AVENUE
SUITE 12
LONG BEACH, CA 90807 044965FC
(310) 989-2333
FAX (310) 426-7450 500-19X NEW
--------------------------------------------
<PAGE> 2
THE CORPORATION IN AUTHORIZED TO ISSUE MORE THAN ONE CLASS AND SERIES OF STOCK.
THE CORPORATION WILL FURNISH TO THE HOLDER UPON WRITTEN REQUEST AND WITHOUT
CHARGE THE PREFERENCES, POWERS, QUALIFICATIONS AND RIGHTS OF EACH CLASS OF STOCK
OR SERIES THEREOF.
The following abbreviations, when used in the inscription on the face of
this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM - as tenants in common UNI GIFT MIN ACT - ...Custodian.........
TEN ENT - as tenants by entireties (Cust) (Minor)
JT TEN - as joint tenants with right of under Uniform Gifts
survivorship and not as to Minors
tenants in common Act ..................
(State)
COM PROP - as community property
Additional abbreviations may also be used though not in the above list.
FOR VALUE RECEIVED, _____________________ HEREBY SELL, ASSIGN AND TRANSFER UNTO
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
______________________________________
______________________________________
_______________________________________________________________________________
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE, OF ASSIGNEE)
_______________________________________________________________________________
_______________________________________________________________________________
_________________________________________________________________________SHARES
OF THE COMMON STOCK REPRESENTED BY THE WITHIN CERTIFICATE, AND DO HEREBY
IRREVOCABLY CONSTITUTE AND APPOINT
_______________________________________________________________________ATTORNEY
TO TRANSFER THE SAID STOCK ON THE BOOKS OF THE WITHIN NAMED CORPORATION WITH
FULL POWER OF SUBSTITUTION IN THE PREMISES.
DATED _______________________
_____________________________________________________
NOTICE: THE SIGNATURE TO THIS ASSIGNMENT MUST CORRESPOND WITH
THE NAME AS WRITTEN UPON THE FACE OF THE CERTIFICATE
IN EVERY PARTICULAR, WITHOUT ALTERATION OR
ENLARGEMENT OR ANY CHANGE WHATEVER.
____________________________________________________
SIGNATURE(S) GUARANTEED: THE SIGNATURE(S) SHOULD BE GUARANTEED BY AN ELIGIBLE
GUARANTOR INSTITUTION (BANKS, STOCKBROKERS, SAVINGS
AND LOAN ASSOCIATIONS AND CREDIT UNIONS WITH
MEMBERSHIP IN AN APPROVED SIGNATURE GUARANTEE
MEDALLION PROGRAM), PURSUANT TO S.E.C. RULE 17Ad-15.
--------------------------------------------
AMERICAN BANK NOTE COMPANY JULY 1, 1996 dw
3504 ATLANTIC AVENUE
SUITE 12
LONG BEACH, CA 90807 044965BK
(310) 989-2333
FAX (310) 426-7450 NEW
--------------------------------------------
<PAGE> 1
Exhibit 5.1
July 16, 1996
Xionics Document Technologies, Inc.
70 Blanchard Road
Burlington, MA 01803
Ladies and Gentlemen:
We have acted as counsel for Xionics Document Technologies, Inc., a
Delaware corporation (the "Company"), in connection with the registration under
the Securities Act of 1933, as amended (the "Act"), of 3,450,000 shares
(including 2,500,000 shares to be issued and offered by the Company and 500,000
outstanding shares offered by Phoenix Technologies Ltd. (the "Selling
Stockholder"), and also including an additional 450,000 shares in the aggregate
that may be offered by the Company and the Selling Stockholder in order to cover
over allotments, if any), of Common Stock, par value $.01 per share, of the
Company (the "Shares"), pursuant to a Registration Statement on Form S-1, File
No. 333-4613 (as amended, the "Registration Statement"), initially filed with
the Securities and Exchange Commission on May 28, 1996. The Shares to be issued
and offered by the Company are referred to below as the "Company Shares" and the
Shares to be offered by the Selling Stockholder are referred to as the "Selling
Stockholder Shares."
We have reviewed the corporate proceedings of the Company with respect to
the authorization of the issuance of the Shares. We have also examined and
relied upon originals or copies, certified or otherwise identified or
authenticated to our satisfaction, of such corporate records, instruments,
agreements or other documents of the Company, and certificates of officers of
the Company as to certain factual matters, and have made such investigation of
law and have discussed with officers and representatives of the Company such
questions of fact, as we have deemed necessary or appropriate to enable us to
express the opinions hereinafter expressed. In our examination, we have assumed
the genuineness of all signatures, the conformity to the originals of all
documents reviewed by us as copies, the authenticity and completeness of all
original documents reviewed by us in original or copy form and the legal
competence of each individual executing any document.
We have also assumed that: (i) an Underwriting Agreement substantially in
the form of Exhibit 1.1 to the Registration Statement, by and among the Company,
the Selling Stockholder and the underwriters named therein (the "Underwriting
Agreement"), will have been duly executed and delivered pursuant to the
authorizing votes of the Board of Directors of the Company and that the Shares
will be sold and issued or transferred only upon the payment therefor as
provided in the Underwriting Agreement; and (ii) the Amended and Restated
Certificate of Incorporation of the Company substantially in the form of Exhibit
3.1 to the Registration Statement will have been duly filed in Delaware prior to
the sale of the Shares. We have further assumed that the registration
requirements of the Act and all applicable requirements of state laws regulating
the sale of securities will have been duly satisfied.
This opinion is limited solely to the Delaware General Corporation Law as
applied by courts located in Delaware, to the extent applicable to the
transactions that are the subject of this opinion.
Based upon and subject to the foregoing, we are of the opinion that the
Shares have been duly authorized and that the Selling Stockholder Shares are,
and the Company Shares, when delivered and paid for in accordance with the
provisions of the Underwriting Agreement, will be, validly issued, fully paid
and non-assessable.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to this firm under the heading
"Legal Matters" in the Prospectus included in the Registration Statement.
Very truly yours,
BINGHAM, DANA & GOULD LLP
<PAGE> 1
Exhibit 10.4
BD&G LLP Draft
July 11, 1996
XIONICS DOCUMENT TECHNOLOGIES, INC.
1996 Director Stock Option Plan
l. Purpose.
--------
The Xionics Document Technologies, Inc. 1996 Director Stock Option Plan
(the "Plan") has been adopted to assist in attracting and retaining non-employee
members of the Corporation's Board of Directors and to foster alignment of their
interests with those of stockholders of the Corporation. This Plan is intended
to satisfy all of the conditions of Rule 16b-3 under the Securities Exchange Act
of 1934, as amended.
2. Definitions.
------------
As used herein, the following words or terms have the meanings set forth
below:
2.1 "Affiliate" means any business entity that is directly or indirectly
controlled by the Corporation or any entity in which the Corporation has a
significant equity interest, as determined by the senior legal officer of the
Corporation.
2.2 "Board of Directors" means the Board of Directors of the Corporation
2.3 "Common Stock" means the Common Stock, par value $.01 per share, of
the Corporation.
2.4 "Compensation Committee" means the Compensation Committee of the
Board of Directors.
2.5 "Corporation" means Xionics Document Technologies, Inc., a
corporation established under the laws of the State of Delaware.
2.6 "Effective Date" has the meaning set forth in Section 3.
2.7 "Fair Market Value," in the case of a share of Common Stock on a
particular day, means the closing price of the Common Stock for that day as
reported in the "NASDAQ National Market Issues" section of the Eastern Edition
of THE WALL STREET JOURNAL, or if no prices are quoted for that day, for the
last preceding day on which such prices of Common Stock are so quoted. In the
event "NASDAQ National Market Issues" cease to be reported or the Common Stock
to be included therein, the Compensation Committee shall select some other
appropriate method for determining Fair Market Value.
2.8 "Grant Date" means the business day immediately following the annual
meeting of stockholders of the Corporation (or special meeting or written
consent in lieu
<PAGE> 2
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thereof), commencing with the first annual meeting of stockholders following the
end of the Corporation's 1997 fiscal year.
2.9 "Non-Employee Director" means as of any date a person who on such
date is a director of the Corporation and is not an employee of the Corporation
or any Affiliate. A director of the Corporation who is also an employee of the
Corporation or any Affiliate shall become eligible to participate in the Plan
upon termination of such employment.
2.10 "Option" means a nonstatutory option to purchase Shares granted
under the Plan, pursuant to Article 7.
2.11 "Option Agreement" means an agreement between the Corporation and a
Non-Employee Director, setting forth the terms and conditions of an Option,
substantially in the form of Annex A hereto.
2.12 "Option Price" means the price to be paid by an Option holder upon
exercise of an Option.
2.13 "Optionee" means a person eligible to receive an Option to whom an
Option shall have been granted under the Plan, and any permitted transferee of
such Option pursuant to Section 7.4.
2.14 "Shares" means shares of Common Stock.
3. Effective Date.
---------------
The Plan shall become effective on July __, 1996 (the "Effective Date"),
the date it was adopted by the Board of Directors, provided that the Plan is
approved by the stockholders of the Corporation within one year after that date.
Although Options may be granted before such stockholder approval, no Option may
be exercised until such approval is obtained and any such Options will be null
and void if such approval is not obtained by the first anniversary of the
Effective Date.
4. Administration.
---------------
4.1 The Plan shall be administered by the Compensation Committee. Subject
to the provisions set forth herein, the Compensation Committee shall have full
authority to construe and interpret the terms of the Plan and to make all
determinations and take all other actions necessary or advisable for the
administration of the Plan. The Compensation Committee may delegate to one or
more employees of the Corporation or any Affiliate the authority to perform
administrative functions under the Plan.
4.2 Any determinations or actions made or taken by the Compensation
Committee pursuant to this Article shall be binding and final.
<PAGE> 3
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5. Shares Available for Options; Anti-Dilution Adjustments.
--------------------------------------------------------
5.1 The maximum number of Shares that may be issued under the Plan shall
be 350,000, subject to adjustment in accordance with the provisions of Section
5.2. Any Shares subject to an Option which for any reason expires or is
terminated unexercised as to such Shares may again be the subject of an Option.
Shares delivered upon exercise of an Option under the Plan may consist in whole
or in part of authorized but unissued Shares or treasury Shares.
5.2 Pro rata adjustment shall be made in the maximum number of Shares
subject to the Plan and to the number of Shares thereafter included in each
Option grant to give effect to any stock dividends, stock splits, stock
combinations, recapitalizations and other similar changes in the capital
structure of the Corporation. Pro rata adjustments shall be made in the number,
kind and price of Shares covered by any outstanding Option hereunder to give
effect to any stock dividends, stock splits, stock combinations,
recapitalizations and similar changes in the capital structure of the
Corporation, or a merger, dissolution or reorganization of the Corporation,
after the date the Option is granted, so that the Optionee is treated in a
manner equivalent to that of holders of the underlying Common Stock.
6. Eligibility.
------------
Options shall be granted only to Non-Employee Directors, as provided in
Article 7.
7. Option Grants.
--------------
7.1 ANNUAL GRANTS. On each Grant Date, each person who is then a
Non-Employee Director shall receive an Option to purchase such number of Shares
as is determined by the Compensation Committee.
7.2 OPTION PRICE, EXERCISABILITY AND TERM. The Option Price for each
Option shall be the Fair Market Value on the Grant Date. Each Option shall
become exercisable in full on the first anniversary of the Grant Date, PROVIDED,
HOWEVER, that in the event any Optionee ceases to be a director of the
Corporation after the Grant Date of an Option and before such anniversary, by
reason of death or for any other reason except the resignation of that director
prior to the normal expiration of his or her term (a "Resignation"), such
exercisability shall be accelerated so that such Option shall become exercisable
in full as of the date of such cessation. No Option shall be exercisable later
than ten years after the Grant Date. Each Optionee shall enter into an agreement
with the Corporation with respect thereto substantially in the form of the
Option Agreement.
7.3 TERMINATION OF OPTIONS. Any Option shall terminate and may no longer
be exercised on the tenth anniversary of its Grant Date, or prior thereto (i) in
the event of the Optionee's Resignation before the first anniversary of the
Grant Date, or (ii) if the Optionee dies before such tenth anniversary, in
accordance with the following sentence. If the Optionee dies at a time when he
or she might have exercised an Option, then his or her
<PAGE> 4
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estate, personal representative or beneficiary to whom it has been transferred
pursuant to Section 7.4 may at any time prior to the tenth anniversary of its
Grant Date and within a period of one year after the Optionee's death, but not
thereafter, exercise the Option to the extent the Optionee might have exercised
it at the time of death.
7.4 RESTRICTIONS ON TRANSFERABILITY. Options shall be transferable by the
Optionee by will or the laws of descent and distribution. Otherwise, Options
shall be transferable only if such transfer is permitted by the Compensation
Committee in its discretion. The foregoing restriction shall not, however,
preclude the Optionee from effecting "cashless" exercise of an Option, in
accordance with and as described in Section 7.5(ii).
7.5 Notice of Exercise and Payment.
-------------------------------
(i) An exercisable Option may be exercised in whole or in part. An
Option shall be exercisable only by delivery of a written notice to the
Corporation's Treasurer or Secretary, specifying the number of Shares for
which it is exercised. If the Shares are not at that time effectively
registered under the Securities Act of 1933, as amended, the Optionee
shall include with such notice a letter, in form and substance
satisfactory to the Corporation, confirming that the Shares are being
purchased for the Optionee's own account for investment and not with a
view to distribution. Payment shall be made in full at the time the Option
is exercised, by cash or check, except as otherwise permitted by Section
7.5(ii) below.
(ii) In lieu of payment by cash or check accompanying the written
notice of exercise as described in Section 7.5(i), an Optionee may, unless
prohibited by applicable law, elect to effect payment by including with
the written notice referred to in Section 7.5(i) irrevocable instructions
to deliver for sale to a registered securities broker acceptable to the
Corporation a number of the Shares subject to the Option being exercised
sufficient, after brokerage commissions, to cover the aggregate exercise
price of such Option and, if the Optionee further elects, the Optionee's
withholding obligations with respect to such exercise referred to in
Section 7.7, together with irrevocable instructions to such broker to sell
such Shares and to remit directly to the Corporation such aggregate
exercise price and, if the Optionee has so elected, the amount of such
withholding obligation. The Corporation shall not be required to deliver
to such securities broker any stock certificate for such Shares until it
has received from the broker such exercise price and, if the Optionee has
so elected, such withholding obligation amount.
7.6 NO RIGHTS AS SHAREHOLDER. No Optionee shall have any rights as a
shareholder or any claim to dividends paid with respect to any Shares to which
the Option relates until the date such Shares are issued to him or her.
7.7 WITHHOLDING TAXES. The Corporation's obligation to deliver Shares
upon exercise of an Option shall be subject to the Optionee's satisfaction of
all applicable federal,
<PAGE> 5
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state and local income and employment tax withholding obligations. The Optionee
shall satisfy such obligations by making a payment of the requisite amount in
cash or by check, unless the Optionee has elected to effect such payment through
a "cashless" exercise in accordance with Section 7.5(ii).
8. Duration
--------
This Plan shall terminate (i) ten years from the Effective Date, (ii) on
September 30, 1996, if the Corporation has not consummated its initial public
offering of Common Stock prior to such time, or (iii) pursuant to Section 9.2,
and no Options shall be granted thereafter.
9. General Provisions.
-------------------
9.1 NO RIGHT TO SERVICE. Participating in the Plan does not constitute a
guarantee or contract of service as a director.
9.2 AMENDMENT AND TERMINATION. The Board of Directors may amend, suspend
or terminate the Plan or any portion thereof at any time; PROVIDED, HOWEVER,
that no such amendment, suspension or termination shall adversely affect or
impair any then outstanding Option without the consent of the Optionee.
9.3 REGISTRATION OF SHARES. Nothing in the Plan shall be construed to
require the Corporation to register under the Securities Act of 1933, as
amended, any Options or Shares subject to Options.
9.4 GOVERNING LAW. The provisions of the Plan shall be governed by and
interpreted in accordance with the laws of The Commonwealth of Massachusetts.
<PAGE> 6
ANNEX A
-------
XIONICS DOCUMENT TECHNOLOGIES, INC.
NON-EMPLOYEE DIRECTOR STOCK OPTION AGREEMENT
--------------------------------------------
UNDER THE XIONICS DOCUMENT TECHNOLOGIES, INC. 1996 DIRECTOR STOCK OPTION PLAN
-----------------------------------------------------------------------------
Xionics Document Technologies, Inc. (the "Company") hereby grants,
effective [________] (the "Grant Date"), to [_________] (the "Optionee") an
option (the "Director Option") to purchase a maximum of __________ shares of its
Common Stock, $.01 par value per share (the "Common Stock"), at a price of
$[______] per share, subject to the following:
1. RELATIONSHIP TO PLAN. This Director Option is granted pursuant to
Section 7 of the Company's 1996 Director Stock Option Plan (the "Plan"), and is
in all respects subject to the terms, conditions and definitions of the Plan,
which shall be administered by the Compensation Committee of the Company's
Board of Directors (the "Compensation Committee") pursuant to the terms of the
Plan. Capitalized terms used herein and not otherwise defined herein shall have
the meanings given to such terms in the Plan. The Optionee hereby accepts this
Director Option subject to all the terms and provisions of the Plan (including,
without limitation, provisions relating to expiration of this Director Option
and adjustment of the number of shares subject to this Director Option and the
exercise price therefor). The Optionee further agrees that all decisions under
and interpretations of the Plan by the Compensation Committee shall be final,
binding and conclusive upon the Optionee and his heirs.
2. VESTING AND TERM. This Director Option shall become exercisable in full
on the one-year anniversary of the Grant Date. This Director Option will remain
exercisable until the tenth (10th) anniversary of the Grant Date, unless the
Director Option has earlier terminated in accordance with the provisions of the
Plan.
3. METHODS OF EXERCISE. This Director Option shall be exercisable by a
written notice in the form described under Section 7.5 of the Plan. The notice
shall be accompanied either by cash, personal check equal to the option price
or instructions as to payment in shares of Common Stock pursuant to Section
7.5(ii) of the Plan.
4. ADJUSTMENT OF NUMBER OF SHARES. In the event of any stock dividend
payable in Common Stock or any split-up or contraction in the number of shares
of Common Stock occurring after the date of this Agreement and prior to the
exercise in full of this Director Option, the number of shares for which this
Director Option may thereafter be exercised shall be proportionately adjusted.
In case of any reclassification or change of outstanding shares of Common
Stock, shares of stock or other securities equivalent in kind and value to
those shares which a holder would have received if he or she had held the full
<PAGE> 7
2
number of shares of Common Stock subject to this Director Option immediately
prior to such reclassification or change and had continued to hold those shares
(together with all other shares, stock and securities thereafter issued in
respect thereof) to the time of exercise of this Director Option shall thereupon
be subject to this Director Option. In case of any consolidation or merger of
the Company with or into another company or in case of any sale or conveyance to
another company or entity of the property of the Company as a whole, this
Director Option shall terminate and, to the extent that the value of the shares
of stock, other securities or cash which a stockholder is entitled to receive
for one share of Common Stock in connection with such transaction exceeds the
option price of this Director Option, the Optionee shall be entitled to receive
either cash or shares of stock or other securities equivalent in kind to the
cash or those shares which a holder would have received if he or she had
exercised this Director Option and held the number of shares of the Common Stock
upon such exercise immediately prior to such consolidation, merger, sale or
conveyance and with a value equal to such excess amount multiplied by the number
of shares he or she would have received if he or she so exercised this Director
Option at such time. Further, upon dissolution or liquidation of the Company,
this Director Option shall terminate, but the Optionee shall have the right,
immediately prior to such dissolution or liquidation, to exercise this Director
Option to the full extent not theretofore exercised. No fraction of a share
shall be purchasable or deliverable, but in the event any adjustment of the
number of shares covered by this Director Option shall cause such number to
include a fraction of a share, such fraction shall be adjusted to the nearest
smaller whole number of shares.
5. GENERAL. This Agreement shall be construed as a contract under seal in
accordance with the laws of The Commonwealth of Massachusetts. It shall bind
and, subject to the terms of the Plan, benefit the parties and their respective
successors, assigns and legal representatives.
IN WITNESS WHEREOF, the Company and the Optionee have caused this
agreement to be executed on the date first written above.
XIONICS DOCUMENT TECHNOLOGIES, INC.
By:
-----------------------------------
--------------------------------------
Optionee
<PAGE> 1
Exhibit 10.5
XIONICS DOCUMENT TECHNOLOGIES, INC.
1996 EMPLOYEE STOCK PURCHASE PLAN
1. DEFINITIONS. As used in this 1996 Employee Stock Purchase Plan of
Xionics Document Technologies, Inc., the following terms shall have the meanings
respectively assigned to them below:
(a) BENEFICIARY means the person designated as beneficiary on the
Optionee's Membership Agreement or, if no such beneficiary is named,
the person to whom the Option is transferred by will or under the
applicable laws of descent and distribution.
(b) CODE means the Internal Revenue Code of 1986, as amended.
(c) COMMITTEE means a committee of the board of directors of the Company
composed exclusively of disinterested directors.
(d) COMPANY means Xionics Document Technologies, Inc., a Delaware
corporation.
(e) COMPENSATION means annual compensation, including commissions,
overtime and bonuses, for the most recently completed calendar year.
(f) ELIGIBLE EMPLOYEE means a person who is eligible under the provisions
of Section 7 to receive an Option as of a particular Grant Date.
(g) EXERCISE DATE means a date not more than 27 months after a Grant Date,
as determined by the Committee, on which Options must, if ever, be
executed.
(h) GRANT DATE means a date specified by the Committee on which Options
are to be granted to Eligible Employees.
(j) MARKET VALUE means, as of a particular date, the value as determined
by the Committee in accordance with applicable provisions of the Code
and Treasury Department rulings and regulations thereunder or, if
applicable, the closing price of the Stock reported by NASDAQ in The
Wall Street Journal on such date.
<PAGE> 2
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(k) MEMBERSHIP AGREEMENT means an agreement whereby an Optionee authorizes
the Company to withhold payroll deductions from his or her
Compensation.
(l) OPTION means an option to purchase shares of Stock granted under the
Plan.
(m) OPTIONEE means an Eligible Employee to whom an Option is granted.
(n) PLAN means this 1996 Employee Stock Purchase Plan of the Company.
(o) RELATED CORPORATION means any corporation which is a parent
corporation of the Company, as defined in Section 424(e) of the Code,
and any corporation controlled by that parent corporation or the
Company.
(p) STOCK means common stock, $.01 par value, of the Company.
2. PURPOSE OF THE PLAN. The Plan is intended to encourage ownership of
Stock by employees of the Company and to provide additional incentive for the
employees to promote the success of the business of the Company. It is intended
that the Plan shall be an "employee stock purchase plan" within the meaning of
Section 423 of the Code.
3. TERM OF THE PLAN. The Plan shall become effective on ________ __,
1996. No option shall be granted under the Plan after December 31, 2000.
4. ADMINISTRATION OF THE PLAN. The Plan shall be administered by the
Committee, which shall determine from time to time whether to grant Options
under the Plan, shall specify which dates shall be Grant Dates and Exercise
Dates, shall determine the Market Value of the Stock, and shall fix the maximum
percentage of each Optionee's Compensation which may be withheld for the purpose
of purchasing shares of Stock. The Committee shall have authority to interpret
the Plan, to prescribe, amend and rescind rules and regulations relating to the
Plan, to determine the terms of Options granted under the Plan, and to make all
other determinations necessary or advisable for the administration of the Plan.
5. TERMINATION AND AMENDMENT OF PLAN. The Committee may terminate or
amend the Plan at any time; PROVIDED HOWEVER, that the
<PAGE> 3
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Committee may not, without approval by the holders of a majority of the shares
of Stock, increase the maximum number of shares of Stock purchasable under the
Plan, change the description of employees or classes of employees eligible to
receive Options, change the manner of determining the exercise price of Options,
or extend the period during which Options may be granted or exercised. No
termination of or amendment to the Plan may adversely affect the rights of an
Optionee with respect to any Option held by the Optionee as of the date of such
termination or amendment.
6. SHARES OF STOCK SUBJECT TO THE PLAN. No more than an aggregate of
200,000 shares of Stock may be issued or delivered pursuant to the exercise of
Options granted under the Plan, subject to adjustments made in accordance with
Section 9.8. Shares to be delivered upon the exercise of Options may be either
shares of Stock which are authorized but unissued or shares of Stock held by the
Company in its treasury. If an Option expires or terminates for any reason
without having been exercised in full, the unpurchased shares subject to the
Option shall become available for other Options granted under the Plan. The
Company shall, at all items during which Options are outstanding, reserve and
keep available shares of Stock sufficient to satisfy such Options, and shall pay
all fees and expenses incurred by the Company in connection there with. In the
event of any capital change in the outstanding Stock as contemplated by Section
9.8, the number of shares of Stock reserved and kept available by the Company
shall be appropriately adjusted.
7. PERSONS ELIGIBLE TO RECEIVE OPTIONS. Each employee of the Company or a
specified Related Corporation shall be granted an Option on each Grant Date on
which such employee meets all of the following requirements:
(a) The employee is employed by the Company or the Related Corporation for
at least twenty hours per week and for more than five months per
calendar year.
(b) The employee will not, after grant of the Option, own stock possessing
five percent or more of the total combined voting power or value of
all classes of stock of the Company or of any Related Corporation. For
purposes of this paragraph (b), the rules of Section 424(d) of the
Code shall apply in determining the stock ownership of the employee,
and stock which the employee may purchase under outstanding options
shall be treated as stock owned by the employee.
<PAGE> 4
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(c) Upon grant of the Option, the employee's rights to purchase stock
under all employee stock purchase plans (as defined in Section 423(b)
of the Code) of the Company and its Related Corporations will not
accrue at a rate which exceeds $25,000 of fair market value of the
stock (determined as of the Grant Date) for each calendar year in
which such option is outstanding at any time. The accrual of rights to
purchase stock shall be determined in accordance with Section
423(b)(8) of the Code.
8. DATES FOR GRANTING OPTIONS. Options shall be granted on each date
designated by the Committee as a Grant Date.
9. TERMS AND CONDITIONS OF OPTIONS.
9.1 GENERAL. All Options granted on a particular Grant Date shall comply
with the terms and conditions set forth in Section 9.3 through 9.12,
and each Option shall be identical except as to the number of shares
of Stock purchasable under the Option, which shall be determined in
accordance with Section 9.2.
9.2 NUMBER OF SHARES. The maximum number of shares of Stock which an
Optionee shall be permitted to purchase shall be an amount equal to
ten percent of the Optionee's Compensation as of the Grant Date
divided by 85 percent of the Market Value of the Stock as of the Grant
Date.
9.3 PURCHASE PRICE. The purchase price of shares of Stock shall be 85
percent of the lesser of (a) the Market Value of the shares as of the
Grant Date, or (b) the Market Value of the shares as of the Exercise
Date, or such greater percentage as may be set by the Committee from
time to time.
9.4 RESTRICTIONS ON TRANSFER. Options may not be transferred otherwise
than by will or under the laws of descent and distribution. An Option
may not be exercised by anyone other than the Optionee during the
lifetime of the Optionee. Shares of Stock may be sold or otherwise
transferred by the Optionee without restriction subject to the
provisions of Section 9.11 and the Stock Purchase Agreement that will
be signed pursuant to Section 9.10.
9.5 EXPIRATION. Each Option shall expire at the close of business on the
Exercise Date or on such earlier date as may result from the operation
of Section 9.6.
<PAGE> 5
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9.6 TERMINATION OF EMPLOYMENT OF OPTIONEE. If an Optionee ceases for any
reason (other than death or retirement) to be continuously employed by
the Company or a Related Corporation, whether due to voluntary
severance, involuntary severance, transfer, or disaffiliation of the
employer Related Corporation with the Company, his or her Option shall
immediately expire, and the Optionee's accumulated payroll deduction
shall be returned by the Company without interest. For purposes of
this Section 9.6, an Optionee shall be deemed to be employed
throughout any leave of absence for military service, illness or other
bona fide purpose which does not exceed the longer of ninety days or
the period during which the Optionee's reemployment rights are
guaranteed by statute or by contract. If the Optionee does not return
to active employment prior to the termination of such period, his or
her employment shall be deemed to have ended on the ninety-first day
after the date of such leave of absence.
9.7 DEATH OF OPTIONEE. If an Optionee dies, his or her Beneficiary shall
be entitled to withdraw the Optionee's accumulated payroll deductions
without interest or to purchase shares on the Exercise Date to the
extent that the Optionee would be so entitled had he or she continued
to be employed by the Company. The number of shares purchasable shall
be limited by the amount of the Optionee's accumulated payroll
deductions as of the date of his or her death. Accumulated payroll
deductions shall be applied by the Company toward the purchase of
shares only if the Optionee or Beneficiary submits to the Company a
Stock Purchase Agreement pursuant to Section 9.10. Accumulated payroll
deductions not withdrawn or applied to the purchase of shares in
accordance with Section 9.10 shall be delivered by the Company to the
Optionee or Beneficiary without interest within a reasonable time
after the Exercise Date.
9.8 CAPITAL CHANGES AFFECTING THE STOCK. In the event that, between the
Grant Date and the Exercise Date of an Option, a stock dividend is
paid or becomes payable in respect of the Stock or there occurs a
split up or contraction in the number of shares of Stock, the number
of shares for which the Option may thereafter be exercised and the
price to be paid for each such share shall be proportionately
adjusted. In the event that, after the Grant Date, there occurs a
reclassification or change of outstanding shares of the Stock or a
consolidation or merger of the Company
<PAGE> 6
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with or into another corporation or a sale or conveyance,
substantially as a whole, of the property of the Company, the Optionee
shall be entitled on the Exercise Date to receive shares of Stock or
other securities equivalent in kind and value to the shares of stock
he or she would have held if he or she had exercised the Option in
full immediately prior to such reclassification, change,
consolidation, merger, sale or conveyance and had continued to hold
such shares (together with all other shares and securities thereafter
issued in respect thereof) until the Exercise Date. In the event that
there is to occur a recapitalization involving an increase in the par
value exceeding the exercise price under an outstanding Option, the
Company shall notify the Optionee of such proposed recapitalization
immediately upon its being recommended to the Company's shareholders,
after which the Optionee shall have the right to exercise his or her
Option prior to such recapitalization; if the Optionee fails to
exercise the Option prior to recapitalization, the exercise price
under the Option shall be appropriately adjusted. In the event that,
after the Grant Date, there occurs a dissolution or liquidation of the
Company, except pursuant to a transaction to which Section 424(a) of
the Code applies, each Option to purchase Stock of the Company to be
dissolved or liquidated shall terminate, but the Optionee holding such
Option shall have the right to exercise his or her Option prior to
such dissolution or liquidation.
9.9 PAYROLL DEDUCTIONS. An Optionee may receive Options hereunder as of
any Grant Date by completing and returning to the Company, at least
two weeks prior to such Grant Date, a Membership Agreement indicating
the amount of his or her Compensation, not to exceed ten percent,
which is to be withheld each pay period commencing on such Grant Date.
A Membership Agreement may continue from the period following one
Grant Date to the periods following subsequent Grant Dates until
revoked by the Optionee. The Optionee may withdraw any or all of his
or her accumulated payroll deductions without interest on the Exercise
Date or such earlier date as is permitted by the Membership Agreement
by submitting a written request therefor to the Company no later than
two weeks prior to the date on which the withdrawal will be effective.
9.10 EXERCISE OF OPTIONS. On the Exercise Date the Optionee may purchase
the number of shares purchasable by his or her accumulated payroll
deduction, provided that:
<PAGE> 7
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(a) The number of shares of Stock purchasable shall not exceed the
number of shares the Optionee is entitled to purchase pursuant
to Section 9.2.
(b) If the number of shares purchasable includes a fraction, that
number shall be adjusted to the next smaller whole number and
the purchase price shall be adjusted accordingly.
The Optionee shall complete and return to the Company a Stock Purchase
Agreement no later than two weeks prior to the Exercise Date. If the
Company does not receive a Stock Purchase Agreement from the Optionee
by such date, accumulated payroll deductions will be returned within a
reasonable time after the Exercise Date without interest.
9.11 DELIVERY OF STOCK. Within a reasonable time after the Exercise Date,
the Company shall deliver or cause to be delivered to the Optionee a
certificate or certificates for the number of shares purchased by the
Optionee. At the time of any exercise of any Option, the Company may,
if it shall deem it necessary or desirable for any reason connected
with any law or applicable regulation of the Securities and Exchange
Commission or state securities laws, require the Optionee or a
transferee of the Optionee's rights to represent in writing to the
Company that it is such person's then intention to acquire the Stock
for investment and not with a view to the distribution thereof. Such
representation shall lapse when in the view of the Company it is no
longer necessary under the laws or regulations in existence at the
time. The Company shall have the right to place a legend on all
certificates that the shares represented by such certificates may not
be transferred unless a Registration Statement with respect to these
shares is effective under the Securities Act of 1933, as amended, or
unless the Company shall receive an opinion of counsel satisfactory to
it that transfer will not violate said act or regulations thereunder.
If any law or applicable regulation of the Securities and Exchange
Commission or other body having jurisdiction in the premises shall
require that the Company or the Optionee take any action in connection
with the shares being purchased under the Option, delivery of the
certificate or certificates for such shares shall be postponed until
the necessary action shall have been completed. The Optionee
<PAGE> 8
-8-
shall have no rights as a shareholder in respect of shares for which
he or she has not received a certificate.
9.12 RETURN OF ACCUMULATED PAYROLL DEDUCTIONS. In the event that the
Optionee or the Beneficiary is entitled to the return of accumulated
payroll deductions, whether by reason of voluntary withdrawal,
termination of employment, retirement, death, or in the event that
accumulated payroll deductions exceed the price of share purchased,
such amount shall be returned without interest within a reasonable
time after the Exercise Date or such earlier date as is permitted by
the Membership Agreement. Payroll deductions shall be returned by the
Company to the Optionee or the Beneficiary, as the case may be. An
Optionee's Membership Agreement may specify that amounts exceeding the
purchase price will be carried forward to the next option period under
the Plan.
<PAGE> 1
EXHIBIT 10.18
DISTRIBUTOR CONTRACT
BETWEEN
TECH DATA CORPORATION
AND
XIONICS INC.
5/23/94
<PAGE> 2
DISTRIBUTOR AGREEMENT
THIS AGREEMENT, dated this 1st day of July, 1994 (the "Effective
Date"), is between TECH DATA CORPORATION, a Florida corporation ("Tech Data"),
and XIONICS Inc. a Massachusetts corporation ("XIONICS").
WITNESSETH:
WHEREAS, Tech Data desires to purchase certain Products from XIONICS
from time to time; and
WHEREAS, XIONICS desires to sell certain Products to Tech Data in
accordance with the terms and conditions set forth in this Agreement; and
WHEREAS, XIONICS desires to appoint Tech Data as its non-exclusive
distributor to market Products within the territory defined below;
NOW, THEREFORE, in consideration of the mutual premises herein
contained and other good and valuable consideration, Tech Data and XIONICS
hereby agree as follows:
ARTICLE I. TERM OF AGREEMENT
----------------------------
1.1 TERM OF AGREEMENT. During the term of this Agreement, XIONICS will
provide to Tech Data the Products set forth in Purchase Orders (as
defined herein) in accordance with the terms and conditions set forth
in this Agreement. The term of this Agreement shall commence on the
Effective Date and, unless terminated by either party as set forth in
this Agreement, shall remain in full force and effect for a term of one
(1) year, and will be automatically renewed for successive one (1) year
terms unless prior written notification of nonrenewal is received at
least thirty (30) days prior to the renewal date.
1.2 DEFINITIONS. The following definitions shall apply to this Agreement.
(a) "Applicable Specification" shall mean the functional
performance, operational and compatibility characteristics of
a Product agreed upon in writing by the parties or, in the
absence of an agreement, as described in applicable
Documentation and as referenced in Attachment A.
(b) "Documentation" shall mean user manuals, training
materials, product descriptions and specifications, technical
manuals, license agreements, supporting materials and other
printed information relating to the Products, whether
distributed in print, electronic, or video format, in effect
as of the date of the applicable Purchase Order and
incorporated therein by reference.
(c) "Products" shall mean, individually or collectively as
appropriate, hardware, licensed software, Documentation,
developed Products, supplies, accessories, and other
commodities related to any of the foregoing, provided or to be
provided by XIONICS pursuant to this Agreement. Such Products
require no changes, alterations or additions and are
customarily offered by XIONICS and as described in brochures
and by exhibits.
(d) "Territory" shall mean the United States of America and
its territories and possessions and Latin America.
TECH DATA ??? 2 XIONICS _____
<PAGE> 3
(e) "Customers" of Tech Data shall include dealers, resellers,
commercial Customers, value added resellers and other similar
Customers, but shall not include End Users unless specifically
set forth in an addendum to the Agreement.
(f) "End Users" shall mean final retail purchasers or
licensees who have acquired Products for their own use and not
for resale, remarketing or redistribution, unless specifically
set forth in a separate agreement.
(g) "Services" means any warranty, maintenance, advertising,
marketing or technical support and any other services
performed or to be performed by XIONICS.
1.3 APPOINTMENT AS DISTRIBUTOR. XIONICS hereby grants to Tech Data the
non-exclusive right to distribute Products during the term of this
agreement within the Territory as herein defined. XIONICS reserves the
right to appoint other authorized distributors. Tech Data will use its
best efforts to promote sales of the Products with the Territory.
ARTICLE II. PURCHASE ORDERS
---------------------------
2.1 PREPARATION OF PURCHASE ORDERS. From time to time or at Tech Data's
request, XIONICS shall inform Tech Data of Products available from
XIONICS including, but not limited to, replacement Products, new
releases, enhancements or versions of existing Products. XIONICS shall
notify Tech Data at least thirty (30) days prior to the date any new
Product is to be introduced and shall make such Product available to
Tech Data for distribution no later than the date it is first made
available for general shipment.
2.2 ISSUANCE AND ACCEPTANCE OF PURCHASE ORDERS. Tech Data may purchase and
XIONICS shall sell to Tech Data, Products as described below:
(a) Each Purchase Order may include whatever is necessary to
place a Purchase Order, such as billing and shipping
information, required delivery dates, delivery locations and
the purchase price or charges for Products, including discount
or adjustments for special marketing programs, but otherwise
shall use the terms and conditions of this Agreement, which
shall control the relationship between the parties.
(b) A Purchase Order shall be deemed accepted by XIONICS
unless XIONICS notifies Tech Data in writing within five (5)
days after receiving the Purchase Order that XIONICS does not
accept the Purchase Order.
(c) XIONICS shall accept Purchase Orders from Tech Data for
additional Products which Tech Data is contractually obligated
to furnish to its Customers and does not have in its inventory
upon the termination of this Agreement; provided Tech Data
notifies XIONICS of any and all such transactions in writing
within sixty (60) days after the termination date.
(d) This agreement shall not obligate Tech Data to purchase
any Products or services except as specifically set forth in a
written purchase order.
2.3 PURCHASE ORDER ALTERATIONS OR CANCELLATIONS. Up to twenty-four (24)
hours prior to shipment of Standard Products, XIONICS shall accept an
alteration or cancellation to a Purchase Order in order to: (i) change
a location for delivery, (ii) modify the quantity or type of Products
to be delivered or (iii) correct typographical or clerical errors.
TECH DATA ??? 3 XIONICS _____
<PAGE> 4
2.4 EVALUATION OR DEMONSTRATION PURCHASE ORDERS. Tech Data may issue
Purchase Orders in order to evaluate Products or for use as
Demonstration Products at no charge for sixty (60) days pursuant to
XIONICS' acceptance of the Purchase Order based on the number of units
requested. After evaluation or when such Products are no longer needed
for demonstration, Tech Data shall have the option to purchase the
Products or to return such Products to XIONICS at Tech Data's expense.
2.5 PRODUCT SHORTAGES. If for any reason XIONICS' production is not on
schedule, XIONICS agrees to allocate Product to Tech Data's orders
based upon a percentage equal to the same percentage as XIONICS' like
Customers purchasing like volume of same Products.
ARTICLE III. DELIVERY AND
-------------------------
ACCEPTANCE OF PRODUCTS
----------------------
3.1 SUBSIDIARIES. XIONICS understands and acknowledges that Tech Data may
obtain Products in accordance with this Agreement for the benefit of
subsidiaries of Tech Data. Upon prior written approval from XIONICS
subsidiaries of Tech Data shall be entitled to obtain Products directly
from XIONICS pursuant to this Agreement.
3.2 ACCEPTANCE OF PRODUCTS. Tech Data shall, within ten (10) days inspect
each shipment, accept each Product on the date (the "Acceptance Date")
when such Products and all necessary documentation are delivered to
Tech Data in accordance with the Purchase Order and the Product
specifications. Any Products not ordered or not otherwise in accordance
with the purchase order, such as mis-shipments, overshipments will be
returned to XIONICS at XIONICS' expense (including without limitation
costs of shipment or storage) and shall promptly refund to Tech Data
all monies paid in respect to such Products. Tech Data shall not be
required to accept partial shipment unless Tech Data agrees prior to
shipment, except in the case of Product Shortages with previous notice.
Tech Data shall have the ability to return for credit products which
have boxes that are or become damaged, unless such damage was caused by
Tech Data or for which damages Tech Data can be reimbursed by their
insurance carrier.. An offsetting purchase order will be placed for all
bad box returns. In addition, XIONICS will supply to Tech Data, at no
charge, any and all missing material(s).
3.3 DEFECTIVE PRODUCTS. In the event any Products are received in a
defective condition or not in accordance with XIONICS' published
specifications or the documentation relating to such Products, Tech
Data may return the Products for full credit. Products shall be deemed
defective if the Product, or any portion of the Product, fails to
operate properly on initial "burn in", boot, or use as applicable. Tech
Data shall have the right to return any such Products that are returned
to Tech Data from its Customers or End Users, with proof of shipment
from the Customer, within sixty (60) days of the Products' initial
delivery date to the end-user.
3.4 TRANSPORTATION OF PRODUCTS. XIONICS shall deliver the Products to Tech
Data warehouses, at the location shown and on the delivery date set
forth in the applicable Purchase Order or as otherwise agreed upon by
the parties. Charges for transportation of the Products shall be paid
by Tech Data. XIONICS shall use only those common carriers preapproved
by Tech Data or listed in Tech Data's published routing instructions,
unless prior written approval of Tech Data is received.
3.5 TITLE AND RISK OF LOSS. FOB Peabody, MA. Title to Products shall pass
to Tech Data at the time that the Products are delivered to the common
carrier. All risk of loss or damage to the Products shall be borne by
XIONICS until delivery of such Products to the common carrier.
TECH DATA ??? 4 XIONICS _____
<PAGE> 5
3.6 RESALE OF PRODUCTS BY TECH DATA. During the term of this Agreement,
Tech Data may market, promote, distribute and resell Products to
Customers of Tech Data, either directly or through its subsidiaries, in
accordance with the following terms and conditions:
(a) XIONICS shall extend to Tech Data and each Customer of
Tech Data the same warranties and indemnifications, with
respect to Products purchased and resold hereunder as XIONICS
extends to its end-user Customers. The term of warranties and
indemnities extended by XIONICS to an End User shall commence
upon delivery of the Product to the End User.
(b) XIONICS shall make available at no charge to Tech Data all
training, technical support and other services related to the
Products that are currently offered for free and are not for
the support of tool kit libraries or that may be offered by
XIONICS. XIONICS also agrees to provide Tech Data telephone
support at no charge during Tech Data's normal business hours.
(c) XIONICS shall provide at no charge to Tech Data and the
Customers of Tech Data, sales training, marketing support,
advertising materials and technical training in connection
with the resale of Products as are currently offered or that
may be offered by XIONICS. Tech Data reserves the right to
charge XIONICS for such services.
(d) Tech Data is hereby authorized to use trademarks and trade
names of XIONICS and third parties used in connection with the
Products, advertising, promoting or distributing the Products.
Tech Data recognizes XIONICS or other third parties may have
rights or ownership of certain trademarks, trade names and
patents associated with the Products. Tech Data will act
consistently with such rights, and Tech Data shall comply with
any reasonable, written guidelines when provided by XIONICS or
third parties relating to such trademark or trade name usage.
Tech Data will notify XIONICS of any infringement of which
Tech Data has actual knowledge. Tech Data shall discontinue
use of XIONICS" trademarks or trade names upon termination of
this agreement, except as may be needed to sell or liquidate
any final inventories of Product.
(e) XIONICS shall clearly mark each unit package with the
serial number, product description and machine readable bar
code (employing ISBN or other industry standard bar code).
3.7 INVENTORY ADJUSTMENT. Open ended inventory adjustment will be accepted
during the initial six (6) months of the Contract. Thereafter XIONICS
agrees to accept, on a calendar quarter basis, a shipment of unused
Product, not to exceed twenty percent (20%) of the previous quarters
purchases and that have been purchased within the previous twelve (12)
months, in sealed cartons returned by Tech Data and to credit Tech
Data's account in the amount of the net price paid by Tech Data
therefore (the "Return Credit"), provided that Tech Data places an
offsetting purchase order.
In addition, Tech Data shall have the right to return for full credit,
without limitation as to the dollar amount, all Products that become
obsolete or XIONICS discontinues or are removed from XIONICS' current
price list; provided Tech Data returns such Products within ninety (90)
days after Tech Data receives written notice that such Products are
obsolete, discontinued or are removed from XIONICS' price list and the
Products were purchased within the previous twelve (12) months.
3.8 TIME OF PERFORMANCE. Time is hereby expressly made of the essence with
respect to each and every term and provision of this agreement.
TECH DATA M 5 XIONICS _____
-
<PAGE> 6
3.9 QUALITY CONTROL. XIONICS shall test and inspect Products prior to
shipment. XIONICS' standard inspection records, and a report setting
forth product defect percentage rates are to be maintained by XIONICS
and made available to Tech Data upon request with reasonable notice or,
at the option of Tech Data, on a quarterly basis.
ARTICLE IV. WARRANTIES,
-----------------------
INDEMNITIES AND LIABILITIES
---------------------------
4.1 WARRANTY. XIONICS hereby represents and warrants that it has not
entered into any agreements or commitments which are inconsistent with
or in conflict with the rights granted to Tech Data herein; the
Products shall be free and clear of all liens and encumbrances; Tech
Data and its Customers and end-users shall be entitled to use the
Products without disturbance; the Products will be free from latent and
patent defects in design, materials, and workmanship for a period of
one (1) year from date of delivery to the end-user, not to exceed a
total of fifteen (15) months from the date of shipment to Tech Data;
the Products do and will conform to all applicable codes, laws or
regulations; and the Products conform in all respects to the Product
warranties. XIONICS shall supply Tech Data, at no additional charge,
all services, parts or replacement Products necessary for XIONICS to
comply with its Product warranties. XIONICS agrees that Tech Data shall
be entitled to pass through to Customers of Tech Data and End Users of
the Products all warranties granted by XIONICS. XIONICS represents that
the Product warranties shall also include those set forth in
literature, specifications, documentation, advertising and printed
material distributed by XIONICS.
HARDWARE WARRANTY. XIONICS warrants to Tech Data that XIONICS hardware
purchased from XIONICS shall be free from defects in materials and
workmanship, when given normal proper and intended usage, for fifteen
(15) months after shipment to Tech Data. XIONICS agrees during the
warranty period to repair all defective XIONICS hardware to proper
operating condition in accordance with XIONICS published specifications
for such XIONICS hardware. All defective parts must be returned
transportation prepaid, to XIONICS' offices in Peabody, MA. All
replaced parts become XIONICS' property on an exchange basis.
SOFTWARE WARRANTY. XIONICS warrants to Tech Data that the XlONICS
Software, when given normal, proper and intended usage for fifteen (15)
months after the date of shipment to Tech Data. XlONICS agrees during
the warranty period to use every reasonable effort to provide update,
patches, fixes or other solutions to cure any failure of the XlONICS
Software to perform substantially in accordance with such published
specifications and documentation.
REPAIR WARRANTY. XIONICS warrants its repair work replacement parts
and/or software fixes for a period of ninety (90) days after completion
of or for the original warranty period, whichever is greater.
THE FOREGOING WARRANTIES ARE IN LIEU OF ANY AND ALL REPRESENTATIONS AND
WARRANTIES, EXPRESS OR IMPLIED, INCLUDING ANY IMPLIED WARRANTY OF
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE. XIONICS OR ITS
LICENSORS SHALL NOT BE LIABLE FOR ANY SPECIAL, CONSEQUENTIAL OR
INCIDENTAL DAMAGES, INCLUDING BUT NOT LIMITED TO LOST DATA OR LOST
PROFITS, RESULTING FROM THE USE OF XIONICS PRODUCTS, OR CAUSED BY ANY
DEFECT, FAILURE OR MALFUNCTION WHETHER SUCH CLAIM OR SUCH DAMAGE IS
BASED UPON WARRANTY CONTRACT NEGLIGENCE OR OTHERWISE, EXCLUDING
LIABILITY FOR PERSONAL INJURY, PROPERTY DAMAGE OR INFRINGEMENT. UNDER
NO CIRCUMSTANCES SHALL XIONICS OR ITS LICENSOR BE LIABLE FOR AN AMOUNT
GREATER THAN PAYMENTS MADE TO XIONICS BY TECH DATA, EXCEPT FOR
LIABILITY FOR PERSONAL INJURY, PROPERTY DAMAGE OR INFRINGEMENT.
TECH DATA ??? 6 XIONICS _____
<PAGE> 7
4.2 PROPRIETARY RIGHTS INDEMNIFICATION. XIONICS hereby represents and
warrants that XIONICS has all right, title, ownership interest and/or
marketing rights necessary to provide the Products to Tech Data, and
Products and their sale and use hereunder do not infringe upon any
copyright, patent, trade secret or other proprietary or intellectual
property right of any third party, and that there are no suits or
proceeding, pending or threatened alleging any such infringement.
XlONICS shall indemnify and hold Tech Data, Tech Data's related and/or
subsidiary companies, Tech Data's Customers and End Users and their
respective successors, officers, directors, employees and agents
harmless from and against any and all actions, claims, losses, damages,
liabilities, awards, costs and expenses, including but not limited to
XIONICS' manufacture, sale, offering for sale, distribution, promotion
or advertising of the Products supplied under this Agreement (including
attorney's fees) which they or any of them incur or become obligated to
pay resulting from or arising out of any breach or claimed breach of
the foregoing warranty, or by reason of any acts that may be committed
suffered or permitted by XIONICS. XIONICS shall defend and settle, at
its expense, all suits or proceedings arising therefrom. Tech Data
shall inform XIONICS of any such suit or proceeding against Tech Data
and shall have the right to participate in the defense of any such suit
or proceeding at Tech Data's expense and through counsel of Tech Data's
choosing. In the event an injunction is sought or obtained against the
use of a Product or in XIONICS' opinion is likely to be sought or
obtained, XIONICS shall within ninety (90) days of receipt of notice,
at its option and expense, either (i) procure for Tech Data, its
Customers and Product End Users the right to continue to use the
infringing Product as set forth in this Agreement, or (ii) replace, to
the extent Products are available, or modify the infringing Product to
make its use non-infringing while being capable of performing the same
function without degradation of performance. XIONICS shall have no
liability under this Section for any infringement based on the use of
any equipment or software, if the equipment or software is used in a
manner or with equipment for which it was not reasonably intended, or
if the equipment or software is used in an infringing process. XIONICS'
obligations hereunder shall survive termination of this Agreement.
4.3 CROSS INDEMNIFICATION. In the event any act or omission of either party
or its employees, servants, agents or representatives causes or results
in (i) loss, damage to or destruction of property of the other party or
third parties, and/or (ii) death or injury to persons including, but
not limited to, employees or invitees of either party, then such party
shall indemnify, defend and hold the other party harmless from and
against any and all claims, actions, damages, demands, liabilities,
costs and expenses, including reasonable attorneys' fees and expenses,
resulting therefrom. The indemnifying party shall pay or reimburse the
other party promptly for all such loss, damage, destruction, death or
injury.
4.4 INSURANCE.
(a) The parties shall be responsible for providing Workman's
Compensation insurance in the statutory amounts required by the
applicable state laws.
(b) Without in any way limiting XIONICS' indemnification obligation as
set forth in this Agreement, XIONICS shall maintain Commercial General
Liability and/or Comprehensive General Liability Insurance in such
amounts as is reasonably satisfactory to Tech Data. Either policy form
should contain the following coverage's: Personal and Advertising
Injury, Broad Form Property Damage, Products and Completed Operations,
Contractual Liability, employees as Insured and Fire Legal Liability.
(c) XIONICS will provide evidence of the existence of insurance
coverage's referred to in this Section by certificates of insurance
which should also provide for at least thirty (30) days notice of
cancellation, non-renewal or material change of coverage to Tech Data.
The certificates of insurance shall name Tech Data Corporation as an
additional insured for the limited purpose of claims arising pursuant
to this Agreement.
TECH DATA ??? 7 XIONICS _____
<PAGE> 8
4.5 LIMITATION OF LIABILITY. NEITHER PARTY SHALL BE LIABLE TO THE OTHER
PURSUANT TO THIS AGREEMENT FOR AMOUNTS REPRESENTING LOSS OF PROFITS,
LOSS OF BUSINESS OR INDIRECT, CONSEQUENTIAL, OR PUNITIVE DAMAGES OF THE
OTHER PARTY.
4.6 UNAUTHORIZED REPRESENTATIONS. Tech Data shall have no authority to
alter or extend any of the warranties of XIONICS expressly contained or
referred to in this Agreement without prior approval of XIONICS.
4.7 DISCLAIMER OF WARRANTIES. XIONICS has made expressed warranties in this
Agreement and in documentation, promotional and advertising materials.
EXCEPT AS SET FORTH HEREIN OR THEREIN, XIONICS DISCLAIMS ALL WARRANTIES
WITH REGARD TO THE PRODUCTS.
ARTICLE V. PAYMENT TO XIONICS
-----------------------------
5.1 CHARGES. PRICES AND FEES FOR PRODUCTS. Charges, prices, quantities and
discounts, if any, for Products shall be determined as set forth in
Exhibit A, or as otherwise agreed upon by the parties, and may be
confirmed at the time or order. In no event shall charges exceed
XIONICS' then current established charges. XIONICS shall have the right
to increase prices from time to time, upon written notice to Tech Data
not less than thirty (30) days prior to the effective date of such
increase. All orders placed prior to the effective date of the
increase, for shipment within thirty (30) days after the effective
date, shall be at the old price. Tech Data shall not be bound by any of
XIONICS' suggested prices.
5.2 MOST FAVORED PRICING AND TERMS. XIONICS represents that the prices
charged and the terms offered to Tech Data are and will be at least as
low as those charged or offered by XIONICS to any of its other
distributors. If XIONICS offers price discounts, promotional discounts
or other special prices to its other distributors, Tech Data shall also
be entitled to participate and receive notice of the same no later than
other distributors.
5.3 PAYMENT. Except as otherwise set forth herein, any undisputed sum due
to XIONICS pursuant to this Agreement shall be payable as follows: 2%
prepay, 1%-20 net forty-five (45) days after the invoice date. XIONICS
shall invoice Tech Data no earlier than the applicable shipping date
for the Products covered by such invoice. The due date for payment
shall be extended during any time the parties have a bona fide dispute
concerning such payment. Notwithstanding anything herein to the
contrary, for the initial order only, payment terms shall be net ninety
(90) days and Tech Data may return any of the initial order for credit.
All prices referenced herein are exclusive of all taxes (other than
income or franchise taxes). Including without limitation any applicable
customs, privilege, excise, sales, use, value added or property taxes.
Tech Data will in all cases pay such taxes promptly when due or provide
to XIONICS a certificate of exemption from such taxes acceptable to the
appropriate taxing authority.
5.4 PRICE PROTECTION. XIONICS shall grant to Tech Data a retroactive price
credit for the full amount of any XIONICS price decrease on all
Products on order, in transit and in its inventory on the effective
date of such price decrease. Tech Data shall, within sixty (60) days
after receiving written notice of the effective date of the price
decrease, provide a list of all Products for which it claims a credit.
XIONICS shall have the right to a reasonable audit at XIONICS' expense.
All orders scheduled for shipment or in transit to Tech Data at the
time of notice of the price decrease shall be adjusted to the decreased
price.
TECH DATA ??? 8 XIONICS _____
<PAGE> 9
5.5 INVOICES. A "correct" invoice shall contain (i) XIONICS' name and
invoice date, (ii) a reference to the Purchase Order or other
authorizing document, (iii) separate descriptions, unit prices and
quantities of the Products actually delivered, (iv) credits (if
applicable), (v) shipping charges (vi) name (where applicable), title,
phone number and complete mailing address of responsible official to
whom payment is to be sent, and (vii) other substantiating
documentation or information as may reasonably be required by Tech Data
from time to time.
5.6 ADVERTISING CREDIT. XIONICS offers a 2.5% co-op program and may offer
additional advertising credits or other promotional programs or
incentives to Tech Data as it offers its other distributors, then Tech
Data shall have the right at Tech Data's option, to participate in such
programs. XIONICS shall attach a copy of its co-op program hereto.
5.7 XIONICS REPORTS. XIONICS shall, if requested, render monthly reports to
Tech Data setting forth the separate Products, dollars invoiced for
each Product, and total dollars invoiced to Tech Data for the month,
and such other information as Tech Data may reasonably request.
5.8 TECH DATA REPORTS. Tech Data shall, if requested, render monthly sales
out reports on diskette, in ASCII Comma Delimited Format. Information
provided will include: Month and year sales activity occurred, internal
product number (assigned by Tech Data), written description, State and
zip-code of Resellers location, unit cost (distributor's cost at
quantity 1), quantity and extended cost (cost times quantity). A
monthly inventory report, will be provided on a paper format once a
month. The reports will be delivered to XIONICS by the 15th of the
following month.
5.9 XIONICS agrees that for the term of this Agreement, upon request,
XIONICS shall provide financial statements annually and semi-annually
as follows:
a. Within one hundred and twenty (120) days alter the end of
XIONICS' fiscal year unaudited financial statements for the
fiscal year prepared by XIONICS' authorized representative.
b. Within sixty (60) days after the end of the XIONICS' second
fiscal year quarter, semi-annual unaudited financial
statements, prepared by XIONICS' authorized representative.
Such financial statements shall include profit and loss statement,
balance sheets and such other accounting data as may be requested by
Tech Data and be acknowledged by the XIONICS' authorized representative
in writing as true and correct.'
ARTICLE VI. TERMINATION
-----------------------
6.1 TERMINATION. Either party may terminate this agreement, with or without
cause, upon giving the other party sixty (60) days prior written
notice. In the event that either party materially or repeatedly
defaults in the performance of any of its duties or obligations set
forth in this Agreement, and such default is not substantially cured
within thirty (30) days after written notice is given to the defaulting
party specifying the default, then the party not in default may, by
giving written notice thereof to the defaulting party, terminate this
Agreement or the applicable Purchase Order relating to such default as
of the date specified in such notice of termination.
6.2 TERMINATION FOR INSOLVENCY OR BANKRUPTCY. Either party may immediately
terminate this Agreement and any Purchase Order by giving written
notice to the other party in the event of (i) the liquidation or
insolvency of the other party, (ii) the appointment of a receiver or
similar officer for the other party, (iii) an assignment by the other
party for the benefit of all or substantially all of
TECH DATA ??? 9 XIONICS _____
<PAGE> 10
its creditors, (iv) entry by the other party into an agreement for the
composition, extension, or readjustment of all or substantially all of
its obligations, or (v) the filing of a meritorious petition in
bankruptcy by or against the other party under-any bankruptcy or
debtors' law for its relief or reorganization, which is not discharged
within ninety (90) days.
6.3 RIGHTS UPON TERMINATION. Termination of any Purchase Order or this
Agreement shall not affect XIONICS' right to be paid for undisputed
invoices for Products already shipped. The termination of this
Agreement shall not affect any of XIONICS' warranties,
indemnifications or obligations relating to returns, credits or any
other matters set forth in this agreement that are to survive
termination in order to carry out their intended purpose, all of which
shall survive this Agreement. Upon termination of this Agreement, Tech
Data shall discontinue holding itself out as a distributor of XIONICS'
Products. The expiration of the term of this Agreement shall not affect
the obligations of either party to the other party pursuant to any
Purchase Order previously forwarded to XIONICS.
6.4 REPURCHASE OF PRODUCTS UPON TERMINATION. Upon the effective date of
termination of this Agreement for any reason, XIONICS agrees to
repurchase the Products in Tech Data's inventory, which have been
purchased within the previous twelve (12) months. XIONICS will
repurchase such Products at the original net purchase price; provided
that the Products have been unopened and are in their original factory
sealed packages. Tech Data shall submit to XIONICS, within sixty (60)
days after termination, the quantity of Product that Tech Data wishes
XIONICS to repurchase. In such event XIONICS shall issue a Return
Authorization to Tech Data for all such Products; provided, however,
that XIONICS shall accept returned Products in accordance with this
Section absent a Return Authorization if XIONICS fails to issue said
Return Authorization within five (5) working days of Tech Data's
request. XIONICS shall credit any outstanding balances owed to Tech
Data and remit in the form of a check to Tech Data the remaining dollar
amount of the Product returned within ten (10) days of receipt of the
Product. Special order or customized Products shall not be eligible for
repurchase pursuant to this section.
ARTICLE VII. MISCELLANEOUS
--------------------------
7.1 BINDING NATURE, ASSIGNMENT, AND SUBCONTRACTING. This Agreement shall be
binding on the parties and their respective successors and assigns, but
neither party shall have the power to assign this Agreement without the
prior written consent of the other party.
7.2 COUNTERPARTS. This Agreement may be executed in several counterparts,
all of which taken together shall constitute one single agreement
between the parties.
7.3 HEADINGS. The Article and Section headings used in this Agreement are
for reference and convenience only and shall not enter into the
interpretation hereof.
7.4 RELATIONSHIP OF PARTIES. Tech Data is performing pursuant to this
Agreement only as an independent contractor. Nothing set forth in this
Agreement shall be construed to create the relationship of principal
and agent between Tech Data and XIONICS. Neither party shall act or
represent itself, directly or by implication, as an agent of the other
party.
7.5 CONFIDENTIALITY. Each party acknowledges that in the course of
performance of its obligations pursuant to this Agreement, it may
obtain certain confidential and/or proprietary information. Each party
hereby agrees that all such information communicated to it by the other
party, its subsidiaries, or Customers, whether before or after the
effective date, shall be and was received
TECH DATA ??? 10 XIONICS _____
<PAGE> 11
in strict confidence, shall be used only for purposes of this
Agreement, and shall not be disclosed without the prior written consent
of the other party, except as may be necessary by reason of legal,
accounting or regulatory requirements beyond either party's reasonable
control. The provisions of this Section shall survive the term or
termination of this Agreement for any reason.
7.6 ARBITRATION. Any disputes arising under this Agreement shall be
submitted to arbitration in accordance with such rules as the parties
jointly agree. If the parties are unable to agree on arbitration
procedures, arbitration shall be conducted in Pinellas County, Florida
in accordance with the rules of the American Arbitration Association.
Any such award shall be final and binding upon both parties.
7.7 NOTICES. Wherever one party is required or permitted to give notice to
the other pursuant to this Agreement, such notice shall be deemed given
when delivered in hand, by telex or cable, or when mailed by registered
or certified mail, return receipt requested, postage prepaid, and
addressed as follows:
In the case of XlONCS: In the Case of Tech Data;
---------------------- -------------------------
Xionics Inc. Tech Data Corporation
Two Corporation Way 5350 Tech Data Drive
Peabody, MA 01960 Clearwater, Fl 34620
Attn: Ed Mallen Attn: Director of Marketing
Vice President Sales Operations
cc: Debi A. Schwatka
Contracts Administrator
Either party may from time to time change its address for notification
purposes by giving the other party written notice of the new address
and the date upon which it will become effective.
7.8 FORCE MAJEURE. The term "Force Majeure" shall be defined to include
fires or other casualties or accidents, acts of God, severe weather
conditions, strikes or labor disputes, war or other violence, or any
law, order, proclamation, regulation, ordinance, demand or requirement
of any governmental agency.
(a) A party whose performance is prevented, restricted or
interfered with by reason of a Force Majeure condition shall be
excused from such performance to the extent of such Force
Majeure condition so long as such party provides the other
party with prompt written notice describing the Force Majeure
condition immediately continues performance whenever and to the
extent such causes are removed.
(b) If, due to a Force Majeure condition, the scheduled time of
delivery or performance is or will be delayed for more than
ninety (90) days after the scheduled date, the party not
relying upon the Force Majeure condition may terminate, without
liability to the other party, any Purchase Order or portion
thereof covering the delayed Products.
7.9 RETURN MATERIAL AUTHORIZATION NUMBERS. In the event XIONICS is required
to issue a Return Material Authorization Number (RMA) to Tech Data
within forty-eight (48) hours of Tech Data's request; if for some
reason XIONICS cannot issue said RMA, XIONICS will provide detailed
information they require and the forty-eight (48) hours will begin from
the time Tech Data provides its' response; however, if the Return
Material Authorization is not received within forty-eight (48) hours,
XIONICS shall accept returned Products absent a Return Material
Authorization Number. The net purchase price, minus any adjustments of
such Products returned to XIONICS shall be credited to Tech Data's
account.
TECH DATA ??? 11 XIONICS _____
<PAGE> 12
7.10 CREDITS TO TECH DATA. In the event any provisions of this Agreement or
any other agreement between Tech Data and XIONICS require that XIONICS
grant credits to Tech Data's account, and 'such credits are not
received within thirty (30) days then, all such credits shall become
effective immediately upon notice to XIONICS. In such event, Tech Data
shall be entitled to deduct any such credits from the next monies owed
to XIONICS. In the event credits exceed any balances owed by Tech Data
to XIONICS, then XIONICS shall issue a check payable to Tech Data
within ten (10) days of such notice.
7.11 SEVERABILITY. If, but only to the extent that, any provision of this
Agreement is declared or found to be illegal, unenforceable or void,
then both parties shall be relieved of all obligations arising under
such provision, it being the intent and agreement of the parties that
this Agreement shall be deemed amended by modifying such provision, to
the extent necessary to make it legal and enforceable while preserving
its intent.
7.12 WAIVER. A waiver by either of the parties of any covenants, conditions
or agreements to be performed by the other or any breach thereof shall
not be construed to be a waiver of any succeeding breach thereof or of
any other covenant, condition or agreement herein contained.
7.13 REMEDIES. All remedies set forth in this Agreement shall be cumulative
and in addition to and not in lieu of any other remedies available to
either party at law, in equity or otherwise, and may be enforced
concurrently or from time to time.
7.14 SURVIVAL OF TERMS. Termination or expiration of this Agreement for any
reason shall not release either party from any liabilities or
obligations set forth in this Agreement which (i) the parties have
expressly agreed shall survive any such termination or expiration, or
(ii) remain to be performed or by their nature would be intended to be
applicable following any such termination or expiration.
7.15 NONEXCLUSIVE MARKET AND PURCHASE RIGHTS. It is expressly understood and
agreed that this Agreement does not grant to XIONICS or Tech Data an
exclusive right to purchase or sell Products and shall not prevent
either party from developing or acquiring other Vendors or Customers or
competing Products.
7.16 SPECIFICATIONS AND DRAWING. XIONICS agrees to provide upon Tech Data's
request, at no charge to Tech Data, quantities as requested by Tech
Data of the following: (1) the specifications, (2) published user
instructions, manuals and other training materials, and (3) current
manuals covering installation, operation and complete maintenance of
the Products. Tech Data shall have the right to copy or reproduce the
foregoing materials for use in connection with Tech Data's use or sale
of the Products.
7.17 ENTIRE AGREEMENT. This Agreement, including any Exhibits and documents
referred to in this Agreement or attached hereto, constitutes the
entire and exclusive statement of Agreement between the parties with
respect to its subject matter and there are no oral or written
representations, understandings or agreements relating to this
Agreement which are not fully expressed herein.
7.18 GOVERNING LAW. This Agreement shall have Florida as its situs and shall
be governed by and construed in accordance with the laws of the State
of Florida.
7.19 SOFTWARE LICENSES. Whenever the Products described in this Agreement
shall include software licenses, XIONICS hereby grants to Tech Data a
nonexclusive license to market, demonstrate and distribute the software
to Customers of Tech Data. Tech Data agrees to comply with XIONICS'
software license agreements, and agrees to use reasonable efforts to
protect XIONICS' software, including using reasonable efforts to avoid
allowing Customers, individuals,
TECH DATA ??? 12 XIONICS _____
<PAGE> 13
or employees to make any unauthorized copies of XIONICS' licensed
software; to modify, disassemble or decompile any software; to remove,
obscure or alter any notice of patent, trademark, copyright or trade
name; or authorize any person to do anything that Tech Data is
prohibited from doing under this Agreement. Provided, however, XIONICS
shall provide Tech Data with copies of appropriate software and
documentation, at no charge, for the purpose of effectively
demonstrating equipment to Customers. This demonstration software shall
be updated as appropriate to insure that current software is available
for sales demonstration. Tech Data acknowledges that no title or
ownership of the proprietary rights to any software is transferred by
virtue of this Agreement. Tech Data will use reasonable efforts to
protect XIONICS' rights under this section but Tech Data is not
authorized and shall not be required to instigate legal action on
behalf of XIONICS or its suppliers against third parties for
infringement. Tech Data will notify XIONICS of any infringement of
which it has actual knowledge.
7.20 INTERNATIONAL BUSINESS. XIONICS acknowledges that Tech Data may desire
to obtain Products or Systems for use in countries outside the United
States and its territories. The parties acknowledge that in such case
it may be necessary to enter into additional agreements between XlONICS
and Tech Data and/or the respective subsidiaries, agents, distributors
or subsidiaries authorized to conduct business in such countries or to
negotiate further terms and conditions to provide for such right. The
parties intend that any further agreements or terms and conditions will
be consistent with and based upon the applicable terms and conditions
of this Agreement, subject, however, to requirements of local law and
local business practice. All Products obtained pursuant to this Section
shall be deemed for purposes of calculating accumulated purchases and
any discounts set forth in this Agreement, to have been obtained
pursuant to this Agreement. However, in no way should this obligate
XIONICS to enter into a distribution agreement for other countries.
IN WITNESS WHEREOF, the parties have each caused this Agreement to be
signed and delivered by its duly authorized officer or representative as of the
Effective Date.
XIONICS, INC. TECH DATA CORPORATION
By: /s/ Ed Mallen By: /s/ Peggy K. Caldwell
----------------------- ---------------------------------
Printed Name: Ed Mallen Printed Name: PEGGY K. CALDWELL
Title: Vice President Title: Senior Vice President
Marketing
Date: June 7, 1994 Date: July 1, 1994
TECH DATA ??? 13 XIONICS _____
<PAGE> 14
CO-OP OUTLINE
XIONICS, INC.
To increase the effectiveness of advertising and sales promotions Tech Data has
developed the following advertising requirements:
HOW CO-OP IS EARNED:
- - Co-op dollars will be 2.5% or greater based on mutual agreement of the
purchases made by Tech Data, net of returns.
- - Co-op dollars will be accrued on a monthly basis.
HOW CO-OP IS SPENT:
- - Tech Data will be reimbursed for 100% of the cost for ads or promotions that
feature vendor products. - Co-op dollars will be used within the 6 months
immediately following the month in which they are earned, and may be extended
upon mutual agreement.
HOW CO-OP IS CLAIMED:
- - Claims for co-op will be submitted to vendor within 60 days of the event date.
- - Claims for co-op will be submitted with a copy of vendor prior approval and
proof of performance.
- - Payment must be remitted within 30 days of the claim date, or Tech Data
reserves the right to deduct from the next invoice.
CO-OP REPORTING:
- - Vendor will submit a monthly co-op statement outlining (i) co-op earned, (ii)
co-op used and (iii) co-op claims paid.
Accepted:
/s/ Edward Mallen
- -----------------------------
Name: Edward Mallen
Title: Vice President
Date: June 7, 1994
TECH DATA ??? 14 XIONICS _____
<PAGE> 15
[LOGO] TECH DATA[registered trademark]
- --------------------------------------------------------------------------------
C O R P O R A T I O N 5350 Tech Data Drive
Clearwater, Florida 34620
(813) 539-7429
July 25, 1994
Mr. Ed Mallen
Vice President Sales
Xionics, Inc.
Two Corporation Way
Peabody, MA 01960
Dear Ed:
Enclosed please find a fully executed copy of the Distributor Contract between
Tech Data Corporation and Xionics, Inc. for your files.
Should you have any questions or if I can be of assistance, please do not
hesitate to contact me.
We look forward to working with yourself and Xionics, Inc..
Sincerely,
/s/ Debi A. Schwatka
- -----------------------
Debi A. Schwatka
Contracts Administrator
enclosure
<PAGE> 1
EXHIBIT 10.19
DISTRIBUTION AGREEMENT
THIS AGREEMENT ("Agreement") is made and entered into this 22nd day of November,
1991 by and between Law Cypress Distributing (hereinafter "Distributor") and
Xionics Inc., a Delaware corporation (hereinafter "Vendor").
RECITALS
Vendor manufactures, produces and/or supplies microcomputer products, and
desires to grant to Distributor the right to sell and distribute the products,
as hereinafter defined, upon the terms and conditions set forth below.
Distributor is engaged in the sale and distribution of microcomputer products
and desires to have the right to sell and distribute Vendor's products upon said
terms and conditions.
In consideration of the mutual covenants and agreements set forth below, the
parties hereto agree as follows:
1. RECITALS. The recitals stated above are incorporated herein by
reference.
2. Grant of Distribution Rights.
2.1 Vendor hereby grants to Distributor, and Distributor accepts,
the nonexclusive right to distribute in the United States all
computer products listed on Exhibit A attached hereto
(hereinafter "Product" or "Products") and made a part hereof,
as amended from time to time by mutual written agreement.
2.2 Vendor agrees to make available and to sell to Distributor
such Product as Distributor shall order from Vendor at the
prices and subject to the terms set forth in this Agreement.
Vendor reserves the right at any time to change, modify or
discontinue any Product, model, type or design furnished
hereunder. In addition, Vendor reserves the right to change
its published Dealer Quantity One Price for any Product at any
time.
2.3 Vendor may appoint other distributors to distribute its
Products.
3. TERM. The term of this Agreement shall be for a period of one (1)
year, beginning on the date first above written. Thereafter, the
Agreement shall be renewed for successive terms of one (1) year
without further notice unless terminated sooner as provided under the
provisions of the Agreement.
4. OBLIGATION OF VENDOR.
4.1 Vendor shall use its best efforts to ship Product promptly
after receipt of Distributor's written Purchase Order for
Product, unless otherwise directed by Distributor, provided
that the Purchase Order is within the forecast provided as per
Section 5.3 of this Agreement and provided Purchase Order is
compatible with the criteria described in Section 5. 1 of this
Agreement.
4.2 At the time of initial order and from time to time Vendor
shall provide at no charge a reasonable amount of sales
literature, which amount shall be solely determined by Vendor.
DISTRIBUTION AGREEMENT (LAW CYPRESS DISTRIBUTING 11/20/91) PAGE 1
<PAGE> 2
4.3 For each Product shipment to Distributor, Vendor shall issue
to Distributor an invoice showing Distributor's Purchase Order
number and Product part number, description, price and any
discount. At Distributor's request, Vendor shall provide
Distributor with a current statement of account, listing all
invoices outstanding and any payments made and credits given
since the date of the previous statement, if any.
5. OBLIGATIONS OF DISTRIBUTOR.
5.1 Distributor shall submit written Purchase Orders (which may be
transmitted via facsimile) for all Products purchased under
this Agreement fifteen (15) days prior to the earliest
shipping date requested on that Purchase Order. Purchase
Orders must specify Product model numbers, quantity ordered,
shipping destination(s), shipping date(s) and preferred
carrier (if any). All such Purchase Orders are subject to the
terms and conditions set forth in this Agreement and in the
attached Exhibit A. Any terms or conditions which add to or
differ from the terms and conditions of this Agreement shall
be invalid. Distributor agrees, subject to Vendors ability to
supply Product(s), that Distributor will carry a sufficient
inventory of Product(s) to provide immediate "off-the-shelf"
delivery to Distributor's Customers, and that, upon request,
Distributor will make available to Vendor its current Product
inventory status.
5.2 Distributor will handle all Product returns from its Customers
and batch them for return to Vendor at regular intervals.
5.3 Distributor agrees to provide to Vendor at a fixed date each
month an inventory by Product by location and a non-binding
90-day forecast of purchases of Product.
5.4 Distributor agrees to consistently devote its best efforts to
market, sell, promote and otherwise encourage the purchase of
Products by Customers. Distributor shall factually present
Products in terms of function and performance, and conduct its
business in a manner reflecting favorably upon Vendor's
valuable good will and reputation. Distributor further agrees
to display, demonstrate and market Products prominently and
favorably in comparison with other competitive products.
5.5 Distributor represents that it selects its Customers on the
basis of their ability to promote, demonstrate, market, sell
and support Product(s) they carry on a "face-to-face" basis to
what would in most cases be end users. Distributor will use
its best efforts to ensure that its Customers meet these
criteria on a continuing basis in accordance with
Distributor's standard agreements and business practices.
5.6 Distributor will maintain sufficient facilities, personnel and
demonstration units of Products so as to be able to
effectively demonstrate Products. Distributor agrees to
maintain Customer training expertise and adequate personnel
and premises to facilitate such training. Distributor agrees
to provide technical assistance on an ongoing basis to its
Customers. Distributor agrees to make its best efforts to have
one or more demonstration systems which include Vendor's
Products in Distributor's principal office and in each of its
regional offices. Distributor will make its facilities
available for Product training and support, with the
assistance of Vendor.
5.7 Distributor will list Product in one or more of its catalogs,
price books and/or price lists. Distributor further agrees to
supply Vendor with its catalogs, price books and/or price
lists upon each publication free of charge.
5.8 Distributor will advertise and/or promote Products in a
commercially reasonable manner and will transmit Product
information and promotional materials to its customers.
DISTRIBUTION AGREEMENT (LAW CYPRESS DISTRIBUTING 11/20/91) PAGE 2
<PAGE> 3
5.9 Distributor and Vendor will at the beginning of each quarter
meet at a mutually agreeable time and location to discuss
Distributor's efforts to market Vendor's Products during that
quarter. Distributor further commits to provide to Vendor no
less than ten (10) days prior to this meeting written
marketing plans and corresponding budget information regarding
marketing activities planned by Distributor. Such plans will
contain sufficient detail to convey to Vendor how Distributor
intends to increase sales of Vendor's Products to new and
existing customers.
5.10 Distributor will track and maintain records of each lead
Vendor has provided to Distributor. Such records shall include
the name(s) of Vendor personnel to whom the lead was assigned
to contact the prospect, and a description of the current
status of each lead. Distributor shall provide to Vendor a
report containing this information monthly. Distributor shall
provide the status of individual leads to Vendor upon demand.
In the case of leads provided by Vendor and not otherwise
available to Distributor, Distributor agrees not to promote in
any way other manufacturers' products that directly compete
with Vendor's Products.
5.11 Distributor agrees to provide to Vendor sell-through data,
including customer name, address and telephone number; Product
type and serial number; and responsible salesperson's name for
each Product within 10 days of the end of each month.
5.12 Distributor will provide to Vendor within thirty (30) days of
the effective date of this Agreement, and from time to time
thereafter, a complete list of the personnel comprising
Distributor's sales force, both at its main office and at each
regional office. Distributor shall update this list within
thirty (30) days each time there is a change in the number or
location of sales offices or sales personnel. Each such list
shall include the name, office address and office telephone
number of each member of the sales force. Vendor shall have
the right periodically to convey pertinent sales and product
information directly, or by supplying materials to Distributor
for distribution, to the entire sales force of Distributor.
6. PRICE AND TERMS.
6.1 The net prices (excluding taxes, duties, freight charges and
insurance) for Products sold by Vendor to Distributor shall be
Vendor's Dealer Quantity One Price appearing in Vendor's
published Dealer Price List in effect on the date Vendor
receives Distributor's Purchase Order, less the discount(s)
established for such Product(s) in Exhibit A of this
Agreement. Vendor may change the Dealer Quantity One Price of
any or all of its Products at any time; however, Vendor shall
immediately notify Distributor in writing of any such change.
6.2 In the event that Vendor increases its published Dealer
Quantity One Price for any Product which Distributor is
authorized to resell, only Purchase Orders previously accepted
by Vendor or Purchase Orders received within thirty (30) days
after the date of the price increase for shipment within
forty-five (45) days after the date of the price increase will
be accepted at the lower price. All other Purchase Orders will
be subject to the price increase.
6.3 In the event that Vendor decreases its published Dealer
Quantity One Price for any Product which Distributor is
authorized to resell, Vendor will apply "Price Protection" to
any Purchase Order in process, and to any Product which is in
Distributor's inventory at the time of the price decrease,
with the following restrictions:
(i) Product(s) in Distributor's inventory must have been
purchased directly from Vendor;
DISTRIBUTION AGREEMENT (LAW CYPRESS DISTRIBUTING 11/20/91) PAGE 3
<PAGE> 4
(II) Distributor must present a written request for credit
within thirty (30) days of the price decrease,
including the serial numbers of the inventoried
Product(s) affected; and
(iii) Distributor must be current in its account with
Vendor, and current in providing sell-through data and
inventory information at the time Price Protection is
requested. Vendor reserves the right, at its option,
to verify Price Protection claims and audit inventory
at Distributor's site(s).
(iv) Once Vendor approves Price Protection, Distributor
must submit a Purchase Order for Products with a
dollar value equal to or greater than the price
protection credit total. Under no circumstances will
Vendor credit Distributor's account with a refund.
7. SHIPPING. Vendor shall ship Product only pursuant to Purchase Orders
received by Vendor. Product shall be shipped F.O.B. Vendor's
warehouse, with risk of loss or damage as set forth in Standard Terms
and Conditions, Exhibit B, Section 8, attached hereto. Further,
Vendor's standard shipping and handling charges, as set forth in
Standard Terms and Conditions, Exhibit B, Section 9, attached hereto
and amended from time to time, shall apply to all Purchase Orders.
8. CANCELLATIONS. Distributor may, without charge, cancel any Products on
order, provided that Vendor receives written confirmation of such
cancellation at least fifteen (15) days prior to the original
scheduled shipment date. Orders already shipped, and orders placed for
Products with an estimated shipment date of less than fifteen (15)
days from the date of the initial order, shall be considered firm and
non-cancellable.
9. PROMOTIONAL ACTIVITIES.
9.1 Distributor may advertise and promote Product ("Promotional
Activities") in a commercially reasonable manner and may use
Vendor's trademarks, service marks and trade names in
connection therewith; provided that Distributor shall submit
the advertisement or promotion to Vendor for review and
approval prior to the occurrence of the promotion, which
approval shall not be unreasonably withheld or delayed. Vendor
retains all rights, title and interest in its trade marks, and
all use by Distributor of such trade marks inures to Vendors
benefit.
9.2 Vendor agrees to cooperate with Distributor in Promotional
Activities and hereby grants Distributor a Cooperative
Promotion Allowance ("CPA"). Vendor shall accrue the CPA at a
rate of three percent (3%) of invoice amounts for Product
purchased from Vendor and paid by Distributor, excluding
shipping, handling, taxes and the like, and adjusted for
credits.
9.3 Distributor shall use the CPA for Promotional Activities such
as, but not limited to, seminars, print advertising and direct
mail, which prominently and positively feature Products. Use
of the CPA for Promotional Activities shall be limited to
Distributor's direct out-of-pocket costs, and must be agreed
to in advance in writing by the CEO or Vice President of
Marketing of Xionics Inc., which authorization shall not be
unreasonably denied or delayed. Upon receipt of reasonable
evidence of such expenditures, Vendor will debit the full
amount of qualifying expenditures from the CPA accrued to date
by Distributor, and Vendor will credit the same amount against
future purchases of Product or sales materials from Vendor. In
no event will credit issued by Vendor exceed the CPA amount
accrued to date by Distributor.
DISTRIBUTION AGREEMENT (LAW CYPRESS DISTRIBUTING 11/20/91) PAGE 4
<PAGE> 5
9.4 Vendor shall not be obligated to approve use by Distributor of
CPA for any Promotional Activities to which fewer than three
(3) companies, including Vendor and excluding Distributor,
significantly contribute. Nor shall Vendor be obligated to
approve Distributor use of CPA for any Promotional Activities
in which products that compete with Vendor's Products are
included.
9.5 CPA credits must be used within six (6) months of accrual or
be lost by Distributor. Upon termination of this Agreement for
any reason, all remaining accrued CPA amounts shall revert to
Vendor.
10. STOCK BALANCE.
10.1 Distributor may return Products which Distributor has
previously taken delivery of subject to acceptance by Vendor
of a Stock Balance report which sets forth Product nominated
for return, and provided that inventory is returned to Vendor
freight prepaid within ten (10) days of Vendor's written
acceptance of the Stock Balance Report.
10.2 The following Stock Balance reporting dates and corresponding
reporting periods must be observed.
Report Due: Period When Product Nominated For Return
Was Invoiced:
March 31 October 1 - December 31
June 30 January 1 - March 31
September 30 April 1 - June 30
December 31 July 1 - September 30
10.3 Products must have been purchased directly from Vendor and
must be in restockable and saleable condition, including their
original Vendor packaging.
10.4 Distributor will be credited for any amounts previously paid
by Distributor for Products thus returned, less any CPA
utilized or Price Protection or other credits previously
received for such Product.
10.5 Credit received for Stock Balance may only be applied by
Distributor against a corresponding Purchase Order for
immediate delivery of equal or greater value than the credit.
10.6 The total value of such returns may not exceed ten percent
(10%) of the total value of Products purchased during the
prior six (6) months.
11. DISCONTINUED PRODUCT. Distributor may return to Vendor Products in
inventory which Vendor notifies Distributor that Vendor intends to
remove or has removed from its published Dealer Price List
(collectively "Discontinued Products") subject to the following:
11.1 Distributor must return Discontinued Products freight prepaid
to Vendor within fifteen (15) days after the earlier of: (i)
the date on which Vendor notified Distributor that such
Products have been removed from Vendor's published Dealer
Price List; or (if) the date on which Vendor notified
Distributor that Vendor intends to remove such Products from
Vendor's published Dealer Price List.
11.2 Discontinued Products must have been purchased directly from
Vendor and be in restockable and saleable condition, including
their original Vendor packaging.
DISTRIBUTION AGREEMENT (LAW CYPRESS DISTRIBUTING 11/20/91) PAGE 5
<PAGE> 6
11.3 Distributor will be credited for any amounts previously paid
by Distributor for Discontinued Products thus returned, less
any CPA utilized or Price Protection or other credits
previously received for such Product.
11.4 Credit received for Discontinued Products may only be applied
by Distributor against a corresponding Purchase Order for
immediate delivery of equal or greater value than the credit.
11.5 The total value of such returns may not exceed twenty percent
(20%) of the total value of Products purchased during the
prior three (3) months.
12. PRODUCT WARRANTIES. Vendor warrants its Products as set forth in
Standard Terms and Conditions, Exhibits B, Section 5 attached hereto.
Vendor has no obligation to provide loaner Products to Distributor
while any Product is being repaired, either under warranty or out of
warranty. Distributor may provide its customers with loaners; however,
it shall do so entirely at its own expense. Vendor shall use its best
efforts to repair and return Product within forty-five (45) days of
receipt.
13. INDEMNITY.
13.1 Vendor shall defend, indemnify, and hold Distributor harmless
from and against any claims, demands, liabilities or expenses
(including attorney's fees and costs) for any injury or
damage, including, but not limited to, any personal or bodily
injury or property damage, arising out of or resulting in any
way from any defect in Products. This duty to indemnify
Distributor shall be in addition to the warranty obligations
of Vendor.
13.2 Vendor shall indemnify and hold Distributor harmless from and
against all damages and costs incurred by Distributor arising
from the infringement of any U.S. or Canadian patents,
copyrights or trademarks as set forth in Standard Terms and
Conditions, Exhibit B, Section 6 attached hereto.
13.3 In any event of indemnification, Distributor will give prompt
notice of any claim to Vendor. Vendor will have sole authority
to defend and settle claims. Distributor will cooperate fully
with Vendor in helping it defend itself against such claim,
provided Vendor reimburses Distributor for any reasonable
expenses associated with such cooperation.
14. REPRESENTATIONS AND WARRANTIES. Vendor warrants and represents that
Products or their use do not infringe upon any patents, copyright or
trademarks of others, and that there are not any suits or proceedings
pending or threatened which allege that any Product or the use thereof
infringes upon such patents, copyrights or trademarks. Vendor further
warrants and represents that sales to Distributor of Product at the
listed prices and/or discounts do not in any way constitute violations
of federal, state or local laws ordinances, rules or regulations,
including any anti-trust laws or trade regulations.
15. TERMINATION.
15.1 Either party may terminate this Agreement, with or without
cause, by giving thirty (30) days written notice to the other
party. Both parties have considered the making of expenditures
in preparing for performance under this Agreement, and losses
possibly resulting to each in the event of its termination. As
a result, neither party shall be responsible to the other for
damages or otherwise by reason of such termination of this
Agreement, except as explicitly provided for elsewhere in this
Agreement.
15.2 In the event that Vendor terminates this Agreement without
cause, Vendor agrees to buy Distributor's inventory of
Products subject to the following:
DISTRIBUTION AGREEMENT (LAW CYPRESS DISTRIBUTING 11/20/91) PAGE 6
<PAGE> 7
(i) Products must have been purchased directly from Vendor
and be in restockable and saleable condition,
including their original Vendor packaging.
(ii) Vendor will not be obligated to buy back any
Discontinued Product or any other Product received by
Distributor as a result of a Purchase Order issued
after the date on which Distributor was notified of
termination of this Agreement.
(iii) Distributor must return eligible Products freight
prepaid on or before the date on which termination
becomes effective.
(iv) Distributor most document, by providing with a copy o!
Vendor Invoice, the price paid for each returned
Product by serial number.
(v) Provided that the provisions of this Section 15.2 have
been observed, and provided that Distributor is
current in its account and with regard to providing
inventory and sell-through data, Vendor shall
calculate the total amount to owed to Distributor for
returned Product. Vendor shall then apply such amounts
as a credit against any outstanding invoices not yet
paid by Distributor. Vendor shall then refund the
balance to Distributor in equal parts on or before the
30th, 60th and 90th day after which Vendor received
the returned Products.
15.3 In the event Distributor materially breaches this Agreement or
its obligations herein (e.g., including, without limitation,
becomes delinquent in payment of its obligations,
misrepresents Vendor's Products, fails to adequately support
Vendor's Products, conducts its business in a fashion that
damages Vendor's valuable good will and reputation, breaches
the Confidential Information Agreement executed herewith) and
such breach continues for twenty-one (21) days after written
notice to Distributor, then Distributor agrees that Vendor may
terminate this Agreement with cause.
15.4 This Agreement shall immediately terminate if either party
ceases conducting business in the normal course, becomes
insolvent, makes a general assignment for the benefit of
creditors, suffers or permits the appointment of a receiver
for its business or assets, or avails itself of or becomes
subject to any proceeding under the Federal Bankruptcy Act or
any other federal or state statute relating to insolvency or
the protection of rights of creditors.
15.5 Vendor may immediately terminate this Agreement with cause if
Distributor is delinquent by more than ten (10) days beyond
the approved credit terms applicable to any invoice.
15.6 Upon termination with or without cause, Distributor must
permit Vendor, at Vendor's sole option, to purchase all
inventory of Product which Distributor has purchased and not
yet sold. Such purchase shall be at Distributor's invoiced
cost for such Product, less any CPA or other credits.
15.7 Distributor warrants that on or before the effective date of
termination of this Agreement all identifying signs,
literature, logos or other evidence linking Distributor and
Vendor shall be returned to Vendor or destroyed.
15.8 The rights and remedies provided to the parties in this
Section 15 shall not be exclusive and are in addition to any
other rights and remedies provided by this Agreement or by law
or in equity.
15.9 Distributor may terminate this Agreement if Vendor materially
breaches its obligations herein and such breach continues for
twenty-one (21) days after written notice of such breach to
Vendor.
16. OTHER PROVISIONS.
16.1 Construction. This Agreement shall be construed and enforced
in accordance with the laws of the State of Massachusetts.
DISTRIBUTION AGREEMENT (LAW CYPRESS DISTRIBUTING 11/20/91) PAGE 7
<PAGE> 8
16.2 Notices. All notices, requests, demands and other
communications called for or contemplated hereunder shall be
in writing and shall be deemed to have been duly given when
delivered or two (2) days after mailing by U.S. certified or
registered first-class mail, prepaid and addressed to the
parties at the addresses set forth at the end of this
Agreement or at such other addresses as the parties may
designate by written notice.
16.3 Attorney's Fees. In the event suit is commenced to enforce
this Agreement or otherwise relating to this Agreement, the
prevailing party shall be entitled to reasonable attorney's
fees and costs incurred in connection therewith.
16.4 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but
all of which together shall constitute one and the same
instrument. However, this Agreement shall be of no force or
effect until executed by both parties.
16.5 Confidential Information. Neither party shall disclose to the
other any information regarded as confidential information by
the disclosing party or any third party. Any confidential
disclosures shall be exclusively governed by a separate
agreement. Notwithstanding the foregoing, any information
revealed to Distributor regarding Vendors unreleased Product
shall be considered confidential until such time as Vendor
releases Product or releases information to the general
marketplace.
16.6 No lmplied Waivers. The failure of either party at any time to
require performance by the other party of any provision hereof
shall not affect in any way the full rights to require such
performance at any time thereafter. The waiver by either party
of a breach of any provision hereof shall not be taken,
construed or held to be a waiver of the provision itself or a
waiver of any breach thereafter or any other provision hereof.
16.7 Captions and Section Headings. Captions and section headings
used herein are for convenience only, are not a part of this
agreement, and shall not be used in construing it.
16.8 Covenant of Further Cooperation. Each of the parties agrees to
execute and deliver such further documents and to cooperate in
such a manner as may be necessary to implement and give effect
to the agreements contained herein.
16.9 Binding on Heirs, Successors and Permitted Assigns. This
Agreement shall be binding upon and shall inure to the benefit
of each party, its successors and assigns. The permitted
assigns shall be a parent company, wholly-owned subsidiary or
any entity that merges with or acquires all of the assets or
stock of the party.
16.10 Severability. A judicial determination that any provision of
this Agreement is invalid in whole or in part shall not affect
the enforceability of those provisions found to be valid.
16.11 Entire Agreement. This Agreement constitutes the entire
agreement between the parties hereto pertaining to the subject
matter hereof, superseding any and all previous proposals,
representation or statements, oral or written. Any previous
agreements between the parties pertaining to the subject
matter of this Agreement are hereby expressed, canceled and
terminated. The terms of the Agreement shall supersede the
terms of any invoice or Purchase Order issued by either party.
Any modifications of this Agreement must be in writing and
signed by authorized representatives of both parties hereto.
DISTRIBUTION AGREEMENT (LAW CYPRESS DISTRIBUTING 11/20/91) PAGE 8
<PAGE> 9
16. ARBITRATION. All disputes, questions, controversies, claims or damages
arising between the parties hereto, or in relation to, or in
connection with this Agreement, or for breach thereof shall finally be
settled by arbitration pursuant to the rules of the American
Arbitration Association by which each party hereto is bound. Judgment
upon the award of the arbitrators may be entered in any court having
jurisdiction thereof. Such arbitration shall be held solely in Boston,
Massachusetts, U.S.A.
17. LIMITATION OF LIABILITY. The standard warranty constitutes the sole
and exclusive remedy against Vendor for the furnishing of
nonconforming or defective goods and infringing goods. In no event,
including if the goods are nonconforming, defective, infringing,
delayed or not delivered, shall Vendor be liable for any special,
contingent, incidental, indirect or consequential damages, even if
Vendor has been advised of the possibility of such damage, whether
under a contract, tort, property or other legal theory. Such damages
for which Vendor is not responsible, include but are not limited to,
anticipated profits, labor expended, delays, loss of use and good
will.
18. PARTIES EXECUTING. The parties executing this Agreement warrant that
they have the requisite authority to do so.
IN WITNESS WHEREOF, the parties hereunto have executed this Agreement.
DISTRIBUTOR: VENDOR:
LAW CYPRESS DISTRIBUTING CO.* Xionics Inc.
- ---------------------------------- Two Corporation Way
Peabody, MA 01960
560 LINCOLN AVE.
- ----------------------------------
SAN JOSE, CA, 95126
- ----------------------------------
By: /s/ David E. Law By: /s/ Brian R. Bissett
------------------------------- -------------------------------------
Name: David E. Law Name: Brian R. Bissett
---------------------------- ----------------------------------
Title: President/CEO Title: Director of Marketing
--------------------------- ---------------------------------
Date: November 22, 1991 Date: December 6, 1991
---------------------------- ----------------------------------
* Must be President, duly authorized Vice President or Partner.
DISTRIBUTION AGREEMENT (LAW CYPRESS DISTRIBUTING 11/20/91) PAGE 9
<PAGE> 10
EXHIBIT A
PRODUCTS FOR SALE BY DISTRIBUTOR AND DISCOUNT SCHEDULE
<TABLE>
1. Classes of Products. For purposes of discounting under this Agreement,
Vendor's Products are grouped into three classes. In some instances
products listed below may not yet be available for purchase by
Distributor:
<S> <C> <C>
(i) LIGHTNING CLASS PRODUCTS consist of the following:
XIP-BL Lightning/Prime Image Accelerator Card for AT (with 0 MB)
XIP-DL Lightning/Prime Image Accelerator Card for MCA (with 0 MB)
XIP-BSP Lightning/Plus Image Accelerator Card for AT (with 0 MB)
XIP-TSP Lightning/Plus Image Accelerator Card for MCA (with 0 MB)
XIP-LFC Lightning/Plus Kit for Fujitsu Scanner and Canon/HP Printer
(ii) STANDARD CLASS PRODUCTS consist of the following:
XIP-B2 Mark II Image Accelerator Card with 2 MB for AT
XIP-B4 Mark II Image Accelerator Card with 4 MB for AT
XIP-D2 Mark II Image Accelerator Card with 2 MB for MCA
XIP-D4 Mark II Image Accelerator Card with 4 MB for MCA
XIP-BT4 Turbo Image Accelerator Card with 4 MB for AT
XIP-BT8 Turbo Image Accelerator Card with 8 MB for AT
XIP-DT4 Turbo Image Accelerator Card with 4 MB for MCA
(iii) MEZZANINE CLASS PRODUCTS consist of the following:
XIM-FC2 Kit for Fujitsu M309x Scanner & Canon LBP-8-11 or HP Series II/111 Printer
XIM-FC3 Kit for Fujitsu M309x Scanner & Canon LBP-8-111 Printer
XIM-FF73 Kit for Fujitsu M309x Scanner & Fujitsu RX7300 Printer
XIM-TF73 Kit for TDC 2600/2610 Scanner & Fujitsu RX7300 Printer
XIM-BF73 Kit for Bell & Howell Copiscan II Scanner & Fujitsu RX7300 Printer
XIM-FF74 Kit for Fujitsu M309x Scanner & Fujitsu RX7400 Printer
XIM-TF74 Kit for TDC 2600/2610 Scanner & Fujitsu RX7400 Printer
XIM-BF74 Kit for Bell & Howell Copiscan II Scanner & Fujitsu RX7400 Printer
XIM-Z4 4 MB Add-On Memory for Mark II Card
XIM-Z8 8 MB Add-On Memory for Mark II Card
XIM-ZT4 4 MB Add-On Memory for Turbo Card
XIM-ZT8 8 MB Add-On Memory for Turbo Card
XIM-ZT16 16 MB Add-On Memory for Turbo Card
</TABLE>
2. EXCLUDED PRODUCTS AND ITEMS. The following products and items are
specifically excluded from this Agreement:
(i) Application development software.
(ii) Image accelerator software.
(iii) Kits including both hardware and software.
Purchase of any of these items by Purchaser shall be at Vendor'
published dealer prices or at some other price mutually agreed upon by
Vendor and Purchaser.
DISTRIBUTION AGREEMENT (LAW CYPRESS DISTRIBUTING 11/20/91) PAGE A-1
<PAGE> 11
3. DISTRIBUTOR DISCOUNT PERCENTAGES. The Discount Percentage for Standard
and Mezzanine Class Product shall be NINETEEN PERCENT (19%) off
Vendors published Dealer Quantity One Price. The Discount Percentage
for Lightning Class Product shall be SIXTEEN PERCENT (16%) off Vendors
published Dealer Quantity One Price. These Discount Percentages shall
be subject to the restrictions set forth below.
4. APPLICATION OF DISTRIBUTOR DISCOUNT PERCENTAGES TO DISTRIBUTOR ORDERS.
The above Discount Percentages shall apply to all orders in which the
number of Standard Class Product is greater than or equal to the
number of Mezzanine Class Product. Vendor will not accept orders in
which the number of Mezzanine Class Product exceeds the number of
Standard Class Product, or which combine Mezzanine Class Product and
Lightning Class Product. For all orders of only Mezzanine Class
Product, the Discount Percentage shall be nine percent (9%) off
Vendors published Dealer Quantity One Price. For all orders of Cables,
Mezzanines or Transceivers, the Discount Percentage shall be NINE
PERCENT (9%) off Vendors published Component Price List.
5. MINIMUM ORDER QUANTITIES. Each Purchase Order issued by Distributor
shall be for no less than ten (10) Standard Class Products, Lightning
Class Products or a combination thereof. Mezzanine Class Products
shall not be counted toward fulfillment of Distributor's Minimum Order
Quantity on a given Purchase Order. Each Purchase Order may have no
more than three (3) separate shipping destinations for delivery of
Products. In no event will Vendor accept Purchase Orders specifying
direct shipment of Product to Distributor's Customer or to any
location other than that of Distributor.
DISTRIBUTION AGREEMENT (LAW CYPRESS DISTRIBUTING 11/20/91) PAGE A-2
<PAGE> 12
EXHIBIT B
STANDARD TERMS AND CONDITIONS OF SALE
1. CONTROLLING DOCUMENT. The acceptance of Distributor's Purchase Order
is expressly made conditional on Distributor's consent to the terms
and conditions set forth herein. Vendor agrees to furnish the goods
covered thereby upon these terms and conditions.
2. PRICES AND TAXES. Prices shown are for delivery of goods F.O.B.
Vendor's warehouse. Any manufacturer's sales, use or excise tax, or
customs or inspection fee shall be paid by Distributor. In the event
Vendor is required to pay any such tax, fee or charge, Distributor
shall within ten (10) business days reimburse Vendor thereof.
3. DELIVERY AND DELAY. Delivery of goods to a carrier at Vendor's plant
or other loading point shall constitute delivery to Distributor. All
risk of loss or damage of products in transit are borne by
Distributor. Any partial deliveries shall be separately invoiced and
paid for when due per invoice without regard to following deliveries.
Claims for shortages or errors in delivery must be made in writing to
Vendor within ten (10) days after receipt of shipment. Vendor shall
not be liable for any loss or damage as a result of any delay due to
any cause beyond Vendor's direct reasonable control.
4. INSPECTION. Distributor shall examine all goods promptly upon receipt
thereof. Within ten (10) days of such receipt, Distributor shall
notify Vendor in writing of all claimed shortages and defects and, if
a rejection is intended, a specification of the grounds thereof.
Otherwise, the goods will be deemed accepted as of the date of
shipment.
5. LIMITED WARRANTY. Vendor warrants articles of its manufacture
(excluding computer cables), used under normal operating conditions
against defective materials or workmanship for the shorter of (i)
twelve (12) months from the sale of Product by Distributor, or (ii)
fifteen (15) months from the date of shipment from Vendor to
Distributor. If Distributor has not provided Vendor with sell through
information to enable Vendor to determine date of sale, warranty will
be deemed to be three (3) months from date of shipment from Vendor to
Distributor. The liability of Vendor under this warranty is limited,
at Vendor's option, solely to repair or replace with equivalent
articles, or to provide an appropriate, credit adjustment not to
exceed the sale price to Distributor, provided that the defective
articles are returned to Vendor, transportation charges prepaid, and
Vendor's examination of such article discloses to its satisfaction
that defects were not caused by negligence, misuse, improper
installation, accident or unauthorized repair or alteration. Warranty
claims will only be honored if vendor is promptly notified in writing
of the details of the claim and Vendor has issued a Return Materials
Authorization (RMA) number to Distributor.
THIS WARRANTY IS EXPRESSLY IN LIEU OF AND VENDOR HEREBY DISCLAIMS ALL
OTHER WARRANTIES, EXPRESSED OR IMPLIED, INCLUDING ANY WARRANTY OF
MERCHANTABILITY OR OF FITNESS FOR A PARTICULAR PURPOSE, AND OF ALL
OTHER OBLIGATIONS OR LIABILITIES ON VENDOR'S PART RELATING TO ANY
ALLEGEDLY DEFECTIVE PRODUCT, AND VENDOR NEITHER ASSUMES NOR AUTHORIZES
ANY OTHER PERSON TO ASSUME FOR VENDOR ANY OTHER LIABILITIES.
Out of warranty Product may be returned to Vendor for repair, provided
that Distributor requests and is issued a Return Material
Authorization (RMA) number and provides Vendor with a Purchase Order
to cover the repair charges. Both inbound and outbound freight charges
for nonwarranty repairs will be paid by Distributor. Non-warranty
repairs will be made at a specified repair rate to be agreed in
writing by both parties from time to lime. Distributor will be
notified by Vendor if the Product is determined non-repairable and
request disposition from Distributor at that time.
DISTRIBUTION AGREEMENT (LAW CYPRESS DISTRIBUTING 11/20/91) PAGE B-1
<PAGE> 13
6. INFRINGEMENT CLAIMS. Vendor shall indemnify and hold Distributor
harmless with respect to all liabilities, losses, costs and expenses
including reasonable attorney's lees in connection with claims
resulting from any third party claim made against Distributor for the
infringement of United Stales patents, copyrights, mass works or other
proprietary rights by goods Distributor hereunder, except if the
claimed infringement has resulted from Vendor's compliance with
Distributor's designs, specifications, and instructions, provided that
Distributor notifies Vendor in writing of the claim of infringement
within thirty (30) days of Distributor's notice thereof. Vendor shall
have the option at any time to modify any goods sold hereunder to
avoid allegations of infringement provided such modification does not
materially affect performance hereunder.
7. GOVERNMENT CONTRACTS. If any Purchase Order indicates that the
purchase is being made for use under a U.S. Government Contract, only
those terms and conditions which are made mandatory by federal statute
or regulation for inclusion in fixed price supply subcontracts
covering standard commercial proprietary items sold to the public
shall be deemed incorporated herein by reference. Vendor retains the
sole right to accept or reject such Purchase Orders.
8. TERMS AND METHOD OF PAYMENT. Where Vendor has extended credit to
Distributor, the terms of payment shall be normal net thirty (30) days
from date of invoice. The amount of credit, if any, may be changed or
credit may be withdrawn by Vendor at any time. On any order on which
credit is not extended by Vendor, shipment or delivery shall be made
at Vendors election, Cash with Order or C.O.D. delivered via Federal
Express. Payments delinquent more than 30 days beyond the approved
credit terms on any invoice shall be subject to a carrying charge of
one and one-half percent (1.5%) per month starting from the date the
invoice was due or, if lesser, the maximum amount permitted by law.
Distributor shall reimburse Vendor for any and all costs incurred by
Vendor to collect amounts owed to Vendor by Distributor.
9. SECURITY INTEREST. Vendor shall retain and is hereby granted a
purchase money security interest in the goods delivered hereunder and
in the proceeds from the sale or disposition thereof, until
Distributor has made payment in full for such goods. Distributor
shall, upon request by Vendor, execute all documents (such as UCC-1
Financing Statements) necessary to perfect such security interest.
Vendor has the right, upon demand, to repossess goods delivered
hereunder if Distributor fails to make timely payment.
10. SHIPPING AND HANDLING. Distributor may select from any of the normal
shipping modes offered by United Parcel Service ("UPS") or Federal
Express ("FedEx") for delivery of any Product. Unless otherwise
requested by Distributor, all shipment of Product by Vendor will be
made via UPS Ground. Vendor will invoice Distributor for shipping
costs incurred by the common carrier. Vendor will add, at its sole
discretion, a $50.00 expediting fee for each shipment requested by
Distributor to occur before the fifteenth day after receipt of the
Purchase Order resulting in such shipment. Vendor reserves the light
to change its charges for shipping and handling from time to time
without prior notice.
DISTRIBUTION AGREEMENT (LAW CYPRESS DISTRIBUTING 11/20/91) PAGE B-2
<PAGE> 14
IN WITNESS WHEREOF, the parties hereunto have executed this Agreement.
DISTRIBUTOR: VENDOR:
LAW CYPRESS DISTRIBUTING CO.* Xionics Inc.
- ---------------------------------- Two Corporation Way
Peabody, MA 01960
560 LINCOLN AVE.
- ----------------------------------
SAN JOSE, CA, 95126
- ----------------------------------
By: /s/ David E. Law By: /s/ Brian R. Bissett
------------------------------- -------------------------------------
Name: David E. Law Name: Brian R. Bissett
---------------------------- ----------------------------------
Title: President/CEO Title: Director of Marketing
--------------------------- ---------------------------------
Date: November 22, 1991 Date: December 6, 1991
---------------------------- ----------------------------------
DISTRIBUTION AGREEMENT (LAW CYPRESS DISTRIBUTING 11/20/91) PAGE B-3
<PAGE> 15
EXHIBIT C
CONFIDENTIAL INFORMATION AGREEMENT
This Confidential Information Agreement ("Agreement") is entered into by and
between Xionics Inc., a Delaware corporation ("Vendor") and ,
Law Cypress Distributing Co. ("Distributor").
- -------------------------------------------------------
1. CONFIDENTIAL INFORMATION. "Confidential Information" includes all
information disclosed by Vendor to Distributor (i) in writing which is
clearly labeled 'Confidential" or (ii) orally if designated
confidential at the time of disclosure.
2. USE BY VENDOR, COMBINATION, AND RESULTS AS CONFIDENTIAL INFORMATION.
Distributor agrees that although certain information, data or
technology may be generally known in the relevant industry, the fact
that Vendor uses the same, and how Vendor uses the same, may not be so
known and therefore may constitute Confidential Information.
3. NONDISCLOSURE. Distributor agrees not to disclose to a third party,
duplicate or use any Confidential Information of Vendor during the
term of the Distribution Agreement and for a period of one (1) year
from the date of termination of the Distribution Agreement without the
prior consent of Vendor.
4. AUTHORIZED USE OF CONFIDENTIAL INFORMATION BY DISTRIBUTOR. Distributor
shall use the Confidential Information solely for reference and/or use
for resale of Products purchased under the Distribution Agreement
between the parties. Distributor shall not use Confidential
Information for any other purpose, except as authorized in writing by
Vendor.
5. DISPOSITION OF CONFIDENTIAL INFORMATION. Distributor agrees to return
or dispose of all materials, including copies thereof, containing
Confidential Information of Vendor as directed by Vendor upon Vendors
written request.
6. NO LICENSE GRANTED. The Confidential Information shall remain the
exclusive property of Vendor. Nothing contained in this Agreement
shall be construed as granting a license under any patent, trademark,
copyright or any other proprietary right to any Confidential
Information disclosed pursuant to this Agreement. Any breach of this
Confidential Information Agreement shall be deemed a material breach
of the Distribution Agreement, as described in Section 15 of the
Distribution Agreement.
DISTRIBUTION AGREEMENT (LAW CYPRESS DISTRIBUTING 11/20/91) PAGE C-1
<PAGE> 16
IN WITNESS WHEREOF, the parties hereunto have executed this Agreement.
DISTRIBUTOR: VENDOR:
LAW CYPRESS DISTRIBUTING CO.* Xionics Inc.
- ---------------------------------- Two Corporation Way
Peabody, MA 01960
560 LINCOLN AVE.
- ----------------------------------
SAN JOSE, CA, 95126
- ----------------------------------
By: /s/ David E. Law By: /s/ Brian R. Bissett
------------------------------- -------------------------------------
Name: David E. Law Name: Brian R. Bissett
---------------------------- ----------------------------------
Title: President/CEO Title: Director of Marketing
--------------------------- ---------------------------------
Date: November 22, 1991 Date: December 6, 1991
---------------------------- ----------------------------------
DISTRIBUTION AGREEMENT (LAW CYPRESS DISTRIBUTING 11/20/91) PAGE C-2
<PAGE> 17
- --------------------------------------------------------------------------------
XIONICS
- --------------------------------------------------------------------------------
<TABLE>
DEALER PRICE LIST
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
PRODUCT # PRODUCT DESCRIPTION QTY. 1
<S> <C> <C> <C> <C>
IMAGE ACCELERATOR CARDS
XIP-BL Lighting/Price Image Accelerator Card (AT Bus, 0MB) 695
XIP-B2 Mark II Image Accelerator Card (AT Bus, 2MB) 2,250
XIP-B4 Mark II Image Accelerator Card (AT Bus, 4 MB) 2,950
XIP-D2 Mark II Image Accelerator Card (MCA Bus, 2 MB) 2,500
XIP-D4 Mark II Image Accelerator Card (MCA Bus, 4 M8) 3,200
XIP-BT4 Turbo Image Accelerator Card (AT Bus, 4 MB) 3,350
XIP-BT8 Turbo Image Accelerator Card (AT Bus, 8 MB) 4,450
SCANNER/PRINTER MEZZANINE NITS FOR ACCELERATOR CARDS
XIM-FC2 For Fujitsu M309x Scanner and Canon LBP.-8-II or HP series II/IIIPrinter 400
XIM-FC3 For Fujitsu M309x Scanner and Canon LEP-8-III Printer 400
XIM-FF73 For Fujitsu M309x Scanner and Fujitsu RX7300 Printer 550
XIM-TF73 For TDC 2600/2610 Scanner and Fujitsu RX7300 Printer 550
XIM-FF73 For Bell & Howell 2137/3338/6338 Scanner and Fujitsu RX7300 Printer 550
XIM-FF73 For Fujitsu M309x Scanner and Fujitsu VM2200 Printer 550
XIM-TF73 For TDC 2600 & 2610 Scanner and Fujitsu VM2200 Printer 550
XIM-FF73 For Bell & Howell 2137, 3338 & 6338 Scanner and Fujitsu VM2200 Printer 550
MEMORY MEZZANINES FOR ACCELERATOR CARDS
XIM-Z4 4 MB Add-On Memory for Mark II Card (AT or MCA Bus) 1,300
XIM-Z8 8 MB Add-On Memory for Mark II Card (AT or MCA Bus) 2,900
XIM-ZT4 4 MB Add-On Memory for Turbo Card (AT Bus) 1,200
XIM-ZT8 8 MB Add-On Memory for Turbo Card (AT Bus) 2,000
XIM-ZT16 16 MB Add-On Memory for Turbo Card (AT Bus) 3,600
IMAGE ACCELERATOR SOFTWARE Q10 Q50 Q250
XIP-S ImageSpeed Image Accelerator Software Engine License 3,000 5,000 10,000
APPLICATION DEVELOPMENT SOFTWARE ONE-TIME LICENSE
X-ISL ImageSoft "C" Libraries License for DOS, Windows and 0S/2 (requires purchase of X-TS1) 1,495
TECHNICAL SUPPORT PER YEAR
X-TS1 Technical Support, Bulletin Board and Software Upgrade Program (required with purchase of X-ISL) 995
X-TS2 Bulletin Board and Software Upgrade Program (available only as a renewal to X-TS1) 595
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
All prices are F.O.B. Peabody, MA and subject to change without prior notice.
Volume discounts available under Volume Purchase Agreement.
XIONICS INC.
TWO CORPORATION WAY, PEABODY, MA 01960 [LOGO]
(REV. 11/18/91) TEL: 508-531-6666; FAX 508-531-6669
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our
reports (and to all references to our Firm) included in or made a part of this
registration statement.
ARTHUR ANDERSEN LLP
Boston, Massachusetts
July 15, 1996
