<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
Ancor Communications, Incorporated
(Name of Issuer)
Common Stock, $0.01 par value
(Title of Class of Securities)
03 332 K10 8
(CUSIP Number)
Michael H. Morris, Esq.
Sun Microsystems, Inc.
901 San Antonio Rd., Palo Alto, CA 94303 (650) 960-1300
(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications)
June 2, 1999
(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(e), 240.13d-1(f) or 240.13d-1(g), check the
following box [ ].
Note: Schedules filed in paper format shall include a signed original and five
copies of the schedule, including all exhibits. See Rule 13d-7(b) for other
parties to whom copies are to be sent.
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 (however, see the
Notes).
<PAGE> 2
SCHEDULE 13D
CUSIP NO. 03 332 K10 8
- --------------------------------------------------------------------------------
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
SUN MICROSYSTEMS, INC.
IRS IDENTIFICATION NO.: 94-2805249
- --------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
(a) [ ]
N/A (b) [ ]
- --------------------------------------------------------------------------------
3 SEC USE ONLY
- --------------------------------------------------------------------------------
4 SOURCE OF FUNDS*
WC
- --------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED [ ]
PURSUANT TO ITEMS 2(d) or 2(e)
- --------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
STATE OF DELAWARE
- --------------------------------------------------------------------------------
7 SOLE VOTING POWER
(1) (SEE ITEMS 4, 5 AND 6)
NUMBER OF -----------------------------------------------------------
SHARES 8 SHARED VOTING POWER
BENEFICIALLY
OWNED BY N/A
EACH -----------------------------------------------------------
REPORTING 9 SOLE DISPOSITIVE POWER
PERSON
WITH (1) (SEE ITEMS 4, 5 AND 6)
-----------------------------------------------------------
10 SHARED DISPOSITIVE POWER
N/A
- --------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
(1) (SEE ITEMS 4, 5 AND 6)
- --------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES*
[ ]
- --------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
5.9%
- --------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
CO
- --------------------------------------------------------------------------------
(1) In the event the Warrant (discussed in items 3 and 4 below) becomes
exercisable and is exercised in full Sun Microsystems, Inc. ("Sun") will
have sole voting and dispositive power with respect to 1,500,000 shares of
Common Stock of Ancor Communications, Incorporated ("Ancor"). Prior to the
exercise of the Warrant, Sun is not entitled to any rights as a stockholder
of Ancor as to the shares of Common Stock covered by the Warrant. The
Warrant may only be exercised upon vesting of the Warrant as described in
Item 4. No vesting has occurred to date. Sun expressly disclaims beneficial
ownership of any of the shares of Ancor Common Stock which are purchasable
by Sun upon exercise of the Warrant until such time as the Warrant becomes
exercisable for shares of Ancor's Common Stock.
-2-
<PAGE> 3
ITEM 1. Security and Issuer
This Statement on Schedule 13D (this "Statement") relates to the common
stock, $0.01 par value (the "Common Stock") of Ancor Communications,
Incorporated, a Minnesota corporation ("Ancor"), with its principal business and
executive offices located at 6130 Blue Circle Dr., Minnetonka, MN 55343.
ITEM 2. Identity and Background
The name of the company filing this Statement is Sun Microsystems, Inc.,
a Delaware corporation ("Sun"). Sun's principal business is the design,
manufacture and sale of enterprise network computing products. The address of
Sun's principal business and office is 901 San Antonio Rd., Palo Alto, CA 94303.
Set forth on Schedule 1 is the name of each of the directors and
executive officers of Sun, and their present principal occupation or employment,
including the name, principal business and address of any corporation or other
organization in which such employment is conducted, as of the date hereof to
Sun's knowledge.
Neither Sun nor, to Sun's knowledge, any person named on Schedule 1
hereto is required to disclose legal proceedings pursuant to Items 2(d) or 2(e).
To Sun's knowledge, each of the individuals identified on Schedule 1 is a
citizen of the United States.
ITEM 3. Source and Amount of Funds
This Statement relates to Sun acquiring a warrant (the "Warrant") which
may become exercisable for up to 1,500,000 shares of Ancor Common Stock (the
"Shares"). The Warrant is exercisable upon a vesting schedule set forth in the
Warrant. Sun shall pay an exercise price of $7.30 per share, either in cash or
by net issuance, to purchase the Shares. The source of funds will be Sun's
general working capital. See Item 4 hereof for a description of the Warrant and
the number of shares issuable upon exercise thereof.
ITEM 4. Purpose of Transaction
Sun acquired the Warrant for investment purposes. Each share of Ancor
Common Stock subject to the Warrant becomes exercisable at a rate of one share
for every $67.00 of net revenues billed by Ancor to Sun for the purchase or
license of certain products by Sun from Ancor, provided, however, no Shares
shall vest until the amount of net revenues billed by Ancor to Sun equals or
exceeds $10 million. After such minimum net revenues amount has been billed by
Ancor to Sun, the Shares shall vest, based on the amount of revenues billed
during such period, on June 30, September 30, December 31, and March 31 of each
calendar year beginning June 30, 1999 and ending September 30, 2002. Any Shares
unvested on October 1, 2002 will cease to be exercisable under the Warrant. The
Warrant may only be exercised upon the happening of the foregoing events, none
of which has occurred as of the date hereof. The exercise price for each share
subject to the warrant is $7.30.
According to the number of shares of Ancor's Common Stock outstanding
reported by Ancor as of April 29, 1999, if all of the Shares were to vest and
Sun were to exercise the Warrant in full, Sun would hold a total of 1,500,000
shares of Ancor's Common Stock or approximately 5.9% of the outstanding shares
of Ancor.
Sun presently holds no shares of Ancor's Common Stock and thus 0% of the
outstanding shares of Ancor.
-3-
<PAGE> 4
The foregoing description of the Warrant is qualified in all respects by
reference to the terms of the Warrant, a copy of which is attached as Exhibit 1
to this Schedule.
Other than as described in this Item 4 and in Item 6 below, Sun has no
plans or proposals which relate to, or may result in, (i) any acquisition by any
person of additional securities of Ancor, or any disposition of securities of
Ancor; (ii) any extraordinary corporate transaction, such as a merger,
reorganization or liquidation, involving Ancor or any of its subsidiaries; (iii)
any sale or transfer of a material amount of assets of Ancor or any of its
subsidiaries; (iv) any change in the present Board of Directors (the "Board") or
management of Ancor, including any plans or proposals to change the number or
term of directors or to fill any existing vacancies on the Board; (v) any
material change in the present capitalization or dividend policy of Ancor; (vi)
any other material change in Ancor's business or corporate structure; (vii) any
changes in Ancor's charter, bylaws, or other instruments corresponding thereto
or other actions which may impede the acquisition of control of Ancor by any
person; (viii) any delisting from a national securities exchange or any loss of
authorization for quotation in an inter-dealer quotation system of a registered
national securities association of a class of securities of Ancor; (ix) any
termination of registration pursuant to Section 12(g)(4) of the Securities
Exchange Act of 1934, as amended (the "1934 Act"), of a class of equity
securities of Ancor; or (x) any action similar to any of those enumerated above.
Notwithstanding the foregoing, Sun reserves the right to develop such plans or
proposals related to any of the foregoing.
ITEM 5. Interest in Securities of the Issuer.
In the event the Warrant becomes exercisable and is exercised in full,
Sun will have the sole power to vote, and the sole power to dispose of,
1,500,000 shares of Ancor Common Stock. Such Ancor Common Stock constitutes
approximately 5.9% of the issued and outstanding shares of Ancor Common Stock
based on the number of shares of Ancor Common Stock outstanding as of April 29,
1999 (as set forth in Ancor's Form 10-Q for the quarterly period ended March 31,
1999).
No director or officer of Sun set forth on Schedule 1 hereto holds any
shares of Ancor's Common Stock.
ITEM 6. Contracts, Arrangements, Understandings or Relationships With Respect to
Securities of Issuer.
Except for the Warrant, neither Sun nor, to the knowledge of Sun, any
individual on Schedule 1 hereto, has any contracts, arrangements, understandings
or relationships (legal or otherwise) with any person with respect to any
securities of Ancor, including, but not limited to, transfer or voting of any
securities, finders fees, joint ventures, loan or option arrangements, puts or
calls, guarantees of profits, division of profits or loss, or the giving or
withholding of proxies.
ITEM 7. Material to be Filed as Exhibits
The Warrant, dated June 2, 1999, by and among Sun and Ancor, is filed as Exhibit
1.
-4-
<PAGE> 5
After reasonable inquiry and to the best of our knowledge and belief, I
certify the information set forth in this Statement on Schedule 13D is true,
complete and correct.
June 14, 1998
SUN MICROSYSTEMS, INC.
By: /s/ Michael H. Morris
-------------------------------------
Michael H. Morris, Vice President
General Counsel and Secretary
-5-
<PAGE> 6
SCHEDULE 1
SUN MICROSYSTEMS DIRECTORS
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
Name Business or Residence Address Principal Occupation or Employment
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Scott G. McNealy Sun Microsystems, Inc. Chairman of the Board of Directors,
901 San Antonio Rd. and Chief Executive Officer,
Palo Alto, CA 94303 Sun Microsystems, Inc.
- ---------------------------------------------------------------------------------------------------------------------------
L. John Doerr Kleiner, Perkins, Caufield & Byers General Partner, Kleiner Perkins
2750 Sand Hill Road Caufield & Byers, a venture capital
Menlo Park, CA 94025 investment firm
- ---------------------------------------------------------------------------------------------------------------------------
Judith L. Estrin Cisco Systems, Inc. Chief Technology Officer, Senior Vice
170 West Tasman Dr. President, Cisco Systems, Inc., a
San Jose, CA 95134 networking company
- ---------------------------------------------------------------------------------------------------------------------------
Robert J. Fisher The Gap, Inc. Executive Vice President and Director,
One Harrison Street The Gap, Inc. and President, Gap
San Francisco, CA 94015 Division, a retail clothing company
- ---------------------------------------------------------------------------------------------------------------------------
Robert L. Long 220 Glen Garry Avenue Independent Management Consultant
Melbourne Beach, FL 32951
- ---------------------------------------------------------------------------------------------------------------------------
M. Kenneth Oshman Echelon Systems Corp. Chairman of the Board of Directors,
4015 Miranda Avenue President and Chief Executive Officer,
Palo Alto, CA 94304 Echelon Corporation, a provider of
control network technologies
- ---------------------------------------------------------------------------------------------------------------------------
A. Michael Spence Stanford University Dean, Graduate School of Business,
Graduate School of Business Stanford University
Building 350, Memorial Way
Stanford, CA 94305
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
SUN MICROSYSTEMS OFFICERS
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
Name Business or Residence Address Principal Occupation or Employment
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Scott G. McNealy Sun Microsystems, Inc. Chairman of the Board of Directors,
901 San Antonio Rd. and Chief Executive Officer
Palo Alto, CA 94303
- ---------------------------------------------------------------------------------------------------------------------------
William T. Agnello Sun Microsystems, Inc. Vice President, Real Estate and the
901 San Antonio Rd. Workplace
Palo Alto, CA 94303
- ---------------------------------------------------------------------------------------------------------------------------
Alan E. Baratz Sun Microsystems, Inc. President, Software, Products
901 San Antonio Rd. and Platform
Palo Alto, CA 94303
- ---------------------------------------------------------------------------------------------------------------------------
Mel Friedman Sun Microsystems, Inc. President, Microelectronics
901 San Antonio Rd.
Palo Alto, CA 94303
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
-6-
<PAGE> 7
<TABLE>
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Lawrence W. Hambly Sun Microsystems, Inc. President, Enterprise Services
901 San Antonio Rd.
Palo Alto, CA 94303
- ---------------------------------------------------------------------------------------------------------------------------
Masood A. Jabbar Sun Microsystems, Inc. President, Computer Systems
901 San Antonio Rd.
Palo Alto, CA 94303
- ---------------------------------------------------------------------------------------------------------------------------
William N. Joy Sun Microsystems, Inc. Founder and Chief Scientist
901 San Antonio Rd.
Palo Alto, CA 94303
- ---------------------------------------------------------------------------------------------------------------------------
James Judson Sun Microsystems, Inc. Vice President, Finance, Worldwide
901 San Antonio Rd. Operations
Palo Alto, CA 94303
- ---------------------------------------------------------------------------------------------------------------------------
Michael E. Lehman Sun Microsystems, Inc. Vice President, Corporate Resources
901 San Antonio Rd. and Chief Financial Officer
Palo Alto, CA 94303
- ---------------------------------------------------------------------------------------------------------------------------
Marc L. Loupe Sun Microsystems, Inc. Vice President, Finance and Planning,
901 San Antonio Rd. WWFO
Palo Alto, CA 94303
- ---------------------------------------------------------------------------------------------------------------------------
John E. Marselle Sun Microsystems, Inc. Vice President, The Americas
901 San Antonio Rd.
Palo Alto, CA 94303
- ---------------------------------------------------------------------------------------------------------------------------
John S. McFarlane Sun Microsystems, Inc. President, Network Service Provider
901 San Antonio Rd.
Palo Alto, CA 94303
- ---------------------------------------------------------------------------------------------------------------------------
Stephen T. McGowan Sun Microsystems, Inc. Vice President, Finance, Computer
901 San Antonio Rd. Systems
Palo Alto, CA 94303
- ---------------------------------------------------------------------------------------------------------------------------
Michael H. Morris Sun Microsystems, Inc. Vice President, General Counsel and
901 San Antonio Rd. Secretary
Palo Alto, CA 94303
- ---------------------------------------------------------------------------------------------------------------------------
Michael Murray Sun Microsystems, Inc. Vice President, Finance and
901 San Antonio Rd. Administration, Enterprise Services
Palo Alto, CA 94303
- ---------------------------------------------------------------------------------------------------------------------------
Alton D. Page Sun Microsystems, Inc. Vice President, Operations,
901 San Antonio Rd. Sun-Netscape Alliance
Palo Alto, CA 94303
- ---------------------------------------------------------------------------------------------------------------------------
Gregory M. Papadopoulos Sun Microsystems, Inc. Vice President and Chief Technology
901 San Antonio Rd. Officer
Palo Alto, CA 94303
- ---------------------------------------------------------------------------------------------------------------------------
Marissa Peterson Sun Microsystems, Inc. Vice President, Worldwide Operations,
901 San Antonio Rd. Computer Systems
Palo Alto, CA 94303
- ---------------------------------------------------------------------------------------------------------------------------
Frank A. Pinto Sun Microsystems, Inc. Vice President, Worldwide Sales,
901 San Antonio Rd. Computer Systems
Palo Alto, CA 94303
- ---------------------------------------------------------------------------------------------------------------------------
Michael L. Popov Sun Microsystems, Inc. Vice President, Corporate Controller
901 San Antonio Rd.
Palo Alto, CA 94303
- ---------------------------------------------------------------------------------------------------------------------------
William J. Raduchel Sun Microsystems, Inc. Chief Strategy Officer
901 San Antonio Rd.
Palo Alto, CA 94303
- ---------------------------------------------------------------------------------------------------------------------------
George Reyes Sun Microsystems, Inc. Vice President, Treasurer
901 San Antonio Rd.
Palo Alto, CA 94303
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
-7-
<PAGE> 8
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Edward Saliba Sun Microsystems, Inc. Vice President, Human Resources
901 San Antonio Rd.
Palo Alto, CA 94303
- ---------------------------------------------------------------------------------------------------------------------------
Janpieter T. Scheerder Sun Microsystems, Inc. President, Network Storage
901 San Antonio Rd.
Palo Alto, CA 94303
- ---------------------------------------------------------------------------------------------------------------------------
John C. Shoemaker Sun Microsystems, Inc. Vice President and General Manager,
901 San Antonio Rd. Enterprise Desktop and Server Systems,
Palo Alto, CA 94303 Computer Systems
- ---------------------------------------------------------------------------------------------------------------------------
Mark E. Tolliver Sun Microsystems, Inc. President and General Manager,
901 San Antonio Rd. Sun-Netscape Alliance
Palo Alto, CA 94303
- ---------------------------------------------------------------------------------------------------------------------------
Kevin Walsh Sun Microsystems, Inc. Vice President, Operations, Corporate
901 San Antonio Rd. Resources
Palo Alto, CA 94303
- ---------------------------------------------------------------------------------------------------------------------------
Edward J. Zander Sun Microsystems, Inc. President and Chief Operating Officer
901 San Antonio Rd.
Palo Alto, CA 94303
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
-8-
<PAGE> 1
EXHIBIT 1
THIS WARRANT HAS BEEN, AND THE SHARES OF COMMON STOCK WHICH MAY BE PURCHASED
PURSUANT TO THE EXERCISE OF THIS WARRANT (THE "WARRANT SHARES") WILL BE,
ACQUIRED SOLELY FOR INVESTMENT AND NOT WITH A VIEW TO, OR FOR RESALE IN
CONNECTION WITH, ANY DISTRIBUTION THEREOF. NEITHER THIS WARRANT NOR THE WARRANT
SHARES (TOGETHER, THE "SECURITIES") HAVE BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS.
THE SECURITIES MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE
ABSENCE OF SUCH REGISTRATION OR AN OPINION OF COUNSEL SATISFACTORY TO THE
COMPANY AND ITS COUNSEL THAT SUCH DISPOSITION IS EXEMPT FROM THE REGISTRATION
AND PROSPECTUS DELIVERY REQUIREMENTS OF THE SECURITIES ACT AND OF ANY APPLICABLE
STATE SECURITIES LAWS.
WARRANT
TO PURCHASE SHARES OF COMMON STOCK
OF
ANCOR COMMUNICATIONS, INCORPORATED
A MINNESOTA CORPORATION
WARRANT NO.: ___ ISSUANCE DATE: JUNE 2, 1999
---------------------------
THIS CERTIFIES THAT, for value received, Sun Microsystems, Inc. (the
"Holder") is entitled to subscribe for and purchase from Ancor Communications,
Incorporated, a Minnesota corporation (the "Company"), 1,500,000 fully paid and
nonassessable shares (as adjusted pursuant to Section 2 hereof) (the "Warrant
Shares") of Common Stock, par value $0.01 per share, of the Company ("Common
Stock"), at an exercise price equal to $7.30 per share (as adjusted pursuant to
Section 2 hereof) (the "Exercise Price"), all upon the terms and subject to the
conditions hereinafter set forth.
1. EXERCISE RIGHTS.
(a) Cash Exercise. The purchase rights represented by this Warrant
may be exercised by the Holder for any Warrant Shares that have vested
pursuant Section 7, at any time on or prior to the Expiration Date (as
defined in Section 7), in whole or in part, by delivery to the principal
offices of the Company of this Warrant and a completed and duly executed
Notice of Cash Exercise, in the form attached as Exhibit A hereto,
accompanied by payment to the Company of an amount equal to the Exercise
Price per share then in effect multiplied by the number of Warrant Shares
to be purchased by the Holder in connection with such cash exercise of this
Warrant, which amount may be paid, at the election of the Holder, by wire
transfer or delivery of a check payable to the order of the Company.
<PAGE> 2
(b) Net Issue Exercise.
(i) In lieu of exercising the purchase rights represented by
this Warrant on a cash basis pursuant to Section 1(a) hereof, the
Holder may elect to exercise such rights represented by this
Warrant for any Warrant Shares that have vested pursuant to
Section 7, at any time on or prior to the Expiration Date, in
whole or in part, on a net-issue basis by electing to receive the
number of Warrant Shares which are equal in value to the value of
this Warrant at the time of any such net-issue exercise, by
delivery to the principal offices of the Company of this Warrant
and a completed and duly executed Notice of Net-Issue Exercise,
in the form attached as Exhibit B hereto, properly marked to
indicate (A) the number of Warrant Shares vested, (B) the number
of Warrant Shares to be delivered to Holder, (C) the number of
Warrant Shares surrendered by Holder, (D) the number of Warrant
Shares remaining subject to the Warrant and (F) the calculation
of Fair Market Value as of the date of exercise (each as
determined in accordance with Section 1(b)(ii) hereof).
(ii) In the event that the Holder shall elect to exercise the
rights represented by this Warrant in whole or in part on a
net-issue basis pursuant to this Section 1(b), the Company shall
issue to the Holder the number of Warrant Shares determined in
accordance with the following formula:
X = Y (A-B)
-------
A
X = the number of Warrant Shares to be issued to the
Holder in connection with such net-issue exercise.
Y = the number of Warrant Shares with respect to which
this Warrant is being exercised.
A = the Fair Market Value of one share of Common
Stock.
B = the Exercise Price per share in effect as of the
date of such net-issue exercise.
-2-
<PAGE> 3
(c) Fair Market Value. For purposes of this Section 1, the "Fair
Market Value" of the Common Stock shall mean the average, for the five
trading days ending with the trading day which is two trading days prior to
the date of such exercise, of:
(i) the closing sale price of the Company's Common Stock sold on
the primary national securities exchange or market on which the Common
Stock may at the time be listed or traded, or
(ii) if there have been no sales on such exchange or market on
any such trading day, the average of the highest bid and lowest asked
prices on such exchange or market at the end of such day shall be used
for such day, or
(iii) if on any such trading day the Common Stock is not quoted
on a national exchange or in the NASDAQ System, the average of the
highest bid and lowest asked price on such day in the domestic
over-the-counter market as reported by the National Quotation Bureau,
Incorporated, or any similar successor organization.
(iv) Notwithstanding the foregoing, if the Holder shall purchase
any Warrant Shares contemporaneously with the closing of a Change in
Control (as defined in Section 2(a)), then the Fair Market Value of
one share of Common Stock shall be the value received by the holders
of the Company's Common Stock pursuant to such transaction for each
share of Common Stock, and such purchase shall be effective upon the
closing of such transaction, subject to the due, proper and prior
surrender of this Warrant and the aggregate Exercise Price applicable
thereto.
(d) Additional Conditions to Exercise of Warrant. Notwithstanding the
foregoing, this Warrant may not be exercised unless and until:
(i) the Company shall have received an Investment Representation
Statement, in the form attached as Exhibit C hereto, certifying that,
among other things, the Warrant Shares to be issued upon the exercise
of the rights represented by this Warrant are being acquired for
investment and not with a view to any sale or distribution thereof;
and
(ii) each certificate evidencing the Warrant Shares to be issued
upon the exercise of the rights represented by this Warrant shall be
stamped or imprinted with a legend substantially in the following
form:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES
-3-
<PAGE> 4
ACT OF 1933 (THE "SECURITIES ACT") AND ARE "RESTRICTED
SECURITIES" AS DEFINED IN RULE 144 PROMULGATED UNDER THE
SECURITIES ACT. SUCH SECURITIES MAY NOT BE SOLD, OFFERED FOR
SALE, PLEDGED, HYPOTHECATED OR OTHERWISE DISTRIBUTED EXCEPT (I)
PURSUANT TO A REGISTRATION STATEMENT DECLARED OR ORDERED
EFFECTIVE BY THE SECURITIES AND EXCHANGE COMMISSION UNDER THE
SECURITIES ACT COVERING SUCH SECURITIES, OR (II) IN COMPLIANCE
WITH RULE 144, OR (III) PURSUANT TO AN OPINION OF COUNSEL
SATISFACTORY TO THE ISSUER OF SUCH SECURITIES THAT SUCH
REGISTRATION OR RULE 144 COMPLIANCE IS NOT REQUIRED UNDER THE
SECURITIES ACT AS TO SUCH SALE, OFFER OF SALE, PLEDGE,
HYPOTHECATION OR OTHER DISTRIBUTION. THIS CERTIFICATE MUST BE
SURRENDERED TO THE ISSUER HEREOF OR ITS TRANSFER AGENT AS A
CONDITION PRECEDENT TO THE TRANSFER OF ANY INTEREST IN THE
SECURITIES REPRESENTED HEREBY.
(e) Fractional Shares. Upon the exercise of the rights represented by
this Warrant, the Company shall not be obligated to issue fractional shares
of Common Stock, and in lieu thereof, the Company shall pay to the Holder
an amount in cash equal to the Fair Market Value per share of Common Stock
immediately prior to such exercise multiplied by such fraction (rounded to
the nearest cent).
(f) Record Ownership of Warrant Shares. The Warrant Shares shall be
deemed to have been issued, and the person in whose name any certificate
representing Warrant Shares shall be issuable upon the exercise of the
rights represented by this Warrant (as indicated in the appropriate Notice
of Exercise) shall be deemed to have become the holder of record of (and
shall be treated for all purposes as the record holder of) the Warrant
Shares represented thereby, immediately prior to the close of business on
the date or dates upon which the rights represented by this Warrant are
exercised in accordance with the terms hereof.
(g) Stock Certificates. In the event of any exercise of the rights
represented by this Warrant, certificates for the Warrant Shares so
purchased pursuant hereto shall be delivered to the Holder within a
reasonable time and unless this Warrant has been fully exercised or has
expired, a new Warrant representing the right to purchase the Warrant
Shares with respect to which this Warrant shall not have been exercised
shall also be issued to the Holder within such time.
(h) Issue Taxes. The issuance of certificates for shares of Common
Stock upon the exercise of the rights represented by this Warrant shall be
made without charge
-4-
<PAGE> 5
to the Holder for any issuance tax in respect thereof; provided, however,
that the Company shall not be required to pay any tax which may be payable
in respect of any transfer involved in the issuance and delivery of any
certificate in a name other than that of the Holder of the Warrant.
2. ADJUSTMENT OF EXERCISE PRICE AND NUMBER OF SHARES. The number and kind
of securities purchasable upon the exercise of this Warrant and the Exercise
Price shall be subject to adjustment from time to time upon the occurrence of
certain events, as follows:
(a) Reclassification or Change of Control. In case of any
reclassification or change of outstanding securities of the class issuable
upon exercise of this Warrant (other than a change in par value, or from
par value to no par value, or from no par value to par value, or as result
of a subdivision or combination), or in case of any merger or consolidation
of the Company with or into another corporation, (other than a merger in
which the shares of the Company's Common Stock immediately prior to such
merger are not converted by virtue of the merger into stock, other
securities, cash or other property), or in case of any sale of all or
substantially all of the assets of the Company (any such merger,
consolidation or sale of assets shall be referred to as a "Change in
Control"), the Company shall, as soon as practicable after such
transaction, execute a new Warrant or cause such successor or purchasing
corporation, as the case may be, to execute a new Warrant providing that
the Holder of this Warrant shall have the right to exercise such new
Warrant and upon such exercise to receive, in lieu of each share of Common
Stock theretofore issuable upon exercise of this Warrant, the kind and
amount of shares of stock, other securities, cash and other property
received or receivable upon such reclassification, change or Change in
Control by a holder of one share of Common Stock. Such new Warrant shall
provide for adjustments which shall be as nearly equivalent as may be
practicable to the adjustments provided for in this Section 2. The
provisions of this subparagraph (a) shall similarly apply to successive
reclassifications, changes, Changes in Control and transfers.
(b) Subdivision or Combination of Shares. If the Company at any time
while this Warrant remains outstanding and unexpired shall subdivide or
combine its Common Stock, the Exercise Price shall be proportionately
decreased in the case of a subdivision or increased in the case of a
combination.
(c) Stock Dividends. If the Company at any time while this Warrant is
outstanding and unexpired shall pay a dividend with respect to Common Stock
payable in Common Stock (except any distribution specifically provided for
in the foregoing Sections 2 (a) and (b)), then the Exercise Price shall be
adjusted, from and after the date of determination of shareholders entitled
to receive such dividend, to that price determined by, multiplying the
Exercise Price in effect immediately prior to such date of determination by
a fraction (a) the numerator of which shall be the total number of
-5-
<PAGE> 6
shares of Common Stock outstanding immediately prior to such dividend, and
(b) the denominator of which shall be total number of shares of Common
Stock outstanding immediately after such dividend.
(d) Other Distribution If the Company at anytime while this Warrant
is outstanding and unexpired shall make a distribution (other than a Common
Stock dividend as specifically provided for in Section 2(c) or a cash
dividend) then the number of Warrant Shares exercisable under this Warrant
shall be proportionately adjusted such that the Holder shall be entitled to
receive upon exercise of this Warrant, the Warrant Shares, plus the amount
of shares of stock, other securities or other property (other than cash)
that the Holder would have received if the Holder had exercised the Warrant
prior to the distribution and, provided further, that the Exercise Price
will be proportionately adjusted, only if appropriate, to take into account
such distribution.
(e) Adjustment of Number of Shares. Upon each adjustment in the
Exercise Price pursuant to Sections 2(b) and (c), the number of Warrant
Shares purchasable hereunder shall be adjusted, to the nearest whole share,
to the product obtained by multiplying the number of Warrant Shares
purchasable immediately prior to such adjustment by a fraction, the
numerator of which shall be the Exercise Price immediately prior to such
adjustment and the denominator of which shall be the Exercise Price
immediately thereafter.
3. TRANSFER OF WARRANT.
(a) This Warrant and the rights represented hereby shall not be
transferable unless (i) the Warrant is transferred in whole to a majority-owned
subsidiary of the Holder or a successor in interest of all or substantially all
of the Holder's business, or (ii) the Holder receives prior written consent of
such transfer from the Company, and (iii) such transfer is in compliance with
applicable federal and state securities laws.
4. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company hereby
represents and warrants to the Holder as follows:
(a) This Warrant has been duly authorized and validly executed and
delivered by the Company and constitutes a valid and legally binding
obligation of the Company enforceable against the Company in accordance
with its terms.
(b) The Warrant Shares have been duly and validly authorized and
reserved for issuance by the Company upon the exercise of the rights
represented by this Warrant and, when issued upon the exercise of such
rights in accordance with the terms and conditions hereof, the Warrant
Shares will be (A) duly authorized and validly issued, fully paid and
nonassessable shares of Common Stock, (B) free from all preemptive rights,
rights of first refusal or first offer, taxes, liens, charges or other
encumbrances
-6-
<PAGE> 7
with respect to the issuance thereof by the Company, and (C) free of any
restrictions on the transfer thereof other than restrictions on transfer
under applicable federal and state securities laws. At all times during the
term hereof, the Company shall have authorized and reserved for issuance a
sufficient number of shares of Common Stock to provide for the exercise of
the rights represented by this Warrant. As of April 29, 1999 there were
24,081,331 shares of the Company's Common Stock outstanding and since such
date, the Company has not issued more than 25,000 shares.
(c) The due execution and delivery of this Warrant are not, and the
issuance of the Warrant Shares upon the exercise of the rights represented
by this Warrant in accordance with the terms hereof will not, conflict with
the Articles of Incorporation or Bylaws of the Company, each as amended to
the date of issuance hereof.
5. REPRESENTATIONS AND WARRANTIES OF THE HOLDER. The Holder hereby
represents and warrants to the Company as follows:
(a) This Warrant is being acquired for such Holder's own account, for
investment and not with a view to, or for resale in connection with, any
distribution or public offering thereof within the meaning of the
Securities Act. Upon the exercise of the rights represented by this
Warrant, the Holder shall, if so requested by the Company, confirm in
writing, in a form reasonably satisfactory to the Company, that the Warrant
Shares issuable upon the exercise of such rights are being acquired for
investment and not with a view toward distribution or resale thereof.
(b) The Holder understands that the Warrant and the Warrant Shares
have not been registered under the Securities Act by reason of their
issuance in a transaction exempt from the registration and prospectus
delivery requirements of the Securities Act pursuant to Section 4(2)
thereof, and that such Warrant and the Warrant Shares, as the case may be,
must be held by the Holder indefinitely, and therefore, that the Holder
must bear the economic risk of such investment indefinitely, unless a
subsequent disposition thereof is registered under the Securities Act or is
exempt from such registration requirements. The Holder further understands
that the Warrant Shares have not been qualified under applicable state
securities laws by reason of an exemption from such qualification
requirements, which exemption depends upon, among other things, the bona
fide nature of such Holder's investment intent expressed herein.
(c) The Holder has such knowledge and experience in financial and
business matters that it is capable of evaluating the merits and risks of
the purchase of this Warrant and the Warrant Shares and of protecting its
interests in connection therewith.
(d) The Holder is able to bear the economic risk of the purchase of
the Warrant Shares pursuant to the terms of this Warrant.
(e) The Holder is an accredited investor as defined under Rule 501 of
the Securities Act of 1933.
-7-
<PAGE> 8
6. NO STOCKHOLDER RIGHTS. The Holder of this Warrant (and any transferee
hereof) shall not be entitled to vote on matters submitted for the approval or
consent of the stockholders of the Company or to receive dividends declared on
or in respect of shares of Common Stock, or otherwise be deemed to be the holder
of Common Stock or any other capital stock or other securities of the Company
which may at any time be issuable upon the exercise of the rights represented
hereby for any purpose, nor shall anything contained herein be construed to
confer upon the Holder any of the rights of a stockholder of the Company or any
right to vote for the election of directors or upon any matter submitted for the
approval or consent of the stockholders, or to give or withhold consent to any
corporate action (whether upon any recapitalization, issuance of stock,
reclassification of stock, merger or consolidation, conveyance, or otherwise) or
to receive notice of meetings, or to receive dividends or subscription rights or
otherwise until this Warrant shall have been exercised and the Warrant Shares
issuable upon the exercise of the rights represented hereby shall have become
deliverable as provided herein.
7. VESTING SCHEDULE/EXPIRATION DATE. The number of Warrant Shares
issuable upon exercise of this Warrant shall vest and become issuable on each
Vesting Date (as defined below) at a rate of one share for every $67 of Net
Revenues (as defined below), for the period of time (the "Period") beginning the
first day following the previous Vesting Date and ending on the current Vesting
Date; provided however, that with respect to the first Vesting Date to occur
such Period shall begin on the date hereof and end on the first Vesting Date.
For purposes of this Warrant, the Vesting Dates shall be June 30, September 30,
December 31 and March 31 of each calendar year beginning June 30, 1999 and
ending September 30, 2002 (each such date referred to herein as the "Vesting
Date"). On October 1, 2002, ("the Vesting Termination Date"), any vesting of the
Warrant Shares shall cease and Holder shall not be entitled to exercise this
Warrant for any remaining unvested Warrant. Notwithstanding the foregoing, in
the event that the amount of Net Revenues billed to the Holder does not equal or
exceed $10 million (the "Minimum") by the first Vesting Date, then no Warrant
Shares shall vest until the date that the Minimum is met, at which time the
number of Warrant Shares that would have vested, based on the vesting schedule
set forth in the preceding sentences (the "Vesting Schedule"), shall be
immediately vested. Within five (5) business days of the date that the Minimum
is met, the Company shall notify the Holder that the Minimum has been met and
accompany such notice with an accounting report evidencing the amount of Net
Revenues billed to the Holder, the date that the Minimum was met, and the number
of Warrant Shares that have vested. Once the Minimum has been met, the remaining
unvested Warrant Shares shall vest pursuant to the Vesting Schedule as if no
Minimum was required. In addition, within 30 calendar days of each Vesting Date,
the Company shall deliver to the Holder a report evidencing the Net Revenues
billed to the Holder for such Period and the number of Warrant Shares that
vested on such Vesting Date. This Warrant shall expire on the date five (5)
years from the date hereof (the "Expiration Date"). After the Expiration Date
the Holder shall not be entitled to exercise any portion of this Warrant that
had not been previously exercised. For purposes of this Section 7, Net Revenues
shall mean for each Period, the sum of all amounts billed to Holder
-8-
<PAGE> 9
by the Company for the purchase or license of Products (as defined in the
Agreement, hereafter defined) pursuant to the Product Purchase Agreement between
the Holder and the Company dated the date hereof (the "Agreement") less any
credits issued to the Holder by the Company during such Period which have the
effect of reducing amounts due to the Company by the Holder.
8. NOTICE OF ADJUSTMENTS. Whenever any Exercise Price shall be adjusted
pursuant to Section 2 hereof, the Company shall make a certificate signed by its
chief financial officer setting forth, in reasonable detail, the event requiring
the adjustment, the amount of the adjustment the method by which such adjustment
was calculated, the Exercise Price or Prices and the number of Warrant Shares
excisable hereunder after giving effect to such adjustment, and shall cause
copies of such certificate to be mailed (by first class mail, postage prepaid)
to the Holder of this Warrant.
9. NOTICE OF CHANGE IN CONTROL. In the event that the Company shall
propose at any time to effect a Change in Control, then in connection with such
transaction the Company shall send to the Holder the same notice, proxy
materials or other information that it sends to its shareholders with respect to
such Change in Control at the same time and in the same manner that it sends
such notice and information to its shareholders.
10. LOCK-UP AGREEMENT. Holder agrees not to sell or otherwise transfer any
Warrant Shares purchased under this Warrant until the date ending six months
after the date the first Warrant Shares are purchased hereunder except (i)
Holder may transfer any Warrant Shares purchased hereunder to any affiliate of
the Holder and (ii) in the event of a Change in Control of the Company, this
Section 11 shall terminate and any Warrant Shares purchased hereunder shall be
transferable without restrictions except as provided by Section 3.
11. MISCELLANEOUS.
(a) Governing Law. This Warrant shall be construed and enforced in
accordance with and governed by the laws of the state of Minnesota. The
parties expressly stipulate that any litigation under this Warrant shall be
brought in the State courts of the Counties of Santa Clara or San Mateo,
California and in the United States District Court for the Northern
District of California. The parties agree to submit to the jurisdiction and
venue of such courts. The Company shall deliver to the Holder an opinion of
counsel to the satisfaction of Holder regarding the due issuance of the
Warrant and the Warrant Shares exercisable hereunder and the enforceability
of this Warrant.
(b) Notice Procedures. Any written notice by the Company required
hereunder shall be made by hand delivery, national overnight courier or
first class mail, postage prepaid, addressed to the Holder at the address
set forth on the books of the Company.
-9-
<PAGE> 10
(c) Successors and Assigns. The terms of this Warrant shall be
binding upon and shall inure to the benefit of any successors or assigns of
the Company and of the Holder or Holders of this Warrant and the Warrant
Shares issued or issuable upon the exercise of the rights represented by
this Warrant.
(d) Entire Agreement. This Warrant constitutes the full and entire
understanding and agreement between the parties with respect to the subject
matter hereof and supersedes in their entirety any prior or contemporaneous
agreements by and between the Company and the Holder with respect to such
matters. The parties acknowledge that, upon issuance of this Warrant, the
value of this Warrant cannot be reasonably ascertained, and the parties
agree to account for this Warrant for income tax and financial statement
purposes accordiingly.
(e) Further Assurances; No Impairment. The Company shall not, by
amendment of its Articles of Incorporation or through any other means,
directly or indirectly, avoid or seek to avoid the observance or
performance of any of the terms of this Warrant and shall at all times in
good faith assist in the carrying out of all such terms and in the taking
of all such action as may be necessary or appropriate in order to protect
the rights of the holder of this Warrant against impairment. Subject to
Sections 3 and 11 hereof, Company shall at no time close its transfer books
against the transfer of this Warrant or of any Warrant Shares issued or
issuable upon the exercise of the rights represented by this Warrant in any
matter which interferes with a timely exercise of such rights. The Company
shall not, by any action, seek to avoid the observance or performance of
any of the terms of this Warrant, but shall at all times in good faith seek
to carry out all such terms and take all such actions as may be necessary
or appropriate in order to protect the rights of the Holder under this
Warrant against impairment.
(f) Lost Warrant. Upon receipt of evidence reasonably satisfactory to
the Company of the loss, theft, destruction or mutilation of this Warrant
and, in the case of any such loss, theft or destruction, upon delivery of
an indemnity agreement reasonably satisfactory in form and amount to the
Company or, in the case of any such mutilation, upon surrender and
cancellation of such Warrant, the Company at the Holder's expense shall
execute and deliver to the Holder, in lieu thereof, a new Warrant of like
date and tenor.
(g) Amendments. This Warrant and any provision hereof may be amended,
waived or terminated (either generally or in a particular instance,
retroactively or prospectively and for a specified period of time or
indefinitely) only by a written instrument signed by the Company and the
Holder.
-10-
<PAGE> 11
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by its
duly authorized officer.
Issued this 2nd day of June, 1999. ANCOR COMMUNICATIONS,
INCORPORATED
A Minnesota Corporation
/s/ Cal Nelson
-------------------------------
By: Cal Nelson
Title: President
Address: 6130 Blue Circle Dr.
Minnetonka, MN 55343
Acknowledged and Accepted:
/s/ G. Scott Kelly
- --------------------------------
By: G. Scott Kelly
Title: Vice President Strategic Relationships
Address: 901 San Antonio Road
Palo Alto, CA 94303
-11-
<PAGE> 12
EXHIBIT A
NOTICE OF CASH EXERCISE
TO: ANCOR COMMUNICATIONS, INCORPORATED
Attention: President
1. The undersigned hereby elects to purchase ____________ shares of
Common Stock of Ancor Communications, Incorporated, a Minnesota corporation (the
"Company"), pursuant to the terms of Warrant No. [____], issued [date] to and in
the name of [________________], a copy of which is attached hereto (the
"Warrant"), and tenders herewith full payment of the aggregate Exercise Price
for such shares in accordance with the terms of the Warrant.
2. Please issue a certificate or certificates representing said shares of
Common Stock in such name or names as specified below:
- ------------------------------------ ------------------------------------
(Name) (Name)
- ------------------------------------ ------------------------------------
- ------------------------------------ ------------------------------------
(Address) (Address)
Tax I.D. Number
--------------------
3. The undersigned hereby represents and warrants that the aforesaid
shares of Common Stock are being acquired for the account of the undersigned for
investment and not with a view to, or for resale in connection with, the
distribution thereof, and that the undersigned has no present intention of
distributing or reselling such shares and all representations and warranties of
the undersigned set forth in the attached Warrant are true and correct as of the
date hereof. In support thereof, the undersigned has executed an Investment
Representation Statement, in the form attached as Exhibit C to the Warrant,
concurrently herewith.
------------------------------------
By:
Name:
Title:
Date:
A-1
<PAGE> 13
EXHIBIT B
NOTICE OF NET-ISSUE EXERCISE
TO: ANCOR COMMUNICATIONS, INCORPORATED
Attention: President
1. The undersigned hereby elects to purchase ____________ shares of
Common Stock of Ancor Communications, Incorporated., a Minnesota corporation
(the "Company"), on a net-issue basis pursuant to the terms of Warrant No.
[____], issued [date] to and in the name of [________________], a copy of which
is attached hereto (the "Warrant").
2. Net-Issue Information:
(a) Number of Warrant Shares vested:
(b) Number of Warrant Shares vested to be delivered to Holder:
(c) Number of Warrant Shares vested Surrendered by Holder:
(d) Number of Warrant Shares Remaining Subject to the Warrant:
(e) Calculation of Fair Market Value as of : $
3. Please issue a certificate or certificates representing said shares of
Common Stock in such name or names as specified below:
(Name) (Name)
(Address) (Address)
4. The undersigned hereby represents and warrants that the aforesaid
shares of Common Stock are being acquired for the account of the undersigned for
investment and not with a view to, or for resale in connection with, the
distribution thereof, and that the undersigned has no present intention of
distributing or reselling such shares and all representations and warranties of
the undersigned set forth in the attached Warrant are true and correct as of the
date hereof. In support thereof, the under-signed has executed an Investment
Representation Statement, in the form attached as Exhibit C to the Warrant,
concurrently herewith.
By:
Name:
Title:
Date:
<PAGE> 14
EXHIBIT C
INVESTMENT REPRESENTATION STATEMENT
PURCHASER :
COMPANY : ANCOR COMMUNICATIONS, INCORPORATED
SECURITY : COMMON STOCK
AMOUNT :
DATE :
In connection with the purchase of the above-listed securities (the
"Securities"), I, the Purchaser, represent to the Company the following:
(a) I am aware of the Company's business affairs and financial
condition, and have acquired sufficient information about the
Company to reach an informed and knowledgeable decision to
acquire the Securities. I am purchasing these Securities for my
own account for investment purposes only and not with a view to,
or for the resale in connection with, any "distribution" thereof
for purposes of the Securities Act of 1933 ("Securities Act").
(b) I understand that the Securities have not been registered under
the Securities Act in reliance upon a specific exemption
therefrom, which exemption depends upon, among other things, the
bona fide nature of my investment intent as expressed herein. In
this connection, I understand that, in the view of the Securities
and Exchange Commission ("SEC"), the statutory basis for such
exemption may be unavailable if my representation was predicated
solely upon a present intention to hold these Securities for the
minimum capital gains period specified under tax statutes, for a
deferred sale, for or until an increase or decrease in the market
price of Securities, or for a period of one year or any other
fixed period in the future.
(c) I further understand that the Securities must be held
indefinitely unless subsequently registered under the Securities
Act or unless an exemption from registration is otherwise
available. Moreover, I understand that he Company is under no
obligation to register the Securities. In addition, I understand
that the certificate evidencing the Securities will be imprinted
with a legend which prohibits the transfer of the Securities
unless they are registered or such registration is not required
in the opinion of counsel for the Company.
<PAGE> 15
(d) I am aware of the provisions of Rule 144, promulgated under the
Securities Act, which, in substance, permits limited public
resale of "restricted securities" acquired, directly or
indirectly, from the issuer thereof (or from an affiliate of such
issuer), in a non-public offering subject to the satisfaction of
certain conditions.
(e) I further understand that in the event all of the requirements of
Rule 144 are not satisfied, registration under the Securities
Act, compliance with Regulation A, or some other registration
exemption will be required; and that, notwithstanding the fact
that Rule 144 is not exclusive, the Staff of the SEC has
expressed its opinion that persons proposing to sell private
placement securities other than in a registered offering and
otherwise than pursuant to Rule 144 will have a substantial
burden of proof in establishing that an exemption from
registration is available for such offers or sales, and that such
persons and their respective brokers who participate in such
transactions do so at their own risk.
(f) The exercise price of the Warrant is less that 10% of my net
worth excluding home, home furnishings and automobiles.
(g) The Holder is an accredited investor as defined under Rule 501 of
the Securities Act of 1933.
Signature of Purchaser:
Date: , 19
