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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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SCHEDULE 13D
Under the Securities Exchange Act of 1934
GATEFIELD CORPORATION
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(Name of Issuer)
Common Stock, $.10 par value per share
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(Title of Class of Securities)
367339-10-8
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(CUSIP Number)
Mr. Jonathan Huberman
Idanta Partners Ltd.
4660 La Jolla Village Drive, Suite 850
San Diego, CA 92122 (619) 452-9690
(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications)
NOVEMBER 10, 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 [ ].
NOTE: Six copies of this statement, including all exhibits, should be filed with
the Commission. See Rule 13d-1(a) for other parties to whom copies are to be
sent.
*The remainder of this cover page shall be filled out for a reporting person's
initial filing on this form with respect to the subject class of securities, and
for any subsequent amendment containing information which would alter
disclosures provided in a prior cover page.
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).
(Continued on following pages)
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CUSIP NO. 367339-10-8 Schedule 13D Page 2 of 77
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1. NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
IDANTA PARTNERS LTD.
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2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [ ]
(b) [ ]
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3. SEC USE ONLY
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4. SOURCE OF FUNDS
WC
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5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(d) or 2(e) [ ]
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6. CITIZENSHIP OR PLACE OF ORGANIZATION
TEXAS
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7. SOLE VOTING POWER
4,408,398 (1)
NUMBER OF -------------------------------------------------------
SHARES 8. SHARED VOTING POWER
BENEFICIALLY
OWNED BY None
EACH -------------------------------------------------------
REPORTING 9. SOLE DISPOSITIVE POWER
PERSON 4,408,398 (1)
WITH: -------------------------------------------------------
10. SHARED DISPOSITIVE POWER
None
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11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
4,408,398 (1)
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12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES
[ ]
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13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
11.0% (2)
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14. TYPE OF REPORTING PERSON
PN
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(1) Consists of 3,620,175 shares of the Stock issuable upon conversion of
790,000 shares of Series B Convertible Preferred Stock ("Series B Stock")
held by the Reporting Person and 788,223 shares of the Stock issuable upon
the exercise of a warrant held by the Reporting Person.
(2) Assumes, pursuant to Rule 13d-3(d)(1)(i) of the Act, that there are
outstanding 35,538,756 shares of the Stock, plus the 3,620,175 shares of
the Stock issuable upon conversion of 790,000 shares of Series B Stock,
and 788,223 shares of the Stock issuable upon exercise of a warrant, held
by the Reporting Person.
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CUSIP NO. 367339-10-8 Schedule 13D Page 3 of 77
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1. NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
DUNN FAMILY TRUST, DAVID J. DUNN, TRUSTEE
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2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [ ]
(b) [ ]
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3. SEC USE ONLY
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4. SOURCE OF FUNDS
WC
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5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(d) or 2(e) [ ]
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6. CITIZENSHIP OR PLACE OF ORGANIZATION
USA
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7. SOLE VOTING POWER
1,116,050 (1)
NUMBER OF -------------------------------------------------------
SHARES 8. SHARED VOTING POWER
BENEFICIALLY
OWNED BY 4,408,398 (2)
EACH -------------------------------------------------------
REPORTING 9. SOLE DISPOSITIVE POWER
PERSON 1,116,050 (1)
WITH: -------------------------------------------------------
10. SHARED DISPOSITIVE POWER
4,408,398 (2)
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11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
5,524,448 (2)
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12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES
[ ]
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13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
13.5 % (3)
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14. TYPE OF REPORTING PERSON*
GRANTOR TRUST
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(1) Consists of 916,500 shares of the Stock issuable upon conversion of
200,000 shares of Series B Stock held by the Reporting Person and 199,550
shares of the Stock issuable upon exercise of a warrant held by the
Reporting Person.
(2) Consists of, or includes, the 4,408,398 shares of the Stock beneficially
owned by Idanta Partners Ltd. (including 788,223 shares of the Stock
issuable upon exercise of a warrant) the voting power of which is shared
by its general partners, Dunn Family Trust, Perscilla Faily Trust and
Jonathan Huberman.
(3) Assumes, pursuant to Rule 13d-3(d)(1)(i) of the Act, that there are
outstanding 35,538,756 shares of the Stock, plus an aggregate of 4,536,675
shares of the Stock issuable upon conversion of Series B Stock, and
987,773 shares of the Stock issuable upon exercise of warrants,
beneficially owned by the Reporting Person.
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CUSIP NO. 367339-10-8 Schedule 13D Page 4 of 77
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1. NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
PERSCILLA FAILY TRUST, PERSCILLA FAILY, TRUSTEE
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2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [ ]
(b) [ ]
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3. SEC USE ONLY
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4. SOURCE OF FUNDS
WC
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5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(d) or 2(e) [ ]
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6. CITIZENSHIP OR PLACE OF ORGANIZATION
USA
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7. SOLE VOTING POWER
55,803 (1)
NUMBER OF -------------------------------------------------------
SHARES 8. SHARED VOTING POWER
BENEFICIALLY
OWNED BY 4,408,398 (2)
EACH -------------------------------------------------------
REPORTING 9. SOLE DISPOSITIVE POWER
PERSON 55,803 (1)
WITH: -------------------------------------------------------
10. SHARED DISPOSITIVE POWER
4,408,398 (2)
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11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
4,464,201 (2)
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12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES
[ ]
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13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
11.2 % (3)
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14. TYPE OF REPORTING PERSON*
GRANTOR TRUST
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(1) Consists of 45,825 shares of the Stock issuable upon conversion of
10,000 shares of Series B Stock held by the Reporting Person and 9,978
shares of the Stock issuable upon conversion of a warrant held by the
Reporting Person.
(2) Consists of, or includes, the 4,408,398 shares of the Stock beneficially
owned by Idanta Partners Ltd. (including 788,223 shares of the Stock
issuable upon exercise of a warrant) the voting power of which is shared
by its general partners, Dunn Family Trust, Perscilla Faily Trust and
Jonathan Huberman.
(3) Assumes, pursuant to Rule 13d-3(d)(1)(i) of the Act, that there are
outstanding 35,538,756 shares of the Stock, plus an aggregate of
3,666,000 shares of the Stock issuable upon conversion of Series B
Stock, and 798,201 shares of the Stock issuable upon exercise of
warrants, beneficially owned by the Reporting Person.
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CUSIP NO. 367339-10-8 Schedule 13D Page 5 of 77
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1. NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
JONATHAN HUBERMAN
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2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [ ]
(b) [ ]
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3. SEC USE ONLY
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4. SOURCE OF FUNDS
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5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(d) or 2(e) [ ]
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6. CITIZENSHIP OR PLACE OF ORGANIZATION
USA
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7. SOLE VOTING POWER
NONE
NUMBER OF -------------------------------------------------------
SHARES 8. SHARED VOTING POWER
BENEFICIALLY
OWNED BY 4,408,398 (1)
EACH -------------------------------------------------------
REPORTING 9. SOLE DISPOSITIVE POWER
PERSON NONE
WITH: -------------------------------------------------------
10. SHARED DISPOSITIVE POWER
4,408,398 (1)
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11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
4,408,398 (1)
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12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES
[ ]
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13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
11.0% (2)
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14. TYPE OF REPORTING PERSON
IN
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(1) Consists of 3,620,175 shares of the Stock issuable upon conversion of
790,000 shares of Series B Convertible Preferred Stock ("Series B
Stock") held by Idanta Partners Ltd., of which Mr. Huberman is a
general partner, and 788,223 shares of the Stock issuable upon the
exercise of a warrant held by Idanta Partners Ltd.
(2) Assumes, pursuant to Rule 13d-3(d)(1)(i) of the Act, that there are
outstanding 35,538,756 shares of the Stock, plus 3,620,175 shares of
the Stock issuable upon conversion of 790,000 shares of Series B Stock,
and 788,223 shares of the Stock issuable upon exercise of a warrant,
beneficially owned by the Reporting Person.
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CUSIP NO. 367339-10-8 Schedule 13D Page 6 of 77
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ITEM 1. SECURITY AND ISSUER.
The class of securities to which this statement relates is the Common
Stock, $.10 par value (the "Stock"), of GateField Corporation, a Delaware
corporation (the "Company"). The shares of the Stock covered by this report are
deemed to be beneficially owned, pursuant to Rule 13d-3(1)(i), by the persons
signing this report (the "Reporting Persons") through the right to obtain such
shares of the Stock within 60 days after the date hereof upon (i) conversion of
shares of Series B Convertible Preferred Stock, $.10 par value per share (the
"Series B Stock"), and (ii) exercise of warrants to purchase shares of the Stock
(the "Warrants"). Unless otherwise indicated, all references hereinafter to
beneficial ownership of shares of the Stock refer to such shares. The address of
the principal executive offices of the Company is 47100 Bayside Parkway,
Fremont, California 94538.
ITEM 2. IDENTITY AND BACKGROUND.
(a)-(c) Detailed below are: (i) the name, the state or other place of
organization, the principal business, the address of the principal business and
the address of the principal office of any Reporting Person enumerated in
Instruction C which is a corporation, general partnership, limited partnership,
syndicate or other group of persons, and (ii) the name, the residence or
business address, the present principal occupation or employment, and the name,
principal business and address of any corporation or other organization in which
such employment is conducted, of any Reporting Person enumerated in Instruction
C who is a natural person. The Reporting Persons are making this single, joint
filing because they may be deemed to constitute a "group" within the meaning of
Section 13(d)(3) of the Act, although neither the fact of this filing nor
anything contained herein shall be deemed to be an admission by the Reporting
Persons that a group exists.
REPORTING PERSONS
1.) IDANTA PARTNERS LTD. ("IDANTA")
Idanta is a Texas limited partnership. Idanta's principal business
is investing and reinvesting its assets in securities of all kinds. The
principal business address of Idanta, which also serves as its principal office,
is 4660 La Jolla Village Drive, Suite 850, San Diego, CA 92122. Pursuant to
Instruction C to Schedule 13D of the Act, the name, residence or business
address and present principal occupation or employment of each general partner
of Idanta are as follows:
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CUSIP NO. 367339-10-8 Schedule 13D Page 7 of 77
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<TABLE>
<CAPTION>
<S> <C> <C>
Name of Residence or Business Principal Occupation or
General Partner Address Employment
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Dunn Family Trust 4660 La Jolla Village Dr. General Partner of Idanta
Suite 850
San Diego, CA 92122
Perscilla Faily Trust 4660 La Jolla Village Dr. General Partner of Idanta
Suite 850
San Diego, CA 92122
Jonathan Huberman 4660 La Jolla Village Dr. General Partner of Idanta
Suite 850
San Diego, CA 92122
</TABLE>
2.) DUNN FAMILY TRUST, DAVID J. DUNN, TRUSTEE ("DFT")
See answer above.
3.) PERSCILLA FAILY TRUST, PERSCILLA FAILY, TRUSTEE ("PFT")
See answer above.
4.) JONATHAN HUBERMAN ("JH")
See answer above.
(d)-(e) None of the entities mentioned above nor any persons identified
in this Item 2 has, during the last five years, been convicted in a criminal
proceeding (excluding traffic violations or similar misdemeanors), nor been a
party to a civil proceeding of a judicial or administrative body of competent
jurisdiction and as a result of such proceeding was or is subject to a 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.
(f) Idanta Partners Ltd. is a Texas limited partnership. Dunn Family
Trust and Perscilla Faily Trust were both established in the State of
California. David J. Dunn, Perscilla Faily and Jonathan Huberman are citizens of
the United States of America.
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CUSIP NO. 367339-10-8 Schedule 13D Page 8 of 77
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ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
On November 10, 1997, the Reporting Persons Idanta, DFT and PFT
purchased in a private placement (the "Private Placement") (i) an aggregate of
1,000,000 shares of Series B Stock of the Company, convertible into an aggregate
of 4,582,500 shares of the Stock, and (ii) Warrants exercisable for an aggregate
of 997,751 shares of the Stock. The amount of the funds used by the Reporting
Persons to purchase the Series B Stock and Warrants are as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Reporting Dollar Shares of Shares of the Stock
Person Investment Series B Stock under Warrant
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Idanta $3,620,175 790,000 788,223
DFT 916,500 200,000 199,550
PFT 45,825 10,000 9,978
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TOTALS: $4,582,500 1,000,000 997,751
</TABLE>
The source of the funds used by the Reporting Persons to purchase the
Series B Stock and Warrants was Working Capital. As used herein, the term
"Working Capital" includes income from the business operations of the entity
plus sums borrowed from banks and brokerage firm margin accounts to operate such
business in general. None of the funds reported herein as "Working Capital" were
borrowed or otherwise obtained for the specific purpose of acquiring, handling,
trading or voting the Stock or the Warrants.
ITEM 4. PURPOSE OF TRANSACTION.
Idanta, DFT and PFT acquired the shares of Series B Stock and the
Warrants reported herein for investment purposes in the ordinary course of their
business or financial activities and not with any purpose of changing control of
the Company.
(a) Depending on market conditions and other factors that each may
deem material to its respective investment decision, each of the Reporting
Persons may purchase additional shares of the Stock in the open market or in
private transactions or may dispose of all or a portion of the shares of the
Stock that it now owns or hereafter may acquire.
Pursuant to the Stock Purchase Agreement dated November 10, 1997 (the
"Purchase Agreement") among the Company, Idanta, DFT and PFT, and subject to the
satisfaction of certain conditions, including without limitation, stockholder
approval on or prior to December 19, 1997 of the matters described below at the
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CUSIP NO. 367339-10-8 Schedule 13D Page 9 of 77
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Company's 1997 Annual Meeting of Stockholders (the "Meeting"), Idanta, DFT and
PFT shall purchase an aggregate of 4,582,500 additional shares of the Stock at
$1.00 per share. If the stockholders of the Company approve such matters at the
Meeting, the Warrants held by each of the Reporting Persons will be cancelled.
Pursuant to the Purchase Agreement, if the stockholders of the
Company do not approve at the Meeting the purchase by Idanta, DFT and PFT of 20%
or more of the Company's outstanding voting stock, an amendment to the Company's
Certificate of Incorporation to increase the number of authorized shares of
Stock, and an amendment to the Company's Certificate of Incorporation providing
for a classified Board of Directors, Reporting Persons holding at least 51% of
the outstanding Series B Stock shall have the right to redeem such shares at
$4.5825 per share. If such matters are not approved at the Meeting and such
Reporting Persons do not elect to redeem such shares, the conversion price of
the Series B Convertible Preferred Stock shall be adjusted so that such shares
shall be convertible for such respective numbers of shares of the Stock as are
set forth below:
<TABLE>
<CAPTION>
<S> <C> <C>
Reporting Shares of Preferred Shares of the
Person Stock Held Stock Issuable
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Idanta 790,000 4,826,900
DFT 200,000 1,222,000
PFT 10,000 61,100
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TOTALS: 1,000,000 6,110,000
</TABLE>
In addition, if the Company does not comply with certain covenants
contained in the Purchase Agreement and the Company's Certificate of
Incorporation, the shares of Series B Convertible Preferred Stock may be
redeemed for $4.5825 per share or, in certain circumstances, a higher amount
based on the fair market value of the Company's Common Stock at such time.
(d) At the Meeting, the Company shall nominate, and has recommended
that the stockholders elect, DJD and JH to the Company's Board of Directors.
Except as set forth in this Item 4, the Reporting Persons have no
present plans or proposals that relate to or that would result in any of the
actions specified in clauses (a) through (j) of Item 4 of Schedule 13D of the
Act.
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CUSIP NO. 367339-10-8 Schedule 13D Page 10 of 77
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ITEM 5. INTEREST IN SECURITIES OF THE ISSUER.
(a)-(b)
IDANTA. The aggregate number of shares of the Stock that
Idanta owns beneficially, pursuant to Rule 13d-3 of the Act, is 4,408,398, which
constitutes approximately 11.0% of the outstanding shares of the Stock. Idanta
holds sole voting and investment power with respect to such shares exercised by
its general partners, DFT, PFT and JH. Mr. Dunn and Ms. Faily, in their
capacities as trustees, exercise the voting power vested in DFT and PFT,
respectively.
DFT. Because of its position as a general partner of Idanta,
DFT shares voting and investment power with respect to the 4,408,398 shares held
by Idanta with PFT and JH, and has sole voting and investment power with respect
to the 1,116,050 shares it holds (including 199,550 shares issuable upon
exercise of the Warrants it holds). Accordingly, DFT may, pursuant to Rule 13d-3
of the Act, be deemed to be a beneficial owner of 5,524,448 shares of the Stock
in the aggregate, which constitutes approximately 13.5% of the outstanding
shares of the Stock. Mr. Dunn, in his capacity as Trustee, exercises the voting
power vested in DFT.
PFT. Because of its position as a general partner of Idanta,
PFT shares voting and investment power with respect to the 4,408,398 shares held
by Idanta with DFT and JH, and has sole voting and investment power with respect
to the 55,803 shares it holds (including 9,978 shares issuable upon exercise of
the Warrant it holds). Accordingly, PFT may, pursuant to Rule 13d-3 of the Act,
be deemed to be a beneficial owner of 4,464,201 shares of the Stock in the
aggregate, which constitutes approximately 11.2% of the outstanding shares of
the Stock. Ms. Faily, in her capacity as Trustee, exercises the voting power
vested in PFT.
JH. Because of his position as a general partner of Idanta,
JH may be deemed to be the beneficial owner of the 4,408,398 shares of the Stock
beneficially owned by Idanta (including 788,223 shares issuable upon exercise of
the Warrant held by Idanta) which constitutes approximately 11.0% of the
outstanding shares of the Stock.
(c) During the past sixty (60) days, the Reporting Persons have
purchased no shares of the Stock or Warrants other than the transactions
reported herein.
(d) Each of the Reporting Persons affirms that no person other
than such Reporting Person has the right to receive or the power to direct the
receipt of dividends from, or the proceeds from the sale of, the shares of the
Stock or Warrants beneficially owned by such Reporting Person.
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CUSIP NO. 367339-10-8 Schedule 13D Page 11 of 77
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(e) It is inapplicable for the purposes herein to state the date
on which the Reporting Persons ceased to be the owners of more than five (5)
percent of the outstanding securities of the Company.
ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT
TO SECURITIES OF THE ISSUER.
Except as set forth herein or in the Exhibits filed or to be filed
herewith, there are no contracts, arrangements, understandings or relationships
with respect to the shares of the Stock beneficially owned by the Reporting
Persons.
(a) Joint Filing Agreement Pursuant to Rule 13d-1(f)(iii).
(b) Stock Purchase Agreement dated November 10, 1997 among the
Company, Idanta, DFT and PFT.
(c) Common Stock Purchase Warrants executed by the Company on
November 10, 1997 and registered in the name of each of Idanta, DFT and PFT.
ITEM 7. MATERIAL TO BE FILED AS EXHIBITS.
(a) Joint Filing Agreement Pursuant to Rule 13d-1(f)(iii).
(b) Stock Purchase Agreement dated November 10, 1997 among the
Company, Idanta, DFT and PFT.
(c) Common Stock Purchase Warrant executed by the Company on
November 10, 1997 and registered in the name of Idanta.
(d) Common Stock Purchase Warrant executed by the Company on
November 10, 1997 and registered in the name of DFT.
(e) Common Stock Purchase Warrant executed by the Company on
November 10, 1997 and registered in the name of PFT.
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CUSIP NO. 367339-10-8 Schedule 13D Page 12 of 77
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After reasonable inquiry and to the best of my knowledge and belief,
each of the undersigned certifies that the information set forth in this
statement is true, complete and correct. The undersigned have filed this
statement jointly pursuant to the agreement attached as EXHIBIT A.
DATED: November , 1997
IDANTA PARTNERS LTD.
by: /s/ David J. Dunn
------------------------
David J. Dunn, Trustee
Dunn Family Trust
General Partner
DUNN FAMILY TRUST
by: /s/ David J. Dunn
------------------------
David J. Dunn, Trustee
PERSCILLA FAILY TRUST
by: /s/ Perscilla Faily
------------------------
Perscilla Faily, Trustee
/s/ Jonathan Huberman
----------------------------
Jonathan Huberman
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CUSIP NO. 367339-10-8 Schedule 13D Page 13 of 77
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EXHIBIT A
JOINT FILING AGREEMENT
In accordance with Rule 13d-1(f)(1) of Regulation 13D of the General
Rules and Regulations of the Securities and Exchange Commission under the
Securities Exchange Act of 1934, as amended, the undersigned agree to the joint
filing on behalf of each of them of this statement and any subsequent amendments
hereto.
DATED: November __, 1997
IDANTA PARTNERS LTD.
by: /s/ David J. Dunn
------------------------
David J. Dunn, Trustee
Dunn Family Trust
General Partner
DUNN FAMILY TRUST
by: /s/ David J. Dunn
------------------------
David J. Dunn, Trustee
PERSCILLA FAILY TRUST
by: /s/ Perscilla Faily
------------------------
Perscilla Faily, Trustee
/s/ Jonathan Huberman
- ----------------------------
Jonathan Huberman
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CUSIP NO. 367339-10-8 Schedule 13D Page 14 of 77
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EXHIBIT B
STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement (the "Agreement") dated as of
November 10, 1997, is entered into by and among GateField Corporation, a
Delaware corporation with offices at 47100 Bayside Parkway, Fremont, California
94538 (the "Company"), and the entities listed on Exhibit A hereto (the
"Purchasers"), in connection with the purchase of (i) 1,000,000 shares of the
Company's Series B Convertible Preferred Stock, par value $.10 (the "Preferred
Stock"), convertible into up to 6,110,000 shares of the Company's common stock,
$.10 par value (the "Common Stock"), to be sold to the Purchasers at the First
Closing (as defined below), (ii) Common Stock Purchase Warrants in the form
attached hereto as Exhibit B, to purchase an aggregate of 997,751 shares of
Common Stock at a purchase price of $1.00 per share (collectively, the
"Warrants"), to be sold to the Purchasers at the First Closing (as defined
below), and (iii) 4,582,500 shares of Common Stock to be sold to the Purchasers
at the Second Closing (as defined below). The shares of Common Stock issuable
upon conversion of the Preferred Stock, the shares of Common Stock issuable upon
exercise of the Warrants, and the Common Stock sold to the Purchasers at the
Second Closing are collectively referred to herein as the "Shares". The
Certificate of Designation setting forth the rights, restrictions, privileges
and preferences of the Preferred Stock (the "Certificate of Designation") is
attached hereto as Exhibit C. The solicitation of this Agreement and the offer
and sale of the Preferred Stock, the Warrants and the Shares, are being made in
reliance upon the provisions of Regulation D ("Regulation D") promulgated by the
Securities and Exchange Commission ("SEC") under the United States Securities
Act of 1933, as amended (the "Securities Act") or upon the provisions of
Section 4(2) of the Securities Act. The Preferred Stock, the Warrants and the
Shares are sometimes collectively referred to herein as the "Securities." The
Common Stock issuable upon conversion of the Preferred Stock and the Common
Stock issuable upon exercise of the Warrants are sometimes collectively referred
to herein as the "Underlying Stock."
In consideration of the mutual promises, representations, warranties
and conditions set forth herein, and intending to be legally bounded hereby, the
Company and the Purchasers agree as follows:
1. Purchase and Sale of Securities; Closing Conditions
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CUSIP NO. 367339-10-8 Schedule 13D Page 15 of 77
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1.1 PURCHASE AND SALE OF SECURITIES.
(a) PURCHASE OF PREFERRED STOCK AND THE WARRANTS. Each of the
Purchasers hereby agrees to purchase and the Company agrees to sell to each of
the Purchasers (i) the number of shares of Preferred Stock set forth opposite
such Purchaser's name on Exhibit A and (ii) a Warrant to purchase the number of
shares of Common Stock set forth opposite such Purchaser's name on Exhibit A,
for the aggregate purchase price set forth opposite such Purchaser's name on
Exhibit A. The closing of the purchase of such Preferred Stock and the Warrants
shall take place on the "First Closing," subject to the satisfaction (or waiver)
of the conditions thereto set forth in Sections 1.2 and 1.3 below:
(b) PURCHASE OF COMMON STOCK. Each of the Purchasers hereby
agrees to purchase and the Company agrees to sell to each of the Purchasers the
number of shares of Common Stock set forth opposite such Purchaser's name on
Exhibit A for the purchase price of $1.00 per share. The closing of the purchase
of such Common Stock shall take place on the "Second Closing," subject to the
satisfaction (or the waiver) of the conditions set forth in Sections 1.2 and 1.3
below. Notwithstanding the foregoing, if the stockholders of the Company do not
approve the proposals to be submitted to them at the 1997 Annual Meeting of
Stockholders to be held on or prior to December 19, 1997, as set forth in
Section 1.3(a)(x), each of the Purchasers shall be relieved of its obligation to
purchase Common Stock at the Second Closing.
(c) PAYMENT AND DELIVERY OF STOCK CERTIFICATES. On each
Closing Date (as defined below), (i) each of the Purchasers shall pay the
portion of the purchase price for the Securities to be issued and sold at the
applicable Closing to such Purchaser by check or wire transfer to the Company,
in accordance with the Company's written instructions, against delivery of duly
executed stock certificates and the warrant which each such Purchaser is then
purchasing and (ii) the Company shall deliver to each such Purchaser such stock
certificates and the warrant against delivery of such purchase price.
(d) CLOSING DATES. Subject to the satisfaction (or waiver) of
the conditions thereto set forth in Sections 1.2 and 1.3 below, the date and
time of the issuance and sale of the Preferred Stock, the Warrants and Common
Stock pursuant to this Agreement (the "Closing Dates") shall be (i) in the case
of the First Closing, 10:00 a.m. Pacific Standard Time on November 10, 1997 (the
"First Closing Date"), and (ii) in the case of the Second Closing, 10:00 a.m.
Pacific Standard Time, three business days following notification of the
satisfaction (or waiver) of the condition to such Closing set forth in Section
1.3(b)(vii) (the "Second Closing Date") or, in each case, at such mutually
agreed upon time.
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1.2 CONDITIONS PRECEDENT TO THE OBLIGATION OF THE COMPANY TO ISSUE
AND SELL THE PREFERRED STOCK, WARRANTS AND COMMON STOCK. The obligation
hereunder of the Company to issue and sell the Preferred Stock, Warrants and
Common Stock to each of the Purchasers at each respective Closing is subject to
the satisfaction, at or before such Closing, of each of the conditions set forth
below. These conditions are for the Company's sole benefit and may be waived by
the Company at any time in its sole discretion.
(a) ACCURACY OF THE PURCHASER'S REPRESENTATION AND WARRANTIES.
The representations and warranties of the Purchasers contained in
this Agreement shall be true and correct as of the date when made
and as of the applicable Closing Date as though made at each such
time.
(b) PERFORMANCE BY THE PURCHASER. The Purchasers shall have
performed, satisfied and complied in all respects with all
covenants, agreements and conditions required by this Agreement
to be performed, satisfied or complied with by the Company at or
prior to the applicable Closing.
(c) NO INJUNCTION. No statute, rule, regulation, executive
order, decree, ruling or injunction shall have been enacted,
entered, promulgated or endorsed by any court or governmental
authority of competent jurisdiction which prohibits or adversely
affects any of the transactions contemplated by this Agreement,
and no proceeding shall have been commenced which may have the
effect of prohibiting or adversely affecting any of the
transactions contemplated by this Agreement.
1.3 CONDITIONS PRECEDENT TO THE OBLIGATION OF THE PURCHASERS TO
ACQUIRE THE PREFERRED STOCK, WARRANTS AND COMMON STOCK. The obligation of the
Purchasers hereunder to acquire and pay for the Preferred Stock, Warrants and
Common Stock at each of the First Closing and the Second Closing, as applicable,
is subject to the satisfaction, at or before the Closing Date in respect of such
Closing, of each of the following conditions. Each of these conditions is for
each of the Purchaser's sole benefit and may be waived by a Purchaser at any
time in its sole discretion.
(a) As to the First Closing:
(i) ACCURACY OF THE COMPANY'S REPRESENTATIONS AND
WARRANTIES. The representations and warranties of the Company
contained in this Agreement shall be true and correct as of the
date when made and as of the First Closing Date as though made at
each such time.
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(ii) PERFORMANCE BY THE COMPANY. The Company shall
have performed, satisfied and complied in all respects with all
covenants, agreements and conditions contained in this Agreement
and in all other agreements related to this Agreement to be
performed, satisfied or complied with by the Company at or prior
to the First Closing.
(iii) NO INJUNCTION. No statute, rule, regulation,
executive order, decree, ruling or injunction shall have been
enacted, entered, promulgated or endorsed by any court or
governmental authority of competent jurisdiction which prohibits
or adversely effects any of the transactions contemplated by this
Agreement, and no proceeding shall have been commenced which may
have the effect of prohibiting or adversely affecting any of the
transactions contemplated by this Agreement.
(iv) ADVERSE CHANGES. Since December 31, 1996, no
event which had or is likely to have a Material Adverse Effect
has occurred, except as described in the Company's Form 10-Qs
filed with the SEC for the quarterly periods ended March 31, and
June 30, 1997. For purposes of this Agreement, "Material Adverse
Effect" means any effect on the business, operations, properties,
prospects, condition, financial or otherwise, net worth, or
results of operations of the Company and which is material and
adverse to the Company or to other entities controlled by the
Company, taken as a whole, and/or any condition or situation
which would prohibit or otherwise interfere with the ability of
the Company or other entity controlled by the Company to enter
into and perform its obligations under this Agreement.
(v) NO SUSPENSION OF TRADING IN OR DELISTING OF
COMMON STOCK. As of the First Closing Date, (A) the trading of
the Common Stock shall not have been suspended by the SEC, The
Nasdaq Stock Market, Inc. ("Nasdaq Inc.") or the National
Association of Securities Dealers, Inc. (the "NASD"), (B) the
Common Stock shall not have been delisted from the Nasdaq
National Market (the "Exchange"), and (C) the Company shall not
have been advised in writing that the Common Stock will be
delisted from the Exchange.
(vi) THE LEGAL OPINION. The Company shall have
delivered to each of the Purchasers the opinion of Wilson Sonsini
Goodrich & Rosati, Professional Corporation, independent counsel
to the Company, with respect to the matters set forth in Exhibit
D attached hereto, dated as of the First Closing Date.
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(vii) OFFICER'S CERTIFICATE. The Company shall have
delivered to the Purchasers a certificate in such form and
substance as shall be reasonably satisfactory to the Purchasers,
executed by an executive officer of the Company as of the First
Closing Date, to the effect that all of the conditions to the
First Closing shall have been satisfied.
(viii) REGISTRATION RIGHTS AGREEMENT. The Company and
the Purchasers shall have executed and delivered the Registration
Rights Agreement attached hereto as Exhibit E.
(ix) IRREVOCABLE LETTER OF INSTRUCTION. The Company
shall have issued to the transfer agent for the Common Stock (and
to any substitute or replacement transfer agent for its Common
Stock coterminous with the Company's appointment of any such
substitute or replacement transfer agent) irrevocable
instructions regarding the issuance of certificates representing
the Securities in such form and substance as shall be reasonably
satisfactory to the Purchasers.
(x) PROXY STATEMENT. The Company shall have filed
with the SEC and Nasdaq Inc., a Notice of 1997 Annual Meeting of
Stockholders to be held on or prior to December 19, 1997,
together with a preliminary Proxy Statement requesting
stockholder approval (A) of an amendment to the Company's
Certificate of Incorporation providing for the classification of
the Board of Directors into three classes, with members of each
class serving staggered three-year terms, (B) of an amendment to
the Company's Certificate of Incorporation providing for the
increase in the number of shares of authorized Common Stock from
40,000,000 to 65,000,000 and (C) to sell securities of the
Company to the Purchasers which prior to such sale represent more
than 20% of the Company's outstanding voting stock; and
nominating a four (4) person Board of Directors with Dr. James R.
Fiebiger being nominated as a Class I Director for an initial
term of one year, Messrs. Horst G. Sandfort and David J. Dunn
being nominated as Class II Directors for an initial term of two
years, and Mr. Jonathan S. Huberman being nominated as a Class
III Director for an initial term of three years.
(xi) CERTIFICATE AND DOCUMENTS. The Company shall have
delivered to the Purchasers:
(A) the Certificate of Incorporation of the
Company, as amended and in effect as of the
date of the First Closing, certified by the
Secretary of State of the State of Delaware;
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(B) certificates, as of the most recent
practicable dates, as to the corporate good
standing of the Company issued by the
Secretary of State of the State of Delaware
and the Secretary of State of the State of
California;
(C) the By-laws of the Company, as amended and
in effect as of the date of the First
Closing, certified by the Secretary of the
Company; and
(D) resolutions of the Board of Directors of the
Company authorizing and approving all
matters in connection with this Agreement
and the transactions contemplated hereby and
authorizing and approving the amendments to
the Company's Certificate of Incorporation
and the other matters described in Section
1.3(a)(x) of this Agreement, certified by
the Secretary of the Company as of the First
Closing Date.
(xii) OTHER MATTERS. All corporate and other
proceedings in connection with the transactions contemplated by
this Agreement and all documents and instruments incident to such
transactions shall be reasonably satisfactory in substance and
form to the Purchasers and their counsel, and the Purchasers and
their counsel shall have received all such counterpart originals
or certified or other copies of such documents as they may
reasonably request.
(b) As to the Second Closing:
(i) ACCURACY OF THE COMPANY'S REPRESENTATIONS AND
WARRANTIES. The representations and warranties of the Company
contained in this Agreement shall be true and correct as of the
date when made and as of the Second Closing Date as though made
at each such time.
(ii) PERFORMANCE BY THE COMPANY. The Company shall
have performed, satisfied and complied in all respects with all
covenants, agreements and conditions contained in this Agreement
and in all other agreements related to this Agreement to be
performed, satisfied or complied with by the Company at or prior
to the Second Closing.
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(iii) ADVERSE CHANGES. Since December 31, 1996, no event
which had or is likely to have a Material Adverse Effect has
occurred, except as described in the Company's Form 10-Qs filed
with the SEC for the quarterly periods ended March 31, and June
30, 1997.
(iv) NO SUSPENSION OF TRADING OR DELISTING OF COMMON
STOCK. As of the Second Closing Date, (A) the trading of the
Common Stock shall not have been suspended by the SEC, Nasdaq
Inc. or the NASD, (B) the Common Stock shall not have been
delisted from the Exchange, and (C) the Company shall not have
been advised in writing that the Common Stock will be delisted
from the Exchange.
(v) THE LEGAL OPINION. The Company shall have
delivered to each of the Purchasers the opinion of Wilson Sonsini
Goodrich & Rosati, Professional Corporation, independent counsel
to the Company, dated as of the Second Closing Date, with respect
to the matters set forth in Exhibit D attached hereto, dated as
of the Second Closing Date.
(vi) OFFICER'S CERTIFICATE. The Company shall have
delivered to the Purchasers a certificate in such form and
substance as shall be reasonably satisfactory to the Purchasers,
executed by an executive officer of the Company as of the Second
Closing Date, to the effect that all the conditions to the Second
Closing shall have been satisfied.
(vii) STOCKHOLDER'S MEETING. The stockholders of the
Company shall have approved the amendments to the Company's
Certificate of Incorporation and other matters specified in
Section 1.3(a)(x).
(viii) HART-SCOTT-RODINO ACT. All applicable waiting
periods (and any extensions thereof) under the Hart-Scott-Rodino
Act shall have expired or otherwise been terminated.
(ix) AMENDMENT TO BYLAWS. The Board of Directors of the
Company shall have amended the Bylaws of the Company to include a
provision with respect to the matters specified in Section 4.10.
(x) CERTIFICATE AND DOCUMENTS. The Company shall have
delivered to the Purchasers:
(A) the Certificate of Incorporation of the
Company, as amended and in effect as of the
date of the Second Closing, certified by the
Secretary of State of the State of Delaware;
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(B) certificates, as of the most recent
practicable dates, as to the corporate good
standing of the Company issued by the
Secretary of State of the State of Delaware
and the Secretary of State of the State of
California;
(C) the By-laws of the Company, as amended and in
effect as of the date of the Second Closing,
certified by the Secretary of the Company;
and
(D) resolutions of the Board of Directors of the
Company authorizing and approving all matters
in connection with this Agreement and the
transactions contemplated hereby, certified
by the Secretary of the Company as of the
Second Closing Date.
(xi) OTHER MATTERS. All corporate and other proceedings
in connection with the transactions contemplated by this
Agreement and all documents and instruments incident to such
transactions shall be reasonably satisfactory in substance and
form to the Purchasers and their counsel, and the Purchasers and
their counsel shall have received all such counterpart originals
or certified or other copies of such documents as they may
reasonably request.
1.4 CONVERSION OF PREFERRED STOCK. In the event the stockholders of
the Company fail to approve the proposals specified in Section 1.3(a)(x) at the
1997 Annual Meeting of Stockholders to be held on or prior to December 19, 1997,
the Purchasers holding at least 51% of the then outstanding shares of Preferred
Stock shall have the right, upon fifteen (15) days prior written notice to the
Company, to redeem the Preferred Stock, in whole or in part, for a cash payment
from the Company equal to $4.5825 per share plus accrued and unpaid dividends
thereon (subject to adjustment for stock splits, stock dividends, combination or
similar recapitalizations affecting such shares); PROVIDED, HOWEVER, that if the
Purchasers do not elect to redeem the Preferred Stock, as provided above, the
Conversion Price (as defined in the Certificate of Designation of the Preferred
Stock) of all shares of the Preferred Stock shall be reduced from $1.00 to $.75
per share.
2. Representations and Warranties of Purchaser
Each of the Purchasers severally represents and warrants to the Company
that:
2.1 NO GOVERNMENT RECOMMENDATION OR APPROVAL. Such Purchaser
understands that no United States federal or state agency, or similar agency of
any
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other country, has passed upon or made any recommendation or endorsement of the
Company or the offering of the Securities.
2.2 INTENT. Such Purchaser is purchasing the Securities for its own
account and not with a view towards distribution and such Purchaser has no
present arrangement (whether or not legally binding) at any time to sell the
Securities to or through any person or entity; provided, however, that by making
the representations herein, such Purchaser does not agree to hold the Securities
for any minimum or other specific term and reserves the right to dispose of the
Securities at any time in accordance with Federal and state securities laws
applicable to such disposition. Such Purchaser understands that the Securities
must be held indefinitely unless such Securities are subsequently registered
under the Securities Act or an exemption from registration is available. Such
Purchaser has been advised or is aware of the provisions of Rule 144 promulgated
under the Securities Act.
2.3 SOPHISTICATED INVESTOR. Such Purchaser is a sophisticated
investor (as described in Rule 506(b)(2)(ii) of Regulation D) and, except for
the Perscilla Faily Trust, an accredited investor (as defined in Rule 501 of
Regulation D), and such Purchaser has such experience in business and financial
matters that it is capable of evaluating the merits and risks of an investment
in the Securities. Such Purchaser acknowledges that the Securities are
speculative and involve a high degree of risk.
2.4 INDEPENDENT INVESTIGATION. Such Purchaser, in making its decision
to purchase the Securities subscribed for hereunder, has relied upon an
independent investigation made by it and/or its representatives and has not
relied on any oral or written representations or assurances from the Company or
any representative or agent of the Company, other than as set forth in this
Agreement, in the public filings of the Company and in the documents described
herein. Prior to the date hereof, such Purchaser has been furnished with and has
reviewed the Company's latest proxy statement and Annual Report on Form 10-K
sent to the Company's stockholders and all documents filed by the Company since
December 31, 1996 pursuant to Sections 13(a), 13(c), 14 or 15(d) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), (such
documents are collectively referred to in this Agreement as the "Exchange Act
Reports"). Such Purchaser has had a reasonable opportunity to ask questions of
and receive answers from the Company concerning the Company and the offering of
securities and has received satisfactory answers to all inquiries it has made
with respect to the Company and the Securities. Such Purchaser acknowledges the
price and terms of the Securities offered hereby have been determined by
negotiation based, in part, on the market price for the Common Stock, and does
not necessarily bear any relationship to the assets, book value or potential
performance of the Company or any other recognized criteria of value.
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2.5 AUTHORITY. This Agreement has been duly authorized and validly
executed, and delivered by such Purchaser and is a valid and binding agreement
enforceable in accordance with its terms, subject to general principles of
equity and to bankruptcy or other laws affecting the enforcement of creditors'
rights generally.
2.6 NO LEGAL ADVICE FROM COMPANY. Such Purchaser acknowledges that it
has had the opportunity to review this Agreement and the transactions
contemplated by this Agreement with his or its own legal counsel and tax
advisors. Except for any statements or representations of the Company made in
this Agreement and in the Exchange Act Reports, the Purchaser is relying solely
on such counsel and advisors and not on any statements or representations of the
Company or any of its representative or agents for legal, tax or investment
advice with respect to this investment, the transactions contemplated by this
Agreement or the securities laws of any jurisdiction.
2.7 NO BROKERS. Such Purchaser has taken no action which would give
rise to any claim by any person for brokerage commission, finder's fees or
similar payments by the Company relating to this Agreement or the transactions
contemplated hereby.
2.8 NOT AN AFFILIATE. Prior to the First Closing, such Purchaser has
not been an officer, director or "affiliate" (as that term is defined in Rule
405 of the Securities Act) of the Company.
2.9 RELIANCE ON REPRESENTATIONS AND WARRANTIES. Such Purchaser
understands that the Securities are being offered and sold to it in reliance on
specific provisions of United States federal and state securities laws and that
the Company is relying upon the truth and accuracy of the representations,
warranties, agreements, acknowledgements and understandings of such Purchaser
set forth in this Agreement in order to determine the applicability of such
provisions.
3. Representations and Warranties of the Company
Subject to and except as disclosed by the Company in APPENDIX A annexed
hereto (the "Disclosure Schedule"), the Company represents and warrants to each
of the Purchasers that:
3.1 COMPANY STATUS. The Company has registered the Common Stock
pursuant to Section 12(b) or 12(g) of the Exchange Act, is in full compliance
with all reporting requirements of the Exchange Act, and the Company has
maintained all requirements for the continued listing of the Common Stock, and
the Common Stock is currently listed on the Exchange. The Company has not been
advised that the Common Stock will be delisted from the Exchange.
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3.2 CURRENT PUBLIC INFORMATION. The Exchange Act Reports are the
only filings made by the Company since December 31, 1996 pursuant to Sections
13(a), 13(c), 14 and 15(d) of the Exchange Act.
3.3 NO DIRECTED SELLING EFFORTS OR GENERAL SOLICITATION IN REGARD TO
THIS TRANSACTION. Neither the Company nor any of its affiliates nor any
distributor or any person acting on its or their behalf has conducted any
"directed selling efforts" with respect to the Preferred Stock, the Warrants or
the Common Stock nor has the Company conducted any general solicitation (as that
term is used in Regulation D) with respect to any of the Securities, nor have
they made any offers or sales of any security or solicited any offers to buy any
security, under circumstances that would require registration of the Securities
under the Securities Act.
3.4 CAPITALIZATION; ISSUANCE OF SECURITIES.
(a) As of the date of this Agreement, the authorized capital
stock of the Company consists of 40,000,000 shares of Common Stock, of which
35,538,756 shares are issued and outstanding, and 2,000,000 shares of series
preferred stock, of which 1,000,000 shares have been designated Preferred Stock,
none of which shares are issued or outstanding. The Company has adopted and
filed the Certificate of Designation with the Secretary of State of the State of
Delaware. As of the date of the Second Closing, the authorized capital stock of
the Company consists of 65,000,000 shares of Common Stock and 2,000,000 shares
of series preferred stock, of which 1,000,000 shares have been designated
Preferred Stock, all of which are issued and outstanding. All of the issued and
outstanding shares of Common Stock have been duly and validly issued and are
fully paid and non-assessable. Except as set forth in Section 3.4 of the
Disclosure Schedule (i) no subscription, warrant, option, convertible security
or other right (contingent or otherwise) to purchase or acquire any shares of
capital stock of the Company is authorized or outstanding, (ii) the Company has
no obligation (contingent or otherwise) to issue any subscription, warrant,
option, convertible security or other such right or to issue or distribute to
holders of any shares of its capital stock any evidences of indebtedness or
assets of the Company, and (iii) the Company has no obligation (contingent or
otherwise) to purchase, redeem or otherwise acquire any shares of its capital
stock or any interest therein or to pay any dividend or make any other
distribution in respect thereof. All of the issued and outstanding shares of
capital stock of the Company have been offered, issued and sold by the Company
in compliance with applicable Federal and state securities laws.
(b) The issuance, sale and delivery of the Securities in
accordance with this Agreement, the issuance and delivery of the shares of
Common Stock issuable upon conversion of the Preferred Stock and the issuance
and delivery of the shares of Common Stock upon exercise of the Warrants, have
been duly authorized
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by all necessary corporate action on the part of the Company, and after the
approval by the Company's stockholders of an amendment to the Company's
Certificate of Incorporation increasing the number of authorized shares of
Common Stock, all such shares shall be duly reserved for issuance. Upon issuance
of the Securities (other than the Underlying Stock), the Securities (other than
the Underlying Stock) will be duly and validly issued, fully paid and
non-assessable; after the approval by the Company's stockholders of an amendment
to the Company's Certificate of Incorporation increasing the number of
authorized shares of Common Stock, the shares of Common Stock issuable upon
conversion of the Preferred Stock shall be duly reserved by the Company for
issuance, and when issued and delivered in accordance with the terms of the
Preferred Stock, will be duly and validly issued, fully paid and non-assessable;
and after the approval by the Company's stockholders of an amendment to the
Company's Certificate of Incorporation increasing the number of authorized
shares of Common Stock, the shares of Common Stock issuable upon exercise of the
Warrants have been duly reserved by the Company for issuance, and when issued
and delivered in accordance with the terms of the Warrants, will be duly and
validly issued, fully paid and non-assessable.
(c) There are no agreements, written or oral, between the
Company and any holder of its capital stock or any security convertible into its
capital stock, or to the best of the Company's knowledge, among any such
holders, relating to the acquisition (including, without limitation, rights of
first refusal or pre-emptive rights), disposition, registration under the
Securities Act, or voting of the capital stock of the Company.
3.5 ORGANIZATION AND QUALIFICATION. The Company is a corporation duly
incorporated and existing in good standing under the laws of the State of
Delaware and has the requisite corporate power to own its properties and to
carry on its business as now being conducted. The Company does not have any
subsidiaries, except for those listed on its Form 10-K filed with the SEC for
the year ended December 31, 1996. The Company and each such subsidiary is duly
qualified as a foreign corporation to do business and is in good standing in
every jurisdiction in which the nature of the business conducted or property
owned by it makes such qualification necessary other than those in which the
failure so to qualify would not have a Material Adverse Effect. References to
the "Company" in this Agreement shall also include each subsidiary of the
Company, except where the context otherwise requires.
3.6 AUTHORIZATION; ENFORCEMENT. (i) The Company has the requisite
corporate power and authority to enter into and perform this Agreement and to
issue the Securities in accordance with the terms hereof and thereof, (ii) the
execution, issuance and delivery of this Agreement, the Preferred Stock, the
Warrants and the Common Stock by the Company and all other agreements, including
without
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limitation, the Registration Rights Agreement, required to be executed by the
Company as provided herein (collectively, the "Ancillary Agreements"), and the
consummation by the Company of the transactions contemplated hereby and thereby,
including without limitation, the issuance of Common Stock upon the conversion
or exercise thereof, have been duly authorized by all necessary corporate
action, and no further consent or authorization of the Company or its Board of
Directors or stockholders is required, (iii) this Agreement and the Ancillary
Agreements have been duly executed and delivered by the Company, and (iv) this
Agreement, the Ancillary Agreements, the Preferred Stock and the Warrants
constitute, and upon execution, issuance and delivery thereof the Preferred
Stock and the Warrants shall be, valid and binding obligations of the Company
enforceable against the Company in accordance with their terms, except as such
enforceability may be limited by applicable bankruptcy, insolvency, or similar
laws relating to, or affecting generally the enforcement of, creditors' rights
and remedies or by other equitable principles of general application.
3.7 CORPORATE DOCUMENTS. The Company has furnished or made available
to the Purchaser true and correct copies of the Company's Certificate of
Incorporation, as in effect on the date hereof (the "Certificate"), and the
Company's By-Laws, as in effect on the date hereof (the "By-Laws").
3.8 NO CONFLICTS. The execution, delivery and performance of this
Agreement and the Preferred Stock, the Warrants and Common Stock by the Company
and the consummation by the Company of the transactions contemplated hereby and
thereby, including without limitation the issuance of common stock upon the
conversion or exercise thereof, do not and will not (i) result in a violation of
or conflict with the Certificate or By-Laws or (ii) violate, conflict with, or
constitute a breach of or default (or an event which with notice or lapse of
time or both would become a default) under, or give to others any rights of
termination, amendment, acceleration or cancellation of, any material agreement,
indenture or instrument to which the Company or any of its subsidiaries is a
party, or result in a violation of any Federal, state, local or foreign law,
rule, regulation, order, judgment or decree (including federal and state
securities laws and regulations) applicable to the Company or any of its
subsidiaries or by which any property or asset of the Company or any of its
subsidiaries is bound or affected, except for such conflicts, defaults,
terminations, amendments, accelerations, cancellations and violations as would
not, individually or in the aggregate, have a Material Adverse Effect. The
business of the Company is not being conducted in violation of any law,
ordinance or regulations of any governmental entity, except for possible
violations which either singly or in the aggregate do not and will not have a
Material Adverse Effect. The Company is not required under Federal, state or
local law, rule or regulation in the United States to obtain any consent,
authorization or order of, or make any filing or registration with, any court or
governmental agency in order for it to execute, deliver
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or perform any of its obligations under this Agreement or issue and sell the
Securities in accordance with the terms hereof and thereof (other than (i)
compliance with the applicable requirements of the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended (the "Hart-Scott-Rodino Act") and (ii) any
SEC, NASD, Nasdaq Inc. or state securities filings which may be required to be
made by the Company subsequent to either the First Closing or the Second
Closing, and any registration statement which may be filed pursuant hereto);
provided that, for purposes of the representation made in this sentence, the
Company is assuming and relying upon the accuracy of the relevant
representations and agreements of the Purchasers herein.
3.9 EXCHANGE ACT REPORTS; FINANCIAL STATEMENTS. The Company has
delivered or made available to the Purchasers true and complete copies of the
Exchange Act Reports (including, without limitation, proxy information and
solicitation materials). As of their respective dates, the Exchange Act Reports
complied in all material respects with the requirements of the Exchange Act and
rules and regulations of the SEC promulgated thereunder and other Federal, state
and local laws, rules and regulations applicable to such Exchange Act Reports,
and none of the Exchange Act Reports contained any untrue statement of a
material fact or omitted to state a material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. The financial
statements of the Company included in the Exchange Act Reports comply as to form
in all material respects with applicable accounting requirements and the
published rules and regulations of the SEC or other applicable rules and
regulations with respect thereto. Such financial statements have been prepared
in accordance with generally accepted accounting principles applied on a
consistent basis during the periods involved (except (i) as may be otherwise
indicated in such financial statements or the notes thereto or (ii) in the case
of unaudited interim statements, to the extent they may not include footnotes or
may be condensed or summary statements) and fairly present the financial
condition of the Company as of the dates thereof and the results of operations
and cash flows for the periods then ended (subject, in the case of unaudited
statements, to normal year-end audit adjustments which in the aggregate will not
be material).
3.10 NO MATERIAL ADVERSE CHANGE. Since December 31, 1996, the date
through which the most recent annual report of the Company on Form 10-K which
has been prepared and filed with the SEC, a copy of which is included in the
Exchange Act Reports, there has been no material adverse change in the business,
operations, properties, prospects, condition, financial or otherwise, net worth,
or results of operations of the Company or its subsidiaries, except as described
in the Company's Form 10-Qs filed with the SEC for the quarterly periods ended
March 31, and June 30, 1997, and the Disclosure Schedule.
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3.11 NO UNDISCLOSED LIABILITIES. The Company and its subsidiaries
have no liabilities or obligations of any type, which in the aggregate exceed
$100,000, that are not fully reflected or disclosed in the Exchange Act Reports,
other than those incurred in the ordinary course of the Company's or its
subsidiaries' respective businesses since June 30, 1997.
3.12 NO UNDISCLOSED EVENTS OR CIRCUMSTANCES. No event or circumstance
has occurred or exists with respect to the Company or its subsidiaries or their
respective businesses, properties, prospects, operations or condition, financial
or otherwise, which, under applicable law, rule or regulation, requires
disclosure in the Exchange Act Reports or public disclosure prior to the date
hereof by the Company and which has not been so disclosed.
3.13 NO INTEGRATED OFFERING. Neither the Company, nor any of its
affiliates, nor any person acting on its or their behalf has, directly or
indirectly, made any offers or sales of any security or solicited any offers to
buy any security, under circumstances that would require registration under the
Securities Act of the offer, issuance and sale of the Securities to the
Purchasers.
3.14 NO BROKERS. The Company has taken no action which would give rise
to any claim by any person for brokerage commissions, finder's fees or similar
payments by the Purchasers relating to this Agreement or the transactions
contemplated hereby.
3.15 PROFORMA SEPTEMBER 30, 1997 FINANCIAL STATEMENTS. The proforma
balance sheet and financial statements of the Company as of September 30, 1997
(the "Pro Forma Financials") which have been furnished to the Purchasers are
true and correct in all material respects. The Pro Forma Financials have been
prepared in accordance with generally accepted accounting principles applied on
a consistent basis during the periods involved (except to the extent they may
not include footnotes or may be condensed or summary statements) and fairly
present the financial condition of the Company as of the dates thereof and the
results of operations and cash flows for the periods then ended (subject to
normal year-end audit adjustments which in the aggregate will not be material).
3.16 GOVERNMENTAL CONSENTS. No consent, approval, order or
authorization of, or registration, qualification, designation, declaration or
filing with, any governmental authority is required on the part of the Company
in connection with the execution and delivery of this Agreement, the offer,
issuance, sale and delivery of the Securities, or the other transactions to be
consummated at the First and Second Closings (other than the stockholder
approval with respect to the Second Closing in accordance with Section
1.3(b)(vii)), as contemplated by this Agreement, except such filings as shall
have been made prior to and shall be effective on and as of such
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Closing. Based on the representations made by the Purchasers in Section 2 of
this Agreement, the offer and sale of the Securities to the Purchasers will be
in compliance with applicable Federal and state securities laws.
3.17 LITIGATION. There is no action, suit or proceeding, or
governmental inquiry or investigation, pending, or, to the best of the Company's
knowledge, any basis therefor or threat thereof, against the Company, which
questions the validity of this Agreement or the right of the Company to enter
into it, or which might result, either individually or in the aggregate, in a
Material Adverse Effect.
3.18 INTELLECTUAL PROPERTY. Set forth in the Disclosure Schedule is a
true and complete list of all patents, patent applications, trademarks, service
marks, trademark and service mark applications, trade names, copyright
registrations and licenses presently used by the Company or necessary for the
conduct of the Company's business as conducted and as proposed to be conducted,
as well as any agreement under which the Company has access to any confidential
information used by the Company in its business (collectively, the "Intellectual
Property Rights"). The Company owns, or has the right to use under the
agreements or upon the terms described in the Disclosure Schedule, all of the
Intellectual Property Rights, and has taken all actions reasonably necessary to
protect the Intellectual Property Rights. The business conducted or proposed by
the Company does not and will not cause the Company to infringe or violate any
of the patents, trademarks, service marks, trade names, copyrights, licenses,
trade secrets or other intellectual property rights of any other person or
entity. The Company is not aware that any employee is obligated under any
contract (including any license, covenant or commitment of any nature), or
subject to any judgment, decree or order of any court or administrative agency,
that would conflict or interfere with (i) the performance of employee's duties
as an officer, employee or director of the Company, (ii) the use of such
employee's best efforts to promote the interests of the Company or (iii) the
Company's business as conducted or proposed to be conducted. No other person or
entity (including without limitation any prior employer of any employee of the
Company) has any right to or interest in any inventions, improvements,
discoveries or other confidential information utilized by the Company in its
business.
3.19 MATERIAL CONTRACTS AND OBLIGATIONS. Section 3.19 of the
Disclosure Schedule lists each material agreement to which the Company is a
party or subject, including without limitation all material employment and
consulting agreements, employee benefit, bonus, pension, profit-sharing, stock
option, stock purchase and similar plans and arrangements, and distributor and
sales representative agreements. The Disclosure Schedule lists each agreement
with any stockholder, officer or director of the Company, or any "affiliate" or
"associate" of such persons (as such terms are defined in the rules and
regulations promulgated under the Securities Act), including without limitation
any agreement or other arrangement providing for the furnishing
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of services by, rental of real or personal property from, or otherwise requiring
payments to, any such person or entity and any agreement relating to the
Intellectual Property Rights. The Company has delivered to counsel to the
Purchasers copies of all of the foregoing agreements. All of such agreements and
contracts are valid, binding and in full force and effect.
3.20 EMPLOYEES. All employees of the Company whose employment
responsibility requires access to confidential or proprietary information of the
Company have executed and delivered nondisclosure and assignment of invention
agreements in the form attached hereto as Exhibit F, and all of such agreements
are in full force and effect.
3.21 ERISA. The Company does not have or otherwise contribute to or
participate in any employee benefit plan subject to the Employee Retirement
Income Security Act of 1974.
3.22 BOOKS AND RECORDS. The minute books of the Company contain
complete and accurate records of all meetings and other corporate actions of its
stockholders and its Board of Directors and committees thereof. The Company has
delivered to counsel to the Purchasers copies of all of the minutes of all
meetings and other corporate actions of its stockholders and its Board of
Directors and committees thereof held or taken since October 1, 1995.
3.23 SECTION 203 OF THE DELAWARE GENERAL CORPORATION LAW. The
transactions contemplated by this Agreement have been approved by the Board of
Directors of the Company for purposes of Section 203 of the Delaware General
Corporation Law.
3.24 DISCLOSURES. Neither this Agreement nor any Attachment or Exhibit
hereto, nor any report, certificate or instrument furnished to any Purchaser or
its counsel in connection with the transactions contemplated by this Agreement,
when read together, contains or will contain any untrue statement of a material
fact or omits or will omit to state a material fact necessary in order to make
the statements contained herein or therein, in light of the circumstances under
which they were made, not misleading. The Company knows of no information or
fact which has or would have a Material Adverse Effect which has not been
disclosed in the Disclosure Schedule.
4. Covenants
4.1 REGISTRATION RIGHTS. The Company agrees that, at the First
Closing, it will enter into a Registration Rights Agreement with the Purchasers,
in the form and substance of Exhibit E attached hereto.
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4.2 RESERVATION OF COMMON STOCK.
(a) As of the date hereof, the Company has reserved and the
Company shall continue to reserve and keep available at all times, free of
preemptive rights, 250,000 shares of Common Stock for the purpose of enabling
the Company to satisfy any obligation to issue shares of its Common Stock upon
conversion of the Preferred Stock and exercise of the Warrants, and to sell to
each of the Purchasers shares of its Common Stock at the Second Closing. The
number of shares so reserved shall be increased to reflect stock splits and
stock dividends and distributions.
(b) From and after the date of stockholder approval of an
amendment to the Company's Certificate of Incorporation to increase the number
of authorized shares of Common Stock, the Company shall reserve and keep
available at all times, free of preemptive rights, shares of Common Stock for
the purpose of enabling the Company to satisfy any obligation to issue shares of
its Common Stock upon conversion of the Preferred Stock and exercise of the
Warrants, and to sell to each of the Purchasers shares of its Common Stock at
the Second Closing. The number of shares so reserved shall be increased to
reflect stock splits and stock dividends and distributions.
4.3 LISTING OF SHARES. The Company hereby agrees, promptly following
the First Closing, to take such action to cause the Shares to be listed on the
Exchange as promptly as possible but no later than 90 days following the First
Closing Date. The Company further agrees, if the Company applies to have its
Common Stock traded on any principal stock exchange or market, it will include
the Shares in such application and will take such other action as is necessary
or desirable to cause the Shares to be listed on such other exchange or market
as promptly as possible.
4.4 EXCHANGE ACT REGISTRATION. The Company will cause its Common
Stock to continue to be registered under Section 12(g) or 12(b) of the Exchange
Act, will comply in all respects with its reporting and filing obligations under
the Exchange Act, and will not take any action or file any document (whether or
not permitted by the Exchange Act or the rules thereunder) to terminate or
suspend such registration or to terminate or suspend its reporting and filing
obligations under the Exchange Act. The Company will take all action under its
control to continue the listing and trading of its Common Stock on the Exchange
and will comply in all respects with the Company's reporting, filing and other
obligations under the bylaws or rules of the NASD, the Nasdaq Inc. and the
Exchange.
4.5 LEGENDS. The Shares, and certificates evidencing the same shall,
upon the effectiveness of the Registration Statement to be filed pursuant to the
Registration Rights Agreement described in Section 4.1 (the "Registration
Statement") be free of
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legends (except as provided in Section 5.1 below), "stop transfers," so-called,
"stock transfer restrictions," or other restrictions.
4.6 CORPORATE EXISTENCE. The Company will take all steps necessary
to preserve and continue the corporate existence of the Company.
4.7 BOARD OF DIRECTORS NOMINATIONS. The Company will cause David J.
Dunn and Jonathan S. Huberman, or their successors as designated by the
Purchasers (by action of the holders of at least 51% of the then outstanding
Shares on as-converted basis), to be nominated on the Company's management slate
of Directors for election to the Company's Board of Directors at the 1997 Annual
Meeting of Stockholders to be held on or prior to December 19, 1997, and for
re-election to the Company's Board of Directors on each Proxy Statement filed
for each subsequent Annual Meeting of Stockholders (or Special Meeting of
Stockholders where directors are elected) as their respective board seats come
up for re-election until the earlier of (a) the date that the Company first
reports Annual Net Income of at least Fifteen Million Dollars ($15,000,000) and
(b) the date that the Purchasers (including for this purpose each of the
Purchaser's general partners and members of their respective immediate families
to whom shares may have been distributed by a Purchaser) collectively own less
than the Minimum Holdings (as defined below). The "Minimum Holdings" shall be
the number of shares of Common Stock equal to 50% of the sum of (i) 4,582,500
(subject to appropriate adjustment for any stock dividend, stock split,
combination or other similar recapitalization) (such number being the total
number of shares of Common Stock issuable, as of the First Closing, upon
conversion of the Preferred Stock issued to the Purchasers at the First Closing)
and (ii) the total number of shares of Common Stock, if any, issued to the
Purchasers at the Second Closing. For purposes of determining the total number
of shares of Common Stock owned by the Purchasers, each of the Purchaser's
general partners and members of their respective immediate families to whom
shares may have been distributed by a Purchaser, such holders shall be deemed to
own the total number of shares of Common Stock issuable upon conversion of the
Preferred Stock. "Annual Net Income", as used herein, means the net income of
the Company for a full fiscal year as reported in the Company's audited
financial statements for such year, adjusted, however, by excluding from revenue
for such fiscal year any extraordinary or non-recurring revenue and any up-front
license fees which entitle the licensee-payor to license rights for a period in
excess of one year.
4.8 RIGHT OF FIRST REFUSAL.
(a) Until such time as the earlier of (i) the date that the
Company first reports Annual Net Income of Fifteen Million Dollars ($15,000,000)
and (ii) the date that the Purchasers and their respective affiliates described
in Section 4.7 collectively own less than the Minimum Holdings, each of the
Purchasers shall have
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the right of first refusal to purchase all or part of its pro rata share of any
New Securities (as defined below) which the Company may, from time to time,
propose to sell and issue, subject to the terms and conditions set forth below.
Each Purchaser's pro rata share, for purposes of this Section 4.8, shall equal a
fraction, the numerator of which is the number of shares of Common Stock then
held by such Purchaser or issuable upon conversion or exercise of any shares of
Preferred Stock, the Warrants or other convertible securities, options, rights
or warrants then held by such Purchaser, and the denominator of which is the
total number of shares of Common Stock then outstanding plus the number of
shares of Common Stock issuable upon conversion or exercise of then outstanding
Preferred Stock or the Warrants or other convertible securities, option, rights
or warrants held by the Purchasers.
(b) "New Securities" shall mean any shares of capital stock of
the Company whether now authorized or not, and rights, options or warrants to
purchase capital stock, and securities of any type whatsoever which are, or may
become, convertible into capital stock; PROVIDED, HOWEVER, that the term "New
Securities" does not include
(i) the shares of Preferred Stock and the Warrants
issued or issuable to the Purchasers pursuant to
the terms of this Agreement or the shares of
Common Stock issued or issuable to the Purchasers
upon conversion of such securities;
(ii) securities issued for the acquisition of another
corporation by the Company by merger, purchase of
substantially all the assets of such corporation
or another reorganization resulting in the
ownership by the Company of not less than a
majority of the voting power of such corporation;
(iii) not more than 4,037,618 shares of Common Stock
(such number being subject to adjustment for any
stock dividend, stock split, subdivision,
combination or other recapitalization of the
Common Stock of the Company) issued to directors
or employees of or consultants to the Company
pursuant to the Company's stock option plans and
such additional shares of Common Stock that may be
issued to employees of or consultants to the
Company pursuant to stock option plans approved by
a majority of the members of the Company's Board
of Directors then in office;
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(iv) not more than 117,433 shares of Common Stock (such
number being subject to adjustment for any stock
dividend, stock split, subdivision, combination or
other recapitalization of the Common Stock of the
Company) issued to employees of the Company
pursuant to the Company's employee stock purchase
plan;
(v) not more than 304,500 shares of Common Stock
(such number being subject to adjustment for any
stock dividend, stock split, subdivision,
combination or other recapitalization of the
Common Stock of the Company) issued to Halifax
Fund L.P. or Capital Ventures International or
their permitted transferees, pursuant to warrants
issued to such holders and outstanding on the date
hereof;
(vi) not more than 202,595 shares of Common Stock
(such number being subject to adjustment for any
stock dividend, stock split, subdivision,
combination or other recapitalization of the
Common Stock of the Company) issued to Benjamin
Huberman, James Fiebiger, Ton Tanke and Horst
Sandfort or their permitted transferees, pursuant
to warrants issued to such holders and outstanding
on the date hereof;
(vii) not more than 500,000 shares of Common Stock (such
number being subject to adjustment for any stock
dividend, stock split, subdivision, combination or
other recapitalization of the Common Stock of the
Company) issued to Siemens Aktiengesellschaft
("Siemens"), pursuant to Section 5.1 of that
certain License Agreement between the Company and
Siemens dated October 22, 1997; or
(viii) securities issued as a result of any stock split,
stock dividend or reclassification of Common
Stock, distributable on a pro rata basis to all
holders of Common Stock.
(c) In the event the Company intends to issue New Securities,
it shall give each Purchaser written notice of such intention, describing the
type of New Securities to be issued, the price thereof and the general terms
upon which the Company proposes to effect such issuance. Each of the Purchasers
shall have 20 days from the date of its receipt of any such notice to agree to
purchase all or part of its pro rata share of New Securities, and any additional
New Securities not purchased by
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the other Purchasers, for the price and upon the general terms and conditions
specified in the Company's notice by giving written notice to the Company
stating the quantity of New Securities to be so purchased. In the event a
Purchaser elects not to purchase all of its pro rata share of New Securities,
and if each of the other Purchasers has given written notice to the Company that
it does not desire to purchase the New Securities not being purchased, the
Company may issue the New Securities described in the Company's notice within 30
days after the expiration of such 20-day period, for the price and upon the
general terms and conditions specified in the Company's notice to the
Purchasers.
(d) For purposes of this Section 4.8, "Purchaser" shall
include the general partners, officers or other affiliates of the Purchaser and
members of their families, and the Purchasers may apportion, to the extent such
apportionment would not prevent the Company from issuing New Securities in
satisfaction of its obligations under this Section 4.8 pursuant to an exemption
from registration under the Securities Act, its pro rata share among itself and
such general partners, officers, affiliates and family members in such
proportion as it deems appropriate.
4.9 ABSENCE OF STOCKHOLDER APPROVAL. In the event the stockholders of
the Company do not approve the proposals described in Section 1.3(a)(x) of this
Agreement at the Company's 1997 Annual Meeting of Stockholders to be held on or
prior to December 19, 1997, the Company shall promptly reimburse each of the
Purchasers for the reasonable costs and expenses, including reasonable
attorneys' fees, incurred by such Purchaser in connection with this Agreement
and the transactions contemplated hereby; and the condition to exercise
contained in the second paragraph of the Warrants shall cease to apply with the
effect that such Warrants shall be irrevocably exercisable in accordance with
their terms.
4.10 BOARD OF DIRECTORS EXPANSION, ETC. The Company and the Purchasers
agree that the election of the Chairman of the Board of the Company, if any, and
the nomination of additional Directors to serve as members of the Board beyond
the number specified in Section 1.3(a)(x) of this Agreement shall require the
affirmative vote of three-fourths of the members of the Board of Directors then
in office, and the Company shall use its best efforts to cause its Board of
Directors to amend by the Bylaws of the Company to include therein such a
provision. Any amendments to such bylaw provision shall require the affirmative
vote of three-fourths of the members of the Board of Directors then in office.
4.11 HART-SCOTT-RODINO ACT. The Company and the Purchasers shall each
promptly file any Notification and Report Forms and related material that it may
be required to file with the Federal Trade Commission and the Antitrust Division
of the United States Department of Justice under the Hart-Scott-Rodino Act,
shall use its best efforts to obtain an early termination of the applicable
waiting period, and shall
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make any further filings or information submissions pursuant thereto that may be
necessary, proper or advisable.
4.12 SALE OF SHARES UNDER RULE 144. From and after the First Closing,
at the request of any holder of Shares (or other Registrable Securities (as
defined in the Registration Rights Agreement) who proposes to sell the same in
compliance with Rule 144 under the Securities Act, the Company shall (a)
promptly furnish to such holder a written statement as to its compliance with
the filing requirements of the SEC as set forth in Rule 144, as the same may be
amended from time to time, and (b) make such additional filings of reports with
the SEC as will enable the holders of Registrable Securities to make sales
thereof pursuant to such Rule. The Company shall provide its transfer agent with
appropriate instructions and/or opinions of counsel in order for any restrictive
legend contained on the certificates for the Shares (or other Registrable
Securities) to be removed when appropriate and for such holders to sell,
transfer and/or dispose of the Registrable Securities in accordance with
Rule 144.
4.13 EXERCISE OF THE WARRANTS. Each of the Purchasers agrees that it
shall not exercise the Warrants, in whole or in part, on or prior to December
19, 1997, PROVIDED, HOWEVER, each of the Purchasers may elect to exercise
Warrants, in whole or in part, prior to such date in the event of any proposed
(a) merger or consolidation of the Company into or with another corporation or
other entity, (b) sale or other transfer in one or more transactions of 50% or
more of the assets or earning power of the Company, (c) tender or exchange offer
for securities of the Company, (d) sale or other transfer in one or more
transactions of 20% or more of the securities of the Company, or (e)
liquidation, dissolution or winding up of the Company.
4.14 ABSENCE OF MATERIAL CHANGES. In addition to any other rights
provided by law or in the Certificate of Designations, prior to January 31,
1998, without the prior written consent of the Purchasers holding at least 51%
of the Shares then outstanding, the Company shall not: (a) issue any stock,
bonds or other corporate securities or grant any option or issue any warrant to
purchase or subscribe for any of such securities or issue any securities
convertible into such securities, EXCLUDING, HOWEVER, options to purchase Common
Stock issued to employees of the Company in the ordinary course of business
pursuant to the Company's existing stock option plans; (b) declare or make any
payment or distribution to its stockholders with respect to its stock, including
without limitation a stock split or stock dividend, or purchase or redeem any
shares of its capital stock; (c) reclassify any shares of its capital stock; (d)
merge or consolidate with or into any corporation or other entity, or sell all
or substantially all of its assets; or (e) commit or agree to do any of the
foregoing in the future.
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5. Legends
5.1 LEGENDS. The certificates evidencing the Preferred Stock, the
certificates evidencing the Common Stock purchased by the Purchaser at the
Second Closing and certificates evidencing any shares of Common Stock issued
upon conversion of the Preferred Stock prior to the effectiveness of the
Registration Statement and, except as hereinafter provided in this Section 5.1,
after effectiveness of the Registration Statement, will bear the following
legend (the "Legend"):
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933 OR ANY STATE SECURITIES LAWS. THEY MAY NOT BE SOLD OR OFFERED FOR
SALE EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT AS TO THE
SECURITIES UNDER SAID ACT AND ANY APPLICABLE STATE SECURITIES LAWS OR
AN APPLICABLE EXEMPTION FROM SUCH REGISTRATION REQUIREMENTS.
At the First Closing, the Company will issue to the transfer agent for
its Common Stock (and to any substitute or replacement transfer agent for its
Common Stock coterminous with the Company's appointment of any such substitute
or replacement transfer agent) irrevocable instructions in form and substance
reasonably satisfactory to the Purchasers. It is the intent and purpose of such
instructions to require the transfer agent for the Common Stock from time to
time to issue certificates evidencing the Shares free of the Legend during the
following periods and under the following circumstances and without consultation
by the transfer agent with Company or its counsel and without the need for any
further advice or instruction to the transfer agent by or from the Company or
its counsel:
(a) At any time from and after the effectiveness of the
Registration Statement, except during periods when use of the
Registration Statement is suspended (as described in Section 7 of the
Registration Rights Agreement):
(i) Upon any surrender of one or more Preferred Stock
certificates for conversion into Underlying Stock, to the extent
such surrender is accompanied by a conversion notice requesting
the issuance of certificates evidencing Common Stock free of the
Legend and either containing or also accompanied by
representations to the effect that the holder of the surrendered
securities intends to effect one or more sales of such Shares
pursuant to and in accordance with the Registration Statement,
including the prospectus delivery requirements applicable
thereto; and
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(ii) upon any surrender of one or more certificates
evidencing Shares and which bear the Legend, to the extent
accompanied by a notice requesting the issuance of new
certificates free of the Legend to replace those surrendered and
containing or also accompanied by representations by the holder
of the surrendered securities to the effect of those described in
Section 5.1(a)(i) above.
(b) At any time from and after the First Closing Date, upon
any surrender of one or more certificates evidencing Shares and which
bear the Legend, to the extent accompanied by a notice requesting the
issuance of new certificates free of the Legend to replace those
surrendered and containing or also accompanied by representations that
(i) the holder thereof is permitted to dispose thereof pursuant to
Rule 144 promulgated under the Securities Act or (ii) the holder
intends to effect the sale or other disposition of such securities,
whether or not pursuant to the Registration Statement, to a purchaser
or purchasers who will not be subject to the registration requirements
of the Securities Act, or (iii) such holder is not then subject to such
requirements.
In addition, and if applicable, the Company shall reissue the Preferred
Stock, the Common Stock and the Underlying Stock without the Legend at such time
as (i) the holder thereof is permitted to dispose thereof pursuant to Rule 144
under the Securities Act or (ii) the holder intends to effect a sale thereof to
a purchaser or purchasers who will not be subject to the registration
requirements of the Securities Act, or (iii) the holder is not then subject to
such requirements.
5.2 NO OTHER LEGEND OR STOCK TRANSFER RESTRICTIONS. No legend has
been or shall be placed on the share certificates representing the Securities
and no instructions or "stop transfers," so called, "stock transfer
restrictions," so called, or other restrictions have been or shall be given to
the Company's transfer agent with respect thereto, other than as set forth in
this Section 5.
5.3 PURCHASER'S COMPLIANCE. Nothing in this section shall affect in
any way the Purchasers' obligations under and agreement to comply with all
applicable securities laws upon resale of the Securities.
6. Choice of Law and Venue
THIS AGREEMENT SHALL BE CONSTRUED UNDER THE LAWS OF THE STATE OF
CALIFORNIA, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW OR CHOICE OF LAW,
EXCEPT TO THE EXTENT THAT THE LAW OF THE STATE OF DELAWARE REGULATES THE
COMPANY'S ISSUANCE OF SECURITIES.
<PAGE> 39
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7. Assignment; Entire Agreement; Amendment
7.1 ASSIGNMENT. This Agreement may not be assigned by the Purchasers
or the Company to any other person. Notwithstanding the foregoing, the
provisions of this Agreement shall inure to the benefit of, and be enforceable
by, any assignee of a Purchaser which is a general partner of such Purchaser and
by any transferee of any of the Securities purchased or acquired by such
Purchaser hereunder with respect to the Securities held by such person or
entity.
7.2 ENTIRE AGREEMENT; AMENDMENT. This Agreement, the Preferred Stock,
the Warrants, the Common Stock, the Registration Rights Agreement, the Ancillary
Agreements and the other agreements and documents delivered pursuant hereto
constitute the full and entire understanding and agreement between the parties
with regard to the subjects hereof and thereof and supersede all prior
agreements and understandings relating to such subject matter, and no party
shall be liable or bound to any other party in any manner by any warranties,
representations or covenants except as specifically set forth in this Agreement
or therein. Except as expressly provided in this Agreement, neither this
Agreement nor any term hereof may be amended, waived, discharged or terminated
other than by a written instrument signed by the party against whom enforcement
of any such amendment, waiver, discharge or termination is sought.
8. Publicity
The Company agrees that it will not disclose, and will not include in
any public announcement, the name of a Purchaser without its consent, unless and
until such disclosure is required by law or applicable regulation, and then only
to the extent of such requirement and subject to the prior review of the content
of such disclosure by each of the Purchasers.
9. Notices, Etc.; Expenses; Indemnity
9.1 NOTICES. Any notice, demand, request or other communication
required or permitted to be given by either the Company or a Purchaser pursuant
to the terms of this Agreement shall be in writing and shall be deemed to have
been duly given when delivered personally or by facsimile, with a hard copy to
follow by overnight delivery by a reputable courier:
If to the Company, at 47100 Bayside Parkway, Fremont, California
94538, Attention: President, Facsimile No: (510) 623-4405, or at such other
address or addresses as may have been furnished in writing by the Company to the
Purchasers, with a copy to Andrew J. Hirsch, Esq., Wilson Sonsini Goodrich &
Rosati,
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Professional Corporation, 650 Page Mill Road, Palo Alto, California 94304,
Facsimile No. (650) 493-6811; or
If to a Purchaser, at its address set forth in Exhibit A, or at
such other address or addresses as may have been furnished to the Company in
writing by such Purchaser, with a copy to Paul P. Brountas, Esq., Hale and Dorr
LLP, 60 State Street, Boston, Massachusetts 02109, Facsimile No: (617) 526-5000.
9.2 INDEMNIFICATION. Each party ("Indemnifying Party") shall
indemnify the other party against any loss, liabilities, expenses, cost or
damages (including reasonable attorney's fees) incurred as a result of the
Indemnifying Party's breach of any representation, warranty, covenant or
agreement in this Agreement. In addition, if the Company fails for any reason to
sell the Preferred Stock to the Purchasers at the First Closing, the Company
shall promptly pay the Purchaser an amount equal to the Purchasers' reasonable
expenses and costs (including without limitation, reasonable attorneys' fees)
incurred in connection with this Agreement and the transactions contemplated
hereby.
10. Counterparts
This Agreement may be executed in any number of counterparts, each of
which shall be enforceable against the parties actually executing such
counterparts, and all of which together shall constitute one instrument.
11. Survival; Severability
The representations, warranties, covenants and agreements of the
parties hereto shall survive both the First Closing and the Second Closing. In
the event that any provision of this Agreement becomes or is declared by a court
of competent jurisdiction to be illegal, unenforceable or void, this Agreement
shall continue in full force and effect without said provision; provided that
the absence of such provision does not materially change the economic benefit of
this Agreement to any party.
12. Title and Subtitles
The titles and subtitles used in this Agreement are used for
convenience only and are not to be considered in construing or interpreting this
Agreement.
[THE NEXT PAGE IS THE SIGNATURE PAGE]
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IN WITNESS WHEREOF, the parties have signed this Agreement the day and
year first written above.
GATEFIELD CORPORATION
ATTEST By: /s/ JAMES R. FIEBIGER
----------------------------------------
James R. Fiebiger
Its President and Chief Executive Officer
/s/ Douglas E. Klint
- -------------------------------
Douglas E. Klint
Vice President, General Counsel
and Corporate Secretary
IDANTA PARTNERS LTD.
By: /s/ David J. Dunn
------------------------
David J. Dunn, Trustee
Dunn Family Trust
General Partner
DUNN FAMILY TRUST
By: /s/ David J. Dunn
------------------------
David J. Dunn, Trustee
PERSCILLA FAILY TRUST
By: /s/ Perscilla Faily
------------------------
Perscilla Faily, Trustee
<PAGE> 42
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EXHIBIT A
LIST OF PURCHASERS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------
No. of Shares
No. of Shares No. of Shares Aggregate of Common
of Preferred of Common Purchase Stock to be
Stock to be Stock Issuable Price to be Purchased at
Purchased at upon Exercise Paid at First Second
Name And Address Of Purchaser First Closing Of Warrant Closing Closing
- ----------------------------------------------------------------------------------------------------------------------
Idanta Partners Ltd. 790,000 788,223 $3,620,175 3,620,175
4660 La Jolla Village Drive, Suite 850
San Diego, California 91222
Attn: David J. Dunn
Facsimile No.: (619) 452-2013
- ----------------------------------------------------------------------------------------------------------------------
Dunn Family Trust 200,000 199,550 $ 916,500 916,500
4660 La Jolla Village Drive, Suite 850
San Diego, California 91222
Attn: David J. Dunn, Trustee
Facsimile No.: (619) 452-2013
- ----------------------------------------------------------------------------------------------------------------------
Perscilla Faily Trust 10,000 9,978 $ 45,825 45,825
4660 La Jolla Village Drive, Suite 850
San Diego, California 91222
Attn: Perscilla Faily, Trustee
Facsimile No.: (619) 452-2013
- ----------------------------------------------------------------------------------------------------------------------
TOTAL 1,000,000 997,751 $4,582,500 4,582,500
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
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THIS WARRANT AND THE SHARES OF COMMON STOCK ISSUED UPON ITS
EXERCISE ARE SUBJECT TO THE RESTRICTIONS ON
TRANSFER SET FORTH IN SECTION 4 OF THIS WARRANT
Warrant No. 9 Number of Shares: 788,223
(subject to adjustment)
Date of Issuance: November 10, 1997
GATEFIELD CORPORATION
COMMON STOCK PURCHASE WARRANT
(Void after November 10, 1999)
GateField Corporation, a Delaware corporation (the "Company"), for
value received, hereby certifies that Idanta Partners Ltd., or its registered
assigns (the "Registered Holder"), is entitled, subject to the terms set forth
below, to purchase from the Company, at any time or from time to time on or
after the date of issuance and on or before November 10, 1999 at not later than
5:00 p.m. (California time), Seven Hundred Eighty-Eight Thousand Two Hundred
Twenty Three (788,223) shares of Common Stock, $.10 par value per share, of the
Company, at a purchase price of $1.00 per share. The shares purchasable upon
exercise of this Warrant, and the purchase price per share, each as adjusted
from time to time pursuant to the provisions of this Warrant, are hereinafter
referred to as the "Warrant Shares" and the "Purchase Price," respectively.
Notwithstanding the foregoing, if (A) the stockholders of the Company
approve the proposals to be submitted to them at the 1997 Annual Meeting of
Stockholders to be held on or prior to December 19, 1997, as set forth in
Section 1.3(a)(x) of the Stock Purchase Agreement among the Company, the
Registered Holder, the Dunn Family Trust and the Perscilla Faily Trust
(collectively, the "Purchasers"), dated November 10, 1997 (the "Stock Purchase
Agreement"), and (B) the Company issues 4,582,500 shares of its Common Stock to
the Purchasers at the Second Closing (as defined the Stock Purchase Agreement),
then, and only in such event, this Warrant shall be cancelled and all of the
rights of the Registered Holder and the obligations of the Company hereunder
shall be of no further force or effect and shall terminate effective at the
later of, (i) the time such stockholder approval is so obtained and certified by
the Secretary of the Company and the amendment to the
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Certificate of Incorporation of the Company so approved by the stockholders is
duly filed and recorded under the laws of the State of Delaware and (ii) the
effective time of the transactions consummated at the Second Closing (as defined
in the Stock Purchase Agreement).
1. EXERCISE.
a. This Warrant may be exercised by the Registered Holder, in whole
or in part, by surrendering this Warrant, with the purchase form
appended hereto as EXHIBIT I duly executed by such Registered
Holder or by such Registered Holder's duly authorized attorney, at
the principal office of the Company, or at such other office or
agency as the Company may designate, accompanied by payment in
full, in lawful money of the United States, of the Purchase Price
payable in respect of the number of Warrant Shares purchased upon
such exercise.
b. The Registered Holder may, at its option, elect to pay some or all
of the Purchase Price payable upon an exercise of this Warrant by
cancelling a portion of this Warrant exercisable for such number
of Warrant Shares as is determined by dividing (i) the total
Purchase Price payable in respect of the number of Warrant Shares
being purchased upon such exercise by (ii) the excess of the Fair
Market Value per share of Common Stock as of the effective date of
exercise, as determined pursuant to subsection 1(c) below (the
"Exercise Date") over the Purchase Price per share. If the
Registered Holder wishes to exercise this Warrant pursuant to this
method of payment with respect to the maximum number of Warrant
Shares purchasable pursuant to this method, then the number of
Warrant Shares so purchasable shall be equal to the total number
of Warrant Shares, minus the product obtained by multiplying (x)
the total number of Warrant Shares by (y) a fraction, the
numerator of which shall be the Purchase Price per share and the
denominator of which shall be the Fair Market Value per share of
Common Stock as of the Exercise Date. The Fair Market Value per
share of Common Stock shall be determined as follows:
i. If the Common Stock is listed on a national securities
exchange, the Nasdaq National Market, or another nationally
recognized exchange or trading system as of the Exercise
Date, the Fair Market Value per share of Common Stock shall
be deemed to be the last reported sale price per share of
Common Stock thereon on the Exercise Date; or, if no such
price is reported on such date, such price on the next
preceding business day (provided that if no such price is
reported on the next preceding business day, the
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Fair Market Value per share of Common Stock shall be
determined pursuant to clause (ii)).
ii. If the Common Stock is not listed on a national securities
exchange, the Nasdaq National Market, or another nationally
recognized exchange or trading system as of the Exercise
Date, the Fair Market Value per share of Common Stock shall
be deemed to be the amount most recently determined by the
Board of Directors to represent the fair market value per
share of the Common Stock (including without limitation a
determination for purposes of granting Common Stock options
or issuing Common Stock under an employee benefit plan of the
Company); and, upon request of the Registered Holder, the
Board of Directors (or a representative thereof) shall
promptly notify the Registered Holder of the Fair Market
Value per share of Common Stock. Notwithstanding the
foregoing, if the Board of Directors has not made such a
determination within the three-month period prior to the
Exercise Date, then (A) the Fair Market Value per share of
Common Stock shall be the amount next determined by the Board
of Directors to represent the fair market value per share of
the Common Stock (including without limitation a
determination for purposes of granting Common Stock options
or issuing Common Stock under an employee benefit plan of the
Company), (B) the Board of Directors shall make such a
determination within 15 days of a request by the Registered
Holder that it do so, and (C) the exercise of this Warrant
pursuant to this subsection 1(b) shall be delayed until such
determination is made.
c. Each exercise of this Warrant shall be deemed to have been
effected immediately prior to the close of business on the day on
which this Warrant shall have been surrendered to the Company as
provided in subsection 1(a) above. At such time, the person or
persons in whose name or names any certificates for Warrant Shares
shall be issuable upon such exercise as provided in subsection
1(d) below shall be deemed to have become the holder or holders of
record of the Warrant Shares represented by such certificates.
d. As soon as practicable after the exercise of this Warrant in full
or in part, and in any event within 10 days thereafter, the
Company, at its expense, will cause to be issued in the name of,
and delivered to, the Registered Holder, or as such Holder (upon
payment by such Holder of any applicable transfer taxes) may
direct:
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i. a certificate or certificates for the number of full Warrant
Shares to which such Registered Holder shall be entitled upon
such exercise plus, in lieu of any fractional share to which
such Registered Holder would otherwise be entitled, cash in
an amount determined pursuant to Section 3 hereof; and
ii. in case such exercise is in part only, a new warrant or
warrants (dated the date hereof) of like tenor, calling in
the aggregate on the face or faces thereof for the number of
Warrant Shares equal (without giving effect to any adjustment
therein) to the number of such shares called for on the face
of this Warrant minus the sum of (a) the number of such
shares purchased by the Registered Holder upon such exercise
plus (b) the number of Warrant Shares (if any) covered by the
portion of this Warrant cancelled in payment of the Purchase
Price payable upon such exercise pursuant to subsection 1(b)
above.
2. ADJUSTMENTS.
a. If outstanding shares of the Company's Common Stock shall be
subdivided into a greater number of shares or a dividend in Common
Stock shall be paid in respect of Common Stock, the Purchase Price
in effect immediately prior to such subdivision or at the record
date of such dividend shall simultaneously with the effectiveness
of such subdivision or immediately after the record date of such
dividend be proportionately reduced. If outstanding shares of
Common Stock shall be combined into a smaller number of shares,
the Purchase Price in effect immediately prior to such combination
shall, simultaneously with the effectiveness of such combination,
be proportionately increased. When any adjustment is required to
be made in the Purchase Price, the number of Warrant Shares
purchasable upon the exercise of this Warrant shall be changed to
the number determined by dividing (i) an amount equal to the
number of shares issuable upon the exercise of this Warrant
immediately prior to such adjustment, multiplied by the Purchase
Price in effect immediately prior to such adjustment, by (ii) the
Purchase Price in effect immediately after such adjustment.
b. If there shall occur any capital reorganization or
reclassification of the Company's Common Stock (other than a
change in par value or a subdivision or combination as provided
for in subsection 2(a) above), or any consolidation or merger of
the Company with or into another corporation, or a transfer of all
or substantially all of the assets of the Company, then, as part
of any such reorganization, reclassification,
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consolidation, merger or sale, as the case may be, lawful
provision shall be made so that the Registered Holder of this
Warrant shall have the right thereafter to receive upon the
exercise hereof the kind and amount of shares of stock or other
securities or property which such Registered Holder would have
been entitled to receive if, immediately prior to any such
reorganization, reclassification, consolidation, merger or sale,
as the case may be, such Registered Holder had held the number of
shares of Common Stock which were then purchasable upon the
exercise of this Warrant. In any such case, appropriate adjustment
(as reasonably determined in good faith by the Board of Directors
of the Company) shall be made in the application of the provisions
set forth herein with respect to the rights and interests
thereafter of the Registered Holder of this Warrant, such that the
provisions set forth in this Section 2 (including provisions with
respect to adjustment of the Purchase Price) shall thereafter be
applicable, as nearly as is reasonably practicable, in relation to
any shares of stock or other securities or property thereafter
deliverable upon the exercise of this Warrant.
c. When any adjustment is required to be made in the Purchase Price,
the Company shall promptly mail to the Registered Holder a
certificate setting forth the Purchase Price after such adjustment
and setting forth a brief statement of the facts requiring such
adjustment. Such certificate shall also set forth the kind and
amount of stock or other securities or property into which this
Warrant shall be exercisable following the occurrence of any of
the events specified in subsection 2(a) or (b) above.
3. FRACTIONAL SHARES. The Company shall not be required upon the exercise
of this Warrant to issue any fractional shares, but shall make an
adjustment therefor in cash on the basis of the Fair Market Value per
share of Common Stock, as determined pursuant to subsection 1(b) above.
4. REQUIREMENTS FOR TRANSFER.
a. This Warrant and the Warrant Shares shall not be sold or
transferred unless either (i) they first shall have been
registered under the Securities Act of 1933, as amended (the
"Act"), or (ii) the Company first shall have been furnished with
an opinion of legal counsel, reasonably satisfactory to the
Company, to the effect that such sale or transfer is exempt from
the registration requirements of the Act.
b. Notwithstanding the foregoing, no registration or opinion of
counsel shall be required for (i) a transfer by a Registered
Holder which is a partnership to a partner of such partnership or
a retired partner of such
<PAGE> 48
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partnership who retires after the date hereof, or to the estate of
any such partner or retired partner, if the transferee agrees in
writing to be subject to the terms of this Section 4, or (ii) a
transfer made in accordance with Rule 144 under the Act.
c. Each certificate representing Warrant Shares shall bear a legend
substantially in the following form:
"The securities represented by this certificate have not been
registered under the Securities Act of 1933, as amended, and may
not be offered, sold or otherwise transferred, pledged or
hypothecated unless and until such securities are registered under
such Act or an opinion of counsel satisfactory to the Company is
obtained to the effect that such registration is not required."
The foregoing legend shall be removed from the certificates representing any
Warrant Shares, at the request of the holder thereof, at such time as they
become eligible for resale pursuant to Rule 144(k) under the Act.
5. NO IMPAIRMENT. The Company will not, by amendment of its charter or
through reorganization, consolidation, merger, dissolution, sale of
assets or any other voluntary action, avoid or seek to avoid the
observance or performance of any of the terms of this Warrant, but will
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.
6. LIQUIDATING DIVIDENDS. If the Company pays a dividend or makes a
distribution on the Common Stock payable otherwise than in cash out of
earnings or earned surplus (determined in accordance with generally
accepted accounting principles) except for a stock dividend payable in
shares of Common Stock (a "Liquidating Dividend"), then the Company
will pay or distribute to the Registered Holder of this Warrant, upon
the exercise hereof, in addition to the Warrant Shares purchased upon
such exercise, the Liquidating Dividend which would have been paid to
such Registered Holder if he had been the owner of record of such
Warrant Shares immediately prior to the date on which a record is taken
for such Liquidating Dividend or, if no record is taken, the date as of
which the record holders of Common Stock entitled to such dividends or
distribution are to be determined.
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7. NOTICES OF RECORD DATE, ETC. In case:
a. the Company shall take a record of the holders of its Common Stock
(or other stock or securities at the time deliverable upon the
exercise of this Warrant) for the purpose of entitling or enabling
them to receive any dividend or other distribution, or to receive
any right to subscribe for or purchase any shares of stock of any
class or any other securities, or to receive any other right; or
b. of any capital reorganization of the Company, any reclassification
of the capital stock of the Company, any consolidation or merger
of the Company with or into another corporation (other than a
consolidation or merger in which the Company is the surviving
entity), or any transfer of all or substantially all of the assets
of the Company; or
c. of the voluntary or involuntary dissolution, liquidation or
winding-up of the Company,
then, and in each such case, the Company will mail or cause to be mailed to the
Registered Holder of this Warrant a notice specifying, as the case may be, (i)
the date on which a record is to be taken for the purpose of such dividend,
distribution or right, and stating the amount and character of such dividend,
distribution or right, or (ii) the effective date on which such reorganization,
reclassification, consolidation, merger, transfer, dissolution, liquidation or
winding-up is to take place, and the time, if any is to be fixed, as of which
the holders of record of Common Stock (or such other stock or securities at the
time deliverable upon the exercise of this Warrant) shall be entitled to
exchange their shares of Common Stock (or such other stock or securities) for
securities or other property deliverable upon such reorganization,
reclassification, consolidation, merger, transfer, dissolution, liquidation or
winding-up. Such notice shall be mailed at least ten (10) days prior to the
record date or effective date for the event specified in such notice.
8. RESERVATION OF STOCK. The Company will at all times reserve and keep
available, solely for issuance and delivery upon the exercise of this
Warrant, such number of Warrant Shares and other stock, securities and
property, as from time to time shall be issuable upon the exercise of
this Warrant.
9. EXCHANGE OF WARRANTS. Upon the surrender by the Registered Holder of
any Warrant or Warrants, properly endorsed, to the Company at the
principal office of the Company, the Company will, subject to the
provisions of Section 4 hereof, issue and deliver to or upon the order
of such Holder, at the Company's expense, a new Warrant or Warrants of
like tenor, in the name of such Registered Holder or as such Registered
Holder (upon payment by such
<PAGE> 50
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Registered Holder of any applicable transfer taxes) may direct, calling
in the aggregate on the face or faces thereof for the number of shares
of Common Stock called for on the face or faces of the Warrant or
Warrants so surrendered.
10. REPLACEMENT OF WARRANTS. Upon receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or
mutilation of this Warrant and (in the case of loss, theft or
destruction) upon delivery of an indemnity agreement (with surety if
reasonably required) in an amount reasonably satisfactory to the
Company, or (in the case of mutilation) upon surrender and cancellation
of this Warrant, the Company will issue, in lieu thereof, a new Warrant
of like tenor.
11. TRANSFERS, ETC.
a. The Company will maintain a register containing the names and
addresses of the Registered Holders of this Warrant. Any
Registered Holder may change its or his address as shown on the
warrant register by written notice to the Company requesting such
change.
b. Subject to the provisions of Section 4 hereof, this Warrant and
all rights hereunder are transferable, in whole or in part, upon
surrender of this Warrant with a properly executed assignment (in
the form of EXHIBIT II hereto) at the principal office of the
Company.
c. Until any transfer of this Warrant is made in the warrant
register, the Company may treat the Registered Holder of this
Warrant as the absolute owner hereof for all purposes; PROVIDED,
HOWEVER, that if and when this Warrant is properly assigned in
blank, the Company may (but shall not be obligated to) treat the
bearer hereof as the absolute owner hereof for all purposes,
notwithstanding any notice to the contrary.
12. MAILING OF NOTICES, ETC. All notices and other communications from the
Company to the Registered Holder of this Warrant shall be mailed by
first-class certified or registered mail, postage prepaid, to the
address furnished to the Company in writing by the last Registered
Holder of this Warrant who shall have furnished an address to the
Company in writing. All notices and other communications from the
Registered Holder of this Warrant or in connection herewith to the
Company shall be mailed by first-class certified or registered mail,
postage prepaid, to the Company at its principal office set forth
below. If the Company should at any time change the location of its
principal office to a place other than as set forth below, it shall
give prompt written notice to the Registered Holder of this Warrant and
thereafter all
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references in this Warrant to the location of its principal office at
the particular time shall be as so specified in such notice.
13. NO RIGHTS AS STOCKHOLDER. Until the exercise of this Warrant, the
Registered Holder of this Warrant shall not have or exercise any rights
by virtue hereof as a stockholder of the Company.
14. CHANGE OR WAIVER. Any term of this Warrant may be changed or waived
only by an instrument in writing signed by the party against which
enforcement of the change or waiver is sought.
15. HEADINGS. The headings in this Warrant are for purposes of reference
only and shall not limit or otherwise affect the meaning of any
provision of this Warrant.
16. GOVERNING LAW. This Warrant will be governed by and construed in
accordance with the laws of the State of California.
GATEFIELD CORPORATION
By: /s/ James R. Fiebiger
-----------------------------------------
James R. Fiebiger
Its President and Chief Executive Officer
ATTEST
/s/ Douglas E. Klint
- -------------------------------
Douglas E. Klint
Vice President, General Counsel
and Corporate Secretary
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EXHIBIT I
PURCHASE FORM
To:_________________ Dated:______________
The undersigned, pursuant to the provisions set forth in the attached
Warrant (No. ___), hereby irrevocably elects to purchase _____ shares of the
Common Stock covered by such Warrant. The undersigned herewith makes payment of
$____________, representing the full purchase price for such shares at the price
per share provided for in such Warrant. Such payment takes the form of (check
applicable box or boxes):
[ ] $_________ in lawful money of the United States, and/or
[ ] the cancellation of such portion of the attached
Warrant as is exercisable for a total of ______
Warrant Shares (using a Fair Market Value of $_______
per share for purposes of this calculation).
Signature:___________________________
Address:_____________________________
_____________________________________
<PAGE> 53
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EXHIBIT II
ASSIGNMENT FORM
FOR VALUE RECEIVED, ________________________________________ hereby
sells, assigns and transfers all of the rights of the undersigned under the
attached Warrant (No. ____) with respect to the number of shares of Common Stock
covered thereby set forth below, unto:
<TABLE>
<CAPTION>
Name Of Assignee Address No. Of Shares
- ---------------- ------- -------------
<S> <C> <C>
</TABLE>
Dated:______________ Signature:____________________________
Dated:______________ Witness:______________________________
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EXHIBIT D
THIS WARRANT AND THE SHARES OF COMMON STOCK ISSUED UPON ITS
EXERCISE ARE SUBJECT TO THE RESTRICTIONS ON
TRANSFER SET FORTH IN SECTION 4 OF THIS WARRANT
Warrant No. 10 Number of Shares: 199,550
(subject to adjustment)
Date of Issuance: November 10, 1997
GATEFIELD CORPORATION
COMMON STOCK PURCHASE WARRANT
(Void after November 10, 1999)
GateField Corporation, a Delaware corporation (the "Company"), for
value received, hereby certifies that the Dunn Family Trust, or its registered
assigns (the "Registered Holder"), is entitled, subject to the terms set forth
below, to purchase from the Company, at any time or from time to time on or
after the date of issuance and on or before November 10, 1999 at not later than
5:00 p.m. (California time), One Hundred Ninety-Nine Thousand Five Hundred Fifty
(199,550) shares of Common Stock, $.10 par value per share, of the Company, at
a purchase price of $1.00 per share. The shares purchasable upon exercise of
this Warrant, and the purchase price per share, each as adjusted from time to
time pursuant to the provisions of this Warrant, are hereinafter referred to as
the "Warrant Shares" and the "Purchase Price," respectively.
Notwithstanding the foregoing, if (A) the stockholders of the Company
approve the proposals to be submitted to them at the 1997 Annual Meeting of
Stockholders to be held on or prior to December 19, 1997, as set forth in
Section 1.3(a)(x) of the Stock Purchase Agreement among the Company, the
Registered Holder, Idanta Partners Ltd., and the Perscilla Faily Trust
(collectively, the "Purchasers"), dated November 10, 1997 (the "Stock Purchase
Agreement"), and (B) the Company issues 4,582,500 shares of its Common Stock to
the Purchasers at the Second Closing (as defined the Stock Purchase Agreement),
then, and only in such
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event, this Warrant shall be cancelled and all of the rights of the Registered
Holder and the obligations of the Company hereunder shall be of no further force
or effect and shall terminate effective at the later of, (i) the time such
stockholder approval is so obtained and certified by the Secretary of the
Company and the amendment to the Certificate of Incorporation of the Company so
approved by the stockholders is duly filed and recorded under the laws of the
State of Delaware and (ii) the effective time of the transactions consummated at
the Second Closing (as defined in the Stock Purchase Agreement).
17. EXERCISE.
a. This Warrant may be exercised by the Registered Holder, in whole
or in part, by surrendering this Warrant, with the purchase form
appended hereto as EXHIBIT I duly executed by such Registered
Holder or by such Registered Holder's duly authorized attorney, at
the principal office of the Company, or at such other office or
agency as the Company may designate, accompanied by payment in
full, in lawful money of the United States, of the Purchase Price
payable in respect of the number of Warrant Shares purchased upon
such exercise.
b. The Registered Holder may, at its option, elect to pay some or all
of the Purchase Price payable upon an exercise of this Warrant by
cancelling a portion of this Warrant exercisable for such number
of Warrant Shares as is determined by dividing (i) the total
Purchase Price payable in respect of the number of Warrant Shares
being purchased upon such exercise by (ii) the excess of the Fair
Market Value per share of Common Stock as of the effective date of
exercise, as determined pursuant to subsection 1(c) below (the
"Exercise Date") over the Purchase Price per share. If the
Registered Holder wishes to exercise this Warrant pursuant to this
method of payment with respect to the maximum number of Warrant
Shares purchasable pursuant to this method, then the number of
Warrant Shares so purchasable shall be equal to the total number
of Warrant Shares, minus the product obtained by multiplying (x)
the total number of Warrant Shares by (y) a fraction, the
numerator of which shall be the Purchase Price per share and the
denominator of which shall be the Fair Market Value per share of
Common Stock as of the Exercise Date. The Fair Market Value per
share of Common Stock shall be determined as follows:
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i. If the Common Stock is listed on a national securities
exchange, the Nasdaq National Market, or another nationally
recognized exchange or trading system as of the Exercise
Date, the Fair Market Value per share of Common Stock shall
be deemed to be the last reported sale price per share of
Common Stock thereon on the Exercise Date; or, if no such
price is reported on such date, such price on the next
preceding business day (provided that if no such price is
reported on the next preceding business day, the Fair Market
Value per share of Common Stock shall be determined pursuant
to clause (ii)).
ii. If the Common Stock is not listed on a national securities
exchange, the Nasdaq National Market, or another nationally
recognized exchange or trading system as of the Exercise
Date, the Fair Market Value per share of Common Stock shall
be deemed to be the amount most recently determined by the
Board of Directors to represent the fair market value per
share of the Common Stock (including without limitation a
determination for purposes of granting Common Stock options
or issuing Common Stock under an employee benefit plan of the
Company); and, upon request of the Registered Holder, the
Board of Directors (or a representative thereof) shall
promptly notify the Registered Holder of the Fair Market
Value per share of Common Stock. Notwithstanding the
foregoing, if the Board of Directors has not made such a
determination within the three-month period prior to the
Exercise Date, then (A) the Fair Market Value per share of
Common Stock shall be the amount next determined by the Board
of Directors to represent the fair market value per share of
the Common Stock (including without limitation a
determination for purposes of granting Common Stock options
or issuing Common Stock under an employee benefit plan of the
Company), (B) the Board of Directors shall make such a
determination within 15 days of a request by the Registered
Holder that it do so, and (C) the exercise of this Warrant
pursuant to this subsection 1(b) shall be delayed until such
determination is made.
c. Each exercise of this Warrant shall be deemed to have been
effected immediately prior to the close of business on the day on
which this Warrant shall have been surrendered to the Company as
provided in
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subsection 1(a) above. At such time, the person or persons in
whose name or names any certificates for Warrant Shares shall be
issuable upon such exercise as provided in subsection 1(d) below
shall be deemed to have become the holder or holders of record of
the Warrant Shares represented by such certificates.
d. As soon as practicable after the exercise of this Warrant in full
or in part, and in any event within 10 days thereafter, the
Company, at its expense, will cause to be issued in the name of,
and delivered to, the Registered Holder, or as such Holder (upon
payment by such Holder of any applicable transfer taxes) may
direct:
i. a certificate or certificates for the number of full Warrant
Shares to which such Registered Holder shall be entitled upon
such exercise plus, in lieu of any fractional share to which
such Registered Holder would otherwise be entitled, cash in
an amount determined pursuant to Section 3 hereof; and
ii. in case such exercise is in part only, a new warrant or
warrants (dated the date hereof) of like tenor, calling in
the aggregate on the face or faces thereof for the number of
Warrant Shares equal (without giving effect to any adjustment
therein) to the number of such shares called for on the face
of this Warrant minus the sum of (a) the number of such
shares purchased by the Registered Holder upon such exercise
plus (b) the number of Warrant Shares (if any) covered by the
portion of this Warrant cancelled in payment of the Purchase
Price payable upon such exercise pursuant to subsection 1(b)
above.
18. ADJUSTMENTS.
a. If outstanding shares of the Company's Common Stock shall be
subdivided into a greater number of shares or a dividend in Common
Stock shall be paid in respect of Common Stock, the Purchase Price
in effect immediately prior to such subdivision or at the record
date of such dividend shall simultaneously with the effectiveness
of such subdivision or immediately after the record date of such
dividend be proportionately reduced. If outstanding shares of
Common Stock shall be combined into a smaller number of shares,
the Purchase Price in
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effect immediately prior to such combination shall, simultaneously
with the effectiveness of such combination, be proportionately
increased. When any adjustment is required to be made in the
Purchase Price, the number of Warrant Shares purchasable upon the
exercise of this Warrant shall be changed to the number determined
by dividing (i) an amount equal to the number of shares issuable
upon the exercise of this Warrant immediately prior to such
adjustment, multiplied by the Purchase Price in effect immediately
prior to such adjustment, by (ii) the Purchase Price in effect
immediately after such adjustment.
b. If there shall occur any capital reorganization or
reclassification of the Company's Common Stock (other than a
change in par value or a subdivision or combination as provided
for in subsection 2(a) above), or any consolidation or merger of
the Company with or into another corporation, or a transfer of all
or substantially all of the assets of the Company, then, as part
of any such reorganization, reclassification, consolidation,
merger or sale, as the case may be, lawful provision shall be made
so that the Registered Holder of this Warrant shall have the right
thereafter to receive upon the exercise hereof the kind and amount
of shares of stock or other securities or property which such
Registered Holder would have been entitled to receive if,
immediately prior to any such reorganization, reclassification,
consolidation, merger or sale, as the case may be, such Registered
Holder had held the number of shares of Common Stock which were
then purchasable upon the exercise of this Warrant. In any such
case, appropriate adjustment (as reasonably determined in good
faith by the Board of Directors of the Company) shall be made in
the application of the provisions set forth herein with respect to
the rights and interests thereafter of the Registered Holder of
this Warrant, such that the provisions set forth in this Section 2
(including provisions with respect to adjustment of the Purchase
Price) shall thereafter be applicable, as nearly as is reasonably
practicable, in relation to any shares of stock or other
securities or property thereafter deliverable upon the exercise of
this Warrant.
c. When any adjustment is required to be made in the Purchase Price,
the Company shall promptly mail to the Registered Holder a
certificate setting forth the Purchase Price after such adjustment
and setting forth a brief statement of the facts requiring such
adjustment. Such certificate shall also set forth the kind and
amount of stock or other securities or
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property into which this Warrant shall be exercisable following
the occurrence of any of the events specified in subsection 2(a)
or (b) above.
19. FRACTIONAL SHARES. The Company shall not be required upon the exercise
of this Warrant to issue any fractional shares, but shall make an
adjustment therefor in cash on the basis of the Fair Market Value per
share of Common Stock, as determined pursuant to subsection 1(b) above.
20. REQUIREMENTS FOR TRANSFER.
a. This Warrant and the Warrant Shares shall not be sold or
transferred unless either (i) they first shall have been
registered under the Securities Act of 1933, as amended (the
"Act"), or (ii) the Company first shall have been furnished with
an opinion of legal counsel, reasonably satisfactory to the
Company, to the effect that such sale or transfer is exempt from
the registration requirements of the Act.
b. Notwithstanding the foregoing, no registration or opinion of
counsel shall be required for (i) a transfer by a Registered
Holder which is a partnership to a partner of such partnership or
a retired partner of such partnership who retires after the date
hereof, or to the estate of any such partner or retired partner,
if the transferee agrees in writing to be subject to the terms of
this Section 4, or (ii) a transfer made in accordance with Rule
144 under the Act.
c. Each certificate representing Warrant Shares shall bear a legend
substantially in the following form:
"The securities represented by this certificate have not been
registered under the Securities Act of 1933, as amended, and may
not be offered, sold or otherwise transferred, pledged or
hypothecated unless and until such securities are registered under
such Act or an opinion of counsel satisfactory to the Company is
obtained to the effect that such registration is not required."
The foregoing legend shall be removed from the certificates representing any
Warrant Shares, at the request of the holder thereof, at such time as they
become eligible for resale pursuant to Rule 144(k) under the Act.
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21. NO IMPAIRMENT. The Company will not, by amendment of its charter or
through reorganization, consolidation, merger, dissolution, sale of
assets or any other voluntary action, avoid or seek to avoid the
observance or performance of any of the terms of this Warrant, but will
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.
22. LIQUIDATING DIVIDENDS. If the Company pays a dividend or makes a
distribution on the Common Stock payable otherwise than in cash out of
earnings or earned surplus (determined in accordance with generally
accepted accounting principles) except for a stock dividend payable in
shares of Common Stock (a "Liquidating Dividend"), then the Company
will pay or distribute to the Registered Holder of this Warrant, upon
the exercise hereof, in addition to the Warrant Shares purchased upon
such exercise, the Liquidating Dividend which would have been paid to
such Registered Holder if he had been the owner of record of such
Warrant Shares immediately prior to the date on which a record is taken
for such Liquidating Dividend or, if no record is taken, the date as of
which the record holders of Common Stock entitled to such dividends or
distribution are to be determined.
23. NOTICES OF RECORD DATE, ETC. In case:
a. the Company shall take a record of the holders of its Common Stock
(or other stock or securities at the time deliverable upon the
exercise of this Warrant) for the purpose of entitling or enabling
them to receive any dividend or other distribution, or to receive
any right to subscribe for or purchase any shares of stock of any
class or any other securities, or to receive any other right; or
b. of any capital reorganization of the Company, any reclassification
of the capital stock of the Company, any consolidation or merger
of the Company with or into another corporation (other than a
consolidation or merger in which the Company is the surviving
entity), or any transfer of all or substantially all of the assets
of the Company; or
c. of the voluntary or involuntary dissolution, liquidation or
winding-up of the Company,
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then, and in each such case, the Company will mail or cause to be mailed to the
Registered Holder of this Warrant a notice specifying, as the case may be, (i)
the date on which a record is to be taken for the purpose of such dividend,
distribution or right, and stating the amount and character of such dividend,
distribution or right, or (ii) the effective date on which such reorganization,
reclassification, consolidation, merger, transfer, dissolution, liquidation or
winding-up is to take place, and the time, if any is to be fixed, as of which
the holders of record of Common Stock (or such other stock or securities at the
time deliverable upon the exercise of this Warrant) shall be entitled to
exchange their shares of Common Stock (or such other stock or securities) for
securities or other property deliverable upon such reorganization,
reclassification, consolidation, merger, transfer, dissolution, liquidation or
winding-up. Such notice shall be mailed at least ten (10) days prior to the
record date or effective date for the event specified in such notice.
24. RESERVATION OF STOCK. The Company will at all times reserve and keep
available, solely for issuance and delivery upon the exercise of this
Warrant, such number of Warrant Shares and other stock, securities and
property, as from time to time shall be issuable upon the exercise of
this Warrant.
25. EXCHANGE OF WARRANTS. Upon the surrender by the Registered Holder of
any Warrant or Warrants, properly endorsed, to the Company at the
principal office of the Company, the Company will, subject to the
provisions of Section 4 hereof, issue and deliver to or upon the order
of such Holder, at the Company's expense, a new Warrant or Warrants of
like tenor, in the name of such Registered Holder or as such Registered
Holder (upon payment by such Registered Holder of any applicable
transfer taxes) may direct, calling in the aggregate on the face or
faces thereof for the number of shares of Common Stock called for on
the face or faces of the Warrant or Warrants so surrendered.
26. REPLACEMENT OF WARRANTS. Upon receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or
mutilation of this Warrant and (in the case of loss, theft or
destruction) upon delivery of an indemnity agreement (with surety if
reasonably required) in an amount reasonably satisfactory to the
Company, or (in the case of mutilation) upon surrender and cancellation
of this Warrant, the Company will issue, in lieu thereof, a new Warrant
of like tenor.
27. TRANSFERS, ETC.
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a. The Company will maintain a register containing the names and
addresses of the Registered Holders of this Warrant. Any
Registered Holder may change its or his address as shown on the
warrant register by written notice to the Company requesting such
change.
b. Subject to the provisions of Section 4 hereof, this Warrant and
all rights hereunder are transferable, in whole or in part, upon
surrender of this Warrant with a properly executed assignment (in
the form of EXHIBIT II hereto) at the principal office of the
Company.
c. Until any transfer of this Warrant is made in the warrant
register, the Company may treat the Registered Holder of this
Warrant as the absolute owner hereof for all purposes; PROVIDED,
HOWEVER, that if and when this Warrant is properly assigned in
blank, the Company may (but shall not be obligated to) treat the
bearer hereof as the absolute owner hereof for all purposes,
notwithstanding any notice to the contrary.
28. MAILING OF NOTICES, ETC. All notices and other communications from
the Company to the Registered Holder of this Warrant shall be mailed by
first- class certified or registered mail, postage prepaid, to the
address furnished to the Company in writing by the last Registered
Holder of this Warrant who shall have furnished an address to the
Company in writing. All notices and other communications from the
Registered Holder of this Warrant or in connection herewith to the
Company shall be mailed by first-class certified or registered mail,
postage prepaid, to the Company at its principal office set forth
below. If the Company should at any time change the location of its
principal office to a place other than as set forth below, it shall
give prompt written notice to the Registered Holder of this Warrant and
thereafter all references in this Warrant to the location of its
principal office at the particular time shall be as so specified in
such notice.
29. NO RIGHTS AS STOCKHOLDER. Until the exercise of this Warrant, the
Registered Holder of this Warrant shall not have or exercise any rights
by virtue hereof as a stockholder of the Company.
30. CHANGE OR WAIVER. Any term of this Warrant may be changed or waived
only by an instrument in writing signed by the party against which
enforcement of the change or waiver is sought.
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31. HEADINGS. The headings in this Warrant are for purposes of reference
only and shall not limit or otherwise affect the meaning of any
provision of this Warrant.
32. GOVERNING LAW. This Warrant will be governed by and construed in
accordance with the laws of the State of California.
GATEFIELD CORPORATION
By: /s/ James R. Fiebiger
-----------------------------------------
James R. Fiebiger
Its President and Chief Executive Officer
ATTEST
/s/ Douglas E. Klint
- -------------------------------
Douglas E. Klint
Vice President, General Counsel
and Corporate Secretary
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EXHIBIT I
PURCHASE FORM
To:_________________ Dated:______________
The undersigned, pursuant to the provisions set forth in the attached
Warrant (No. ___), hereby irrevocably elects to purchase _____ shares of the
Common Stock covered by such Warrant. The undersigned herewith makes payment of
$____________, representing the full purchase price for such shares at the price
per share provided for in such Warrant. Such payment takes the form of (check
applicable box or boxes):
[ ] $_________ in lawful money of the United States, and/or
[ ] the cancellation of such portion of the attached
Warrant as is exercisable for a total of ______
Warrant Shares (using a Fair Market Value of $_______
per share for purposes of this calculation).
Signature:___________________________
Address:_____________________________
_____________________________________
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EXHIBIT II
ASSIGNMENT FORM
FOR VALUE RECEIVED, ________________________________________ hereby
sells, assigns and transfers all of the rights of the undersigned under the
attached Warrant (No. ____) with respect to the number of shares of Common Stock
covered thereby set forth below, unto:
<TABLE>
<CAPTION>
Name Of Assignee Address No. Of Shares
- ---------------- ------- -------------
<S> <C> <C>
</TABLE>
Dated:______________ Signature:____________________________
Dated:______________ Witness:______________________________
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EXHIBIT E
THIS WARRANT AND THE SHARES OF COMMON STOCK ISSUED UPON ITS
EXERCISE ARE SUBJECT TO THE RESTRICTIONS ON
TRANSFER SET FORTH IN SECTION 4 OF THIS WARRANT
Warrant No. 11 Number of Shares: 9,978
(subject to adjustment)
Date of Issuance: November 10, 1997
GATEFIELD CORPORATION
COMMON STOCK PURCHASE WARRANT
(Void after November 10, 1999)
GateField Corporation, a Delaware corporation (the "Company"), for
value received, hereby certifies that the Perscilla Faily Trust, or its
registered assigns (the "Registered Holder"), is entitled, subject to the terms
set forth below, to purchase from the Company, at any time or from time to time
on or after the date of issuance and on or before November 10, 1999 at not later
than 5:00 p.m. (California time), Nine Thousand Nine Hundred Seventy-Eight
(9,978) shares of Common Stock, $.10 par value per share, of the Company, at
a purchase price of $1.00 per share. The shares purchasable upon exercise of
this Warrant, and the purchase price per share, each as adjusted from time to
time pursuant to the provisions of this Warrant, are hereinafter referred to as
the "Warrant Shares" and the "Purchase Price," respectively.
Notwithstanding the foregoing, if (A) the stockholders of the Company
approve the proposals to be submitted to them at the 1997 Annual Meeting of
Stockholders to be held on or prior to December 19, 1997, as set forth in
Section 1.3(a)(x) of the Stock Purchase Agreement among the Company, the
Registered Holder, Idanta Partners Ltd., and the Dunn Family Trust
(collectively, the "Purchasers"), dated November 10, 1997 (the "Stock Purchase
Agreement"), and (B) the Company issues 4,582,500 shares of its Common Stock to
the Purchasers at the Second Closing (as defined the Stock Purchase Agreement),
then, and only in such event, this Warrant shall be cancelled and all of the
rights of the Registered Holder
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and the obligations of the Company hereunder shall be of no further force or
effect and shall terminate effective at the later of, (i) the time such
stockholder approval is so obtained and certified by the Secretary of the
Company and the amendment to the Certificate of Incorporation of the Company so
approved by the stockholders is duly filed and recorded under the laws of the
State of Delaware and (ii) the effective time of the transactions consummated at
the Second Closing (as defined in the Stock Purchase Agreement).
33. EXERCISE.
a. This Warrant may be exercised by the Registered Holder, in whole
or in part, by surrendering this Warrant, with the purchase form
appended hereto as EXHIBIT I duly executed by such Registered
Holder or by such --------- Registered Holder's duly authorized
attorney, at the principal office of the Company, or at such other
office or agency as the Company may designate, accompanied by
payment in full, in lawful money of the United States, of the
Purchase Price payable in respect of the number of Warrant Shares
purchased upon such exercise.
b. The Registered Holder may, at its option, elect to pay some or all
of the Purchase Price payable upon an exercise of this Warrant by
cancelling a portion of this Warrant exercisable for such number
of Warrant Shares as is determined by dividing (i) the total
Purchase Price payable in respect of the number of Warrant Shares
being purchased upon such exercise by (ii) the excess of the Fair
Market Value per share of Common Stock as of the effective date of
exercise, as determined pursuant to subsection 1(c) below (the
"Exercise Date") over the Purchase Price per share. If the
Registered Holder wishes to exercise this Warrant pursuant to this
method of payment with respect to the maximum number of Warrant
Shares purchasable pursuant to this method, then the number of
Warrant Shares so purchasable shall be equal to the total number
of Warrant Shares, minus the product obtained by multiplying (x)
the total number of Warrant Shares by (y) a fraction, the
numerator of which shall be the Purchase Price per share and the
denominator of which shall be the Fair Market Value per share of
Common Stock as of the Exercise Date. The Fair Market Value per
share of Common Stock shall be determined as follows:
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i. If the Common Stock is listed on a national securities
exchange, the Nasdaq National Market, or another nationally
recognized exchange or trading system as of the Exercise
Date, the Fair Market Value per share of Common Stock shall
be deemed to be the last reported sale price per share of
Common Stock thereon on the Exercise Date; or, if no such
price is reported on such date, such price on the next
preceding business day (provided that if no such price is
reported on the next preceding business day, the Fair Market
Value per share of Common Stock shall be determined pursuant
to clause (ii)).
ii. If the Common Stock is not listed on a national securities
exchange, the Nasdaq National Market, or another nationally
recognized exchange or trading system as of the Exercise
Date, the Fair Market Value per share of Common Stock shall
be deemed to be the amount most recently determined by the
Board of Directors to represent the fair market value per
share of the Common Stock (including without limitation a
determination for purposes of granting Common Stock options
or issuing Common Stock under an employee benefit plan of the
Company); and, upon request of the Registered Holder, the
Board of Directors (or a representative thereof) shall
promptly notify the Registered Holder of the Fair Market
Value per share of Common Stock. Notwithstanding the
foregoing, if the Board of Directors has not made such a
determination within the three-month period prior to the
Exercise Date, then (A) the Fair Market Value per share of
Common Stock shall be the amount next determined by the Board
of Directors to represent the fair market value per share of
the Common Stock (including without limitation a
determination for purposes of granting Common Stock options
or issuing Common Stock under an employee benefit plan of the
Company), (B) the Board of Directors shall make such a
determination within 15 days of a request by the Registered
Holder that it do so, and (C) the exercise of this Warrant
pursuant to this subsection 1(b) shall be delayed until such
determination is made.
c. Each exercise of this Warrant shall be deemed to have been
effected immediately prior to the close of business on the day on
which this Warrant shall have been surrendered to the Company as
provided in
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subsection 1(a) above. At such time, the person or persons in
whose name or names any certificates for Warrant Shares shall be
issuable upon such exercise as provided in subsection 1(d) below
shall be deemed to have become the holder or holders of record of
the Warrant Shares represented by such certificates.
d. As soon as practicable after the exercise of this Warrant in full
or in part, and in any event within 10 days thereafter, the
Company, at its expense, will cause to be issued in the name of,
and delivered to, the Registered Holder, or as such Holder (upon
payment by such Holder of any applicable transfer taxes) may
direct:
i. a certificate or certificates for the number of full Warrant
Shares to which such Registered Holder shall be entitled upon
such exercise plus, in lieu of any fractional share to which
such Registered Holder would otherwise be entitled, cash in
an amount determined pursuant to Section 3 hereof; and
ii. in case such exercise is in part only, a new warrant or
warrants (dated the date hereof) of like tenor, calling in
the aggregate on the face or faces thereof for the number of
Warrant Shares equal (without giving effect to any adjustment
therein) to the number of such shares called for on the face
of this Warrant minus the sum of (a) the number of such
shares purchased by the Registered Holder upon such exercise
plus (b) the number of Warrant Shares (if any) covered by the
portion of this Warrant cancelled in payment of the Purchase
Price payable upon such exercise pursuant to subsection 1(b)
above.
34. ADJUSTMENTS.
a. If outstanding shares of the Company's Common Stock shall be
subdivided into a greater number of shares or a dividend in Common
Stock shall be paid in respect of Common Stock, the Purchase Price
in effect immediately prior to such subdivision or at the record
date of such dividend shall simultaneously with the effectiveness
of such subdivision or immediately after the record date of such
dividend be proportionately reduced. If outstanding shares of
Common Stock shall be combined into a smaller number of shares,
the Purchase Price in
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effect immediately prior to such combination shall, simultaneously
with the effectiveness of such combination, be proportionately
increased. When any adjustment is required to be made in the
Purchase Price, the number of Warrant Shares purchasable upon the
exercise of this Warrant shall be changed to the number determined
by dividing (i) an amount equal to the number of shares issuable
upon the exercise of this Warrant immediately prior to such
adjustment, multiplied by the Purchase Price in effect immediately
prior to such adjustment, by (ii) the Purchase Price in effect
immediately after such adjustment.
b. If there shall occur any capital reorganization or
reclassification of the Company's Common Stock (other than a
change in par value or a subdivision or combination as provided
for in subsection 2(a) above), or any consolidation or merger of
the Company with or into another corporation, or a transfer of all
or substantially all of the assets of the Company, then, as part
of any such reorganization, reclassification, consolidation,
merger or sale, as the case may be, lawful provision shall be made
so that the Registered Holder of this Warrant shall have the right
thereafter to receive upon the exercise hereof the kind and amount
of shares of stock or other securities or property which such
Registered Holder would have been entitled to receive if,
immediately prior to any such reorganization, reclassification,
consolidation, merger or sale, as the case may be, such Registered
Holder had held the number of shares of Common Stock which were
then purchasable upon the exercise of this Warrant. In any such
case, appropriate adjustment (as reasonably determined in good
faith by the Board of Directors of the Company) shall be made in
the application of the provisions set forth herein with respect to
the rights and interests thereafter of the Registered Holder of
this Warrant, such that the provisions set forth in this Section 2
(including provisions with respect to adjustment of the Purchase
Price) shall thereafter be applicable, as nearly as is reasonably
practicable, in relation to any shares of stock or other
securities or property thereafter deliverable upon the exercise of
this Warrant.
c. When any adjustment is required to be made in the Purchase Price,
the Company shall promptly mail to the Registered Holder a
certificate setting forth the Purchase Price after such adjustment
and setting forth a brief statement of the facts requiring such
adjustment. Such certificate shall also set forth the kind and
amount of stock or other securities or
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property into which this Warrant shall be exercisable following
the occurrence of any of the events specified in subsection 2(a)
or (b) above.
35. FRACTIONAL SHARES. The Company shall not be required upon the exercise
of this Warrant to issue any fractional shares, but shall make an
adjustment therefor in cash on the basis of the Fair Market Value per
share of Common Stock, as determined pursuant to subsection 1(b) above.
36. REQUIREMENTS FOR TRANSFER.
a. This Warrant and the Warrant Shares shall not be sold or
transferred unless either (i) they first shall have been
registered under the Securities Act of 1933, as amended (the
"Act"), or (ii) the Company first shall have been furnished with
an opinion of legal counsel, reasonably satisfactory to the
Company, to the effect that such sale or transfer is exempt from
the registration requirements of the Act.
b. Notwithstanding the foregoing, no registration or opinion of
counsel shall be required for (i) a transfer by a Registered
Holder which is a partnership to a partner of such partnership or
a retired partner of such partnership who retires after the date
hereof, or to the estate of any such partner or retired partner,
if the transferee agrees in writing to be subject to the terms of
this Section 4, or (ii) a transfer made in accordance with Rule
144 under the Act.
c. Each certificate representing Warrant Shares shall bear a legend
substantially in the following form:
"The securities represented by this certificate have not been
registered under the Securities Act of 1933, as amended, and may
not be offered, sold or otherwise transferred, pledged or
hypothecated unless and until such securities are registered under
such Act or an opinion of counsel satisfactory to the Company is
obtained to the effect that such registration is not required."
The foregoing legend shall be removed from the certificates representing any
Warrant Shares, at the request of the holder thereof, at such time as they
become eligible for resale pursuant to Rule 144(k) under the Act.
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37. NO IMPAIRMENT. The Company will not, by amendment of its charter or
through reorganization, consolidation, merger, dissolution, sale of
assets or any other voluntary action, avoid or seek to avoid the
observance or performance of any of the terms of this Warrant, but will
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.
38. LIQUIDATING DIVIDENDS. If the Company pays a dividend or makes a
distribution on the Common Stock payable otherwise than in cash out of
earnings or earned surplus (determined in accordance with generally
accepted accounting principles) except for a stock dividend payable in
shares of Common Stock (a "Liquidating Dividend"), then the Company
will pay or distribute to the Registered Holder of this Warrant, upon
the exercise hereof, in addition to the Warrant Shares purchased upon
such exercise, the Liquidating Dividend which would have been paid to
such Registered Holder if he had been the owner of record of such
Warrant Shares immediately prior to the date on which a record is taken
for such Liquidating Dividend or, if no record is taken, the date as of
which the record holders of Common Stock entitled to such dividends or
distribution are to be determined.
39. NOTICES OF RECORD DATE, ETC. In case:
a. the Company shall take a record of the holders of its Common Stock
(or other stock or securities at the time deliverable upon the
exercise of this Warrant) for the purpose of entitling or enabling
them to receive any dividend or other distribution, or to receive
any right to subscribe for or purchase any shares of stock of any
class or any other securities, or to receive any other right; or
b. of any capital reorganization of the Company, any reclassification
of the capital stock of the Company, any consolidation or merger
of the Company with or into another corporation (other than a
consolidation or merger in which the Company is the surviving
entity), or any transfer of all or substantially all of the assets
of the Company; or
c. of the voluntary or involuntary dissolution, liquidation or
winding-up of the Company,
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then, and in each such case, the Company will mail or cause to be mailed to the
Registered Holder of this Warrant a notice specifying, as the case may be, (i)
the date on which a record is to be taken for the purpose of such dividend,
distribution or right, and stating the amount and character of such dividend,
distribution or right, or (ii) the effective date on which such reorganization,
reclassification, consolidation, merger, transfer, dissolution, liquidation or
winding-up is to take place, and the time, if any is to be fixed, as of which
the holders of record of Common Stock (or such other stock or securities at the
time deliverable upon the exercise of this Warrant) shall be entitled to
exchange their shares of Common Stock (or such other stock or securities) for
securities or other property deliverable upon such reorganization,
reclassification, consolidation, merger, transfer, dissolution, liquidation or
winding-up. Such notice shall be mailed at least ten (10) days prior to the
record date or effective date for the event specified in such notice.
40. RESERVATION OF STOCK. The Company will at all times reserve and keep
available, solely for issuance and delivery upon the exercise of this
Warrant, such number of Warrant Shares and other stock, securities and
property, as from time to time shall be issuable upon the exercise of
this Warrant.
41. EXCHANGE OF WARRANTS. Upon the surrender by the Registered Holder of
any Warrant or Warrants, properly endorsed, to the Company at the
principal office of the Company, the Company will, subject to the
provisions of Section 4 hereof, issue and deliver to or upon the order
of such Holder, at the Company's expense, a new Warrant or Warrants of
like tenor, in the name of such Registered Holder or as such Registered
Holder (upon payment by such Registered Holder of any applicable
transfer taxes) may direct, calling in the aggregate on the face or
faces thereof for the number of shares of Common Stock called for on
the face or faces of the Warrant or Warrants so surrendered.
42. REPLACEMENT OF WARRANTS. Upon receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or
mutilation of this Warrant and (in the case of loss, theft or
destruction) upon delivery of an indemnity agreement (with surety if
reasonably required) in an amount reasonably satisfactory to the
Company, or (in the case of mutilation) upon surrender and cancellation
of this Warrant, the Company will issue, in lieu thereof, a new Warrant
of like tenor.
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43. TRANSFERS, ETC.
a. The Company will maintain a register containing the names and
addresses of the Registered Holders of this Warrant. Any
Registered Holder may change its or his address as shown on the
warrant register by written notice to the Company requesting such
change.
b. Subject to the provisions of Section 4 hereof, this Warrant and
all rights hereunder are transferable, in whole or in part, upon
surrender of this Warrant with a properly executed assignment (in
the form of EXHIBIT II hereto) at the principal office of the
Company.
c. Until any transfer of this Warrant is made in the warrant
register, the Company may treat the Registered Holder of this
Warrant as the absolute owner hereof for all purposes; PROVIDED,
HOWEVER, that if and when this Warrant is properly assigned in
blank, the Company may (but shall not be obligated to) treat the
bearer hereof as the absolute owner hereof for all purposes,
notwithstanding any notice to the contrary.
44. MAILING OF NOTICES, ETC. All notices and other communications from
the Company to the Registered Holder of this Warrant shall be mailed by
first- class certified or registered mail, postage prepaid, to the
address furnished to the Company in writing by the last Registered
Holder of this Warrant who shall have furnished an address to the
Company in writing. All notices and other communications from the
Registered Holder of this Warrant or in connection herewith to the
Company shall be mailed by first-class certified or registered mail,
postage prepaid, to the Company at its principal office set forth
below. If the Company should at any time change the location of its
principal office to a place other than as set forth below, it shall
give prompt written notice to the Registered Holder of this Warrant and
thereafter all references in this Warrant to the location of its
principal office at the particular time shall be as so specified in
such notice.
45. NO RIGHTS AS STOCKHOLDER. Until the exercise of this Warrant, the
Registered Holder of this Warrant shall not have or exercise any rights
by virtue hereof as a stockholder of the Company.
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46. CHANGE OR WAIVER. Any term of this Warrant may be changed or waived
only by an instrument in writing signed by the party against which
enforcement of the change or waiver is sought.
47. HEADINGS. The headings in this Warrant are for purposes of reference
only and shall not limit or otherwise affect the meaning of any
provision of this Warrant.
48. GOVERNING LAW. This Warrant will be governed by and construed in
accordance with the laws of the State of California.
GATEFIELD CORPORATION
By: /s/ James R. Fiebiger
-----------------------------------------
James R. Fiebiger
Its President and Chief Executive Officer
ATTEST
/s/ Douglas E. Klint
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Douglas E. Klint
Vice President, General Counsel
and Corporate Secretary
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EXHIBIT I
PURCHASE FORM
To:_________________ Dated:______________
The undersigned, pursuant to the provisions set forth in the attached
Warrant (No. ___), hereby irrevocably elects to purchase _____ shares of the
Common Stock covered by such Warrant. The undersigned herewith makes payment of
$____________, representing the full purchase price for such shares at the price
per share provided for in such Warrant. Such payment takes the form of (check
applicable box or boxes):
[ ] $_________ in lawful money of the United States, and/or
[ ] the cancellation of such portion of the attached
Warrant as is exercisable for a total of ______
Warrant Shares (using a Fair Market Value of $_______
per share for purposes of this calculation).
Signature:__________________________
Address:____________________________
____________________________________
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EXHIBIT II
ASSIGNMENT FORM
FOR VALUE RECEIVED, ________________________________________ hereby
sells, assigns and transfers all of the rights of the undersigned under the
attached Warrant (No. ____) with respect to the number of shares of Common Stock
covered thereby set forth below, unto:
<TABLE>
<CAPTION>
Name of Assignee Address No. of Shares
- ---------------- ------- -------------
<S> <C> <C>
</TABLE>
Dated:______________ Signature:____________________________
Dated:______________ Witness:______________________________
