SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
XIRCOM, INC.
(Name of Issuer)
Common Stock
(Title of Class of Securities)
983922105
(CUSIP Number)
F. Thomas Dunlap, Jr.
Vice President, General Counsel and Secretary
Intel Corporation
2200 Mission College Boulevard
Santa Clara, CA 95052
Telephone: (408) 765-8080
{Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications)
February 28, 1997
(Date of Event which Requires
Filing of this Statement)
If the filing person has previously filed a statement on Schedule
13G to report the acquisition which is the subject of this
Schedule 13D, and is filing this schedule because of Rule 13d-1
(b)(3) or (4), check the following box [ ].
The information required on the remainder of this cover page
shall not be deemed to be "filed" for the purpose of Section 18
of the Securities Exchange Act of 1934 ("Act") or otherwise
subject to the liabilities of that section of the Act but shall
be subject to all other provisions of the Act.
<PAGE>
CUSIP No. 983922105 SC 13D Page 2 of 11 Pages
1. NAME OF REPORTING PERSON Intel
Corporation
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE 94-1672743
PERSON
2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A (a) [ ]
GROUP (b) [ ]
3. SEC USE ONLY
4. SOURCE OF FUNDS Working
Capital
5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS [ ]
IS REQUIRED PURSUANT TO ITEM 2(d) OR 2(e)
6. CITIZENSHIP OR PLACE OF ORGANIZATION Delaware
NUMBER OF 7. SOLE VOTING POWER 4,026,308
SHARES
BENEFICIALLY 8. SHARED VOTING POWER N/A
OWNED BY
EACH 9. SOLE DISPOSITIVE POWER 4,026,308
REPORTING
PERSON WITH 10. SHARED DISPOSITIVE POWER N/A
11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH 4,026,308
REPORTING PERSON
12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) [ ]
EXCLUDES CERTAIN SHARES
13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW 16.7%
(11)
14. TYPE OF REPORTING PERSON CO
<PAGE>
CUSIP No. 983922105 SC 13D Page 3 of 11 Pages
Item 1. Security and Issuer.
(a) Name and Address of Principal Executive Offices
of Issuer:
Xircom, Inc.
2300 Corporate Center Drive
Thousand Oaks, California 91320
(b) Title and Class of Equity Securities: Common
Stock
Item 2. Identity and Background
(a) Name of Person Filing: Intel Corporation
The executive
officers and
directors of Intel
Corporation are set
forth on Appendix A
hereto.
(b) State of Incorporation: Delaware
(c) Principal Business: Manufacturer of
microcomputer
components, modules
and systems
(c) Address of Principal Business and Principal
Office:
2200 Mission College Boulevard
Santa Clara, CA 95052-8119
(d) Criminal Proceedings:
During the last five years neither the
Reporting Person nor any officer or director of
the Reporting Person has been convicted in any
criminal proceeding.
(e) Civil Proceedings:
During the last five years neither the
Reporting Person nor any officer or director of
the Reporting Person has been party to any
civil proceeding of a judicial or
administrative body of competent jurisdiction
as a result of which such person would have
been subject to any judgment, decree or final
order enjoining future violations of or
prohibiting or mandating activities subject to
Federal or State securities laws or finding any
violation with respect to such laws.
Item 3. Source and Amount of Funds or Other
Funds for the purchase of the securities are derived
from the Reporting Person's working capital.
$52,278,313.88 was paid to acquire 2,516,405 shares of
Common Stock of the Issuer. Additional amounts, which
vary depending on the date of exercise, will be paid
should the Reporting Person exercise the Warrant (as
defined in Item 4).
<PAGE>
CUSIP No. 983922105 SC 13D Page 4 of 11 Pages
Item 4. Purpose of the Transaction
The Reporting Person acquired the Common Stock and the
Warrant (as described in Item 5(c), below) as an
investment and in connection with a technology
agreement between the Issuer and the Reporting Person
pursuant to which the Issuer and Reporting Person will
work together to further advance mobile connectivity
solutions for high performance business computing. In
addition to the 2,516,405 shares of Common Stock of
the Issuer acquired by the Reporting Person, the
Reporting Person also acquired a warrant (the
"Warrant") to purchase up to 1,509,903 shares of
Common Stock of the Issuer. The shares of Common
Stock subject to the Warrant are vested and
immediately exercisable . The exercise price for the
shares increases periodically throughout the time that
the Warrant is in effect, pursuant to a schedule set
forth in the Warrant. The Warrant expires on February
27, 2002.
Item 5. Interests in Securities of the Issuer.
(a) Number of Shares 4,026,308 shares*
Beneficially Owned:
Number of Shares 4,026,308 shares*
Beneficially Owned:
Percent of Class: 16.7%* (based upon
24,158,349 shares* of
common stock
outstanding, determined
from representations
made by the Issuer to
the Reporting Person in
connection with the
closing under the
Purchase Agreement (as
defined below)
(b) Sole Power to Vote,
Direct the Vote of, or
Dispose of Shares: 4,026,308 shares*
Shared Power to Vote,
Direct the Vote of, or
Dispose of Shares: None
(c) Recent Transactions:
On February 28, 1997, pursuant to the terms of
that certain Common Stock and Warrant Purchase
Agreement dated as of January 13, 1997 (the
"Purchase Agreement"), the Reporting Person
purchased (I) 2,516,405 newly issued shares of
Common Stock of the Issuer at a price per share
of $20.775, and (ii) the Warrant to
- -----------------------
* Includes the additional shares (up to 1,509,903) of Common
Stock that the Reporting Person has a right to acquire pursuant
to the Warrant (as defined and described in Item 4). Such
shares are beneficially owned by the Reporting Person under Rule
13d-3 because the Reporting Person has a right to acquire such
shares within the next 60 days.
<PAGE>
CUSIP No. 983922105 SC 13D Page 5 of 11 Pages
purchase up to 1,509,903 shares of Common
Stock. See the Purchase Agreement and the
Warrant, each of which has been filed as an
Exhibit hereto, for additional details.
(d) Rights with Respect to Dividends or
Sales Proceeds: N/A
(e) Date of Cessation of Five Percent
Beneficial Ownership: N/A
Item 6. Contracts, Arrangements, Understandings or
Relationships With Respect to Securities of the
Issuer.
Pursuant to the Investor Rights Agreement between the
Reporting Person and the Issuer, the Reporting Person
has, under certain circumstances, various rights
related to (a) registration of the Common Stock that
the Reporting Person owns, (b) participation in future
sales and issuances of securities by the Issuer, (c)
maintaining its ownership percentage in the Issuer,
(d) receiving various public filings directly from the
Issuer on a periodic basis, and (e) the opportunity to
acquire the Issuer or certain assets of the Issuer if
the Issuer seeks other offers or receives certain
unsolicited offers. The Reporting Person has certain
standstill obligations relating to its acquisition of
shares of Common Stock of the Issuer and certain
restrictions on its voting rights. The Purchase
Agreement also contains certain restrictions on
transfer of the Common Stock by the Reporting Person.
See the Investor Rights Agreement, attached as an
Exhibit hereto, for a further description of these
provisions.
Item 7. Material to Be Filed as Exhibits.
Exhibit 1 Xircom, Inc. Common Stock and Warrant
Purchase Agreement, of January 13, 1997,
between Xircom, Inc. and Intel
Corporation.
Exhibit 2 Warrant to Purchase Shares of Common
Stock of Xircom, Inc., dated February 28,
1997.
Exhibit 3 Investor Rights Agreement, dated February
28, 1997, between Xircom, Inc. and Intel
Corporation.
Exhibit 4 Press Release of Xircom, Inc., dated
January 16, 1997.
Exhibit 5 Press Release of Xircom, Inc., dated
March 3, 1997.
<PAGE>
CUSIP No. 983922105 SC 13D Page 6 of 11 Pages
SIGNATURE
After reasonable inquiry and to the best of my knowledge and
belief, I certify that the information set forth in this
statement is true, complete and correct.
Dated as of March 7, 1997.
INTEL CORPORATION
/s/F. Thomas Dunlap, Jr.
By: F. Thomas Dunlap, Jr.
Vice President, General counsel
and Secretary
<PAGE>
CUSIP No. 983922105 SC 13D Page 7 of 11 Pages
APPENDIX A
DIRECTORS
The following is a list of all Directors of Intel Corporation and
certain other information with respect to each Director. All
Directors are United States citizens.
Name: Craig R. Barrett
Business 2200 Mission College Boulevard, Santa Clara,
Address: CA 95052
Principal Executive Vice President and Chief Operating
Occupation: Officer of Intel Corporation
Name, principal Intel Corporation, a manufacturer of
business and microcomputer components, modules and systems.
address of 2200 Mission College Boulevard
corporation or Santa Clara, CA 95052
other
organization on
which employment
is conducted:
Name: Winston H. Chen
Business Paramitas Foundation, 3945 Freedom Circle,
Address: Suite 760, Santa Clara, CA 95054
Principal Chairman of Paramitas Foundation
Occupation:
Name, principal Paramitas Foundation, a charitable foundation.
business and 3945 Freedom Circle, Suite 760
address of Santa Clara, CA 95054
corporation or
other
organization on
which employment
is conducted:
Name: Andrew S. Grove
Business 2200 Mission College Boulevard, Santa Clara,
Address: CA 95052
Principal President and Chief Executive Officer of Intel
Occupation: Corporation
Name, principal Intel Corporation, a manufacturer of
business and microcomputer components, modules and systems.
address of 2200 Mission College Boulevard
corporation or Santa Clara, CA 95052
other
organization on
which employment
is conducted:
<PAGE>
CUSIP No. 983922105 SC 13D Page 8 of 11 Pages
Name: D. James Guzy
Business 295 North Bernardo, Mountain View, CA 94043
Address:
Principal Chairman of The Arbor Company
Occupation:
Name, principal The Arbor Company, a limited partnership
business and engaged in the electronics and computer
address of industry.
corporation or 295 North Bernardo
other Mountain View, CA 94043
organization on
which employment
is conducted:
Name: Gordon E. Moore
Business 2200 Mission College Boulevard, Santa Clara,
Address: CA 95052
Principal Chairman of the Board of Intel Corporation
Occupation:
Name, principal Intel Corporation, a manufacturer of
business and microcomputer components, modules and systems.
address of 2200 Mission College Boulevard
corporation or Santa Clara, CA 95052
other
organization on
which employment
is conducted:
Name: Max Palevsky
Business 924 Westwood Boulevard, Suite 700, Los Angeles
Address: CA 90024
Principal Industrialist
Occupation:
Name, principal Self-employed.
business and
address of
corporation or
other
organization on
which employment
is conducted:
Name: Arthur Rock
Business One Maritime Plaza, Suite 1220, San Francisco,
Address: CA 94111
Principal Venture Capitalist
Occupation:
Name, principal Arthur Rock and Company, a venture capital
business and firm.
address of One Maritime Plaza, Suite 1220
corporation or San Francisco, CA 94111
other
organization on
which employment
is conducted:
<PAGE>
CUSIP No. 983922105 SC 13D Page 9 of 11 Pages
Name: Jane E. Shaw
Business c/o Intel Corporation, 2200 Mission College
Address: Boulevard, Santa Clara, CA 95052
Principal Founder of The Stable Network, a
Occupation: biopharmaceutical consulting company
Name, principal c/o Intel Corporation
business and 2200 Mission College Boulevard
address of Santa Clara, CA 95052
corporation or
other
organization on
which employment
is conducted:
Name: Leslie L. Vadasz
Business 2200 Mission College Boulevard, Santa Clara,
Address: CA 95052
Principal Senior Vice President, Director, Corporate
Occupation: Business Development, Intel Corporation
Name, principal Intel Corporation, a manufacturer of
business and microcomputer components, modules and systems.
address of 2200 Mission College Boulevard
corporation or Santa Clara, CA 95052
other
organization on
which employment
is conducted:
Name: David B. Yoffie
Business Harvard Business School, Soldiers Field Park 1-
Address: 411, Boston, MA 92163
Principal Max and Doris Starr Professor of International
Occupation: Business Administration
Name, principal Harvard Business School, an educational
business and institution.
address of Harvard Business School
corporation or Soldiers Field Park 1-411
other Boston, MA 92163
organization on
which employment
is conducted:
Name: Charles E. Young
Business 405 Hilgard Avenue, Los Angeles, CA 90024
Address:
Principal Chancellor
Occupation:
Name, principal University of California at Los Angeles, an
business and educational institution.
address of 405 Hilgard Avenue
corporation or Los Angeles, CA 90024
other
organization on
which employment
is conducted:
<PAGE>
CUSIP No. 983922105 SC 13D Page 10 of 11 Pages
EXECUTIVE OFFICERS
The following is a list of all executive officers of Intel
Corporation excluding executive officers who are also directors.
Unless otherwise indicated, each officer's business address is
2200 Mission College Boulevard, Santa Clara, CA 95052-8119, which
address is Intel Corporation's business address. All executive
officers are United States citizens.
Name: Frank C. Gill
Title: Executive Vice President; General Manager, Internet
and Communications Group
Address: 5200 N.E. Elam Young Parkway, Hillsboro, OR 97124-
6497
Name: Paul S. Otellini
Title: Executive Vice President; Director, Sales and
Marketing Group
Name: Gerhard H. Parker
Title: Executive Vice President, General Manager, Technology
and Manufacturing Group
Name: Ronald J. Whittier
Title: Senior Vice President; General Manager, Content Group
Name: Albert Y. C. Yu
Title: Senior Vice President; General Manager,
Microprocessor Products Group
Name: Michael A. Aymar
Title: Vice President; General Manager, Desktop Products
Group
Name: Andy D. Bryant
Title: Vice President and Chief Financial Officer
Name: G. Carl Everett, Jr.
Title: Senior Vice President, General Manager, Desktop
Products Group
Name: F. Thomas Dunlap, Jr.
Title: Vice President, General Counsel and Secretary
Name: Patrick P. Gelsinger
Title: Vice President, General Manager, Desktop Products
Group
Address: 5200 N.E. Elam Young Parkway, Hillsboro, OR 97124-
6497
Name: John H. F. Miner
Title: Vice President, General Manager, Enterprise Server
Group
Address: 5200 N.E. Elam Young Parkway, Hillsboro, OR 97124-
6497
Name: Stephen P. Nachtsheim
Title: Vice President; General Manager, Mobile/Handheld
Products Group
Name: Ronald J. Smith
Title: Vice President, General Manager, Computing
Enhancement Group
<PAGE>
CUSIP No. 983922105 SC 13D Page 11 of 11 Pages
EXHIBIT INDEX
Sequentially
Numbered
Exhibit No. Document Page
Exhibit 1 Xircom, Inc. Common Stock and 1.1
Warrant Purchase Agreement, of
January 13, 1997, between Xircom,
Inc. and Intel Corporation.
Exhibit 2 Warrant to Purchase Shares of Common 2.1
Stock of Xircom, Inc., dated
February 28, 1997.
Exhibit 3 Investor Rights Agreement, dated 3.1
February 28, 1997, between Xircom,
Inc. and Intel Corporation.
Exhibit 4 Press Release of Xircom, Inc., dated 4.1
January 16, 1997.
Exhibit 5 Press Release of Xircom, Inc., dated 5.1
March 3, 1997.
EXHIBIT 1
COMMON STOCK AND WARRANT
PURCHASE AGREEMENT
<PAGE>
XIRCOM, INC.
COMMON STOCK AND WARRANT
PURCHASE AGREEMENT
This Common Stock and Warrant Purchase Agreement (this
"Agreement") is made and entered into as of January 13, 1997, by
and between Xircom, Inc., a California corporation (the
"Company"), and Intel Corporation, a Delaware corporation (the
"Investor").
R E C I T A L
WHEREAS, the Company desires to sell to the Investor, and the
Investor desires to purchase from the Company, shares of the
Company's Common Stock and a Warrant to purchase additional
shares of the Company's Common Stock on the terms and conditions
set forth in this Agreement;
NOW, THEREFORE, in consideration of the foregoing recital, the
mutual promises hereinafter set forth, and other good and
valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto agree as follows:
1. AGREEMENT TO PURCHASE AND SELL STOCK.
1.1 Authorization. As of the Closing (as defined below),
the Company's Board of Directors will have authorized the
issuance, pursuant to the terms and conditions of this Agreement,
of up to the number of shares of the Company's Common Stock equal
to twelve and one-half percent (12.5%) of the number of shares of
the Company's Common Stock and other voting securities
outstanding on the day immediately preceding the date of Closing
minus 100 shares ("Purchased Shares") PLUS the number of shares
of the Company's Common Stock equal to seven and one-half percent
(7.5%) of the number of shares of the Company's Common Stock and
other voting securities outstanding on the day immediately
preceding the date of Closing ("Warrant Shares") shares of the
Company's Common Stock, $0.001 par value (the "Common Stock").
1.2 Agreement to Purchase and Sell Common Stock. The
Company hereby agrees to sell to the Investor at the Closing, and
the Investor agrees to purchase from the Company at the Closing,
the Purchased Shares at a price per share equal to the Per Share
Purchase Price.
1.3 Per Share Purchase Price. The "Per Share Purchase
Price" shall be $20.775.
1.4 Agreement to Purchase and Sell Warrant. The Company
hereby agrees to issue to the Investor at the Closing a Warrant
(the "Warrant") to purchase the Warrant Shares in the form
attached hereto as Exhibit A.
1.5 Compliance with HSR Requirements. Promptly after the
execution hereof, the Company and the Investor shall each
complete and file their respective premerger notification
<PAGE> 2
report forms under the HSR Act (as defined in Section 3.6).
After the filing thereof, the Company and the Investor shall use
all reasonable efforts to comply with the HSR Requirements;
provided, however, that neither the Company nor the Investor
shall be under any obligation to comply with any request or
requirement imposed by the Federal Trade Commission (the "FTC"),
the Department of Justice (the "DofJ") or any other governmental
authority in connection with the compliance with the HSR
Requirements if the Company or the Investor, in the exercise of
such entity's sole discretion, elects not to do so. Without
limiting the generality of the foregoing, neither the Company nor
the Investor shall be obligated to comply with any request by, or
any requirement of, the FTC, the DofJ or any other governmental
authority: (i) to disclose information the Company or the
Investor, as the case may be, desires to keep confidential; (ii)
to dispose of any assets or operations; or (iii) to comply with
any restriction on the manner in which they conduct their
respective operations.
2. CLOSING
2.1 The Closing. The purchase and sale of the Purchased
Shares and the Warrant will take place at the offices of Gibson,
Dunn & Crutcher, 2029 Century Park East, Los Angeles, California,
at 10:00 a.m. California time, within three (3) business days
after the conditions set forth in Articles 5 and 6 have been
satisfied, or at such other time and place as the Company and the
Investor mutually agree upon (which time and place are referred
to in this Agreement as the "Closing"). At the Closing, the
Company will deliver to the Investor the Warrant and a
certificate representing the Purchased Shares, all against
delivery to the Company by the Investor of the full purchase
price of the Purchased Shares, paid by wire transfer of funds to
the Company.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
hereby represents and warrants to the Investor that the
statements in this Section 3 are true and correct, except as set
forth in the Disclosure Letter from the Company dated January 13,
1997 (the "Disclosure Letter").
3.1 Organization, Good Standing and Qualification. The
Company is a corporation duly organized, validly existing and in
good standing under the laws of the State of California and has
all corporate power and authority required to (a) carry on its
business as presently conducted, and (b) enter into this
Agreement, the Investor Rights Agreement (as defined in Section
5.8) and the Warrant, and to consummate the transactions
contemplated hereby and thereby. The Company is qualified to do
business and is in good standing in each jurisdiction in which
the failure to so qualify would have a Material Adverse Effect.
As used in this Agreement, "Material Adverse Effect" means a
material adverse effect on, or a material adverse change in, or a
group of such effects on or changes in, the business, operations,
financial condition, results of operations, prospects, assets or
liabilities of the Company.
3.2 Capitalization. As of the date of this Agreement the
capitalization of the Company is as follows:
<PAGE> 3
(a) Preferred Stock. A total of 2,000,000 authorized
shares of Preferred Stock, $0.01 par value per share (the
"Preferred Stock"), none of which is issued or outstanding.
(b) Common Stock. A total of 50,000,000 authorized
shares of Common Stock, $0.001 par value, of which 20,001,304
shares are issued and outstanding. All of such outstanding
shares are validly issued, fully paid and non-assessable. No
such outstanding shares were issued in violation of any
preemptive right.
(c) Options, Warrants, Reserved Shares. Except for
the Xircom Stock Option Plan, 1992 Directors Stock Option Plan,
1994 Employee Stock Purchase Plan, and the 1995 Stock Option
Plan, each as amended (the "Plans"), there are not outstanding
any options, warrants, rights (including conversion or preemptive
rights) or agreements for the purchase or acquisition from the
Company of any shares of its capital stock or any securities
convertible into or ultimately exchangeable or exercisable for
any shares of the Company's capital stock. Except for any stock
repurchase rights of the Company under the Plans, no shares of
the Company's outstanding capital stock, or stock issuable upon
exercise, conversion or exchange of any outstanding options,
warrants or rights, or other stock issuable by the Company, are
subject to any rights of first refusal or other rights to
purchase such stock (whether in favor of the Company or any other
person), pursuant to any agreement, commitment or other
obligation of the Company.
3.3 Subsidiaries. The Company does not presently own or
control, directly or indirectly, any interest in any other
corporation, partnership, trust, joint venture, association or
other entity.
3.4 Due Authorization. All corporate action on the part of
the Company, its officers, directors and shareholders necessary
for the authorization, execution, delivery of, and the
performance of all obligations of the Company under, this
Agreement, the Investor Rights Agreement (as defined below), and
the Warrant, and the authorization, issuance, reservation for
issuance and delivery of all of the Purchased Shares being sold
under this Agreement and of the Warrant Shares has been taken or
will be taken prior to the Closing, and this Agreement
constitutes, and the Investor Rights Agreement and the Warrant
when executed, will constitute, valid and legally binding
obligations of the Company, enforceable against the Company in
accordance with their respective terms, except as may be limited
by (i) applicable bankruptcy, insolvency, reorganization or
others laws of general application relating to or affecting the
enforcement of creditors' rights generally and (ii) the effect of
rules of law governing the availability of equitable remedies.
3.5 Valid Issuance of Stock.
(a) The Purchased Shares, when issued, sold and
delivered in accordance with the terms of this Agreement for the
consideration provided for herein, will be duly and validly
issued, fully paid and nonassessable. The Warrant Shares have
been duly and validly reserved for issuance and, upon issuance,
sale and delivery in accordance with the terms of
<PAGE> 4
the Warrant for the consideration provided for therein, will be
duly and validly issued, fully paid and nonassessable.
(b) Based in part on the representations made by the
investors in Section 4 hereof, the Purchased Shares, the Warrant
and (assuming no change in applicable law and no unlawful
distribution of Purchased Shares or the Warrant by the Investor
or other parties) the Warrant Shares will be issued in full
compliance with the registration and prospectus delivery
requirements of the Securities Act of 1933, as amended (the "1933
Act"), or in compliance with applicable exemptions therefrom, and
the registration and qualification requirements of all applicable
securities laws of the states of the United States.
3.6 Governmental Consents. No consent, approval, order or
authorization of, or registration, qualification, designation,
declaration or filing with, any federal, state or local
governmental authority on the part of the Company is required in
connection with the consummation of the transactions contemplated
by this Agreement, except for compliance with the HSR
Requirements (as defined below) and the filing of such
qualifications or filings under the 1933 Act and the regulations
thereunder and all applicable state securities laws as may be
required in connection with the transactions contemplated by this
Agreement. All such qualifications and filings will, in the case
of qualifications, be effective on the Closing and will, in the
case of filings, be made within the time prescribed by law. As
used herein, the "HSR Requirements" means compliance with the
filing and other requirements of the Hart-Scott-Rodino Antitrust
Improvements Acts of 1976, as amended (the "HSR Act").
3.7 Non-Contravention. The execution, delivery and
performance of this Agreement, the Investor Rights Agreement and
the Warrant by the Company, and the consummation by the Company
of the transactions contemplated hereby and thereby, do not and
will not (i) contravene or conflict with the Articles of
Incorporation or Bylaws of the Company; (ii) constitute a
material violation of any provision of any federal, state, local
or foreign law binding upon or applicable to the Company; or
(iii) constitute a default or require any consent under, give
rise to any right of termination, cancellation or acceleration
of, or to a loss of any benefit to which the Company is entitled
under, or result in the creation or imposition of any lien, claim
or encumbrance on any assets of the Company under, any contract
to which the Company is a party or any permit, license or similar
right relating to the Company or by which the Company may be
bound or affected in such a manner as would have Material Adverse
Effect.
3.8 Litigation. There is no action, suit, proceeding,
claim, arbitration or investigation ("Action") pending: (a)
against the Company, its activities, properties or assets or, to
the best of the Company's knowledge, against any officer,
director or employee of the Company in connection with such
officer's, director's or employee's relationship with, or actions
taken on behalf of, the Company, (b) that seeks to prevent,
enjoin, alter or delay the transactions contemplated by this
Agreement, the Investor Rights Agreement or the Warrant. There
is no Action pending or, to the best of the Company's knowledge,
threatened, or any basis therefor, relating to the current or
prior employment of any of the Company's current or former
employees or consultants, their use in connection with the
Company's business of any information, technology or techniques
allegedly proprietary to any of their former employers, clients
or other parties, or their obligations under any agreements with
prior employers, clients or other parties.
<PAGE> 5
The Company is not a party to or subject to the provisions of any
order, writ, injunction, judgment or decree of any court or
government agency or instrumentality. No Action by the Company
is currently pending nor does the Company intend to initiate any
Action which is reasonably likely to have a Material Adverse
Effect.
3.9 Invention Assignment and Confidentiality Agreement. To
the best knowledge of the Company, each employee and consultant
or independent contractor of the Company whose duties include the
development of products or Intellectual Property (as defined
below), and each former employee and consultant or independent
contractor whose duties included the development of products or
Intellectual Property, has entered into and executed an invention
assignment and confidentiality agreement in customary form or an
employment or consulting agreement containing substantially
similar terms.
3.10 Intellectual Property.
(a) Ownership or Right to Use. The Company has sole
title to and owns, or is licensed or otherwise possesses legally
enforceable rights to use, all patents or patent applications,
software, know-how, registered or unregistered trademarks and
service marks and any applications therefor, registered or
unregistered copyrights, trade names, and any applications
therefor, trade secrets or other confidential or proprietary
information ("Intellectual Property") necessary to enable the
Company to carry on its business as currently conducted, except
where any deficiency therein would not have a Material Adverse
Effect. The Company represents and warrants that it will, where
the Company, in the exercise of reasonable judgment deems it
appropriate, use reasonable business efforts to seek copyright
and patent registration, and other appropriate intellectual
property protection, for Intellectual Property of the Company.
(b) Licenses; Other Agreements. The Company is not
currently subject to any exclusive licenses (whether such
exclusivity is temporary or permanent) to any material portion of
the Intellectual Property of the Company. To the best of the
Company's knowledge, there are not outstanding any licenses or
agreements of any kind relating to any Intellectual Property of
the Company, except for agreements with OEM's and other customers
of the Company entered into in the ordinary course of the
Company's business. The Company is not obligated to pay any
royalties or other payments to third parties with respect to the
marketing, sale, distribution, manufacture, license or use of any
Intellectual Property, except as the Company may be so obligated
in the ordinary course of its business or as disclosed in the
Company's SEC Documents (as defined below).
(c) No Infringement. The Company has not violated or
infringed and is not currently violating or infringing, and the
Company has not received any communications alleging that the
Company (or any of its employees or consultants) has violated or
infringed, any Intellectual Property of any other person or
entity, to the extent that any such violation or infringement,
either individually or together with all other such violations
and infringements, would have a Material Adverse Effect.
(d) Employees and Consultants. To the best of the
Company's knowledge, no employee of or consultant to the Company
is in default under any term of any
<PAGE> 6
employment contract, agreement or arrangement relating to
Intellectual Property of the Company or any non-competition
arrangement, other contract, or any restrictive covenant relating
to the Intellectual Property of the Company. The Intellectual
Property of the Company (other than any Intellectual Property
duly acquired or licensed from third parties) was developed
entirely by the employees of or consultants to the Company during
the time they were employed or retained by the Company, and to
the best knowledge of the Company, at no time during conception
or reduction to practice of such Intellectual Property of the
Company were any such employees or consultants operating under
any grant from a government entity or agency or subject to any
employment agreement or invention assignment or non-disclosure
agreement or any other obligation with a third party that would
materially and adversely affect the Company's rights in the
Intellectual Property of the Company. Such Intellectual Property
of the Company does not, to the best knowledge of the Company,
include any invention or other intellectual property of such
employees or consultants made prior to the time such employees or
consultants were employed or retained by the Company nor any
intellectual property of any previous employer of such employees
or consultants nor the intellectual property of any other person
or entity.
3.11 Compliance with Law and Charter Documents. The Company
is not in violation or default of any provisions of its
Certificate of Incorporation or Bylaws, both as amended, and
except for any violations that would not, either individually or
in the aggregate, have a Material Adverse Effect. The Company
has complied and is in compliance with all applicable statutes,
laws, and regulations and executive orders of the United States
of America and all states, foreign countries and other
governmental bodies and agencies having jurisdiction over the
Company's business or properties.
3.12 Registration Rights. Except as provided in the
Investor Rights Agreement effective upon the Closing, the Company
is not currently subject to any grant or agreement to grant to
any person or entity any rights (including piggyback registration
rights) to have any securities of the Company registered with the
United States Securities and Exchange Commission ("SEC") or any
other governmental authority.
3.13 Title to Property and Assets. The properties and
assets of the Company are owned by the Company free and clear of
all mortgages, deeds of trust, liens, charges, encumbrances and
security interests except for statutory liens for the payment of
current taxes that are not yet delinquent and liens, encumbrances
and security interests that arise in the ordinary course of
business and do not affect material properties and assets of the
Company. With respect to the property and assets it leases, the
Company is in compliance with such leases in all material
respects.
3.14 SEC Documents.
(a) The Company has furnished to the Investor prior to
the date hereof copies of its Annual Report on Form 10-K for the
fiscal year ended September 30, 1996 ("Form 10-K"), and all other
registration statements, reports and proxy statements filed by
the Company with the Securities and Exchange Commission
("Commission") on or after September 30, 1996 (the Form 10-K and
such registration statements, reports and proxy statements, are
collectively referred to herein as the "SEC Documents"). Each of
the SEC Documents, as of the
<PAGE> 7
respective date thereof, did not, and each of the registration
statements, reports and proxy statements filed by the Company
with the Commission after the date hereof and prior to the
Closing will not, as of the date thereof, contain any untrue
statement of a material fact or omit to state a material fact
necessary in order to make the statements made therein, in light
of the circumstances under which they were made, not misleading,
except as may have been corrected in a subsequent SEC Document.
The Company is not a party to any material contract, agreement or
other arrangement which was required to have been filed as an
exhibit to the SEC Documents that is not so filed.
(b) The Company has provided the Investor with its
audited financial statements (the "Audited Financial Statements")
for the fiscal year ended September 30, 1996 (the "Balance Sheet
Date"). Since September 30, 1996, the Company has duly filed
with the Commission all registration statements, reports and
proxy statements required to be filed by it under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and the
1933 Act. The audited and unaudited consolidated financial
statements of the Company included in the SEC Documents filed
prior to the date hereof fairly present, in conformity with
generally accepted accounting principles ("GAAP") (except as
permitted by Form 10-Q) applied on a consistent basis (except as
may be indicated in the notes thereto), the consolidated
financial position of the Company and its consolidated
subsidiaries as at the date thereof and the consolidated results
of their operations and cash flows for the periods then ended
(subject to normal year and audit adjustments in the case of
unaudited interim financial statements).
(c) Except as and to the extent reflected or reserved
against in the Company's Audited Financial Statements (including
the notes thereto), the Company has no material liabilities
(whether accrued or unaccrued, liquidated or unliquidated,
secured or unsecured, joint or several, due or to become due,
vested or unvested, executory, determined or determinable) other
than: (i) liabilities incurred in the ordinary course of
business since the Balance Sheet Date that are consistent with
the Company's past practices, (ii) liabilities with respect to
agreements to which the Investor is a party, and (iii) other
Liabilities that either individually or in the aggregate, would
not result in a Material Adverse Effect.
3.15 Absence of Certain Changes Since Balance Sheet Date.
Since the Balance Sheet Date, the business and operations of the
Company have been conducted in the ordinary course consistent
with past practice, and there has not been:
(a) any declaration, setting aside or payment of any
dividend or other distribution of the assets of the Company with
respect to any shares of capital stock of the Company, or any
repurchase, redemption or other acquisition by the Company or any
subsidiary of the Company of any outstanding shares of the
Company's capital stock;
(b) any damage, destruction or loss, whether or not
covered by insurance, except for such occurrences that have not
resulted, and are not expected to result, in a Material Adverse
Effect;
<PAGE> 8
(c) any waiver by the Company of a valuable right or
of a material debt owed to it, except for such waivers that have
not resulted, and are not expected to result, in a Material
Adverse Effect;
(d) any material change or amendment to, or any waiver
of any material rights under, a material contract or arrangement
by which the Company or any of its assets or properties is bound
or subject, except for changes, amendments, or waivers that are
expressly provided for or disclosed in this Agreement or that
have not resulted, and are not expected to result, in a Material
Adverse Effect;
(e) any change by the Company in its accounting
principles, methods or practices or in the manner it keeps its
accounting books and records, except any such change required by
a change in GAAP; and
(f) any other event or condition of any character,
except for such events and conditions that have not resulted, and
are not expected to result, in a Material Adverse Effect.
3.16 Employee Benefits.
(a) As used in this Section 3.16, the following terms
have the following meanings: (1) "Benefit Arrangement" means any
material benefit arrangement that is not an Employee Benefit
Plan, including (i) each material employment or consulting
agreement, (ii) each material arrangement providing for insurance
coverage or workers' compensation benefits, (iii) each material
bonus or deferred bonus arrangement, (iv) each material
arrangement providing any termination allowance, severance or
similar benefits, (v) each equity compensation plan, (vi) each
deferred compensation plan and (vii) each material compensation
policy and practice maintained by the Company covering the
employees, former employees, officers, former officers, directors
and former directors of the Company, and the beneficiaries of any
of them; (2) "Benefit Plan" means an Employee Benefit Plan or
Benefit Arrangement; (3)"COBRA" means the Consolidated Omnibus
Budget Reconciliation Act of 1985, as amended, as set forth in
Section 4980B of the Code and Part 6 of Title I of ERISA; (4)
"Employee Benefit Plan" means any employee benefit plan, as
defined in Section 3(3) of ERISA, that is sponsored or
contributed to by the Company or any ERISA Affiliate covering
employees or former employees of the Company; (5) "Employee
Pension Benefit Plan" means any employee pension benefit plan, as
defined in Section 3(2) of ERISA that is regulated under Title IV
of ERISA, other than a Multiemployer Plan; (6) "ERISA" means the
Employee Retirement Income Security Act of 1974, as amended; (7)
"ERISA Affiliate" of the Company means any other person or entity
that, together with the Company as of the relevant measuring date
under ERISA, was or is required to be treated as a single
employer under Section 414 of the Code; (8)"Group Health Plan"
means any group health plan, as defined in Section 5000(b)(l) of
the Code; (9) "Multiemployer Plan" means a multiemployer plan, as
defined in Section 3(37) and 4001(a)(3) of ERISA; and (10)
"Prohibited Transaction" means a transaction that is prohibited
under Section 4975 of the Code or Section 406 of ERISA and not
exempt under Section 4975 of the Code or Section 408 of ERISA,
respectively.
<PAGE> 9
(b) Neither the Company nor any of its ERISA
Affiliates sponsors or has sponsored, maintained, contributed to,
or incurred an obligation to contribute to, any Employee Pension
Benefit Plan (whether or not terminated). Neither the Company
nor any of its ERISA Affiliates sponsors or has sponsored,
maintained, contributed to, or incurred an obligation to
contribute to, any Multiemployer Plan (whether or not
terminated).
(c) No Employee Benefit Plan has participated in,
engaged in or been a party to any Prohibited Transaction, and
neither the Company nor any of its ERISA Affiliates has had
asserted against it any claim for any material tax or material
penalty imposed under ERISA or the Code with respect to any
Employee Benefit Plan nor, to the best of the Company's
knowledge, is there a basis for any such claim. To the best
knowledge of the Company, no officer, director or employee of the
Company has committed a material breach of any responsibility or
obligation imposed upon fiduciaries by Title I of ERISA with
respect to any Employee Benefit Plan, with respect to which
breach the Company is directly or indirectly liable.
(d) Other than routine claims for benefits, there is
no material claim pending involving any Benefit Plan by any
Person against such plan or the Company or any ERISA Affiliate,
nor, to the best of the Company's knowledge, is any such material
claim threatened. There is no pending, or to the best of the
Company's knowledge, threatened Proceeding involving any Employee
Benefit Plan before the IRS, the United States Department of
Labor or any other governmental authority.
(e) No material violation of any reporting or
disclosure requirement imposed by ERISA or the Code exists with
respect to any Employee Benefit Plan.
(f) Each Benefit Plan has been maintained in all
material respects, by its terms and in operation, in accordance
with ERISA (if applicable), the Code and all other applicable
federal, state, local and foreign laws. The Company and its
ERISA Affiliates have made full and timely payment of all amounts
required to be (i) contributed under the terms of each Benefit
Plan and such laws, or (ii) required to be paid as expenses under
such Benefit Plan. Each Employee Benefit Plan that is intended
to be qualified under Section 401(a) of the Code either has
received a favorable determination letter with respect to such
qualified status from the IRS or has filed a request for such a
determination letter with the IRS within the remedial amendment
period such that such determination of qualified status will
apply from and after the effective date of any such Employee
Benefit Plan.
(g) With respect to any Group Health Plans maintained
by the Company or its ERISA Affiliates, whether or not for the
benefit of the Company's employees, the Company and its ERISA
Affiliates have complied in all material respects with the
provisions of COBRA.
(h) Except pursuant to the provisions of COBRA,
neither the Company nor any ERISA Affiliate maintains any
Employee Benefit Plan that provides benefits described in Section
3(1) of ERISA for any former employees or retirees, or the
beneficiaries of any of them, of the Company or its ERISA
Affiliates.
<PAGE> 10
3.17 Tax Matters.
(a) All deficiencies asserted or assessments made as a
result of any examinations by the Internal Revenue Service or any
state, local or foreign taxing authority have been fully paid, or
are fully reflected as a liability in the Audited Financial
Statements. The Company has filed on a timely basis all Tax
Returns required to have been filed by it and has paid on a
timely basis all Taxes required to be shown thereon as due. All
such Tax Returns are true, complete and correct in all material
respects. The provisions for taxes in the Audited Financial
Statements have been determined in accordance with GAAP. No
liability for Taxes has been incurred by the Company since the
Balance Sheet Date other than in the ordinary course of its
business. No director, officer or employee of the Company having
responsibility for Tax matters has reason to believe that any
Taxing authority has valid grounds to claim or assess any
additional Tax with respect to the Company in excess of the
amounts shown in the Audited Financial Statements for the periods
covered thereby. As used in this Agreement, (l) "Taxes" means
(x) all federal, state, local and other net income, gross income,
gross receipts, sales use, ad valorem, value added, intangible,
unitary, capital gain, transfer, franchise, profits, license,
lease, service, service use, withholding, backup withholding,
payroll, employment, estimated, excise, severance, stamp,
occupation, premium, property, prohibited transactions, windfall
or excess profits, customs, duties or other taxes, fees,
assessments or charges of any kind whatsoever, together with any
interest and any penalties, additions to tax or additional
amounts with respect thereto, (y) any liability for payment of
amounts described in clause (x) whether as a result of transferee
liability, of being a member of an affiliated, consolidated,
combined or unitary group for any period, or otherwise through
operation of law and (z) any liability for the payment of amounts
described in clauses (x) or (y) as a result of any tax sharing,
tax indemnity or tax allocation agreement or any other express or
implied agreement to indemnify any other person for Taxes; and
the term "Tax" means any one of the foregoing Taxes; and (2) "Tax
Returns" means all returns, reports, forms or other information
required to be filed with respect to any Tax.
(b) With respect to all amounts in respect of Taxes
imposed upon the Company, or for which the Company is or could be
liable, whether to taxing authorities (as, for example, under
law) or to other persons or entities (as, for example, under tax
allocation agreements), and with respect to all taxable periods
or portions of periods ending on or before the Closing Date, all
applicable Tax laws and agreements have been fully complied with,
and all such amounts required to be paid by the Company to taxing
authorities or others have been paid.
(c) The Company has not received notice that the
Internal Revenue Service or any other taxing authority has
asserted against the Company any deficiency or claim for
additional Taxes in connection with any Tax Return, and no issues
have been raised (and are currently pending) by any taxing
authority in connection with any Tax Return. The Company has not
received notice that it is or may be subject to Tax in a
jurisdiction in which it has not filed or does not currently file
Tax Returns.
3.18 Labor Agreements and Actions.
(a) No collective bargaining agreement exists that is
binding on the Company, and no petition has been filed or
proceedings instituted by an employee or group of
<PAGE> 11
employees with any labor relations board seeking recognition of a
bargaining representative. To the best of the Company's
knowledge, no organizational effort is currently being made or
threatened by or on behalf of any labor union to organize any
employees of the Company.
(b) There is no labor strike, dispute, slow down or
stoppage pending or threatened against or directly affecting the
Company. No grievance or arbitration proceeding arising out of
or under any collective bargaining agreement is pending, and no
claims therefor exist. The Company has not received any notice,
and has no knowledge of any threatened labor or civil rights
dispute, controversy or grievance or any other unfair labor
practice proceeding or breach of contact claim or action with
respect to claims of, or obligations to, any employee or group of
employees of the Company.
(c) All individuals who are performing or have
performed services for the Company and are or were classified by
the Company as "independent contractors" qualify for such
classification under Section 530 of the Revenue Act of 1978 or
Section 1706 of the Tax Reform Act of 1986, as applicable, except
for such instances which would not, in the aggregate, have a
Material Adverse Effect.
3.19 Real Property Holding Corporation Status. Since its
inception the Company has not been a "United States real property
holding corporation", as defined in Section 897(c)(2) of the U.S.
Internal Revenue Code of 1986, as amended, and in Section 1.897-
2(b) of the Treasury Regulations issued thereunder (the
"Regulations"), and the Company has filed with the Internal
Revenue Service all statements, if any, with its United States
income tax returns which are required under Section 1.897-2(h) of
the Regulations.
3.20 Full Disclosure. The information contained in this
Agreement and the Disclosure Letter with respect to the business,
operations, assets, results of operations and financial condition
of the Company, and the transactions contemplated by this
Agreement, the Investor Rights Agreement and the Warrant, are
true and complete in all material respects and do not omit to
state any material fact necessary in order to make the statements
therein, in light of the circumstances under which they were
made, not misleading.
4. REPRESENTATIONS, WARRANTIES AND CERTAIN AGREEMENTS OF THE
INVESTOR. The Investor hereby represents and warrants to the
Company, and agrees that:
4.l Authorization. This Agreement and the Investor Rights
Agreement have been duly authorized by all necessary corporate
action on the part of the Investor. This Agreement and the
Investor Rights Agreement constitute the Investor's valid and
legally binding obligations, enforceable in accordance with their
respective terms, except as may be limited by (a) applicable
bankruptcy, insolvency, reorganization or other laws of general
application relating to or affecting the enforcement of
creditors' rights generally and (b) the effect of rules of law
governing the availability of equitable remedies. The Investor
has full corporate power and authority to enter into this
Agreement and the Investor Rights Agreement
<PAGE> 12
4.2 Purchase for Own Account. The Purchased Shares and the
Warrant are being acquired for investment for the Investors own
account, not as a nominee or agent, and not with a view to the
public resale or distribution thereof within the meaning of the
1933 Act, and the Investor has no present intention of selling,
granting any participation in, or otherwise distributing the
same. The Investor also represents that it has not been formed
for the specific purpose of acquiring the Purchased Shares and
the Warrant.
4.3 Disclosure of Information. The Investor has received
or has had full access to all the information it considers
necessary or appropriate to make an informed investment decision
with respect to the Purchased Shares and the Warrant to be
purchased by the Investor under this Agreement. The Investor
further has had an opportunity to ask questions and receive
answers from the Company regarding the terms and conditions of
the offering of the Purchased Shares, the Warrant and the Warrant
Shares and to obtain additional information (to the extent the
Company possessed such information or could acquire it without
unreasonable effort or expense) necessary to verify any
information furnished to the investor or to which the Investor
had access. The foregoing, however, does not in any way limit or
modify the representations and warranties made by the Company in
Article 3.
4.4 Investment Experience. The Investor understands that
the purchase of the Purchased Shares and the Warrant involves
substantial risk. The Investor: (a) has experience as an
investor in securities of companies and acknowledges that it is
able to fend for itself, can bear the economic risk of its
investment in the Purchased Shares and the Warrant and has such
knowledge and experience in financial or business matters that it
is capable of evaluating the merits and risks of this investment
in the Purchased Shares and the Warrant and protecting its own
interests in connection with this investment and/or (b) has a
preexisting personal or business relationship with the Company
and certain of its officers, directors or controlling persons of
a nature and duration that enables the Investor to be aware of
the character, business acumen and financial circumstances of
such persons.
4.5 Accredited Investor Status. The Investor is an
"accredited investor" within the meaning of Regulation D
promulgated under the 1933 Act.
4.6 Restricted Securities. The Investor understands that
the Purchased Shares and the Warrant to be purchased by the
Investor hereunder, and any Warrant Shares to be purchased by the
Investor upon exercise of the Warrant, are characterized as
"restricted securities" under the 1933 Act inasmuch as they are
being acquired from the Company in a transaction not involving a
public offering and that under the 1933 Act and applicable
regulations thereunder such securities may be resold without
registration under the 1933 Act only in certain limited
circumstances. The Investor is familiar with Rule 144 of the
SEC, as presently in effect, and understands the resale
limitations imposed thereby and by the 1933 Act. The Investor
understands that the Company is under no obligation to register
any of the securities sold hereunder except as provided in the
Investor Rights Agreement.
4.7 Further Limitations on Disposition. Without in any way
limiting the representations set forth above, the Investor
further agrees not to make any disposition of all or any portion
of the Purchased Shares, the Warrant or the Warrant Shares unless
and until:
<PAGE> 13
(a) there is then in effect a registration statement
under the 1933 Act covering such proposed disposition and such
disposition is made in accordance with such registration
statement; or
(b) the Investor has notified the Company of the
proposed disposition and has furnished the Company with a
statement of the circumstances surrounding the proposed
disposition, and the Investor has furnished the Company, at the
expense of the Investor or its transferee, with an opinion of
counsel, reasonably satisfactory to the Company, that such
disposition will not require registration of such securities
under the 1933 Act.
Notwithstanding the provisions of paragraphs (a) and (b) of this
Section 4.7, no such registration statement or opinion of counsel
will be required for any transfer of any Purchased Shares, the
Warrant, or any Warrant Shares in compliance with SEC Rule 144,
Rule 144A or Rule 145(d), or if such transfer otherwise is
exempt, in the view of the Company's legal counsel, from the
registration requirements of the 1933 Act.
4.8 Legends. Certificates evidencing the Purchased Shares
and the Warrant Shares will bear each of the legends set forth
below and the Warrant will bear the legends set forth in (a) and
(c) below:
(a) THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT"), OR UNDER THE SECURITIES LAWS OF CERTAIN STATES. THESE
SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND
RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED
UNDER THE ACT AND THE APPLICABLE STATE SECURITIES LAWS, PURSUANT
TO REGISTRATION OR EXEMPTION THEREFROM. INVESTORS SHOULD BE
AWARE THAT THEY MAY BE REQUIRED TO BEAR THE FINANCIAL RISKS OF
THIS INVESTMENT FOR AN INDEFINITE PERIOD OF TIME. THE ISSUER OF
THESE SECURITIES MAY REQUIRE AN OPINION OF COUNSEL IN FORM AND
SUBSTANCE REASONABLY SATISFACTORY TO THE ISSUER TO THE EFFECT
THAT ANY PROPOSED TRANSFER OR RESALE IS IN COMPLIANCE WITH THE
ACT AND ANY APPLICABLE STATE SECURITIES LAWS.
(b) THE SHARES EVIDENCED BY THIS CERTIFICATE ARE
SUBJECT TO CERTAIN RESTRICTIONS SPECIFIED IN A CERTAIN INVESTOR
RIGHTS AGREEMENT BETWEEN THE COMPANY AND THE ORIGINAL HOLDER OF
SUCH SHARES DATED AS OF JANUARY 13, 1997, A COPY OF WHICH IS
AVAILABLE FOR EXAMINATION AT THE ISSUER'S PRINCIPAL OFFICE.
(c) Any Legends required by any applicable state
securities laws.
The Legend set forth in Section 4.8(a) hereof will be removed by
the Company from any certificate evidencing Purchased Shares or
the Warrant Shares upon delivery to the Company of an opinion by
counsel, reasonably satisfactory to the Company, that a
registration statement under the 1933 Act is at that time in
effect with respect to the legended security or that such
security
<PAGE> 14
can be freely transferred in a public sale without such a
registration statement being in effect and that such transfer
will not jeopardize the exemption or exemptions from registration
pursuant to which the Company issued the Purchased Shares, the
Warrant or the Warrant Shares.
5. CONDITIONS TO THE INVESTOR'S OBLIGATIONS AT CLOSING. The
obligations of the Investor under Sections l and 2 of this
Agreement are subject to the fulfillment or waiver, on or before
the Closing (defined in Section 2.l), of each of the following
conditions:
5.1 Representations and Warranties True. Each of the
representations and warranties of the Company contained in
Section 3 will be true and correct on and as of the date hereof
and on and as of the date of the Closing, except as set forth in
the Disclosure Letter, as amended through the Closing, with the
same effect as though such representations and warranties had
been made as of the Closing.
5.2 Performance. The Company will have performed and
complied with all agreements, obligations and conditions
contained in this Agreement that are required to be performed or
complied with by it on or before the Closing and will have
obtained all approvals, consents and qualifications necessary to
complete the purchase and sale described herein.
5.3 Compliance with HSR Requirements. The HSR Requirements
shall have been complied with.
5.4 Compliance Certificate. The Company will have
delivered to the Investor at the Closing a certificate signed on
its behalf by its Chief Executive Officer or Chief Financial
Officer certifying that the conditions specified in Sections 5.1
and 5.2 hereof have been fulfilled.
5.5 Securities Exemptions. The offer and sale of the
Purchased Shares and the Warrant to the Investor pursuant to this
Agreement will be exempt from the registration requirements of
the 1933 Act and the registration and/or qualification
requirements of all applicable state securities laws.
5.6 Proceedings and Documents. All corporate and other
proceedings in connection with the transactions contemplated at
the Closing and all documents incident thereto will be reasonably
satisfactory in form and substance to the Investor, and the
Investor will have received all such counterpart originals and
certified or other copies of such documents as it may reasonably
request. Such documents shall include (but not be limited to)
the following:
(a) Certified Charter Documents. A copy of (i) the
Articles of Incorporation certified as of a recent date by the
Secretary of State of California as a complete and correct copy
thereof, and (ii) the Bylaws of the Company (as amended through
the date of the Closing) certified by the Secretary of the
Company as true and correct copies thereof as of the Closing.
(b) Board Resolutions. A copy, certified by the
Secretary of the Company, of the resolutions of the Board of
Directors of the Company providing for the approval of this
Agreement and the Investor Rights Agreement and the issuance of
the Purchased Shares and the Warrant and the other matters
contemplated hereby.
<PAGE> 15
5.7 Opinion of Company Counsel. The Investor will have
received an opinion on behalf of the Company, dated as of the
date of the Closing, from Wilson, Sonsini, Goodrich & Rosati, in
form and substance reasonably satisfactory to the Investor.
5.8 Warrant and Investor Rights Agreement. The Company
will have issued the Warrant and will have executed and delivered
the Investor Rights Agreement substantially in the form attached
to this Agreement as Exhibit B (the "Investor Rights Agreement").
5.9 No Material Adverse Effect. Between the date hereof
and the Closing, there shall not have occurred any Material
Adverse Effect.
6. CONDITIONS TO THE COMPANY'S OBLIGATIONS AT CLOSING. The
obligations of the Company to the Investor under this Agreement
are subject to the fulfillment or waiver on or before the Closing
(defined in Section 2.1), of each of the following conditions:
6.1 Representations and Warranties True. The
representations and warranties of the Investor contained in
Section 4 will be true and correct on and as of the date hereof
and on and as of the date of the Closing with the same effect as
though such representations and warranties had been made as of
the Closing.
6.2 Payment of Purchase Price. The Investor will have
delivered to the Company the full purchase price of the Purchased
Shares as specified in Section 1.2.
6.3 Compliance with HSR Requirements. The HSR Requirements
shall have been complied with.
6.4 Securities Exemptions. The offer and sale of the
Purchased Shares and the Warrant to the Investor pursuant to this
Agreement will be exempt from the registration requirements of
the 1933 Act and the registration and/or qualification
requirements of all applicable state securities laws.
6.5 Proceedings and Documents. All corporate and other
proceedings in connection with the transactions contemplated at
the Closing and all documents incident thereto will be reasonably
satisfactory in form and substance to the Company and to the
Company's legal counsel, and the Company will have received all
such counterpart originals and certified or other copies of such
documents as it may reasonably request.
6.6 Investor Rights Agreement. The Investor will have
executed and delivered the Investor Rights Agreement.
6.7 Opinion of Investor Counsel. The Company will have
received an opinion on behalf of the Investor, dated as of the
date of the Closing, from Gibson, Dunn & Crutcher, LLP and/or
Intel Corporation in house counsel, in form and substance
reasonably satisfactory to the Company.
<PAGE> 16
7. INDEMNIFICATION.
7.1 Agreement to Indemnify.
(a) Company Indemnity. The Investor, its Affiliates
and Associates, and each officer, director, shareholder,
employer, representative and agent of any of the foregoing
(collectively, the "Investor Indemnitees") shall each be
indemnified and held harmless to the extent set forth in this
Section 7 by the Company with respect to any and all Damages (as
defined below) incurred by any Investor Indemnitee as a proximate
result of any inaccuracy or misrepresentation in, or breach of,
any representation, warranty, covenant or agreement made by the
Company in this Agreement, the Investor Rights Agreement or the
Warrant (including any Exhibits and Schedules hereto).
(b) Investor Indemnity. The Company, its respective
Affiliates and Associates, and each officer, director,
shareholder, employer, representative and agent of any of the
foregoing (collectively, the "Company Indemnitees") shall each be
indemnified and held harmless to the extent set forth in this
Section 7, by the Investor, in respect of any and all Damages
incurred by any Company Indemnitee as a result of any inaccuracy
or misrepresentation in, or breach of, any representation,
warranty, covenant or agreement made by the Investor in this
Agreement or the Investor Rights Agreement.
(c) Equitable Relief. Nothing set forth in this
Section 7 shall be deemed to prohibit or limit any Investor
Indemnitee's or Company Indemnitee's right at any time before, on
or after the Closing Date, to seek injunctive or other equitable
relief for the failure of any Indemnifying Party to perform or
comply with any covenant or agreement contained herein.
7.2 Survival. All representations and warranties of the
Investor and the Company contained herein or in the Investor
Rights Agreement or the Warrant, and all claims of any Investor
Indemnitee or Company Indemnitee in respect of any inaccuracy or
misrepresentation in or breach thereof, shall survive the Closing
until the later of (i) the date of termination of the Right of
Participation under the Investor Rights Agreement, and (ii) the
third anniversary of the date of this Agreement, regardless of
whether the applicable statute of limitations, including
extensions thereof, may expire (except to the extent any such
covenant or agreement shall expire by its terms). All covenants
and agreements of the Investor and the Company contained herein
or in the Investor Rights Agreement or the Warrant shall survive
the Closing in perpetuity (except to the extent any such covenant
or agreement shall expire by its terms). All claims of any
Investor Indemnitee or Company Indemnitee in respect of any
breach of such covenants or agreements shall survive the Closing
until the expiration of two years following the non-breaching
party's obtaining actual knowledge of such breach.
7.3 Claims for Indemnification. If any Investor Indemnitee
or Company Indemnitee (an "Indemnitee") shall believe that such
Indemnitee is entitled to indemnification pursuant to this
Section 7 in respect of any Damages, such Indemnitee shall give
the appropriate Indemnifying Party (which for purposes hereof, in
the case of an Investor Indemnitee, means the Company, and in the
case of a Company Indemnitee, means the Investor) prompt written
notice thereof. Any such notice shall set forth in reasonable
detail and to the extent then known the basis
<PAGE> 17
for such claim for indemnification. The failure of such
Indemnitee to give notice of any claim for indemnification
promptly shall not adversely affect such Indemnitee's right to
indemnity hereunder except to the extent that such failure
adversely affects the right of the Indemnifying Party to assert
any reasonable defense to such claim. Each such claim for
indemnity shall expressly state that the Indemnifying Party shall
have only the twenty (20) business day period referred to in the
next sentence to dispute or deny such claim. The Indemnifying
Party shall have twenty (20) business days following its receipt
of such notice either (a) to acquiesce in such claim by giving
such Indemnitee written notice of such acquiescence or (b) to
object to the claim by giving such Indemnitee written notice of
the objection. If Indemnifying Party does not object thereto
within such twenty (20) business day period, such Indemnitee
shall be entitled to be indemnified for all Damages reasonably
and proximately incurred by such Indemnitee in respect of such
claim. If the Indemnifying Party objects to such claim in a
timely manner, the senior management of the Company and the
Investor shall meet to attempt to resolve such dispute. If the
dispute cannot be resolved by the senior management either party
may make a written demand for formal dispute resolution and
specify therein the scope of the dispute. Within thirty days
after such written notification, the parties agree to meet for
one day with an impartial mediator and consider dispute
resolution alternatives other than litigation. If an alternative
method of dispute resolution is not agreed upon within thirty
days after the one day mediation, either party may begin
litigation proceedings. Nothing in this section shall be deemed
to require arbitration.
7.4 Defense of Claims. In connection with any claim that
may give rise to indemnity under this Section 7 resulting from or
arising out of any claim or Proceeding against an Indemnitee by a
person or entity that is not a party hereto, the Indemnifying
Party may but shall not be obligated to (unless such Indemnitee
elects not to seek indemnity hereunder for such claim), upon
written notice to the relevant Indemnitee, assume the defense of
any such claim or proceeding if the Indemnifying Party with
respect to such claim or Proceeding acknowledges to the
Indemnitee the Indemnitee's right to indemnity pursuant hereto to
the extent provided herein (as such claim may have been modified
through written agreement of the parties or arbitration
hereunder) and provides assurances, satisfactory to such
Indemnitee, that the Indemnifying Party will be financially able
to satisfy such claim to the extent provided herein if such claim
or Proceeding is decided adversely; provided, however, that
nothing set forth herein shall be deemed to require the
Indemnifying Party to waive any crossclaims or counterclaims the
Indemnifying Party may have against the Indemnified Party for
damages. The Indemnified Party shall be entitled to retain
separate counsel, reasonably acceptable to the Indemnifying
Party, if the Indemnified Counsel shall determine, upon the
written advice of counsel, that an actual or potential conflict
of interest exists between the Indemnifying Party and the
Indemnified Party in connection with such Proceeding. The
Indemnifying Party shall be obligated to pay the reasonable fees
and expenses of such separate counsel to the extent the
Indemnified Party is entitled to indemnification by the
Indemnifying Party with respect to such claim or Proceeding under
this Section 7.4. If the Indemnifying Party assumes the defense
of any such claim or Proceeding, the Indemnifying Party shall
select counsel reasonably acceptable to such Indemnitee to
conduct the defense of such claim or Proceeding, shall take all
steps necessary in the defense or settlement thereof and shall at
all times diligently and promptly pursue the resolution thereof.
If the Indemnifying Party shall have assumed the defense of any
claim or Proceeding in accordance with this Section 7.4, the
Indemnifying Party shall be authorized to consent to a settlement
of, or
<PAGE 18>
the entry of any judgment arising from, any such claim or
Proceeding, with the prior written consent of such Indemnitee,
not to be unreasonably withheld; provided, however, that the
Indemnifying Party shall pay or cause to be paid all amounts
arising out of such settlement or judgment concurrently with the
effectiveness thereof; provided, further, that the Indemnifying
Party shall not be authorized to encumber any of the assets of
any Indemnitee or to agree to any restriction that would apply to
any Indemnitee or to its conduct of business; and provided,
further, that a condition to any such settlement shall be a
complete release of such Indemnitee and its Affiliates,
directors, officers, employees and agents with respect to such
claim, including any reasonably foreseeable collateral
consequences thereof. Such Indemnitee shall be entitled to
participate in (but not control) the defense of any such action,
with its own counsel and at its own expense. Each Indemnitee
shall, and shall cause each of its Affiliates, directors,
officers, employees and agents to, cooperate fully with the
Indemnifying Party in the defense of any claim or Proceeding
being defended by the Indemnifying Party pursuant to this Section
7.4. If the Indemnifying Party does not assume the defense of
any claim or Proceeding resulting therefrom in accordance with
the terms of this Section 7.4, such Indemnitee may defend against
such claim or Proceeding in such manner as it may deem
appropriate, including settling such claim or proceeding after
giving notice of the same to the Indemnifying Party, on such
terms as such Indemnitee may deem appropriate. If any
Indemnifying Party seeks to question the manner in which such
Indemnitee defended such claim or Proceeding or the amount of or
nature of any such settlement, such Indemnifying Party shall have
the burden to prove by a preponderance of the evidence that such
Indemnitee did not defend such claim or Proceeding in a
reasonably prudent manner.
7.5 Certain Definitions. As used in this Section 7, (a)
"Affiliate" means, with respect to any person or entity, any
person or entity directly or indirectly controlling, controlled
by or under direct or indirect common control with such other
person or entity; (b) "Associate" means, when used to indicate a
relationship with any person or entity, (l) any other person or
entity of which such first person or entity is an officer,
director or partner or is, directly or indirectly, the beneficial
owner of ten percent (10%) or more of any class of equity
securities, membership interests or other comparable ownership
interests issued by such other person or entity, (2) any trust or
other estate in which such first person or entity has a ten
percent (10%) or more beneficial interest or as to which such
first person or entity serves as trustee or in a similar
fiduciary capacity, and (3) any relative or spouse of such first
person or entity who has the same home as such first person or
entity or who is a director or officer of such first person or
entity; (c) "Damages" means all demands, claims, actions or
causes of action, assessments, losses, damages, costs, expenses,
liabilities, judgments, awards, fines, response costs, sanctions,
taxes, penalties, charges and amounts paid in settlement,
including (1) interest on cash disbursements in respect of any of
the foregoing at the prime rate of Bank of America, NT & SA, as
in effect from time to time, compounded quarterly, from the date
each such cash disbursement is made until the date the party
incurring such cash disbursement shall have been indemnified in
respect thereof, and (2) reasonable out-of-pocket costs, fees and
expenses (including reasonable costs, fees and expenses of
attorneys, accountants and other agents of, or other parties
retained by, such party), and (d) "Proceeding" means any action,
suit, hearing, arbitration, audit, proceeding (public or private)
or investigation that is brought or initiated by or against any
federal, state, local or foreign governmental authority or any
other person or entity.
<PAGE> 19
8.1 Successors and Assigns. The terms and conditions of
this Agreement will inure to the benefit of and be binding upon
the respective successors and assigns of the parties.
8.2 Governing Law. This Agreement will be governed by and
construed under the internal laws of the State of California as
applied to agreements among California residents entered into and
to be performed entirely within California, without reference to
principles of conflict of laws or choice of laws.
8.3 Counterparts. This Agreement may be executed in two or
more counterparts, each of which will be deemed an original, but
all of which together will constitute one and the same
instrument.
8.4 Headings. The headings and captions used in this
Agreement are used for convenience only and are not to be
considered in construing or interpreting this Agreement. All
references in this Agreement to sections, paragraphs, exhibits
and schedules will, unless otherwise provided, refer to sections
and paragraphs hereof and exhibits and schedules attached hereto,
all of which exhibits and schedules are incorporated herein by
this reference.
8.5 Notices. Any notice required or permitted under this
Agreement will be given in writing, shall be effective when
received, and shall in any event be deemed received and
effectively given upon personal delivery to the party to be
notified or three (3) business days after deposit with the United
States Post Office, by registered or certified mail, postage
prepaid, or one (1) business day after deposit with a nationally
recognized courier service such as Fedex for next business day
delivery, or one (1) business day after facsimile with copy
delivered by registered or certified mail, postage prepaid and
addressed to the party to be notified at the address indicated
for such party on the signature page hereof or at such other
address as the Investor or the Company may designate by giving at
least ten (10) days advance written notice pursuant to this
Section 8.5.
8.6 No Finder's Fees. Each party represents that it
neither is nor will be obligated for any finder's or broker's fee
or commission in connection with this transaction other than the
fees of Goldman Sachs & Co. to be paid by the Company. The
Investor will indemnify and hold harmless the Company from any
liability for any commission or compensation in the nature of a
finders' or broker's fee for which the Investor or any of its
officers, partners, employees or consultants, or representatives
is responsible. The Company will indemnify and hold harmless the
Investor from any liability for any commission or compensation in
the nature of a finder's or broker's fee for which the Company or
any of its officers, employees or consultants or representatives
is responsible.
8.7 Amendments and Waivers. This Agreement may be amended
and the observance of any term of this Agreement may be waived
(either generally or in a particular instance and either
retroactively or prospectively), only with the written consent of
the Company and the holders of Purchased Shares and/or Warrant
Shares representing at least a majority of the total aggregate
number of Purchased Shares and Warrant Shares then outstanding
(excluding any of such shares that have been sold to the public
pursuant to SEC Rule 144 or otherwise). Any
<PAGE> 20
amendment or waiver effected in accordance with this Section 8.7
will be binding upon the Investor, the Company and their
respective successors and assigns.
8.8 Severability. If any provision of this Agreement is
held to be unenforceable under applicable law, such provision
will be excluded from this Agreement and the balance of the
Agreement will be interpreted as if such provision were so
excluded and will be enforceable in accordance with its terms.
8.9 Entire Agreement. This Agreement, together with all
Exhibits and schedules hereto, constitutes the entire agreement
and understanding of the parties with respect to the subject
matter hereof and supersedes any and all prior negotiations,
correspondence, agreements, understandings duties or obligations
between the parties with respect to the subject matter hereof.
8.10 Further Assurances. From and after the date of this
Agreement upon the request of the Investor or the Company, the
Company and the Investor will execute and deliver such
instruments, documents or other writings as may be reasonably
necessary or desirable to confirm and carry out and to effectuate
fully the intent and purposes of this Agreement.
8.11 Meaning of Include and Including. Whenever in this
Agreement the word "include" or "including" is used, it shall be
deemed to mean "include, without limitation" or "including,
without limitation," as the case may be, and the language
following "include" or "including" shall not be deemed to set
forth an exhaustive list.
8.12 Fees, Costs and Expenses. All fees, costs and expenses
(including attorneys' fees and expenses) incurred by either party
hereto in connection with the preparation, negotiation and
execution of this Agreement, the Investor Rights Agreement and
the Warrant and the consummation of the transactions contemplated
hereby and thereby, shall be the sole and exclusive
responsibility of such party.
[The remainder of this page is intentionally left blank.]
<PAGE> 21
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first above written.
XIRCOM, INC. INTEL CORPORATION
By: /s/Dirk I. Gates By: /s/Arvind Sodhani
Name: Dirk I. Gates Name: Arvind Sodhani
Title: Chairman, President Title: Vice President and
and Chief Executive Treasurer
Officer
Date Signed: January 13, 1997 Date Signed: January 13, 1997
Address: 2300 Corporate Address: 2200 Mission
Center Drive College Boulevard
Thousand Oaks, Santa Clara,
California 91320 California 95052
Telephone No: (805)376-9300 Telephone No: (408)765-1240
Facsimile No: (805)376-9120 Facsimile No: (408)765-1611
[Signature Page to Common Stock and Warrant Purchase Agreement]
<PAGE> 22
COMMON STOCK AND WARRANT PURCHASE AGREEMENT
LIST OF EXHIBITS
Exhibit A - Form of Warrant
Exhibit B - Form of Investor Rights Agreement
EXHIBIT 2
WARRANT TO PURCHASE SHARES
OF COMMON STOCK
OF
XIRCOM, INC.
<PAGE>
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR UNDER THE
SECURITIES LAWS OF CERTAIN STATES. THESE SECURITIES ARE SUBJECT
TO RESTRICTIONS ON TRANSFERABILITY AND RESALE AND MAY NOT BE
TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE ACT AND THE
APPLICABLE STATE SECURITIES LAWS, PURSUANT TO REGISTRATION OR
EXEMPTION THEREFROM. INVESTORS SHOULD BE AWARE THAT THEY MAY BE
REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS INVESTMENT FOR AN
INDEFINITE PERIOD OF TIME. THE ISSUER OF THESE SECURITIES MAY
REQUIRE AN OPINION OF COUNSEL IN FORM AND SUBSTANCE SATISFACTORY
TO THE ISSUER TO THE EFFECT THAT ANY PROPOSED TRANSFER OR RESALE
IS IN COMPLIANCE WITH THE ACT AND ANY APPLICABLE STATE SECURITIES
LAWS.
Void after 5:00 p.m.,
Pacific Time
on February 27, 2002
WARRANT TO PURCHASE SHARES OF COMMON STOCK
OF
XIRCOM, INC.
Initial Number of Shares: 1,509,903 shares
Date of Grant: February 28, 1997
Expiration Date: February 27, 2002
THIS CERTIFIES THAT, for value received pursuant to that certain
Common Stock and Warrant Purchase Agreement dated as of January
13, 1997 (the "Purchase Agreement), Intel Corporation and any
person to whom the interest in this Warrant is lawfully
transferred pursuant to the terms and conditions set forth herein
(the original holder hereof and such transferees are referred to
hereinafter as the "Holder") is entitled to purchase, at any time
and from time to time after the date hereof, up to the above
number (as adjusted pursuant to Section 2 hereof) of fully paid
and nonassessable shares of the Common Stock (the "Shares") of
Xircom, Inc., a California corporation (the "Company"), at the
applicable Per Share Exercise Price as set forth in Section 1.1
hereof, subject to the provisions and upon the terms and
conditions set forth herein.
This Warrant is subject to the following terms and conditions:
1. EXERCISE.
1.1 Per Share Purchase Price. The "Per Share Purchase
Price" at which this Warrant may be exercised shall be as set
forth in the following table, subject to adjustment as provided
in Section 2 hereof:
<PAGE> 2
Date of Exercise Price
---------------- -----
From February 28, 1997 through February 27, 1998 $22.8525
From February 28, 1998 through February 27, 1999 $27.0075
From February 28, 1999 through February 27, 2002 $31.1625
1.2 Expiration. This Warrant shall expire and be canceled
in its entirety on the Expiration Date set forth above and must
be exercised, if at all, on or before the Expiration Date
(subject only to the provisions of Section 1.6 below).
1.3 Exercise.
(a) The purchase right represented by this Warrant may
be exercised by the Holder, in whole or in part, for up to the
total number of shares then exercisable, by the surrender of this
Warrant (with the Common Stock Warrant Notice of Exercise form
attached hereto as Annex I duly executed) at the principal office
of the Company and by the payment to the Company in cash (by wire
transfer), in an amount equal to the then applicable Purchase
Price Per Share multiplied by the number of Shares then being
purchased.
(b) In lieu of exercising this Warrant by payment of
cash, when permitted by law and applicable regulations, the
Holder may pay such exercise price through a "same day sale"
commitment from the Holder and a broker-dealer that is a member
of the National Association of Securities Dealers (an "NASD
Dealer") whereby the Holder irrevocably elects to exercise the
Warrant and to sell a portion of the Shares so purchased to pay
for the exercise price and whereby the NASD Dealer irrevocably
commits upon receipt of such Shares to forward the exercise price
directly to the Company.
(c) In lieu of exercising this Warrant by payment of
cash or by payment through a same day sale, the Holder may elect
to receive, without the payment by the Holder of any additional
consideration, a number of shares (rounded down to the nearest
whole share) equal to the value of this Warrant or any portion
hereof by the surrender of this Warrant or such portion to the
Company (the "Net Exercise"), with the net issue election
initialed in the Common Stock Warrant Notice of Exercise annexed
hereto duly executed, at the office of the Company. Thereupon
the Company will issue to the Holder such number of shares of
Common Stock of the Company as is computed using the following
formula.
<PAGE> 3
X = Y (A-B)
-------
A
where X = the number of shares of Common Stock to be issued to
the Holder upon the Net Exercise pursuant to this
Section 1.3;
Y = the number of Shares exercised under this Warrant for
which the net issue election is made pursuant to this
Section 1.3 (upon such Net Exercise, the number of
shares subject to further exercise under this Warrant
shall be reduced by this number);
A = the Market Price (as defined below) of one share of
the Company's Common Stock on the date the net issue
election is made pursuant to this Section 1.3; and
B = the Per Share Purchase Price in effect under this
Warrant on the date the net issue election is made
pursuant to this Section 1.3.
For purposes of this Section 1.3, "Market Price" means, as to a
share of Common Stock, the average of the closing prices of sales
on all domestic securities exchanges on which the Common Stock
may at the time be listed, or, if there have been no sales on any
such exchange on any day, the average of the highest bid and
lowest asked prices on all such exchanges at the end of such day,
or, if on any day the Common Stock is not so listed, the average
of the representative bid and asked prices quoted in the Nasdaq
National Market as of 4:00 P.M., New York time, on such day, or,
if on any day the Common Stock is not quoted in the Nasdaq
National Market, the average of the highest bid and lowest asked
prices on such day in the domestic over-the-counter market as
reported by the National Quotation Bureau, Incorporated, or any
similar successor organization, in each such case averaged over a
period of thirty (30) Trading Days immediately preceding the date
the net issue election or other exercise is made pursuant to this
Section 1.3; provided, however, that if the Common Stock is
listed on any domestic securities exchange the term "Trading
Days" as used in this sentence means days on which such exchange
is open for trading. If at any time the Common Stock is not
listed on any domestic securities exchange or quoted in the
Nasdaq National Market or the domestic over-the counter market,
the "Market Price" shall be the fair value thereof determined
jointly by the Company and the Holder; provided, however, that if
such parties are unable to reach agreement within fifteen (15)
business days following written notice from the Holder to the
Company setting forth the Holder's determination of such fair
value, such fair value shall be determined by an appraiser
jointly selected by the Company and the Holder. The
determination of such appraiser shall be final and binding on the
Company and the Holder, and the fees and expenses of such
appraiser shall be paid by the Company.
1.4 Limitations on Exercise. The exercise of this Warrant,
and the issuance of the Shares will be subject to and conditioned
upon compliance by the Company and the Holder with all applicable
state and federal laws and regulations and with all applicable
requirements of any stock exchange or automated quotation system
on which the Company's common stock may be listed or quoted at
the time of such issuance or transfer. The Company shall, at its
sole cost and expense, use its reasonable best efforts to make
all filings, notices and applications required
<PAGE> 4
by the Company (excluding filings, notices and applications
required by the Holder), and take all other actions necessary to
permit the exercise of this Warrant by the Holder and the
issuance of the Shares to the Holder, and the Holder shall
cooperate with all reasonable requests of the Company in
connection therewith. This Warrant may not be exercised as to
fewer than 50,000 Shares unless it is exercised as to all Shares
as to which the Warrant is then exercisable.
1.5 Issuance of New Warrant. In the event of any exercise
of the purchase right represented by this Warrant, certificates
for the Shares so purchased will be delivered to the Holder
within four (4) business days after receipt of such payment and,
unless this Warrant has been fully exercised or has expired, a
new Warrant representing the portion of the Shares, if any, with
respect to which this Warrant will not then have been exercised
will also be issued to the Holder within a reasonable time.
1.6 Hart Scott-Rodino Compliance.
(a) The Company hereby acknowledges that the exercise
of this Warrant by Holder may subject the Company and/or the
Holder to the filing requirements of the Hart-Scott Rodino
Antitrust Improvements Act of 1976 (the "HSR Act") and that the
Holder may be prevented from closing the exercise of this Warrant
until the expiration or early termination of all waiting periods
imposed by, and compliance with all other requirements under, the
HSR Act ("HSR Requirements"). If on or before the Expiration
Date, the Holder (i) has sent the Common Stock Warrant Notice of
Exercise to the Company, (ii) has irrevocably elected to exercise
this Warrant for the number of Shares specified in such notice
subject only to compliance with the HSR Requirements, and (iii)
the Holder has not been able to complete the exercise of this
Warrant prior to the Expiration Date solely because of the HSR
Requirements, then, for so long as the Holder actively continues
in its effort to comply with the HSR Requirements, the Holder
shall be entitled to complete the process of exercising this
Warrant for such number of Shares in accordance with the
procedures contained herein notwithstanding the fact that
completion of the exercise of this Warrant would take place after
the Expiration Date. If an exercise by Holder is subject to HSR
Requirements, the amount payable upon such exercise shall be paid
to the Company within five (5) business days of the Holder's
receiving written notice the expiration or notice of early
termination of, or compliance with, all HSR Requirements.
(b) The Company and the Holder shall use all
reasonable efforts to comply with the HSR Requirements; provided,
however, that neither the Company nor the Holder shall be under
any obligation to comply with any request or requirement imposed
by the Federal Trade Commission (the "FTC"), the Department of
Justice ("DofJ") or any other governmental authority in
connection with their compliance with the HSR Requirements if the
Company or the Holder reasonably determines that such compliance
is unduly burdensome. Without limiting the generality of the
foregoing, neither the Company nor the Holder shall be obligated
to comply with any request by, or requirement of, the FTC, the
DofJ or any other governmental authority, that such party
determines is unduly burdensome: (i) to disclose information the
Company or the Holder, as the case may be, desires to keep
confidential; (ii) to dispose or any assets or operations; or
(iii) to comply with any restriction on the manner in which they
conduct their respective operations. In the event that the
Company shall elect not to comply with any of the HSR
Requirements pursuant to the immediately preceding sentence, it
shall be
<PAGE> 5
obligated to pay to the Holder within sixty (60) business days
following written election from the Holder an amount equal to the
difference between: (1) the Market Price as of the date of the
Common Stock Warrant Notice of Exercise, multiplied by the number
of Shares to which such notice relates; and (2) the Per Share
Purchase Price, multiplied by the number of such Shares.
2. ADJUSTMENT OF NUMBER OF SHARES AND PER SHARE PURCHASE PRICE.
The number of Shares purchasable upon the exercise of this
Warrant, and the Per Share Purchase Price, will be subject to
adjustment from time to time as provided in this Section 2:
2.1 Subdivision or Combination of Common Stock. If the
Company at any time subdivides (by any stock split, stock
dividend, recapitalization or otherwise) its outstanding shares
of Common Stock into a greater number of shares, the Per Share
Purchase Price in effect immediately prior to such subdivision
shall be proportionately reduced and the number of shares of
Common Stock obtainable upon exercise of this Warrant shall be
proportionately increased. If the Company at any time combines
(by reverse stock split or otherwise) its outstanding shares of
Common Stock into a smaller number of shares, the Per Share
Purchase Price in effect immediately prior to such combination
shall be proportionately increased and the number of shares of
Common Stock obtainable upon exercise of this Warrant shall be
proportionately decreased.
2.2 Stock Dividends. If the Company at any time while this
Warrant remains outstanding and unexpired pays a dividend,
without receipt of consideration therefor, to the holders of
Common Stock payable in shares of Common Stock, Preferred Stock,
other capital stock or other securities convertible into or
exchangeable for Common Stock, Preferred Stock or other capital
stock ("Convertible Securities"), or options to purchase Common
Stock, Preferred Stock, other capital stock or Convertible
Securities ("Options"), other than any event for which adjustment
is made pursuant to Section 2.1 hereof, the Holder shall, upon
exercise of this Warrant be entitled to receive, in addition to
the number of Shares receivable thereupon, the amount of Common
Stock, Preferred Stock, other capital stock, Convertible
Securities or Options that such Holder would have received had it
been Holder of record of such Shares as of the date on which
holders of Common Stock received or became entitled to receive
such additional shares of Common Stock, Preferred Stock, other
capital stock, Convertible Securities or Options. Any adjustment
under this Section 2.2 will become effective on the record date
or, if there is no record date, on the date of issuance.
2.3 Reorganization, Reclassifications, Mergers or Sales.
Any recapitalization, reorganization, reclassification,
consolidation, merger, sale of all or substantially all of the
Company's assets or other transaction (including, without
limitation, any Corporate Event (as defined in the Investor
Rights Agreement)), in each case that is effected in such a way
that the holders of Common Stock are entitled to receive (either
directly or upon subsequent liquidation) stock, securities or
assets, or a combination thereof, with respect to or in exchange
for Common Stock is referred to herein as an "Organic Change."
Prior to the consummation of any Organic Change, other than any
event for which adjustment is made pursuant to Section 2.1 or 2.2
hereof, the Company shall, subject to Section 1.2(c), make
appropriate provision (in form and substance reasonably
satisfactory to the Holder) to ensure that the Holder shall
thereafter have the right to acquire and receive, upon exercise
of this Warrant in accordance with its terms and upon payment
<PAGE> 6
of the Per Share Exercise Price then in effect, in lieu of each
Share of Common Stock immediately theretofore acquirable and
receivable upon the exercise of this Warrant, such shares of
stock, securities or assets as may be issued or payable with
respect to each share of Common Stock immediately theretofore
acquirable and receivable upon exercise of the Warrant had the
Warrant been exercised immediately prior to such Organic Change.
The Company shall not effect any such consolidation, merger or
sale, unless prior to the consummation thereof, the successor
entity (if other than the Company) resulting from consolidation
or merger or the entity purchasing such assets assumes by written
instrument, the obligation to deliver to such Holder such shares
of stock, securities or assets as, in accordance with the
foregoing provisions, such Holder may be entitled to acquire.
2.4 Certain Events. If (i) any event occurs of a type that
would have an effect on the rights granted under this Warrant
similar to the effect of any event described by the other
provisions of this Section 2 and (ii) such event is not expressly
provided for by such other provisions (including, without
limitation, the granting of stock appreciation rights, phantom
stock rights or other rights with equity features), then an
appropriate adjustment in the Per Share Purchase Price and the
number of shares of Common Stock obtainable upon exercise of this
Warrant so as to protect the rights of the Holder shall be made.
2.5 Notices.
(a) Within ten (10) business days of any adjustment of
the Per Share Purchase Price, the Company shall give written
notice thereof to the Holder, setting forth and certifying in
reasonable detail the facts causing such adjustment and the
calculation of such adjustment. The Company will give due
consideration to, and consult with counsel regarding, any
objection the Holder may have to the matters described in such
notice, and will make any corrections to such notice deemed
necessary to conform with the terms of this Warrant.
(b) The Company shall give written notice to the
Holder at least ten (10) business days prior to the date on which
the Company closes its books or takes a record (A) with respect
to any dividend or distribution (cash or otherwise) upon the
Common Stock, (B) with respect to any pro rata subscription or
other offer to holders of Common Stock and (C) for determining
rights to vote with respect to any Organic Change, dissolution or
liquidation.
(c) The Company shall also give written notice to the
Holder at least ten (10) business days prior to the date on which
any Organic Change, dissolution or liquidation shall take place,
and, for so long as Intel Corporation or any of its Majority
Owned Subsidiaries holds the Warrant or any portion thereof, at
least three (3) business days prior to the date it enters into an
agreement to do any of the foregoing.
3. TRANSFERABILITY OF WARRANT.
3.1 Majority Owned Subsidiary. A "Majority Owned
Subsidiary" shall mean a subsidiary of which Intel Corporation
beneficially owns, either directly or indirectly, at least 50% of
the voting securities.
<PAGE> 7
3.2 Institutional Investor. An "Institutional Investor"
shall mean any person considered to be an "accredited investor"
under Rule 501(a)(1) of Regulation D promulgated under the Act;
provided, however, that "Institutional Investor" shall not
include any person or affiliate of a person that is a significant
competitor of the Company as determined by the Board of Directors
of the Company in its reasonable discretion.
3.3 Transferability. This Warrant may be transferred or
assigned in whole or in part, at any time, and from time to time,
to any Majority-Owned Subsidiary. Subject to the restrictions on
transfer set forth in the Investor Rights Agreement, the Warrant
may also be transferred or assigned in whole or in any part
representing not less than 100,000 Shares (subject to appropriate
adjustment for stock splits, stock dividends or other similar
events where all holders of the Company's Common Stock
participate on a pro rata basis), at any time, and from time to
time, to any Institutional Investor. The Holder agrees to
provide the Company with five (5) business days prior written
notice of any transfer or assignment of any portion of this
Warrant to any person or entity that is not a Majority Owned
Subsidiary and prompt written notice of any transfer to a
Majority Owned Subsidiary.
4. MISCELLANEOUS.
4.1 Legends. Any certificate for Shares issued upon
exercise hereof will be imprinted with a legend in substantially
the form set forth in the Common Stock Warrant Notice of Exercise
form attached hereto as Annex I.
4.2 Investor Rights Agreement. This Warrant and the Shares
are subject to the terms and conditions of that certain Investor
Rights Agreement between the Company and Intel Corporation dated
as of February 28, 1997 (the "Investor Rights Agreement").
4.3 Successors and Assigns. The terms and provisions of
this Warrant will inure to the benefit of, and be binding upon,
the Company and the Holder and their respective successors and
assigns of the Holder and of the Company.
4.4 Governing Law. This Warrant will be governed by and
construed under the internal laws of the State of California,
without reference to principles of conflict of laws or choice of
laws.
4.5 Headings. The headings and captions used in this
Warrant are used for convenience only and are not to be
considered in construing or interpreting this Warrant. All
references in this Warrant to sections and annexes will, unless
otherwise provided, refer to sections and hereof and annexes
attached hereto, all of which annexes are incorporated herein by
this reference.
4.6 Notices. Unless otherwise provided, any notice
required or permitted under this Warrant shall be given in
writing, shall be effective when received, and shall in any event
be deemed received and effectively given upon personal delivery
to the party to be notified or three (3) business days after
deposit with the United States Post Office, by registered or
certified mail, postage prepaid, or one (1) business day after
deposit with a nationally recognized
<PAGE> 8
courier service such as Fedex, or one (1) business day after
facsimile with copy delivered by registered or certified mail,
postage prepaid and addressed to the party to be notified at the
address indicated for such party on the signature page hereof or
at such other address as the Investor or the Company may
designate by giving at least ten (10) days advance written notice
pursuant to this Section 4.6.
Xircom, Inc.
By: /s/Randall H. Holliday
Name: Randall H. Holliday
Title:General Counsel and
Accepted Secretary
Intel Corporation
By: /s/Satish Rishi
Name: Satish Rishi
Title: Assistant Treasurer
<PAGE> 9
ANNEX TO
WARRANT
______________, 199___
Xircom, Inc.
2300 Corporate Center Drive
Thousand Oak, California 91320
Attention: Chief Financial Officer
Common Stock Warrant Notice of Exercise
--------------------------------------
Gentlemen:
On this date the undersigned hereby acquires from Xircom,
Inc., a California corporation (the "Company"), an aggregate of
________ shares of the Company's Common Stock (the "Warrant
Shares"), by exercise, for such number of shares, of that certain
Warrant to Purchase Shares of Common Stock (the "Warrant"), dated
as of February 28, 1997 from the Company to the original holder
of the Warrant. However, if this exercise of the Warrant is
subject to the Hart-Scott-Rodino Antitrust Improvements Act of
1976 (the "HSR Act") filing requirements, this Warrant shall be
deemed to have been exercised on the date immediately following
the date of the expiration or early termination of all HSR Act
restrictions.
1. Investment Representations and Warranties. The undersigned
represents and warrants that:
1.1 Purchase for Own Account. The Warrant Shares to be
purchased by the undersigned will be acquired for investment for
the undersigned's own account, not as a nominee or agent, and not
with a view to the public resale or distribution thereof within
the meaning of the Securities Act of 1933, as amended (the "1933
Act"), and the undersigned has no present intention of selling,
granting any participation in, or otherwise distributing the
same. The undersigned also represents that it has not been
formed for the specific purpose of acquiring the Warrant Shares.
1.2 Disclosure of Information. The undersigned has
received or has had full access to all the information it
considers necessary or appropriate to make an informed investment
decision with respect to the Warrant Shares to be purchased by
the undersigned.
1.3 Investment Experience. The undersigned understands
that the purchase of the Warrant Shares involves substantial
risk. The undersigned: (a) has experience as an investor in
securities of companies and acknowledges that it is able to fend
for itself, can bear the economic risk of its investment in the
Warrant Shares and has such knowledge and experience in financial
or business matters that it is capable of evaluating the merits
and risks of this investment in the Warrant Shares and protecting
its own interests in connection with this investment and/or (b)
has a preexisting personal or business relationship with the
Company and certain of its
<PAGE> 10
officers, directors or controlling persons of a nature and
duration that enables the undersigned to be aware of the
character, business acumen and financial circumstances of such
persons.
1.4 Accredited Investor Status. The Investor is an
"accredited investor" within the meaning of Regulation D
promulgated under the 1933 Act.
1.5 Restricted Securities. The undersigned understands
that the Warrant Shares to be purchased by the undersigned
hereunder, are characterized as "restricted securities" under the
1933 Act inasmuch as they are being acquired from the Company in
a transaction not involving a public offering and that under the
1933 Act and applicable regulations thereunder such securities
may be resold without registration under the 1933 Act only in
certain limited circumstances. The undersigned is familiar with
Rule 144 of the SEC, as presently in effect, and understands the
resale limitations imposed thereby and by the 1933 Act. The
undersigned understands that the Company is under no obligation
to register any of the securities sold hereunder except as
provided in the Investor Rights Agreement between the Company and
Intel Corporation dated as of February 28, 1997 (the "Investor
Rights Agreement").
1.6 Further Limitations on Disposition. Without in any way
limiting the representations set forth above, the undersigned
further agrees not to make any disposition of all or any portion
of the Warrant Shares unless and until:
(a) there is then in effect a registration statement
under the 1933 Act covering such proposed disposition and such
disposition is made in accordance with such registration
statement; or
(b) the undersigned has notified the Company of the
proposed disposition and has furnished the Company with a
statement of the circumstances surrounding the proposed
disposition, and the undersigned has furnished the Company, at
the expense of the undersigned or its transferee, with an opinion
of counsel, reasonably satisfactory to the Company, that such
disposition will not require registration of such securities
under the 1933 Act.
Notwithstanding the provisions of paragraphs (a) and (b) of this
Section 1.6, no such registration statement or opinion of counsel
will be required for any transfer of any Warrant Shares in
compliance with SEC Rule 144, Rule 144A or Rule 145(d), or if
such transfer otherwise is exempt, in the view of the Company's
legal counsel, from the registration requirements of the 1933
Act.
1.7 Investor Rights Agreement. The undersigned agrees
and acknowledges that the Warrant Shares are subject to the terms
and conditions or the Investor Rights Agreement.
2. Legends. The undersigned understands that certificates
evidencing the Warrant Shares will bear each of the legends set
forth below:
2.1 THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT"), OR UNDER THE SECURITIES LAWS OF CERTAIN STATES. THESE
SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND
RESALE AND MAY NOT
<PAGE> 11
BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE ACT AND
THE APPLICABLE STATE SECURITIES LAWS, PURSUANT TO REGISTRATION OR
EXEMPTION THEREFROM. INVESTORS SHOULD BE AWARE THAT THEY MAY BE
REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS INVESTMENT FOR AN
INDEFINITE PERIOD OF TIME. THE ISSUER OF THESE SECURITIES MAY
REQUIRE AN OPINION OF COUNSEL IN FORM AND SUBSTANCE SATISFACTORY
TO THE ISSUER TO THE EFFECT THAT ANY PROPOSED TRANSFER OR RESALE
IS IN COMPLIANCE WITH THE ACT AND ANY APPLICABLE STATE SECURITIES
LAWS.
2.2 THE SHARES EVIDENCED BY THIS CERTIFICATE ARE SUBJECT TO
CERTAIN RESTRICTIONS SPECIFIED IN A CERTAIN INVESTOR RIGHTS
AGREEMENT BETWEEN THE COMPANY AND INTEL CORPORATION DATED AS OF
FEBRUARY 28, 1997, A COPY OF WHICH IS AVAILABLE FOR EXAMINATION
AT THE ISSUER'S PRINCIPAL OFFICE.
2.3 Any legends required by any applicable state securities
laws.
The undersigned agrees that, to ensure and enforce compliance
with the restrictions imposed by applicable law and those
referred to in the foregoing legend, or elsewhere herein, the
Company may issue appropriate "stop transfer" instructions to its
transfer agent, if any, with respect to any certificate or other
instrument representing Warrant Shares.
3. Net Exercise Election. If applicable, the undersigned
elects to purchase the Warrant Shares by Net Exercise (as defined
in the Warrant), by initialing in the following space (please
initial only if Net Exercise chosen): _________
4. Same Day Sale Election. If applicable, the undersigned
elects to purchase the Warrant Shares by "same day sale" pursuant
to the provisions of Section 1.3(b) of the Warrant, by initialing
on the following space (please initial only if Same Day Sale
chosen): _________
By: ______________________________
Name: ____________________________
Title: ___________________________
Address: _________________________
_________________________
Date Signed: _____________________
[SIGNATURE PAGE - XIRCOM, INC.
COMMON STOCK WARRANT NOTICE OF EXERCISE]
EXHIBIT 3
INVESTOR RIGHTS AGREEMENT
<PAGE>
XIRCOM, INC.
INVESTOR RIGHTS AGREEMENT
This Investor Rights Agreement (this "Agreement") is made
and entered into as of February 28, 1997, by and among Xircom,
Inc., a California corporation (the "Company"), and Intel
Corporation, a Delaware corporation (the "Investor").
R E C I T A L S
--------------
A. The Investor has agreed to purchase from the Company,
and the Company has agreed to sell to the Investor, shares of the
Company's Common Stock (the "Common Stock") and a Warrant (the
"Warrant") on the terms and conditions set forth in that certain
Common Stock and Warrant Purchase Agreement, dated of even date
herewith by and between the Company and the Investor (the
"Purchase Agreement").
B. The Purchase Agreement provides that the Investor shall
be granted certain information rights, registration rights and
other rights, all as more fully set forth herein.
NOW, THEREFORE, in consideration of the foregoing recitals,
the mutual promises hereinafter set forth, and other good and
valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto agree as follows:
1. INFORMATION RIGHTS.
1.1 Financial Information. The Company covenants and
agrees that, commencing on the date of this Agreement, for so
long as the Investor holds shares of Common Stock issued under
this Agreement or the Purchase Agreement or shares of Common
Stock issued or issuable pursuant to exercise of the Warrant, the
Company will:
(a) Annual Reports. Furnish to the Investor promptly
following the filing of such report with the U.S. Securities and
Exchange Commission (the "SEC"), a copy of the Company's Annual
Report on Form 10-K for each fiscal year, which shall include a
consolidated Balance Sheet as of the end of such fiscal year, a
consolidated Statement of Income and a consolidated Statement of
Cash Flows of the Company and its subsidiaries for such year,
setting forth in each case in comparative form the figures from
the Company's previous fiscal year, all prepared in accordance
with generally accepted accounting principles and practices and
audited by nationally recognized independent certified public
accountants. In the event the Company shall no longer be
required to file Annual Reports on Form 10-K, the Company shall,
within ninety (90) days following the end of each respective
fiscal year, deliver to the Investor a copy of such Balance
Sheet, Statement of Income and Statement of Cash Flows.
(b) Quarterly Reports. Furnish to the Investor
promptly following the filing of such report with the SEC, a copy
of each of the Company's Quarterly Reports on Form 10-Q, which
shall include a consolidated Balance Sheet as of the end of the
respective fiscal quarter,
<PAGE> 2
consolidated Statements of Income and consolidated Statements of
Cash Flows of the Company and its subsidiaries for the respective
fiscal quarter and for the year-to-date, setting forth in each
case in comparative form the figures from the comparable periods
in the Company's immediately preceding fiscal year, all prepared
in accordance with generally accepted accounting principles and
practices, but all of which may be unaudited. In the event the
Company shall no longer be required to file Quarterly Reports on
Form 10-Q, the Company shall, within forty-five (45) days
following the end of each of the first three (3) fiscal quarters
of each fiscal year, deliver to the Investor a copy of such
Balance Sheet, Statements of Income and Statements of Cash Flows.
(c) SEC Filings. The Company shall deliver to the
Investor copies of each other document filed with the SEC (as
defined herein) promptly following the filing of such document
with the SEC.
1.2 Board Observer. So long as the Investor, together with
its Majority Owned Subsidiaries (as defined in Section 6.1(c)),
holds at least the number of shares of the Company's Common Stock
equal to twelve and one-half percent (12.5%) of the number of
shares of the Company's Common Stock and other voting securities
outstanding on the day immediately preceding the date of closing
of the Purchase Agreement minus 100 shares (such number to be
proportionately adjusted for stock splits, stock dividends, and
similar events), the Company will permit a representative of the
Investor, reasonably acceptable to the Company (the "Observer")
to attend all meetings of the Company's Board of Directors (the
"Board") (whether in person, telephonic or other) in a non-
voting, observer capacity and shall provide to the Investor,
concurrently with the members of the Board, notice of such
meeting and a copy of all materials provided to such members.
For so long as the Investor shall be entitled to appoint an
Observer pursuant to this section, the Investor shall, by written
election delivered to the Company, be entitled to designate a
representative for appointment or election to the Board (the
"Representative"), in lieu of the observer contemplated above.
Upon written request of the Investor, the Company shall use its
reasonable best efforts to cause the representative designated by
the Investor to be elected to the Board, including recommending
to the stockholders of the Company that they vote for the
election to the Board of the individual designated by the
Investor. The Company shall be entitled to recuse the
Representative or Observer, as the case may be, from portions of
any Board meeting and to redact portions of Board of Directors
materials delivered to the Representative or Observer where and
to the extent that the Board (without the Representative or
Observer present) determines a conflict of interest is present.
2. REGISTRATION RIGHTS.
2.1 Definitions. For purposes of this Section 2:
(a) Registration. The terms "register," "registered,"
and "registration" refer to a registration effected by preparing
and filing a registration statement in compliance with the
Securities Act of 1933, as amended, (the "Securities Act"), and
the declaration or ordering of effectiveness of such registration
statement
(b) Registrable Securities. The term "Registrable
Securities" means: (l) all the shares of Common Stock of the
Company issued or issuable (A) under the Purchase Agreement,
<PAGE> 3
(B) pursuant to an exercise of the Warrant (shares issued or
issuable upon exercise of the Warrant are referred to herein as
the "Warrant Shares"), and (C) pursuant to the Right of
Participation (defined in Section 3 hereof) or the Right of
Maintenance (defined in Section 4 hereof), and (2) any shares of
Common Stock of the Company issued as (or issuable upon the
conversion or exercise of any warrant, right or other security
which is issued as) a dividend or other distribution with respect
to, or in exchange for or in replacement of, any such shares of
Common Stock described in clause (1) of this subsection (b).
Notwithstanding the foregoing, "Registrable Securities" shall
exclude any Registrable Securities sold by a person in a
transaction in which rights under this Section 2 are not assigned
in accordance with this Agreement or any Registrable Securities
sold in a public offering, whether sold pursuant to Rule 144
promulgated under the Securities Act, or in a registered
offering, or otherwise.
(c) Registrable Securities Then Outstanding. The
number of shares of "Registrable Securities then outstanding"
shall mean the number of shares of Common Stock that are
Registrable Securities and (l) are then issued and outstanding or
(2) are then issuable pursuant to an exercise of the Warrant.
(d) Holder. For purposes of this Section 2, the term
"Holder" means any person owning of record Registrable Securities
that have not been sold to the public or pursuant to Rule 144
promulgated under the Securities Act or any permitted assignee of
record of such Registrable Securities to whom rights under this
Section 2 have been duly assigned in accordance with this
Agreement.
(e) Form S-3. The term "Form S-3" means such form
under the Securities Act as is in effect on the date hereof or
any successor registration form under the Securities Act
subsequently adopted by the SEC which permits inclusion or
incorporation of substantial information by reference to other
documents filed by the Company with the SEC.
(f) SEC. The term "SEC" or "Commission" means the
U.S. Securities and Exchange Commission.
2.2 Demand Registration.
(a) Request by Holders. If the Company shall at any
time after the first anniversary of the Closing, as defined in
the Purchase Agreement, receive a written request from the
Holders of at least twenty-five percent (25%) of the Registrable
Securities then outstanding that the Company file a registration
statement under the Securities Act covering the registration of
Registrable Securities pursuant to this Section 2.2, then the
Company shall, within ten (10) business days of the receipt of
such written request, give written notice of such request
("Request Notice") to all Holders, and use its best efforts to
effect, as soon as practicable, the registration under the
Securities Act of all Registrable Securities that Holders request
to be registered and included in such registration by written
notice given such Holders to the Company within twenty (20) days
after receipt of the Request Notice, subject only to the
limitations of this Section 2.2; provided that the Registrable
Securities requested by all Holders to be registered pursuant to
such request must be at least fifteen percent (15%) of all
Registrable Securities then outstanding; and provided further
that the Company shall not be obligated to effect any such
registration if the
<PAGE> 4
Company has, within the six (6) month period preceding the date
of such request, already effected a registration under the
Securities Act pursuant to this Section 2.2 or Section 2.4, or in
which the Holders had an opportunity to participate pursuant to
the provisions of Section 2.3, other than a registration from
which the Registrable Securities of Holders have been excluded
(with respect to all or any portion of the Registrable Securities
the Holders requested be included in such registration) pursuant
to the provisions of Section 2.3(a).
(b) Underwriting. If the Holders initiating the
registration request under this Section 2.2 ("Initiating
Holders") intend to distribute the Registrable Securities covered
by their request by means of an underwriting, then they shall so
advise the Company as a part of their request made pursuant to
this Section 2.2 and the Company shall include such information
in the written notice referred to in subsection 2.2(a). In such
event, the right of any Holder to include his Registrable
Securities in such registration shall be conditioned upon such
Holder's participation in such underwriting and the inclusion of
such Holder's Registrable Securities in the underwriting (unless
otherwise mutually agreed by a majority in interest of the
initiating Holders and such Holder) to the extent provided
herein. All Holders proposing to distribute their securities
through such underwriting shall enter into an underwriting
agreement in customary form with the managing underwriter or
underwriters selected for such underwriting by the Holders of a
majority of the Registrable Securities being registered and
reasonably acceptable to the Company (including a market stand-
off agreement of up to 180 days if required by such
underwriters). Notwithstanding any other provision of this
Section 2.2, if the underwriter(s) advise(s) the Company in
writing that marketing factors require a limitation of the number
of securities to be underwritten then the Company shall so advise
all Holders of Registrable Securities which would otherwise be
registered and underwritten pursuant hereto, and the number of
Registrable Securities that may be included in the underwriting
shall be reduced as required by the underwriter(s) and allocated
among the Holders of Registrable Securities on a pro rata basis
according to the number of Registrable Securities then
outstanding held by each Holder requesting registration
(including the initiating Holders); provided, however, that the
number of shares of Registrable Securities to be included in such
underwriting and registration shall not be reduced unless all
other securities of the Company are first entirely excluded from
the underwriting and registration. Any Registrable Securities
excluded and withdrawn from such underwriting shall be withdrawn
from the registration.
(c) Maximum Number of Demand Registrations. The
Company shall be obligated to effect only three (3) such
registrations pursuant to this Section 2.2.
(d) Deferral. Notwithstanding the foregoing, if the
Company shall furnish to Holders requesting the filing of a
registration statement pursuant to this Section 2.2, a
certificate signed by the President or Chief Executive Officer of
the Company stating that in the good faith judgment of the Board,
it would be materially detrimental to the Company and its
stockholders for such registration statement to be filed, then
the Company shall have the right to defer such filing for a
period of not more than ninety (90) days after receipt of the
request of the initiating Holders; provided, however, that the
Company may not utilize this right more than once in any twelve
(12) month period.
<PAGE> 5
(e) Expenses. All expenses incurred in connection
with any registration pursuant to this Section 2.2, including
without limitation all federal and "blue sky" registration,
filing and qualification fees, printer's and accounting fees, and
fees and disbursements of counsel for the Company (but excluding
underwriters' discounts and commissions relating to shares sold
by the Holders and legal fees of counsel for the Holders), shall
be borne by the Company. Each Holder participating in a
registration pursuant to this Section 2.2 shall bear such
Holder's proportionate share (based on the total number of shares
sold in such registration other than for the account of the
Company) of all discounts, commissions or other amounts payable
to underwriters or brokers, and the Holders' legal fees, in
connection with such offering by the Holders. Notwithstanding
the foregoing, the Company shall not be required to pay for any
expenses of any registration proceeding begun pursuant to this
Section 2.2 if the registration request is subsequently withdrawn
at the request of the Holders of a majority of the Registrable
Securities to be registered, unless the Holders of a majority of
the Registrable Securities then outstanding agree that such
registration constitutes the use by the Holders of one (1) demand
registration pursuant to this Section 2.2 (in which case such
registration shall also constitute the use by all Holders of
Registrable Securities of one (l) such demand registration);
provided, further, however, that if at the time of such
withdrawal, the Holders have learned of a material adverse change
in the condition, business, or prospects of the Company not known
to the Holders at the time of their request for such registration
and have withdrawn their request for registration with reasonable
promptness after learning of such material adverse change, then
the Holders shall not be required to pay any of such expenses and
such registration shall not constitute the use of a demand
registration pursuant to this Section 2.2.
2.3 Piggyback Registrations. The Company shall notify all
Holders of Registrable Securities in writing at least thirty (30)
days prior to filing any registration statement under the
Securities Act for purposes of effecting a public offering of
securities of the Company (including, but not limited to,
registration statements relating to secondary offerings of
securities of the Company, but excluding registration statements
relating to any registration under Section 2.2 or Section 2.4 of
this Agreement, to any employee benefit plan or to any merger or
other corporate reorganization) and will afford each such Holder
an opportunity to include in such registration statement all or
any part of the Registrable Securities then held by such Holder.
Each Holder desiring to include in any such registration
statement all or any part of the Registrable Securities held by
such Holder shall within twenty (20) days after receipt of the
above-described notice from the Company, so notify the Company in
writing, and in such notice shall inform the Company of the
number of Registrable Securities such Holder wishes to include in
such registration statement. If a Holder decides not to include
all of its Registrable Securities in any registration statement
thereafter filed by the Company, such Holder shall nevertheless
continue to have the right to include any Registrable Securities
in any subsequent registration statement or registration
statements as may be filed by the Company with respect to
offerings of its securities, all upon the terms and conditions
set forth herein.
(a) Underwriting. If a registration statement under
which the Company gives notice under this Section 2.3 is for an
underwritten offering, then the Company shall so advise the
Holders of Registrable Securities. In such event, the right of
any such Holder's Registrable Securities to be included in a
registration pursuant to this Section 2.3 shall be conditioned
upon such Holder's participation in such underwriting and the
inclusion of such Holder's Registrable
<PAGE> 6
Securities in the underwriting to the extent provided herein.
All Holders proposing to distribute their Registrable Securities
through such underwriting shall enter into an underwriting
agreement in customary form with the managing underwriter or
underwriters selected for such underwriting (including a market
stand-off agreement of up to 180 days if required by such
underwriters). Notwithstanding any other provision of this
Agreement, if the managing underwriter determine(s) in good faith
that marketing factors require a limitation of the number of
shares to be underwritten, then the managing underwriter(s) may
exclude shares from the registration and the underwriting, and
the number of shares that may be included in the registration and
the underwriting shall be allocated, first to the Company, and
second, to each of the Holders and other holders of registration
rights on a parity with the Holders requesting inclusion of their
Registrable Securities in such registration statement on a pro
rata basis based on the total number of Registrable Securities
and other securities entitled to registration then held by each
such Holder or other holder; provided, however, that the right of
the underwriters to exclude shares (including Registrable
Securities) from the registration and underwriting as described
above shall be restricted so that (i) the number of Registrable
Securities included in any such registration is not reduced below
twenty-five percent (25%) of the aggregate number of Registrable
Securities for which inclusion has been requested; and (ii) all
shares that are not Registrable Securities and are held by any
other person, including, without limitation, any person who is an
employee, officer or director of the Company (or any subsidiary
of the Company) shall first be excluded from such registration
and underwriting before any Registrable Securities are so
excluded (other than to the extent that such persons are non-
employee directors or other non-employees of the Company who hold
registration rights on a parity with the Holders, such non-
employee directors and other non-employees being entitled to
participate with the participating Holders on the basis described
under "second" above). If any Holder disapproves of the terms of
any such underwriting, such Holder may elect to withdraw
therefrom by written notice to the Company and the underwriter,
delivered at least ten (10) business days prior to the effective
date of the registration statement. Any Registrable Securities
excluded or withdrawn from such underwriting shall be excluded
and withdrawn from the registration. For any Holder that is a
partnership, the Holder and the partners and retired partners of
such Holder, or the estates and family members of any such
partners and retired partners and any trusts for the benefit of
any of the foregoing persons, and for any Holder that is a
corporation, the Holder and all corporations that are affiliates
of such Holder, shall be deemed to be a single "Holder," and any
pro rata reduction with respect to such "Holder" shall be based
upon the aggregate amount of shares carrying registration rights
owned by all entities and individuals included in such "Holder,"
as defined in this sentence.
(b) Expenses. All expenses incurred in connection
with a registration pursuant to this Section 2.3 (excluding
underwriters' and brokers' discounts and commissions relating to
shares sold by the Holders and legal fees of counsel for the
Holders), including, without limitation all federal and "blue
sky" registration, filing and qualification fees, printers' and
accounting fees, and fees and disbursements of counsel for the
Company, shall be borne by the Company.
(c) Not Demand Registration. Registration pursuant to
this Section 2.3 shall not be deemed to be a demand registration
as described in Section 2.2 above. Except as otherwise provided
herein, there shall be no limit on the number of times the
Holders may request registration of Registrable Securities under
this Section 2.3.
<PAGE> 7
2.4 Form S-3 Registration. In case the Company shall at
any time after the first anniversary of the Closing, as defined
in the Purchase Agreement, receive from any Holder or Holders of
a majority of all Registrable Securities then outstanding a
written request or requests that the Company effect a
registration on Form S-3 and any related qualification or
compliance with respect to all or a part of the Registrable
Securities owned by such Holder or Holders, then the Company
will:
(a) Notice. Promptly give written notice of the
proposed registration and the Holder's or Holders' request
therefor, and any related qualification or compliance, to all
other Holders of Registrable Securities; and
(b) Registration. As soon as practicable, effect such
registration and all such qualifications and compliances as may
be so requested and as would permit or facilitate the sale and
distribution of all or such portion of such Holders or Holders'
Registrable Securities as are specified in such request, together
with all or such portion of the Registrable Securities of any
other Holder or Holders joining in such request as are specified
in a written request given within twenty (20) days after the
Company provides the notice contemplated by Section 2.4(a);
provided, however, that the Company shall not be obligated to
effect any such registration, qualification or compliance
pursuant to this Section 2.4:
(1) if Form S-3 is not available for such
offering by the Holders:
(2) if the Holders, together with the holders of
any other securities of the Company entitled to inclusion in such
registration, propose to sell Registrable Securities and such
other securities (if any) at an aggregate price to the public of
less than $5,000,000;
(3) if the Company shall furnish to the Holders a
certificate signed by the President or Chief Executive Officer of
the Company stating that in the good faith judgment of the Board
of Directors of the Company, it would be materially detrimental
to the Company and its shareholders for such Form S-3
Registration to be effected at such time, in which event the
Company shall have the right to defer the filing of the Form S-3
registration statement no more than once during any twelve month
period for a period of not more than ninety (90) days after
receipt of the request of the Holder or Holders under this
Section 2.4;
(4) if the Company has, within the six (6) month
period preceding the date of such request, already effected a
registration under the Securities Act other than a registration
from which the Registrable Securities of Holders have been
excluded (with respect to all or any portion of the Registrable
Securities the Holders requested be included in such
registration) pursuant to the provisions of Section 2.3(a); or
(5) in any particular jurisdiction in which the
Company would be required to qualify to do business or to execute
a general consent to service of process in effecting such
registration, qualification or compliance.
(c) Expenses. The Company shall pay all expenses
incurred in connection with each registration requested pursuant
to this Section 2.4, (excluding underwriters' or brokers'
<PAGE> 8
discounts and commissions relating to shares sold by the Holders
and legal fees of counsel for the Holders), including without
limitation federal and "blue sky" registration, filing and
qualification fees, printers' and accounting fees, and fees and
disbursements of counsel.
(d) Deferral. Notwithstanding the foregoing, if the
Company shall furnish to Holders requesting the filing of a
registration statement pursuant to this Section 2.4, a
certificate signed by the President or Chief Executive Officer of
the Company stating that in the good faith judgment of the Board,
it would be materially detrimental to the Company and its
stockholders for such registration statement to be filed, then
the Company shall have the right to defer such filing for a
period of not more than ninety (90) days after receipt of the
request of the initiating Holders; provided, however, that the
Company may not utilize this right more than once in any twelve
(12) month period.
(e) Not Demand Registration. Form S-3 registrations
shall not be deemed to be demand registrations as described in
Section 2.2 above. Except as otherwise provided herein, Holders
may request up to 3 separate registrations of Registrable
Securities under this Section 2.4.
2.5 Obligations of the Company. Whenever required to
effect the registration of any Registrable Securities under this
Agreement the Company shall, as expeditiously as reasonably
possible:
(a) Registration Statement. Prepare and file with the
SEC a registration statement with respect to such Registrable
Securities and use its best efforts to cause such registration
statement to become effective, provided, however, that the
Company shall not be required to keep any such registration
statement effective for more than ninety (90) days.
(b) Amendments and Supplements. Prepare and file with
the SEC such amendments and supplements to such registration
statement and the prospectus used in connection with such
registration statement as may be necessary to comply with the
provisions of the Securities Act with respect to the disposition
of all securities covered by such registration statement.
(c) Prospectuses. Furnish to the Holders such number
of copies of a prospectus, including a preliminary prospectus, in
conformity with the requirements of the Securities Act, and such
other documents as they may reasonably request in order to
facilitate the disposition of the Registrable Securities owned by
them that are included in such registration.
(d) Blue Sky. Use its best efforts to register and
qualify the securities covered by such registration statement
under such other securities or Blue Sky laws of such
jurisdictions as shall be reasonably requested by the Holders,
provided that the Company shall not be required in connection
therewith or as a condition thereto to qualify to do business or
to file a general consent to service of process in any such
states or jurisdictions.
(e) Underwriting. In the event of any underwritten
public offering, enter into and perform its obligations under an
underwriting agreement in usual and customary form, with
<PAGE> 9
the managing underwriter(s) of such offering. Each Holder
participating in such underwriting shall also enter into and
perform its obligations under such an agreement.
(f) Notification. Notify each Holder of Registrable
Securities covered by such registration statement at any time
when a prospectus relating thereto is required to be delivered
under the Securities Act of the happening of any event as a
result of which the prospectus included in such registration
statement, as then in effect, includes an untrue statement of a
material fact or omits to state a material fact required to be
stated therein or necessary to make the statements therein not
misleading in the light of the circumstances then existing.
(g) Opinion and Comfort Letter. Furnish, at the
request of any Holder requesting registration of Registrable
Securities, on the date that such Registrable Securities are
delivered to the underwriters for sale, if such securities are
being sold through underwriters, or, if such securities are not
being sold through underwriters, on the date that the
registration statement with respect to such securities becomes
effective, (i) an opinion, dated as of such date, of the counsel
representing the Company for the purposes of such registration,
in form and substance as is customarily given to underwriters in
an underwritten public offering and reasonably satisfactory to a
majority in interest of the Holders requesting registration,
addressed to the underwriters, if any, and to the Holders
requesting registration of Registrable Securities and (ii) a
"comfort" letter dated as of such date, from the independent
certified public accountants of the Company, in form and
substance as is customarily given by independent certified public
accountants to underwriters in an underwritten public offering
and reasonably satisfactory to a majority in interest of the
Holders requesting registration, addressed to the underwriters,
if any, and to the Holders requesting registration of Registrable
Securities.
2.6 Furnish Information. It shall be a condition precedent
to the obligations of the Company to take any action pursuant to
Sections 2.2, 2.3 or 2.4 that the selling Holders shall furnish
to the Company such information regarding themselves, the
Registrable Securities held by them, and the intended method of
disposition of such securities as shall be required to timely
effect the Registration of their Registrable Securities.
2.7 Indemnification. In the event any Registrable
Securities are included in a registration statement under
Sections 2.2, 2.3 or 2.4:
(a) By the Company. To the extent permitted by law;
the Company will indemnify and hold harmless each Holder, the
partners, officers and directors of each Holder, any underwriter
(as determined in the Securities Act) for such Holder and each
person, if any, who controls such Holder or underwriter within
the meaning of the Securities Act or the Securities Exchange Act
of 1934, as amended, (the "1934 Act"), against any losses,
claims, damages, or Liabilities (joint or several) to which they
may become subject under the Securities Act, the 1934 Act or
other federal or state law, insofar as such losses, claims,
damages, or liabilities (or actions in respect thereof) arise out
of or are based upon any of the following statements, omissions
or violations (collectively a "Violation"):
<PAGE> 10
(i) any untrue statement or alleged untrue
statement of a material fact contained in such
registration statement, including any preliminary
prospectus or final prospectus contained therein or any
amendments or supplements thereto;
(ii) the omission or alleged omission to state
therein a material fact required to be stated therein,
or necessary to make the statements therein not
misleading, or
(iii) any violation or alleged violation by
the Company of the Securities Act, the 1934 Act, any
federal or state securities law or any rule or
regulation promulgated under the Securities Act, the
1934 Act or any federal or state securities law in
connection with the offering covered by such
registration statement;
and the Company will reimburse each such Holder, partner, officer
or director, underwriter or controlling person for any legal or
other expenses reasonably incurred by them, as incurred, in
connection with investigating or defending any such loss, claim,
damage, liability or action; provided, however, that the
indemnity agreement contained in this subsection 2.7(a) shall not
apply to amounts paid in settlement of any such loss, claim,
damage, liability or action if such settlement is effected
without the consent of the Company (which consent shall not be
unreasonably withheld), nor shall the Company be liable in any
such case for any such loss, claim, damage, liability or action
to the extent that it arises out of or is based upon a Violation
which occurs in reliance upon and in conformity with written
information furnished expressly for use in connection with such
registration by such Holder, partner, officer, director,
underwriter or controlling person of such Holder.
(b) By Selling Holders. To the extent permitted by
law, each selling Holder will indemnify and hold harmless the
Company, each of its directors, each of its officers who have
signed the registration statement, each person, if any, who
controls the Company within the meaning of the Securities Act,
any underwriter and any other Holder selling securities under
such registration statement or any of such other Holder's
partners, directors or officers or any person who controls such
Holder within the meaning of the Securities Act or the 1934 Act,
against any losses, claims, damages or liabilities (joint or
several) to which the Company or any such director, officer,
controlling person, underwriter or other such Holder, partner or
director, officer or controlling person of such other Holder may
become subject under the Securities Act, the 1934 Act or other
federal or state law, insofar as such losses, claims, damages or
liabilities (or actions in respect thereto) arise out of or are
based upon any Violation, in each case to the extent (and only to
the extent) that such Violation occurs in reliance upon and in
conformity with written information furnished by such Holder
expressly for use in connection with such registration; and each
such Holder will reimburse any legal or other expenses reasonably
incurred by the Company or any such director, officer,
controlling person, underwriter or other Holder, partner,
officer, director or controlling person of such other Holder in
connection with investigating or defending any such loss, claim,
damage, liability or action: provided, however, that the
indemnity agreement contained in this subsection 2.7(b) shall not
apply to amounts paid in settlement of any such loss, claim,
damage, liability or action if such settlement is effected
without the consent of the Holder, which consent shall not be
unreasonably withheld; and provided, further, that the total
amounts
<PAGE> 11
payable in indemnity by a Holder under this Section 2.7(b) in
respect of any Violation shall not exceed the net proceeds
received by such Holder in the registered offering out of which
such Violation arises.
(c) Notice. Promptly after receipt by an indemnified
party under this Section 2.7 of notice of the commencement of any
action (including any governmental action), such indemnified
party will, if a claim in respect thereof is to be made against
any indemnifying party under this Section 2.7, deliver to the
indemnifying party a written notice of the commencement thereof
and the indemnifying party shall have the right to participate
in, and, to the extent the indemnifying party so desires, jointly
with any other indemnifying party similarly noticed, to assume
the defense thereof with counsel mutually satisfactory to the
parties; provided, however, that an indemnified party shall have
the right to retain its own counsel, with the fees and expenses
to be paid by the indemnifying party, to the extent that
representation of such indemnified party by the counsel retained
by the indemnifying party would be inappropriate due to actual or
potential conflict of interests between such indemnified party
and any other party represented by such counsel in such
proceeding. The failure to deliver written notice to the
indemnifying party within a reasonable time of the commencement
of any such action shall relieve such indemnifying party of
liability to the indemnified party under this Section 2.7 to the
extent the indemnifying party is prejudiced as a result thereof,
but the omission so to deliver written notice to the indemnified
party will not relieve it of any liability that it may have to
any indemnified party otherwise than under this Section 2.7.
(d) Defect Eliminated in Final Prospectus. The
foregoing indemnity agreements of the Company and Holders are
subject to the condition that, insofar as they relate to any
Violation made in a preliminary prospectus but eliminated or
remedied in the amended prospectus on file with the SEC at the
time the registration statement in question becomes effective or
the amended prospectus filed with the SEC pursuant to SEC Rule
424(b) (the "Final Prospectus"), such indemnity agreement shall
not inure to the benefit of any person if a copy of the Final
Prospectus was timely furnished to the indemnified party and was
not furnished to the person asserting the loss, liability, claim
or damage at or prior to the time such action is required by the
Securities Act.
(e) Contribution. In order to provide for just and
equitable contribution to joint liability under the Securities
Act in any case in which either (i) any Holder exercising rights
under this Agreement, or any controlling person of any such
Holder, makes a claim for indemnification pursuant to this
Section 2.7 but it is judicially determined (by the entry of a
final judgment or decree by a court of competent jurisdiction and
the expiration of time to appeal or the denial of the last right
of appeal) that such indemnification may not be enforced in such
case notwithstanding the fact that this Section 2.7 provides for
indemnification in such case, or (ii) contribution under the
Securities Act may be required on the part of any such selling
Holder or any such controlling person in circumstances for which
indemnification is provided under this Section 2.7; then, and in
each such case, the Company and such Holder will contribute to
the aggregate losses, claims, damages or liabilities to which
they may be subject (after contribution from others) in such
proportion so that such Holder is responsible for the portion
represented by the percentage that the public offering price of
its Registrable Securities offered by and sold under the
registration statement bears to the public offering price of all
securities offered by and sold
<PAGE> 12
under such registration statement, and the Company and other
selling Holders are responsible for the remaining portion;
provided, however, that, in any such case: (A) no such Holder
will be required to contribute any amount in excess of the public
offering price of all such Registrable Securities offered and
sold by such Holder pursuant to such registration statement; and
(B) no person or entity guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) will
be entitled to contribution from any person or entity who was not
guilty of such fraudulent misrepresentation.
(f) Survival. The obligations of the Company and
Holders under this Section 2.7 shall survive until the fifth
anniversary of the completion of any offering of Registrable
Securities in a registration statement, regardless of the
expiration of any statutes of limitation or extensions of such
statutes.
2.8 Termination of the Company's Obligations. The Company
shall have no obligations pursuant to this Section 2 with respect
to any Registrable Securities proposed to be sold by a Holder in
a registration pursuant to Section 2.2, 2.3 or 2.4 more than
seven (7) years after the date of this Agreement, or, if, in the
opinion of counsel to the Company, all such Registrable
Securities proposed to be sold by a Holder may then be sold under
Rule 144 in one transaction without exceeding the volume
limitations thereunder.
2.9 No Registration Rights to Third Parties. Without the
prior written consent of the Holders of a majority in interest of
the Registrable Securities then outstanding, the Company
covenants and agrees that it shall not grant, or cause or permit
to be created, for the benefit of any person or entity any
registration rights of any kind (whether similar to the demand,
"piggyback" or Form S-3 registration rights described in this
Article 2, or otherwise) relating to shares of the Company's
Common Stock or any other voting securities of the Company, other
than rights that are on a parity with or subordinate in right to
the Holders.
3. RIGHT OF PARTICIPATION.
3.1 General. The Investor and any Majority Owned
Subsidiary of the Investor to which rights under this Section 3
have been duly assigned in accordance with Section 6 (the
Investor and each such assignee being hereinafter referred to as
a "Participation Rights Holder") shall have the right of first
refusal to purchase such Participation Rights Holder's Pro Rata
Share (as defined below), of all (or any part) of any New
Securities (as defined in Section 3.3) that the Company may from
time to time issue after the date of this Agreement (the "Right
of Participation"); provided, however, that no Participation
Rights Holder shall have the Right of Participation with respect
to any issuance of New Securities that would result in less than
a ten percent (10%) reduction in such Participation Rights
Holder's Pro Rata Share.
3.2 Pro Rata Share. A Participation Rights Holder's "Pro
Rata Share" for purposes of the Right of Participation is the
ratio of (a) the number of Registrable Securities held by such
Participation Rights Holder, to (b) the difference between (i)
the total number of shares of Common Stock of the Company (and
other voting securities of the Company, if any) then outstanding
(immediately prior to the issuance of New Securities giving rise
to the Right of Participation), where for such purposes all
Warrant Shares held by the Investor and its Majority
<PAGE> 13
Owned Subsidiaries are deemed outstanding, and (ii) the number of
Dilutive Securities (defined below) issued since the last Notice
Date (defined below) excluding any Maintenance Securities
(defined below) issued pursuant to the last Maintenance Notice.
3.3 New Securities. "New Securities" shall mean any Common
Stock, Preferred Stock or other voting capital stock of the
Company, whether now authorized or not, and rights, options or
warrants to purchase such Common Stock or Preferred Stock, and
securities of any type whatsoever that are, or may become,
convertible or exchangeable into such Common Stock, Preferred
Stock or other capital stock, provided, however, that the term
"New Securities" shall not include:
(a) any shares of the Company's Common Stock (and/or
options or warrants therefor) issued to employees officers,
directors, contractors, advisors or consultants of the Company
pursuant to incentive agreements or incentive plans approved by
the Board;
(b) any shares of Common Stock issued under the
Purchase Agreement, as such agreement may be amended;
(c) the Warrant or any shares of Common Stock issued
upon any exercise thereof;
(d) any securities issued in connection with any stock
split stock, dividend or other similar event in which all
Participation Rights Holders are entitled to participate on a pro
rata basis;
(e) any securities issued upon the exercise,
conversion or exchange of any outstanding security if such
outstanding security constituted a New Security; or
(f) any securities issued pursuant to the acquisition
of another corporation or entity by the Company by consolidation,
merger, purchase of assets, or other reorganization in which the
Company acquires, in a single transaction or series of related
transactions, assets of such other corporation or entity or fifty
percent (50%) or more of the voting power of such other
corporation or entity or fifty percent (50%) or more of the
equity ownership of such other entity.
3.4 Procedures. In the event that the Company proposes to
undertake an issuance of New Securities (in a single transaction
or a series of related transactions) that would result in a ten
percent (10%) or greater reduction in the Pro Rata Share of each
Participation Rights Holder, it shall give to each Participation
Rights Holder written notice of its intention to issue New
Securities (the "Participation Notice"), describing the amount
and the type of New Securities and the price and the general
terms upon which the Company proposes to issue such New
Securities. Each Participation Rights Holder shall have ten (10)
business days from the date of receipt of any such Participation
Notice to agree in writing to purchase such Participation Rights
Holder's Pro Rata Share of such New Securities for the price and
upon the terms and conditions specified in the Participation
Notice by giving written notice to the Company and stating
therein the quantity of New Securities to be purchased (not to
exceed such Participation Rights Holder's Pro Rata
<PAGE> 14
Share). If any Participation Rights Holder fails to so agree in
writing within such ten (10) business day period to purchase such
Participation Rights Holder's full Pro Rata Share of an offering
of New Securities, then such Participation Rights Holder shall
forfeit the right hereunder to purchase that part of its Pro Rata
Share of such New Securities that it did not so agree to
purchase. Such Participation Rights Holder shall purchase the
portion elected by such Participation Rights Holder concurrently
with the closing of the transaction triggering the Right of
Participation.
3.5 Failure to Exercise. Upon the expiration of such ten
(10) day period, the Company shall have 120 days thereafter to
sell the New Securities described in the Participation Notice
(with respect to which the Participation Rights Holders' rights
of first refusal hereunder were not exercised), or enter into an
agreement to do so, within sixty (60) days thereafter, at no less
than ninety-five percent (95%) of the price and upon non-price
terms not materially more favorable to the purchasers thereof
than specified in the Participation Notice. In the event that
the Company has not issued and sold such New Securities within
such 120 day period, or entered into an agreement to do so within
sixty (60) days thereafter, then the Company shall not thereafter
issue or sell any New Securities without again first offering
such New Securities to the Participation Rights Holders pursuant
to this Section 3.
3.6 Termination. The Right of Participation for the
Investor and each other Participation Rights Holder shall
terminate upon the first date that the Investor and its
Affiliates (as defined in Rule 144 under the Securities Act)
collectively hold less than the number of shares of the Company's
Common Stock equal to twelve and one-half percent (12.5%) of the
number of shares of the Company's Common Stock and other voting
securities outstanding on the day immediately preceding the date
of closing of the Purchase Agreement minus 100 shares (such
number to be proportionately adjusted for stock splits, stock
dividends and similar events).
4. RIGHT OF MAINTENANCE.
4.1 General. Each Participation Rights Holder will,
pursuant to the terms and conditions of this Section 4, have the
right to purchase shares of Common Stock, voting Preferred Stock
or other voting capital stock ("Maintenance Securities") from the
Company at the Purchase Price (as defined in Section 4.3)
following the issuance by the Company of Dilutive Securities (as
defined in Section 4.2) that the Company may from time to time
issue after the date of this Agreement, solely in order to
maintain such Participation Rights Holder's Prior Percentage
Interest (as defined in Section 4.4) in the Company (the "Right
of Maintenance"). Each right to purchase Maintenance Securities
pursuant to this Section 4 shall be on the same terms (other than
price to the extent provided in Section 4.3 below) as the
issuance of the Dilutive Securities that gave rise to the right
to purchase such Maintenance Securities
4.2 Dilutive Securities. "Dilutive Securities" means any
Common Stock, voting Preferred Stock or other voting capital
stock of the Company, whether now authorized or not; provided,
however, that the term "Dilutive Securities" does not include:
<PAGE> 15
(a) any securities other than Common Stock, voting
Preferred Stock or other voting capital stock (e.g., warrants or
options to purchase Common Stock, Preferred Stock or other
capital stock);
(b) any shares of Common Stock issued under the
Purchase Agreement, as such agreement may be amended;
(c) the Warrant or any shares of Common Stock issuable
upon any exercise thereof;
(d) any securities issued in connection with any stock
split, stock dividend or similar event in which all Participation
Rights Holders are entitled to participate on a pro rata basis;
(e) any securities for which the issuance gave rise to
the Right of Participation (regardless of whether any such right
was exercised); or
(f) any securities issuable upon the exercise,
conversion or exchange of any securities described in (d) or (e)
above.
4.3 Purchase Price.
(a) Employee Stock. To the extent that the right to
purchase Maintenance Securities arises out of the issuance of
Dilutive Securities to employees, officers, directors,
contractors, advisors or consultants of the Company pursuant to
incentive agreements or incentive plans approved by the Board
("Employee Stock"), the per share "Purchase Price" of the
Maintenance Securities shall equal the average Market Price (as
defined below) of such Maintenance Securities over the thirty
(30) trading days immediately preceding the date on which the
Participation Rights Holder elects to purchase such Maintenance
Securities.
(b) Other Dilutive Securities. To the extent that the
right to purchase Maintenance Securities arises out of any
issuance of Dilutive Securities other than Employee Stock, the
per share "Purchase Price" of the Maintenance Securities shall
equal the higher of (i) the weighted average of the per share
prices at which such Dilutive Securities were issued, and (ii)
seventy-five percent (75%) of the average Market Price (as
defined below) of such Maintenance Securities over the thirty
(30) trading days immediately preceding the date on which the
Participation Rights Holder elects to purchase such Maintenance
Securities. For purposes hereof, in the event that the issuance
of any Dilutive Securities occurs upon the exercise, conversion
or exchange of other securities ("Exchangeable Securities"), then
the per share price at which such Dilutive Securities shall be
deemed to have been issued shall be the sum of (A) the per share
amount paid upon such exercise, conversion or exchange, plus (B)
the per share amount previously paid for the Exchangeable
Securities (adjusted for any stock splits, stock dividends or
other similar events).
(c) Market Price. For purposes of this Section 4.3,
"Market Price" means, as to any Maintenance Securities on a given
day, the average of the closing prices of such security's sales
on all domestic securities exchanges on which such security may
at the time be listed, or, if
<PAGE> 16
there have been no sales on any such exchange on such day, the
average of the highest bid and lowest asked prices on all such
exchanges at the end of such day, or, if on any day such security
is not so listed, the average of the representative bid and asked
prices quoted in the NASDAQ National Market as of 4:00 P.M., New
York time, on such day, or, if on any day such security is not
quoted in the NASDAQ National Market, the average of the highest
bid and lowest asked prices on such day in the domestic over-the-
counter market as reported by the National Quotation Bureau,
Incorporated, or any similar successor organization. If at any
time the Maintenance Securities are not listed on any domestic
securities exchange or quoted in the NASDAQ National Market or
the domestic over-the-counter market ("Unlisted Securities"), the
"Market Price" shall be the fair value thereof determined jointly
by the Company and the Holder.
(d) Consideration Other than Cash. In the event that
Dilutive Securities or Exchangeable Securities were issued for
consideration other than cash, the per share amounts paid for
such Dilutive Securities or Exchangeable Securities shall be
determined jointly by the Company and the Participation Rights
Holder.
(e) Appraiser. If the Company and the Participation
Rights Holder are unable to reach agreement within a reasonable
period of time with respect to (i) the Market Price of Unlisted
Securities, or (ii) the per share amounts paid for Dilutive
Securities or Exchangeable Securities issued for consideration
other than cash, such Market Price or per share amounts paid, as
the case may be, shall be determined by an appraiser jointly
selected by the Company and the Participation Rights Holder. The
determination of such appraiser shall be final and binding on the
Company and the Participation Rights Holder. The fees and
expenses of such appraiser shall be paid for by the Company.
4.4 Prior Percentage Interest. A Participation Rights
Holder's "Prior Percentage Interest" for purposes of the Right of
Maintenance is the ratio of (a) the number of Registrable
Securities held by such Participation Rights Holder as of the
date of such Maintenance Notice (as defined in Section 4.6) (the
"Notice Date"), to (b) the difference between (i) the total
number of shares of Common Stock of the Company (and other voting
securities of the Company, if any) outstanding on the Notice
Date, where for such purposes all Warrant Shares held by the
Investor and its Majority Owned Subsidiaries are deemed
outstanding, and (ii) the total number of Dilutive Securities
issued since the later of the date of this Agreement or the last
Notice Date excluding any Maintenance Securities (defined below)
issued pursuant to the last Maintenance Notice.
4.5 Maintenance Amount. A Participation Rights Holder's
"Maintenance Amount" with respect to any Maintenance Notice shall
equal such number of Maintenance Securities as shall (upon
purchase thereof in full by the Participation Rights Holder)
enable such Participation Rights Holder to maintain its Prior
Percentage Interest on a fully-diluted basis. As an example,
assume that the Company had 10,000 shares outstanding, and the
Participation Rights Holder holds 20% of such shares (or 2,000
shares). The Company first issues 400 shares to a third party
("Issuance 1"), an amount insufficient to trigger a Notice of
Issuance pursuant to Section 4.6. The Company then issues 4,600
shares to a third party ("Issuance 2"), an amount sufficient to
trigger a Notice of Issuance. The Participation Rights Holder
will have the right to maintain its 20% interest after
considering Issuances 1 and 2 and the new shares issued to the
Participation
<PAGE> 17
Rights Holder. In this example, the Participation Rights Holder
will have the right to purchase an additional 1,250 shares,
thereby resulting in the Participation Rights Holder holding 20%
of the securities outstanding (3,250 shares out of 16,250
shares).
4.6 Notice of Issuance. Within fifteen (15) business days
of each anniversary of this Agreement, and within fifteen (15)
business days of each issuance of Dilutive Securities which when
cumulated with all prior issuances of Dilutive Securities since
the later of (i) the date of this Agreement, or (ii) the date of
the last Notice Date (subsequent to which the Participation
Rights Holder has had an opportunity to purchase Maintenance
Securities), results in a five percent (5%) reduction in a
Participation Rights Holders' Prior Percentage Interest, the
Company shall give to each Participation Rights Holder written
notice (the "Maintenance Notice") describing the number of
Dilutive Securities issued since such prior Notice Date and the
non-price terms upon which the Company issued such Dilutive
Securities, and the Maintenance Amount of Maintenance Securities
that such Participation Rights Holder is entitled to purchase as
a result of such issuances.
4.7 Purchase of Maintenance Securities. Each Participation
Rights Holder shall have sixty (60) days from the receipt of a
Maintenance Notice to elect to purchase up to such Participation
Rights Holder's Maintenance Amount of such Maintenance Securities
at the Purchase Price as defined in Section 4.3 and upon the
terms and conditions specified in the Maintenance Notice. The
closing of such purchase shall occur within ten (10) days after
such election to purchase. If any Participation Rights Holder
fails to elect to purchase such Participation Rights Holder's
full Maintenance Amount of Maintenance Securities within such
sixty (60) day period, then such Participation Rights Holder
shall forfeit the right hereunder to purchase that part of its
Maintenance Amount that it did not so elect to purchase.
4.8 Termination. The provisions of Sections 4.1 through
4.7 shall terminate with respect to the issuance of any Dilutive
Securities by the Company after the Right of Participation
terminates.
5. RIGHTS IN CORPORATE EVENTS.
5.l Corporate Event.
(a) A "Corporate Event" shall mean any of the
following, whether accomplished through one or a series of
related transactions (a) the acquisition of all or substantially
all the assets of the Company, (b) an acquisition of the Company
by consolidation, merger, share purchase or exchange, or other
reorganization or transaction in which the holders of the
Company's outstanding voting stock immediately prior to such
transaction own, immediately after such transaction, securities
representing less than fifty percent (50%) of the voting power of
the corporation or other entity surviving such transaction, and
(c) any other transaction or series of related transactions
(excluding any exercise or exercises of the Warrant) that would
result in a greater than twenty-five percent (25%) change in the
total outstanding number of shares of Voting Stock (as defined
below) of the Company (other than any such change solely as a
result of a stock split, stock dividend or other recapitalization
affecting holders of Common Stock and other classes of voting
securities of the Company on a pro rata basis).
<PAGE> 18
(b) The Company agrees that it will provide the
Investor with detailed written notice of any offer from a third
party for a proposed Corporate Event within two (2) business days
of the date the Company first becomes aware of such offer or
proposed Corporate Event. In addition, the Company agrees that
it will provide the Investor, within two (2) business days of the
Company's becoming aware thereof, with detailed written notice of
any offer from a third party to acquire ten percent (10%) or more
of the Company's outstanding voting securities.
5.2 Right of First Refusal The Company agrees that prior
to entering into any agreement for what would be considered a
Corporate Event, the Company will present to the Investor in
writing the final terms and conditions of the proposed Corporate
Event, including without limitation the name of the other party
or parties to the Corporate Event and a copy of the definitive
agreements that the Company is prepared to enter into (the
"Corporate Event Agreement"). The Investor shall have ten (10)
calendar days from the date of receipt of the Corporate Event
Agreement to deliver written notice to the Company agreeing in
writing to enter into an agreement with the Company on
substantially the same terms and conditions specified in the
Corporate Event Agreement, which agreement shall call for
completion within one hundred twenty (120) days from the date of
delivery of the Corporate Event Agreement (such 120-day period
subject to extensions for regulatory compliance). If the
Investor fails to so agree in writing within such ten (10)
business day period, for a period of one hundred twenty (120)
days thereafter, the Company shall have the right to enter into
the Corporate Event Agreement with the party specified in such
agreement.
5.3 Termination of Rights. The rights of the Investor
under Section 5.23 shall terminate after July 13, 2000; provided,
however, that the Investor's rights under such sections of this
Section 5 shall remain in full force and effect with respect to
any Corporate Event for which the Investor has received, or been
entitled to receive, notice from the Company prior to July 13,
2000.
5.4 Right of First Negotiation. After July 13, 2000 and
through July 13, 2004 (before July 13, 2000, the provisions of
Section 5.2 shall govern), prior to entering into a definitive
agreement with respect to a Corporate Event, the Company shall
first attempt to negotiate in good faith with the Investor for a
period of not less than twenty (20) calendar days for the
Investor to acquire the Company or enter into another Corporate
Event with the Company. During such 20-calendar day period, the
Investor shall be entitled to conduct due diligence with the
reasonable cooperation of the Company. To the extent that the
Company and the Investor do not enter into an agreement with
respect to such an acquisition or other Corporate Event with the
Investor during such 20-calendar day period, the Company shall be
free to enter into a definitive agreement with respect to a
Corporate Event with a third party and subsequently consummate
such Corporate Event, provided that such definitive agreement is
entered into within ninety (90) days following termination of
such 20-calendar day period, and, provided further, that if
during such 20-calendar day period, the Investor shall have made
a written offer for the acquisition of the Company, the Corporate
Event with such a third party shall be for at least ninety-five
percent (95%) of the price offered by the Investor and on other
terms no less favorable to shareholders of the Company than the
terms of the offer proposed by the Investor with respect to
shareholders other than the Investor. The Investor shall
reasonably cooperate with the Company and other
<PAGE> 19
persons to effect such Corporate Event with such third party and,
if the Investor votes in favor of such Corporate Event, shall
comply with applicable pooling-of-interests restrictions.
6. ASSIGNMENT AND AMENDMENT.
6.1 Assignment. Notwithstanding anything herein to the
contrary:
(a) Information Rights. The rights of the Investor
under Section 1.1 are transferable to any Holder who acquires and
holds at least 250,000 Registrable Securities (subject to
appropriate adjustment for all stock splits, dividends,
combinations, recapitalizations and the like where all holders of
the Company's Common Stock participate on a pro rata basis);
provided, however, that no party may be assigned any of the
foregoing rights unless the Company is given written notice by
the assigning party at the time of such assignment stating the
name and address of the assignee and identifying the securities
of the Company as to which the rights in question are being
assigned; and provided further that any such assignee shall
receive such assigned rights subject to all the terms and
conditions of this Agreement, including without limitation the
provisions of this Section 6. The rights of the Investor under
Section 1.2 may not be assigned.
(b) Registration Rights. The registration rights of
the Investor under Section 2 hereof may be assigned to any
Holder; provided, however, that no party may be assigned any of
the foregoing rights unless the Company is given written notice
by the assigning party at the time of such assignment stating the
name and address of the assignee and identifying the securities
of the Company as to which the rights in question are being
assigned; and provided further that any such assignee shall
receive such assigned rights subject to all the terms and
conditions of this Agreement, including without limitation the
provisions of this Section 6.
(c) Rights of Participation and Maintenance. The
rights of the Investor under Sections 3 and Section 4 hereof may
be assigned only to a subsidiary of which the Investor
beneficially owns, either directly or indirectly, at least 50% of
the voting securities (a "Majority Owned Subsidiary"); provided,
however that no party may be assigned any of the foregoing rights
unless the Company is given written notice by the Investor at the
time of such assignment stating the name and address of the
assignee and identifying the securities of the ;Company as to
which the rights in question are being assigned; and provided
further that any such assignee shall receive such assigned rights
subject to all the terms and conditions of this Agreement.
(d) Rights On Corporate Events. The rights of the
Investor under Section 5 hereof may be assigned only in whole,
and not in part, and only to a Majority Owned Subsidiary;
provided, however that no party may be assigned any of the
foregoing rights unless the Company is given written notice by
the Investor at the time of such assignment stating the name and
address of the assignee; and provided further that any such
assignee shall receive such assigned rights subject to all the
terms and conditions of this Agreement.
6.2 Amendment of Rights. Any provision of this Agreement
may be amended and the observance thereof may be waived (either
generally or in a particular instance and either retroactively or
prospectively), only with the written consent of the Company and
Investor (or, in the case of an amendment or waiver of any
provision of Section 2 hereof, only with the written
<PAGE> 20
consent of the Company and the Holders of a majority of the
Registrable Securities then outstanding and entitled to the
registration rights set forth in Section 2 hereof). Any
amendment or waiver effected in accordance with this Section 6.2
shall be binding upon the Investor, each Holder, each permitted
successor or assignee of such Investor or Holder and the Company.
7. CONFIDENTIALITY.
7.1 (a) Except to the extent required by law or judicial
order or except as provided herein, each party to this Agreement
will hold any of the other's Confidential Information (as defined
in the next paragraph) in confidence and will: (i) use the same
degree of care to prevent unauthorized disclosure or use of the
Confidential Information that the receiving party uses with its
own information of like nature (but in no event less than
reasonable care), (ii) limit disclosure of the Confidential
Information, including any materials regarding the Confidential
Information that the receiving party has generated, to such of
its employees and contractors as have a need to know the
Confidential Information to accomplish the purposes of this
Agreement, and (iii) advise its employees, agents and contractors
of the confidential nature of the Confidential Information and of
the receiving party's obligations under this Agreement.
(b) For purposes of this Agreement, the term
"Confidential Information" refers to the following items relating
to the confidential and proprietary information, including trade
secrets, of the disclosing party: (i) all written materials
provided by the disclosing party that are clearly marked as
confidential, (ii) any tangible materials provided by the
disclosing party that are clearly marked as confidential, and
(iii) all information that is orally or visually disclosed by the
disclosing party if it is identified as confidential at the time
of disclosure and is reduced to a summary written disclosure
delivered to the receiving party within thirty (30) days after
the original disclosure. "Confidential Information" will not
include, even if marked as confidential, materials or information
which: (i) is rightfully known without obligations of
confidentiality by the receiving party, (ii) is or becomes public
knowledge through no wrongful act of the receiving party, its
agent, employees or affiliates, (iii) is rightfully received by
the receiving party from another party authorized by the
disclosing party to disseminate such materials or information,
(iv) is independently developed by the receiving party without
breach of this Agreement, or (v) is approved in writing for
release by the disclosing party. Any employee or contractor of
the receiving party having access to the Confidential Information
will be required to sign a non-disclosure agreement protecting
the Confidential Information if not already bound by such a non-
disclosure agreement.
7.2 Except to the extent required by law or judicial order
or except as provided herein, neither party shall disclose this
Agreement or any of its terms without the other's prior written
approval, which approval will not be delayed or unreasonably
withheld. Either party may disclose this Agreement to the extent
required by law or judicial order, provided that if such
disclosure is pursuant to judicial order or proceedings, the
disclosing party will notify the other party promptly before such
disclosure and will cooperate with the other party to seek
confidential treatment with respect to the disclosure if
requested by the other party and provided further that if such
disclosure is required pursuant to the rules and regulations of
any federal, state or local organization, the parties will
cooperate to seek confidential treatment of this Agreement to the
maximum extent possible under law.
<PAGE> 21
7.3 Prior to the execution of this Agreement, the parties
will agree on the content of a joint press release announcing the
existence of this Agreement, which press release will be issued
as mutually agreed by the parties.
7.4 Neither party will be required to disclose to the other
any confidential information of any third party without having
first obtained such third party's prior written consent.
7.5 The provisions of this Section 7 shall survive for a
period of five (5) years from the date which the Investor ceases
to have any rights under Sections 1, 3, 4 and 5 of this
Agreement.
8. STANDSTILL AGREEMENT.
8.1 Standstill. The Investor hereby agrees that the
Investor (together with all Majority Owned Subsidiaries) shall
neither acquire, nor enter into discussions, negotiations,
arrangements or understandings with any third party to acquire,
beneficial ownership (as defined in Rule 13d-3 promulgated under
the Securities Exchange Act of 1934, as amended) of any Voting
Stock (as defined below), any securities convertible into or
exchangeable for Voting Stock, or any other right to acquire
Voting Stock (except, in any case, by way of stock dividends or
other distributions or offerings made available to holders of any
Voting Stock generally) without the written consent of the
Company, if the effect of such acquisition would be to increase
the Voting Power (as defined below) of all Voting Stock then
beneficially owned (as defined above) by the Investor or which it
has a right to acquire (together with all Majority Owned
Subsidiaries) to a percentage greater than twenty-two and one-
half percent (22.5%) (the "Standstill Percentage") of the Total
Voting Power (as defined below) of the Company at the time in
effect; provided that nothing in this Section 8 shall affect the
Investors rights under Section 3 and Section 4, and provided
further that:
(a) The Investor may acquire Voting Stock without
regard to the foregoing limitation, and such limitation shall be
suspended, but not terminated, if and for as long as (i) a tender
or exchange offer is made and is not withdrawn or terminated by
another person or group to purchase or exchange for cash or other
consideration any Voting Stock that, if accepted or if otherwise
successful, would result in such person or group beneficially
owning or having the right to acquire shares of Voting Stock with
aggregate Voting Power of more than twenty-five percent (25%) of
the Total Voting Power of the Company then in effect (not
counting for these purposes any shares of Voting Stock of the
Company originally acquired ( where such Shares or shares
exchanged with the Company in respect thereof, are still held) by
such person or group from the Investor or any Majority Owned
Subsidiary), and such offer is not withdrawn or terminated prior
to the Investor making an offer to acquire Voting Stock or
acquiring Voting Stock; provided, however, that the foregoing
standstill limitation will be reinstated once any such tender or
exchange offer is withdrawn or terminated, (ii) another person or
group hereafter acquires Voting Stock with aggregate Voting Power
of more than ten percent (10%) of the Total Voting Power of the
Company then in effect (not counting for these purposes any
shares of Voting Stock of the Company originally acquired (where
such Shares or shares exchanged with the Company in respect
thereof, are still held) by such person or group from the
Investor or any Majority Owned Subsidiary), where such person or
group files a Schedule 13D (under the rules promulgated under
Section 13(d) under the Securities and Exchange Act of 1934, as
such rules and section are in
<PAGE> 22
effect on the date hereof), or other similar or successor
schedule or form, indicating that such person's or group's
holdings exceed ten percent (10%); provided, however, that the
foregoing standstill limitation will be reinstated once the
percentage of Total Voting Power beneficially owned by such other
person or group falls below ten percent (10%); (iii) another
person or group hereafter acquires Voting Stock that results in
such person or group being required to file a Schedule 13G, or
other similar or successor schedule or form, indicating that such
other person or group beneficially owns or has the right to
acquire Voting Stock with aggregate Voting Power of more than
twenty percent (20%) of the Total Voting Power of the Company
(not counting for these purposes any shares of Voting Stock of
the Company originally acquired (where such Shares or shares
exchanged with the Company in respect thereof, are still held) by
such person or group from the Investor or any Majority Owned
Subsidiary); provided, however, that the foregoing standstill
limitation will be reinstated once the percentage of Total Voting
Power beneficially owned by such other person or group falls
below ten percent (10%); or (iv) another person or group orally
or in writing contacts the Company and advises the Company of
such person's or group's intention to commence a tender or
exchange offer that, if so commenced, would result in a
suspension pursuant to clause (i) above (e.g., a "bear hug"
offer); provided, however, that the foregoing standstill
limitation will be reinstated if such intention is withdrawn in
writing or other reasonable evidence of such withdrawal is
provided to the Investor. The Company shall notify the Investor
in writing of the occurrence of any event described in clauses
(i) through (iv) of the immediately preceding sentence as soon as
practicable following the Company's becoming aware of any such
event, and in any case, shall provide the Investor written notice
of any such event within two (2) business days of the Company's
being aware of the occurrence of any such event.
(b) The Investor will not be obliged to dispose of any
Voting Stock to the extent that the aggregate percentage of the
Total Voting Power of the Company represented by Voting Stock
beneficially owned by the Investor or which the Investor has a
right to acquire is increased beyond the Standstill Percentage
(i) as a result of a recapitalization of the Company or a
repurchase or exchange of securities by the Company or any other
action taken by the Company or its affiliates; (ii) as the result
of acquisitions of Voting Stock made during the period when the
Investor's "standstill" obligations are suspended pursuant to
Section 8.1(a); (iii) as a result of an equity index transaction,
provided that Investor shall not vote such shares; (iv) by way of
stock dividends or other distributions or rights or offerings
made available to holders of shares of Voting Stock generally;
(v) with the consent of a simple majority of the independent
authorized members of the Company's Board of Directors; or (vi)
as part of a transaction on behalf of Investor's Defined Benefit
Pension Plan, Profit Sharing Retirement Plan, 401(k) Savings
Plan, Sheltered Employee Retirement Plan and Sheltered Employee
Retirement Plan Plus, or any successor or additional retirement
plans thereto (collectively, the "Retirement Plans") where the
Company's shares in such Retirement Plans are voted by a trustee
for the benefit of Investor employees or, for those Retirement
Plans where Investor controls voting, where Investor agrees not
to vote any shares of such Retirement Plan Voting Stock that
would cause Investor to exceed the Standstill Percentage.
(c) As used in this Section 8, (i) the term "Voting
Stock" means the Common Stock and any other securities issued by
the Company having the ordinary power to vote in the
<PAGE> 23
election of directors of the Company (other than securities
having such power only upon the happening of a contingency that
has not occurred), (ii) the term "Voting Power" of any Voting
Stock means the number of votes such Voting Stock is entitled to
cast for directors of the Company at any meeting of shareholders
of the Company, and (iii) the term "Total Voting Power" means the
total number of votes which may be cast in the election of
directors of the Company at any meeting of shareholders of the
Company if all Voting Stock was represented and voted to the
fullest extent possible at such meeting, other than votes that
may be cast only upon the happening of a contingency that has not
occurred. For purposes of this Section 8, the Investor shall not
be deemed to have beneficial ownership of any Voting Stock held
by a pension plan or other employee benefit program of the
Investor if the Investor does not have the power to control the
investment decisions of such plan or program.
8.2 Right of First Refusal upon Section 8.1(a) Event. If
the Investor or any Majority Owned Subsidiary elects to
participate and tender or exchange any of the Shares, the Warrant
and/or the Warrant Shares pursuant to any event described in
clause (i) of the first sentence of Section 8.1(a), the Investor
shall provide written notice of such intention to the Company.
The Company shall have five (5) business days from delivery of
such notice to elect to purchase all, but not less than all, of
such Shares from the Investor or Majority Owned Subsidiary for
cash, at the Offer Price (as defined below) per share offered by
the person or group in the event described in clause (i), by
delivering an irrevocable written election by the Company to
purchase such Shares at such price. In the event the Company
delivers such written election, the Company shall be obligated to
purchase, and the Investor or Majority Owned Subsidiary shall be
obligated to sell, such Shares within ten (10) business days of
delivery of the Company's written election to the Investor. If
the Company fails to deliver such written election within the
five (5) business day period described above or fails to purchase
such Shares within the ten (10) business day period described
above, it shall forfeit its rights under this Section 8.2 with
respect to such tender or exchange, regardless whether the terms
and conditions of such tender or exchange may subsequently be
modified. As used herein, "Offer Price" means (a) in the case of
a cash offer, the amount of cash per share to be paid; (b) in the
case of a share offer where the shares offered are listed on an
exchange or quoted on the Nasdaq National Market, an amount equal
to the average of the closing prices of such security's sales on
all domestic securities exchanges on which said security may at
the time be listed, or, if there have been no sales on any such
exchange on such day, the average of the highest bid and lowest
asked prices on all such exchanges at the end of such day, or, if
on any day such security is not so listed, the average of the
representative bid and asked prices quoted in the NASDAQ National
Market as of 4:00 p.m., New York time, or, if on any day such
security is not quoted in the NASDAQ National Market, the average
of the highest bid and lowest asked prices on such day in the
domestic over-the-counter market as reported by the National
Quotation Bureau, Incorporated, or any similar successor
organization, all determined as of the date written notice is
delivered to the Company by the Investor pursuant to the first
sentence of this Section 8.2; or (c) in the event of any other
tender or exchange offer, the value of the securities and/or
other property as set forth in the offer by the person or group
making such offer.
8.3 Right of First Refusal upon Transfer of Five Percent
Stake. In circumstances other than those described in Section
8.2, if the Investor intends to sell Voting Stock (including the
Voting Stock underlying any portion of the Warrants proposed to
be sold) with Voting Power
<PAGE> 24
constituting more than five percent or more of the Total Voting
Power (or intends to sell Voting Stock (including the Voting
Stock underlying any such portion of the Warrant) with Voting
Power constituting less than five percent (5%) of the Total
Voting Power to any person which beneficially owns five percent
(5%) or more of the Total Voting Power as indicated on a Schedule
13D or 13G filed with the SEC), the Investor shall provide
written notice thereof to the Company (the "Investor Notice").
The Investor Notice shall specify the number of Shares involved,
the name and address of the proposed purchaser, and the proposed
price per Share. For a period of five (5) business days after
delivery of the Investor Notice, the Company shall be entitled to
elect to purchase all, but not less than all, of the Shares
described in the Investor Notice, at the price per share
described in such notice, by delivery of a written notice (a
"Company Purchase Election") to the Investor irrevocably electing
to purchase such Shares and shall have thirty (30) business days
to consummate said purchase from the Investor. In the event that
the Company has not delivered a Company Purchase Election prior
to the expiration of such five (5) business-day period or has
failed to purchase such Shares within said thirty (30)-business
day period, the Company's right to purchase such Shares shall
expire, and the Investor or Majority Owned Subsidiary shall be
entitled to sell the Shares described in the Investor Notice for
a period of ninety (90) days following the expiration of such 90-
day period, but only to the proposed purchaser set forth in the
Investor Notice (or any Majority Owned Subsidiary thereof) and
only for a purchase price equal to at least ninety-five (95%) of
the purchase price set forth in the Investor Notice. In the
event the Investor or Majority Owned Subsidiary has not sold such
Shares by the end of such 90-day period, the rights of the
Company set forth above in this Section 8.3 shall apply to any
subsequent sales by the Investor or Majority Owned Subsidiary.
Notwithstanding the foregoing, the provisions of this Section 8.3
shall not apply to any sales or other transfers by the Investor
to any Majority Owned Subsidiary.
8.4 Termination of Standstill. The provisions of Section
8.1 shall terminate on the second anniversary of the date of this
Agreement. The provisions of Sections 8.2 and 8.3 shall
terminate when the Investor (together with all Majority Owned
Subsidiaries) shall cease to beneficially own at least five
percent (5%) of the Total Voting Power of the Company; provided,
however, that for purposes of determining beneficial ownership,
the number of Warrant Shares underlying the unexercised portion
of the Warrant shall be included.
9. VOTING AGREEMENT.
9.1 Proportional Voting. Whenever the Investor directly or
indirectly owns (of record or beneficially) Voting Stock which
constitutes five percent (5%) or more of the Total Voting Power
of the Company, the Investor agrees to vote all Registrable
Securities of the Company then owned directly or indirectly by
the Investor, that consist of Voting Stock, in the same
proportion as the votes cast by all other holders of the
Company's Voting Stock, except on matters that the Investor, in
its reasonable discretion, deems could potentially be materially
adverse to the Investor's interests.
9.2 No Dissent. The Investor hereby agrees that it will
not exercise dissenter's or appraisal rights or otherwise dissent
or seek appraisal rights with respect to any Corporate Event or
any other merger or acquisition involving the Company (e.g. an
acquisition by the Company of a third party), provided that, in
the event that the provisions of Section 5 hereof have not been
<PAGE> 25
terminated, the provisions of this Section 9.2 shall only apply
with respect to such a Corporate Event if the Company has
complied with the applicable provisions of Section 5 with respect
to such Corporate Event.
9.3 Survival. The provisions of Section 9 shall terminate
on the fifth anniversary of the Closing (as defined in the
Purchase Agreement).
10. GENERAL PROVISIONS.
10.1 Notices. Any notice required or permitted under this
Agreement will be given in writing, shall be effective when
received, and shall in any event be deemed received and
effectively given upon personal delivery to the party to be
notified or three (3) business days after deposit with the United
States Post Office, by registered or certified mail, postage
prepaid, or one (1) business day after deposit with a nationally
recognized courier service such as Fedex for next business day
delivery, or one (1) business day after facsimile with copy
delivered by registered or certified mail, postage prepaid and
addressed to the party to be notified at the address indicated
for such party on the signature page hereof or at such other
address as the Investor or the Company may designate by giving at
least ten (10) days advance written notice pursuant to this
Section 10.1.
(a) if to the Investor, at: Intel Corporation
2200 Mission College
Boulevard
Santa Clara, California
95052
Attention: Treasurer
Telephone No.: (408) 765-1240
Facsimile No.: (408) 765-1611
and
Attention: General
Counsel
Telephone No.: (408) 765-1125
Facsimile No.: (408) 765-1859
with a copy to: Gibson, Dunn & Crutcher
LLP
One Montgomery Street
Telesis Tower
San Francisco, California
94104-4505
Attention: Kenneth R.
Lamb
Telephone No.: (415) 393-8382
Facsimile No.: (415) 986-5309
(b) if to the Company, at: Xircom, Inc.
2300 Corporate Center
Drive
Thousand Oak, California
91230
Attention: General
Counsel
Telephone No.: (805) 376-9300
Facsimile No.: (805) 376-9120
<PAGE> 26
with a copy to: Wilson Sonsini Goodrich &
Rosati
650 Page Mill Road
Palo Alto, California
94304-1050
Attention: Larry Sonsini
and Howard Zeprun
Telephone No.: (415) 493-9300
Facsimile No.: (415) 493-6811
Any party hereto (and such party's permitted assigns) may by
notice so given change its address for future notices hereunder.
Notice shall conclusively be deemed to have been given when
personally delivered or when deposited in the mail in the manner
set forth above. Any notice provided to the Investor in
accordance with this Section 10.1 shall be deemed to have also
been given to any Majority Owned Subsidiary, and any notice
provided by the Investor to the Company shall also be deemed
notice by its Majority Owned Subsidiaries, and they shall be
bound thereby.
10.2 Entire Agreement. This Agreement, together with all
the Exhibits hereto, constitutes and contains the entire
agreement and understanding of the parties with respect to the
subject matter hereof and supersedes any and all prior
negotiations, correspondence, agreements, understandings, duties
or obligations between the parties respecting the subject matter
hereof.
10.3 Governing Law. This Agreement shall be governed by and
construed exclusively in accordance with the internal laws of the
State of California as applied to agreements among California
residents entered into and to be performed entirely within
California, excluding that body of law relating to conflict of
laws and choice of law.
10.4 Severability. If one or more provisions of this
Agreement are held to be unenforceable under applicable law, then
such provision(s) shall be excluded from this Agreement and the
balance of this Agreement shall be interpreted as if such
provision(s) were so excluded and shall be enforceable in
accordance with its terms.
10.5 Third Parties. Nothing in this Agreement, express or
implied, is intended to confer upon any person, other than the
parties hereto and their permitted successors and assigns, any
rights or remedies under or by reason of this Agreement.
10.6 Successors And Assigns. Subject to the provisions of
Section 6.1, the provisions of this Agreement shall inure to the
benefit of, and shall be binding upon, the successors and
permitted assigns of the parties hereto.
10.7 Captions. The captions to sections of this Agreement
have been inserted for identification and reference purposes only
and shall not be used to construe or interpret this Agreement.
10.8 Counterparts. This Agreement may be executed in
counterparts, each of which shall be deemed an original, but all
of which together shall constitute one and the same instrument.
<PAGE> 27
10.9 Adjustments for Stock Splits, Etc. Wherever in this
Agreement there is a reference to a specific number of shares of
Common Stock of the Company, then, upon the occurrence of any
subdivision, combination or stock dividend of Common Stock, the
specific number of shares so referenced in this Agreement shall
automatically be proportionally adjusted to reflect the affect on
the outstanding shares of such class or series of stock by such
subdivision, combination or stock dividend.
[The remainder of this page is intentionally left blank.]
<PAGE> 28
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date and year first above written.
Xircom, Inc. Intel Corporation
By: /s/Randall H. Holliday By: /s/Satish Rishi
Name: Randall H. Holliday Name: Satish Rishi
Title: Secretary and General Title: Assistant Treasurer
Counsel
[Signature Page to Investor Rights Agreement]
EXHIBIT 4
PRESS RELEASE OF
XIRCOM, INC.
DATED
JANUARY 16, 1997
<PAGE>
XIRCOM RECEIVES INVESTMENT FROM INTEL
Companies Also Sign Three-Year, Technology
and OEM Agreement to Further Advance Mobile Communications
Thousand Oaks, Calif., Jan. 16, 1997 - Xircom, Inc. (NASDAQ:
XIRC), the leader in connectivity solutions for mobile
professionals, announced today that the company has signed an
agreement with Intel Corporation, the world's largest chip maker
(NASDAQ: INTC), in which Intel will purchase a 12.5 percent
interest in Xircom (2.5 million shares) and acquire warrants to
obtain an additional 7.5 percent of the company's stock (1.5
million shares). The value of the initial Intel equity
investment in Xircom is $52 million.
In addition, Xircom and Intel have signed a three-year technology
and multi-million dollar OEM agreement. As a result, the
companies plan to work together to further advance mobile
connectivity solutions for high-performance business computing.
"Xircom is the key provider of mobile network solutions and
shares Intel's goal to provide high-performance networking
technology that advances the connected PC," said Mark
Christensen, vice president of Intel's Internet and
Communications Group and general manager of Intel's Network
Products Division. "By working together, Intel and Xircom will
evolve the network connectivity industry and fulfill a very real
customer need in using high-performance, Intel architecture-based
mobile PCs as strategic business tools."
"The corporate alliance brings together world leaders in mobile
connectivity and microprocessors to jointly deliver desktop
connectivity performance to mobile computers," said Dirk I.
Gates, chairman, president and chief executive officer of Xircom,
Inc. "This agreement also signals a growing trend that notebooks
can be a flexible and strategic alternative for desktop PCs.
Both firms are committed to delivering solutions designed for
today's as well as tomorrow's portable computing environments."
Xircom Corporate Background. Founded in 1988, Xircom is the
leading manufacturer of PC Card communications products for
connecting mobile and remote portable computer users to corporate
networks, the Internet, and other online services from a wide
variety of locations. World Wide Web: http://www.xircom.com.
Intel Corporate Background. Intel, the world's largest chip
maker, is also a leading manufacturer of personal computer,
networking and communications products. Through innovative
technologies, Intel is committed to advancing the connected PC
for high performance business computing. Additional information
is available at http://www.intel.com/pressroom.
EXHIBIT 5
PRESS RELEASE OF
XIRCOM, INC.
DATED
MARCH 3, 1997
<PAGE>
XIRCOM EQUITY INVESTMENT FROM INTEL IS FINALIZED
Shares Have Been Issued, Funds Transferred and
Products are Shipping From Xircom to Intel Corporation
Thousand Oaks, Calif., March 3, 1997 - Xircom, Inc. (NASDAQ:
XIRC), the leader in connectivity solutions for mobile
professionals, announced today that Intel Corporation's equity
investment in Xircom, valued at $52 million, has been completed.
On January 16, 1997, Xircom reported that it had reached an
agreement with Intel, in which Intel would purchase a 12.5
percent interest in the company's stock (2,516,405 million newly
issued shares) and acquire warrants to obtain an additional 7.5
percent of the company's stock (1,509,903 million shares). This
transaction is now finalized. In addition, Xircom has begun
shipping products to Intel under a three-year technology and OEM
agreement, also announced on January 16, 1997.
"We are pleased to report that this transaction is fully funded
and that the first products are shipping from Xircom to Intel,"
said Dirk Gates, chairman, president and chief executive officer
of Xircom. "We look forward to a long and mutually beneficial
relationship."
Notice to Reader: This news release contains forward-looking
statements based on current expectations that involve a number of
risks and uncertainties which could cause actual results to
differ materially and include, but are not limited to, future
shipments under the Intel OEM arrangement and introduction and
market acceptance of new products. Other additional risks are
described in the company's SEC report on Form 10-K for the fiscal
year ended September 30, 1996. Investor information may be found
on Xircom's web site at www.xircom.com or on the SEC's EDGAR
electronic filing database.
Xircom Corporate Background. Founded in 1988, Xircom is the
leading manufacturer of PC Card communications products for
connecting mobile and remote portable computer users to corporate
networks, the Internet, and other online services from a wide
variety of locations. World Wide Web: http://www.xircom.com.
# # #
For more information, contact:
Kristi Cushing
Xircom, Inc.
805-376-6968
[email protected]
Xircom is a registered trademark of Xircom, Inc. GlobalACCESS,
CreditCard Ethernet+Modem, CreditCard Modem, CountrySelect, and
Netaccess are trademarks of Xircom, Inc. Other company product
names have been used for identification purposes only and may be
trademarks of their respective companies. Xircom is
headquartered in Thousand Oaks, Calif., and has regional offices
in Salem, N.H., Antwerp, Belgium, and Singapore. Sales: (800)
438-4526. Telephone: (805) 376-9300; Fax: (805) 376-9311.
