<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 8-K/A
Current Report Pursuant To Section 13 Or 15(d)
Of The Securities Exchange Act Of 1934
Date of Report (Date of earliest event reported):
August 14, 1998
GATEFIELD CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE
(State of incorporation)
0-13244 41-1404495
Commission file number (I.R.S. Employer Identification No.)
47100 BAYSIDE PARKWAY
FREMONT, CALIFORNIA 94538
(Address of principal executive offices and zip code)
Registrant's telephone number, including area code: (510) 623-4400
<PAGE>
Item 5. Other Events.
Current Executive Officers
In connection with the GateField Corporation's (the "Company") consummation
of certain transactions with Actel Corporation, which are described in the
Company's Current Report on Form 8-K dated August 14, 1998, the Company has
reorganized its senior management. The current members of the Company's
senior management are as follows:
1. James R. Fiebiger, Vice-Chairman and Chief Executive Officer;
2. Timothy Saxe, President and Chief Operating Officer;
3. Peter G. Feist, Senior Vice President, Marketing; and
4. James B. Boyd, Corporate Controller.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
(a) Financial Statements of Business Acquired:
Not applicable.
(b) Pro Forma Financial Information:
(1) GateField Corporation pro forma Condensed Income
Statement (unaudited) for the six months ended June
30, 1998 (see page 5).
(2) GateField Corporation amended pro forma Condensed
Balance Sheets (unaudited) for the six months ended
June 30, 1998 (see page 6).
(c) Exhibits:
2.1 Asset Purchase Agreement dated August 14, 1998, regarding
the purchase of GateField Corporation's Design Services
Business by Actel Corporation (incorporated by reference to
Exhibit 2.1 to the Company's Current Report on Form 8-K filed
on August 14, 1998).
4.1 Series C Preferred Stock Purchase Agreement dated August
14, 1998 between GateField Corporation and Actel Corporation.
4.2 Registration Rights Agreement dated August 14, 1998
between GateField Corporation and Actel Corporation.
4.3 Restated Certificate of Incorporation dated August 28,
1998.
99.1 License Agreement dated July 31, 1998 between GateField
Corporation and Rohm Co., Ltd. (incorporated by reference to
Exhibit 10.1 to the Company's Current Report on Form 8-K filed
on August 14, 1998).
99.2 GateField Corporation's press release dated August 14,
1998 (incorporated by reference to Exhibit 99.1 to the
Company's Current Report on Form 8-K filed on August 14, 1998).
99.3 Agreement for Wafer Production and Testing between
GateField Corporation and Siemens Aktiengesellschaft.
2.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
GATEFIELD CORPORATION
/s/ Timothy Saxe
-------------------------------------
Timothy Saxe
President and Chief Operating Officer
/s/ James B. Boyd
-------------------------------------
James B. Boyd
Corporate Controller
Dated: August 31, 1998
3.
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GATEFIELD CORPORATION
(FORMERLY ZYCAD CORPORATION)
PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Pursuant to that certain Asset Purchase Agreement dated as of August 14, 1998
(the "Asset Purchase Agreement"), GateField Corporation (the "Company") sold
certain of the assets relating to its Design Service Business Unit, which is
engaged in the business of providing prototyping design services and
verification services for electronic systems, integrated circuits and other
electronic components, located in Mt. Arlington, NJ (the "Design Service
Business") to Actel Corporation ("Actel"). The purchase price for such
assets was (i) $5.4 million plus (ii) contingent payments to be paid over a
three-year period on a quarterly basis based on the Design Services Business
achieving certain profitability levels which payments shall not exceed $1.0
million in the aggregate.
The Company's accompanying unaudited pro forma condensed consolidated
financial statements give retroactive effect to the disposition of these
assets. Such pro forma financial statements are presented to comply with the
requirements of Article 11 of Regulation S-X. The pro forma information is
not necessarily indicative of the results that would have been reported had
such events actually occurred on the dates specified nor is it indicative of
the Company's future results.
4.
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GATEFIELD CORPORATION
(FORMERLY ZYCAD CORPORATION)
PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Actual Pro forma
Actual Effect of Sale Pro forma Six Months Effect of Sale Six Months
(IN THOUSANDS, EXCEPT Year Ended of Design Year Ended Ended of Design Ended
PER SHARE AMOUNTS) December 31, Services Business December 31, June 30, Services Business June 30,
1997 1997 1998 1998
--------------------------------------------- -------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Revenues:
Product $ 5,385 $ - $ 5,385 $ 1,999 $ - $ 1,999
Service 10,407 (3,800) 6,607 3,318 (1,708) 1,610
--------------------------------------------- -------------------------------------------
Total revenues 15,792 (3,800) 11,992 5,317 (1,708) 3,609
--------------------------------------------- -------------------------------------------
Cost of revenues:
Product 6,421 - 6,421 2,536 - 2,536
Service 4,482 (2,297) 2,185 1,365 (813) 552
--------------------------------------------- -------------------------------------------
Total cost of revenues 10,903 (2,297) 8,606 3,901 (813) 3,088
--------------------------------------------- -------------------------------------------
Gross profit 4,889 (1,503) 3,386 1,416 (895) 521
--------------------------------------------- -------------------------------------------
Operating expenses:
Sales and marketing 9,664 - 9,664 2,274 - 2,274
Research and development 7,854 - 7,854 2,696 - 2,696
General and administrative 4,086 (778) 3,308 1,550 (551) 999
--------------------------------------------- -------------------------------------------
Total operating expenses 21,604 (778) 20,826 6,520 (551) 5,969
--------------------------------------------- -------------------------------------------
Operating loss (16,715) (725) (17,440) (5,104) (344) (5,448)
--------------------------------------------- -------------------------------------------
Other income (expense), net 1,639 272 1,911 (179) 136 (43)
--------------------------------------------- -------------------------------------------
Net loss $(15,076) $ (453) $(15,529) $(5,283) $ (208) $(5,491)
--------------------------------------------- -------------------------------------------
--------------------------------------------- -------------------------------------------
Basic and diluted net loss
per share $ (0.50) $ (0.51) $ (0.13) $ (0.13)
---------- ---------- --------- ---------
---------- ---------- --------- ---------
Basic and diluted weighted
average shares outstanding 30,303 30,303 40,840 40,840
---------- ---------- --------- ---------
---------- ---------- --------- ---------
</TABLE>
SEE NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
5.
<PAGE>
GATEFIELD CORPORATION
(FORMERLY ZYCAD CORPORATION)
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
Effect of Sale
Actual of Design Pro forma
(IN THOUSANDS) June 30,1998 Services Business June 30,1998
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 2,851 $5,444 $ 8,295
Short-term investments 113 - 113
Accounts receivable, net 1,874 (678) 1,196
Inventories 669 - 669
Other current assets 546 (3) 543
---------------------------------------------
Total current assets 6,053 4,763 10,816
Property and equipment, net 3,107 (55) 3,052
Other assets 254 (20) 234
---------------------------------------------
Total assets $ 9,414 $4,688 $14,102
---------------------------------------------
---------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term obligations $ 617 $ - $ 617
Accounts payable 2,778 (115) 2,663
Accrued expenses 2,434 (147) 2,287
Deferred revenues 692 (30) 662
---------------------------------------------
Total current liabilities 6,521 (292) 6,229
Other long-term liabilities 420 - 420
---------------------------------------------
Total liabilities 6,941 (292) 6,649
Redeemable Preferred Stock 4,663 - 4,663
Total stockholders' equity (2,190) 4,980 2,790
---------------------------------------------
Total liabilities and stockholders' equity $ 9,414 $4,688 $14,102
---------------------------------------------
---------------------------------------------
</TABLE>
SEE NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
6.
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GATEFIELD CORPORATION
(FORMERLY ZYCAD CORPORATION)
Notes to Unaudited Pro Forma Consolidated Financial Statements
June 30, 1998
(1) The unaudited pro forma condensed consolidated balance sheet as of June 30,
1998 gives retroactive effect to the sale of the Company's design services
business assets as if such transaction had taken place on June 30, 1998.
The unaudited pro forma condensed consolidated statement of operations for
the year ended December 31, 1997 and for the six months ended June 30, 1998
gives retroactive effect to the sale of the Company's design services
business assets as if such transaction had taken place on January 1, 1997.
Accordingly, the "pro forma" columns exclude the accounts of the design
services business. The unaudited pro forma condensed consolidated
statements of operations exclude the $5.0 million gain on the transaction
but include interest income on the proceeds of the sale as if the funds
were available for investment beginning January 1997.
(2) The net proceeds from the sale were deposited in the Company's bank
accounts and will be used for general working capital purposes. In
November 1997 the Company issued 1,000,000 shares of Series B Convertible
Preferred Stock for $4,583,000. Each share is convertible into 4.5825
shares of Common Stock plus the amount of accrued and unpaid dividends at
the option of the holder. The Preferred Stock agreement defines Events of
Noncompliance, which includes a delisting of the Company's stock from
Nasdaq National Market System. On the occurrence of an Event of
Noncompliance, the Preferred Stock becomes redeemable at the option of the
holder or convertible at 75% of the stated conversion ratio. On July 16,
1998 the Company's listing was moved to the Nasdaq SmallCap Market,
accordingly the redeemable and convertible Preferred Stock is classified as
mezzanine financing separate from stockholders equity.
7.
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SERIES C PREFERRED STOCK PURCHASE AGREEMENT
This Series C Preferred Stock Purchase Agreement (the "Agreement") dated
as of August 14, 1998, is entered into by and among GateField Corporation, a
Delaware corporation with offices at 47100 Bayside Parkway, Fremont,
California 94538 (the "Company"), and Actel Corporation, a California
corporation with offices at 955 East Arques Avenue, Sunnyvale, California
94086-4533 (the "Purchaser"), in connection with the purchase of 300,000
shares of the Company's Series C Convertible Preferred Stock, par value $.10
(the "Preferred Stock"), initially convertible into up to 2,000,000 shares of
the Company's common stock, $.10 par value (the "Common Stock"), to be sold
to the Purchaser at the Closing (as defined below). The Certificate of
Designations setting forth the rights, restrictions, privileges and
preferences of the Preferred Stock (the "Certificate of Designations") is
attached hereto as Exhibit A. The solicitation of this Agreement and the
offer and sale of the Preferred Stock 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 and the Common Stock are sometimes
collectively referred to herein as the "Shares".
In consideration of the mutual promises, representations, warranties and
conditions set forth herein, and intending to be legally bound hereby, the
Company and the Purchaser agree as follows:
1. PURCHASE AND SALE OF PREFERRED STOCK; CLOSING CONDITIONS
1.1 PURCHASE AND SALE OF PREFERRED STOCK.
(a) PURCHASE OF PREFERRED STOCK. The Purchaser hereby agrees
to purchase and the Company agrees to sell to the Purchaser 300,000 shares of
Preferred Stock at a price of $10.00 per share for the aggregate purchase
price of $3,000,000 (the "Purchase Price"). The closing of the purchase of
such Preferred Stock shall take place at the "Closing," subject to the
satisfaction (or waiver) of the conditions thereto set forth in Sections 1.2
and 1.3 below:
(b) PAYMENT AND DELIVERY OF STOCK CERTIFICATES. On the
Closing Date (as defined below), (i) the Purchaser shall pay the Purchase
Price by wire transfer of immediately available funds to the Company, in
accordance with the Company's written instructions, against delivery of duly
executed stock certificates which the Purchaser is then purchasing and (ii)
the Company shall deliver to the Purchaser such stock certificates against
delivery of the Purchase Price.
(c) 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 pursuant to this
Agreement (the "Closing Date") shall be 9:00 a.m. Pacific Daylight Time on
August 14, 1998 or at such time as the parties may mutually agree upon.
<PAGE>
1.2 CONDITIONS PRECEDENT TO THE OBLIGATION OF THE COMPANY TO ISSUE
AND SELL THE PREFERRED STOCK. The obligation hereunder of the Company to
issue and sell the Preferred Stock to the Purchaser at the Closing is subject
to the satisfaction, at or before the 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 REPRESENTATIONS AND
WARRANTIES. The representations and warranties of the Purchaser contained in
this Agreement shall be true and correct as of the date when made and as of
the Closing Date as though made at such time.
(b) PERFORMANCE BY THE PURCHASER. The Purchaser 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 Purchaser at or prior to the 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.
(d) DOCUMENTS. The Purchaser shall have delivered to the
Company:
(i) the Asset Purchase Agreement of even date
herewith between the Company and the Purchaser (the "Asset Purchase
Agreement"); and
(ii) the Product Marketing Agreement of even date
herewith between the Company and the Purchaser (the "Product Marketing
Agreement").
1.3 CONDITIONS PRECEDENT TO THE OBLIGATION OF THE PURCHASER TO
ACQUIRE THE PREFERRED STOCK. The obligation of the Purchaser hereunder to
acquire and pay for the Preferred Stock at the Closing is subject to the
satisfaction, at or before the Closing Date, of each of the following
conditions. Each of these conditions is for the Purchaser's sole benefit and
may be waived by the Purchaser at any time in its sole discretion.
(a) 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 Closing Date
as though made at such time.
(b) PERFORMANCE BY THE COMPANY. The Company shall have
performed, satisfied and complied in all respects with all covenants,
agreements and conditions
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required by this Agreement to be performed, satisfied or complied with by the
Company at or prior to the 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 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.
(d) THE LEGAL OPINION. The Company shall have delivered to
the Purchaser the opinion of Cooley Godward LLP, independent counsel to the
Company, with respect to the matters set forth in Exhibit B attached hereto,
dated as of the Closing Date.
(e) OFFICER'S CERTIFICATE. The Company shall have delivered
to the Purchaser a certificate in such form and substance as shall be
reasonably satisfactory to the Purchaser, executed by an executive officer of
the Company as of the Closing Date, to the effect that all of the conditions
to the Closing shall have been satisfied.
(f) REGISTRATION RIGHTS AGREEMENT. The Company and the
Purchaser shall have executed and delivered the Registration Rights Agreement
(the "Registration Rights Agreement") attached hereto as Exhibit C.
(g) CERTIFICATE AND DOCUMENTS. The Company shall have
delivered to the Purchaser:
(i) the Certificate of Incorporation of the
Company, as amended and in effect as of the date of the Closing including
the Certificate of Designations, certified by the Secretary of State of the
State of Delaware;
(ii) 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;
(iii) the By-laws of the Company, as amended and in
effect as of the date of the Closing, certified by the Secretary of the
Company;
(iv) 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 Closing Date;
(v) the Asset Purchase Agreement; and
(vi) the Product Marketing Agreement.
3
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(h) 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 Purchaser and its counsel, and the
Purchaser and its counsel shall have received all such counterpart originals
or certified or other copies of such documents as they may reasonably request.
2. REPRESENTATIONS AND WARRANTIES OF PURCHASER
The Purchaser represents and warrants to the Company that:
2.1 NO GOVERNMENT RECOMMENDATION OR APPROVAL. The Purchaser
understands that no United States federal or state agency, or similar agency
of any other country, has passed upon or made any recommendation or
endorsement of the Company or the offering of the Preferred Stock.
2.2 INTENT. The Purchaser is purchasing the Preferred Stock for
its own account and not with a view towards distribution and the Purchaser
has no present arrangement (whether or not legally binding) at any time to
sell the Shares to or through any person or entity; provided, however, that
by making the representations herein, the Purchaser does not agree to hold
the Shares for any minimum or other specific term and reserves the right to
dispose of the Shares at any time in accordance with Federal and state
securities laws applicable to such disposition. The Purchaser understands
that the Shares must be held indefinitely unless such Shares are subsequently
registered under the Securities Act or an exemption from registration is
available. The Purchaser has been advised or is aware of the provisions of
Rule 144 promulgated under the Securities Act.
2.3 SOPHISTICATED INVESTOR. The Purchaser is a sophisticated
investor (as described in Rule 506(b)(2)(ii) of Regulation D) and an
accredited investor (as defined in Rule 501 of Regulation D), and the
Purchaser has such experience in business and financial matters that it is
capable of evaluating the merits and risks of an investment in the Preferred
Stock. The Purchaser acknowledges that the investment in the Preferred Stock
is speculative and involves a high degree of risk.
2.4 INDEPENDENT INVESTIGATION. The Purchaser, in making its
decision to purchase the Preferred Stock 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 and in the public filings of the Company. Prior to
the date hereof, the 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 March 31,
1998 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").
The 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
4
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made with respect to the Company and the Shares. The Purchaser acknowledges
the price and terms of the Shares 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.
2.5 AUTHORITY. This Agreement has been duly authorized and
validly executed, and delivered by the 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. The 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. The 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 Closing, the 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. The Purchaser
understands that the Preferred Stock is 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, acknowledgments and understandings
of the 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 the Purchaser that:
3.1 COMPANY STATUS. The Company has registered the Common Stock
pursuant to Section 12(b) or 12(g) of the Exchange Act and is in full
compliance with all reporting requirements of the Exchange Act.
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3.2 CURRENT PUBLIC INFORMATION. The Exchange Act Reports include all
the filings made by the Company since March 31, 1998 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, 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 offer,
issuance and sale of the Preferred Stock under the Securities Act.
3.4 CAPITALIZATION; ISSUANCE OF SHARES.
(a) As of the date of this Agreement, the authorized capital
stock of the Company consists of 65,000,000 shares of Common Stock, of which
41,971,495 shares are issued and outstanding, and 2,000,000 shares of series
preferred stock, of which 1,000,000 shares have been designated Series B
Preferred Stock, 1,000,000 shares of which shares are issued and outstanding,
and 300,000 shares of which have been designated Series C Preferred Stock
none of which is issued or outstanding. The Company has adopted and filed
the Certificate of Designations with the Secretary of State of the State of
Delaware. All of the issued and outstanding shares of Preferred Stock and
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 Preferred Stock in
accordance with this Agreement and the issuance and delivery of the shares of
Common Stock issuable upon conversion of the Preferred Stock have been duly
authorized by all necessary corporate and stockholder action on the part of
the Company and all such shares shall be duly reserved for issuance. Upon
issuance of the Preferred Stock, the shares of Preferred Stock will be duly
and validly issued, fully paid and non-assessable; the shares of Common Stock
issuable upon conversion of the Preferred Stock, when issued and delivered in
accordance with the terms of the Preferred Stock, will be duly and validly
issued, fully paid and non-assessable.
(c) Except as set forth in Schedule 3.4 of the Disclosure
Schedule, 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
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such holders, relating to the acquisition (including, without limitation,
rights of first refusal or preemptive 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 in its Annual Report on Form 10-K
(or the exhibits attached thereto) filed with the SEC for the year ended
December 31, 1997. 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 Change (as defined
below). 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 Shares in accordance with the terms hereof and thereof, (ii) the
execution, issuance and delivery of this Agreement, the Preferred Stock, the
Common Stock by the Company and the Registration Rights Agreement, 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 Registration Rights Agreement have been duly executed and delivered by
the Company, and (iv) this Agreement, the Registration Rights Agreement, and
the Preferred Stock constitute, and upon execution, issuance and delivery
thereof 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, the sale and issuance of the Preferred Stock by the Company and
the issuance of common stock upon the conversion 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
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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 Change. 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 Change. 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 or perform any of its obligations under this
Agreement or issue and sell the Shares in accordance with the terms hereof
and thereof (other than any SEC, NASD, Exchange or state securities filings
which may be required to be made by the Company subsequent to the 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 Purchaser herein.
3.9 EXCHANGE ACT REPORTS; FINANCIAL STATEMENTS. The Company has
delivered or made available to the Purchaser 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 March 31, 1998, 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
Exchange Act Reports and the Disclosure Schedule ("Material Adverse Change").
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
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reflected or disclosed in the Exchange Act Reports, other than contractual
liabilities and those incurred in the ordinary course of the Company's or its
subsidiaries' respective businesses since March 31, 1998.
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 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 Purchaser relating to this Agreement or the
transactions contemplated hereby.
3.14 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 Change.
3.15 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.
3.16 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,
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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 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 Purchaser copies of all of the
foregoing agreements. All of such agreements and contracts are valid,
binding and in full force and effect.
3.17 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 to that certain Stock Purchase
Agreement by and among the Company and the purchasers listed therein dated as
of November 10, 1997 (the "Series B Agreement"), and all of such agreements
are in full force and effect.
3.18 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.
3.19 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 Purchaser 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 January 1,
1996.
3.20 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 Change which has not been disclosed in the Disclosure Schedule.
4. COVENANTS
4.1 REGISTRATION RIGHTS. The Company agrees that, at the Closing,
it will enter into a Registration Rights Agreement with the Purchaser, in the
form of Exhibit C attached hereto.
4.2 RESERVATION OF COMMON STOCK. As of the date hereof, the
Company has reserved and the Company shall continue to reserve and keep
available at all times,
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free of preemptive rights, 2,000,000 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. 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 Closing, to take such action to cause the shares of Common
Stock issuable upon conversion of the Preferred Stock to be listed on the
Exchange as promptly as possible but no later than 90 days following the
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 of Common Stock issuable upon conversion of the Preferred
Stock 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 Stock Market 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 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 RIGHT OF FIRST REFUSAL
(a) Until such time as the earlier of (i) the date that the
Company first reports Annual Net Income (as defined below) of Fifteen Million
Dollars ($15,000,000) and (ii) the date that the Purchaser owns less than
1,000,000 shares (subject to appropriate adjustment for any stock dividend,
stock split, combination or similar recapitalization) of common stock, or
common stock issuable upon conversion of Preferred Stock, the Purchaser shall
have 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. The Purchaser's pro rata share, for purposes of this Section
4.7, shall equal a fraction, the numerator of which is the sum of (1) the
number of shares of common stock then held by such Purchaser, (2) the number
of shares of common stock issuable upon conversion or exercise of shares
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<PAGE>
of Preferred Stock then held by the Purchaser, and (3) the number of shares
of common stock issuable upon conversion or exercise of the other convertible
securities, options, rights or warrants then held by such Purchaser, and the
denominator of which is the sum of (1) the total number of shares of common
stock then outstanding, (2) the number of shares of common stock issuable
upon conversion or exercise of then outstanding preferred stock, and (3) the
total number of shares of common stock issuable upon conversion or exercise
of all then outstanding convertible securities, options, rights and warrants.
"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.
(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) shares of Preferred Stock issued or issuable to
the Purchaser pursuant to the terms of this Agreement or the shares of common
stock issued or issuable upon conversion of such securities;
(ii) shares of common stock issued or issuable as a
dividend or distribution on the Preferred Stock or the Series B Convertible
Preferred Stock;
(iii) 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;
(iv) shares of common stock issued or issuable to
directors or employees of or consultants to the Company pursuant to a plan or
arrangement approved by a majority of the members of the Company's Board of
Directors then in office;
(v) shares of common stock issued or issuable to
Halifax Fund L.P. or Capital Ventures International or their permitted
transferees, pursuant to warrants outstanding on the date hereof;
(vi) shares of common stock issued or issuable to
Benjamin Huberman, James Fiebiger and Ton Tanke or their permitted
transferees, pursuant to warrants outstanding on the date hereof;
(vii) shares of common stock issued or issuable to
Siemens Aktiengesellschaft ("Siemens"), pursuant to Section 5.1 of that
certain License Agreement between the Company and Siemens dated October 22,
1997, or upon the exercise of warrants to purchase shares of common stock
outstanding on the date hereof;
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(viii) shares of common stock issued or issuable upon
conversion of shares of the Company's Series B Convertible Preferred Stock;
(ix) shares of common stock issued or issuable to
holders of Series B Convertible Preferred Stock pursuant to Section 4.8 of
the Series B Agreement; or
(x) 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 the 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. The Purchaser shall
have 15 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 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 the Purchaser elects not to
purchase all of its pro rata share of New Securities, the Company may issue
the New Securities described in the Company's notice within 45 days after the
expiration of such 15-day period, for the price and upon the general terms
and conditions specified in the Company's notice to the Purchaser.
4.8 SALE OF SHARES UNDER RULE 144. From and after the 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.
5. LEGENDS
5.1 LEGENDS. The certificates evidencing the Preferred Stock 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
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SECURITIES LAWS OR AN APPLICABLE EXEMPTION FROM SUCH REGISTRATION
REQUIREMENTS.
At the 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 Purchaser. 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 Common 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
(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 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 and the share of Common Stock issuable upon conversion thereof 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
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<PAGE>
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 Preferred
Stock 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 Purchaser's obligations under and agreement to comply with all
applicable securities laws upon resale of the Shares.
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.
7. ASSIGNMENT; ENTIRE AGREEMENT; AMENDMENT
7.1 ASSIGNMENT. This Agreement may not be assigned by the
Purchaser or the Company to any other person or entity. Notwithstanding the
foregoing, the provisions of this Agreement shall inure to the benefit of,
and be enforceable by, any entity which shall succeed to all or substantially
all of the assets and liabilities of Purchaser by merger or purchase.
7.2 ENTIRE AGREEMENT; AMENDMENT. This Agreement, the Preferred
Stock, the Common Stock, the Registration Rights Agreement, and the other
agreements and documents delivered pursuant hereto constitute the full and
entire understanding and agreement between the parties with regard to the
subject 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 the 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 the Purchaser.
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<PAGE>
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 the 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) 623-4484, or at such other address
or addresses as may have been furnished in writing by the Company to the
Purchaser, with a copy to Eric C. Jensen, Esq., Cooley Godward LLP, 5 Palo
Alto Square, 4th Floor, 3000 El Camino Real, Palo Alto, California
94306-2155, Facsimile No: (650) 857-0663; or
If to the Purchaser, at its address set forth above, or at such other
address or addresses as may have been furnished to the Company in writing by
such Purchaser, with a copy to Henry P. Massey, Jr., Esq., Wilson Sonsini
Goodrich & Rosati, 650 Page Mill Road, Palo Alto, California 94304, Facsimile
No: (650) 493-6811.
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.
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 the 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.
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[This space left blank intentionally.]
17
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IN WITNESS WHEREOF, the parties have signed this Agreement the day and
year first written above.
GATEFIELD CORPORATION
By: James R. Fiebiger
-------------------------------------
(Print Name)
By: /s/ James R. Fiebiger
-------------------------------------
(Sign Name)
Title: Chief Executive Officer
-------------------------------------
(Position, if applicable)
PURCHASER:
ACTEL CORPORATION
By: John C. East
-------------------------------------
(Print Name)
By: /s/ John C. East
-------------------------------------
(Sign Name)
Title: President & Chief Executive Officer
-------------------------------------
(Position, if applicable)
<PAGE>
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT ("Registration Rights Agreement"),
entered into as of August 14, 1998, among GateField Corporation, a Delaware
corporation with offices at 47100 Bayside Parkway, Fremont, California 94538
(the "Company"), and the party listed on Exhibit A (the "Purchaser").
W I T N E S S E T H:
WHEREAS, pursuant to a Stock Purchase Agreement, dated as of August 14,
1998 (the "Stock Purchase Agreement"), by and between the Company and the
Purchaser, the Company has agreed to sell and such Purchaser has agreed to
purchase 300,000 shares of the Company's Series C Convertible Preferred
Stock, $.10 par value (the "Preferred Stock"), convertible into up to
2,000,000 shares of Common Stock (the "Shares").
WHEREAS, pursuant to the terms of, and in partial consideration for, the
Purchaser's agreement to enter into the Stock Purchase Agreement, the Company
has agreed to provide the Purchaser with certain rights with respect to the
registration of the Shares under the Securities Act of 1933, as amended (the
"Securities Act");
NOW, THEREFORE, in consideration of the mutual promises,
representations, warranties, covenants and conditions set forth herein, the
Company and the Purchaser agree as follows:
1. CERTAIN DEFINITIONS. As used in this Registration Rights
Agreement, the following terms shall have the following respective meanings.
Other terms used herein which are defined in the Stock Purchase Agreement,
shall have the same meanings herein as they do in the Stock Purchase
Agreement.
"Commission" or "SEC" shall mean the Securities and Exchange Commission,
or any other Federal agency at the time administering the Securities Act.
"Holder" shall include the Purchaser and any transferee of Preferred
Stock, Shares or Registrable Securities which have not been sold to the
public, to whom the registration rights covered by this Registration Rights
Agreement have been transferred in compliance with Section 12 of this
Registration Rights Agreement.
"Registrable Securities" shall mean: (i) the Shares, (ii) any shares of
Common Stock, and any other securities, acquired by the Purchaser pursuant to
Section 4.7 of the Stock Purchase Agreement, and (iii) and any other shares
of common stock issued in respect of such shares (because of stock splits,
stock dividends, reclassifications, recapitalizations, or similar events).
Wherever reference is made in this Registration Rights Agreement to a request
or consent of holders of a certain percentage
<PAGE>
of Registrable Securities, the determination of such percentage shall include
shares of common stock issuable upon conversion of the Preferred Stock even
if such conversion has not yet been effected.
The terms "register," "registered" and "registration" shall refer to a
registration effected by preparing and filing a registration statement with
the Commission in compliance with the Securities Act and applicable rules and
regulations thereunder, and the declaration or ordering of the effectiveness
of such registration statement.
"Registration Expenses" shall mean all expenses to be incurred by the
Company in connection with the Purchaser's exercise of its registration
rights under this Registration Rights Agreement, including, without
limitation, all registration and filing fees, printing expenses, fees and
disbursements of counsel for the Company, blue sky fees and expenses and the
expenses of any special audits incident to or required by any such
registration (but excluding the compensation of regular employees of the
Company, which shall be paid in any event by the Company).
"Registration Statement" shall mean a registration statement filed by
the Company with the Commission for a public offering and sale of Common
Stock (other than a registration statement on Form S-8 or Form S-4, or their
successors, or any other form for a similar limited purpose, or any
registration statement covering only securities proposed to be issued in
exchange for securities or assets of another corporation).
"Regulation D" shall mean Regulation D as promulgated pursuant to the
Securities Act, and as subsequently amended.
"Selling Expenses" shall mean all underwriting discounts and selling
commissions, if any, applicable to the sale of Registrable Securities and all
fees and disbursements of counsel for the Holder not included within
"Registration Expenses."
2. THE REGISTRATION REQUIREMENTS. If and when requested by the
Holders holding in the aggregate at least 30% of the Registrable Securities
then held by the Holders, but not before August 14, 1999 the Company shall
file, and use its reasonable best efforts to cause to become effective, as
promptly as possible and in no event later than 60 days after the date of
such request, one Registration Statement covering the resale of all the
Registrable Securities requested by the Holders to be included in such
registration and shall take all action necessary to qualify the Registrable
Securities requested by the Holders to be included in such registration under
state "blue sky" laws as hereinafter provided; PROVIDED, HOWEVER, that the
Company shall not be required to effect such registrations on more than one
occasion. The Company shall use its reasonable best efforts to effect the
registration contemplated by the foregoing (including, without limitation,
the execution of an undertaking to file amendments and post-effective
amendments, appropriate qualification under and compliance with applicable
blue sky or other state securities laws and appropriate compliance with
applicable regulations issued under the Securities Act) and as would permit
or facilitate the sale and distribution of all the Registrable Securities in
all states reasonably
<PAGE>
requested by the Holders for purposes of maximizing the proceeds realizable
by the Holders from such sale and distribution. Such reasonable best efforts
by the Company shall include, without limitation, the following:
(a) The Company shall file (i) Registration Statements with the
Commission under the Securities Act registering the Registrable Securities
for public sale and shall use its reasonable best efforts to cause such
Registration Statements to become and remain effective for the period of
time set forth in Section 6 hereof, subject to the provisions of Section 7
hereof; (ii) such blue sky filings as shall be reasonably requested to permit
such sales PROVIDED, HOWEVER, that the Company shall not be required to
register the Registrable Securities in any jurisdiction that would subject it
to general service of process in any such jurisdiction where it is not then
so subject or subject the Company to any tax in any such jurisdiction where
it is not then so subject or require the Company to qualify to do business in
any jurisdiction where it is not then so qualified; and (iii) any required
filings with the National Association of Securities Dealers, Inc. ("NASD")
or exchange where the Registrable Securities are traded; all as soon as
practicable after demand is made pursuant to this Section 2. The Company
shall use its reasonable best efforts to have the Registration Statements
and other filings declared effective as soon thereafter as may be
practicable.
(b) The Company shall enter into such customary agreements
(including a customary underwriting agreement with the underwriter or
underwriters, if any) and take all such other reasonable actions in
connection therewith in order to expedite or facilitate the disposition of
such Registrable Securities and in such connection, if the Registrable
Securities are to be sold in an underwritten offering, the Company shall:
(i) make such representations and warranties to the
Holders and the underwriter or underwriters in form and substance and scope
as are customarily made by issuers to underwriters in secondary underwritten
offerings;
(ii) cause to be delivered to the sellers of Registrable
Securities and the underwriter or underwriters opinions of general counsel to
the Company, dated the effective day (or in the case of an underwritten
offering, dated the date of delivery of any Registrable Securities sold
pursuant thereto) of the applicable Registration Statement, which counsel and
opinions (in form, scope and substance), shall be reasonably satisfactory to
the managing underwriter or underwriters and the appointed representative or
counsel of the Holders, addressed to the Holders and each underwriter
covering the matters customarily covered in opinions requested in secondary
underwritten offerings and such other matters as may be reasonably requested
by the Holders;
(iii) cause to be delivered, immediately prior to the
effectiveness of the applicable Registration Statement (and at the time of
delivery of any Registrable Securities sold pursuant thereto), letters from
the Company's independent certified public accountants addressed to the
Holders and each underwriter stating that such accountants are independent
public accountants
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within the meaning of the Securities Act and the applicable published rules
and regulations thereunder, and otherwise in customary form and covering such
financial and accounting matters as are customarily covered by letters of the
independent certified public accountants delivered in connection with
secondary underwritten public offerings;
(iv) if an underwriting agreement is entered into, use
its best efforts to cause the same to set forth indemnification and
contribution provisions and procedures which are no less favorable to the
Holders and the Company than those contemplated by Sections 8 and 9 of this
Registration Rights Agreement with respect to all parties to be indemnified
pursuant to such sections; and
(v) deliver such documents and certificates as may be
reasonably requested by the Holders of the Registrable Securities being sold
or the managing underwriter or underwriters to evidence compliance with
clause (i) above and with any customary conditions contained in the
underwriting agreement, if any, or other agreement entered into by the
Company; the foregoing in this Section 2(b) shall be done at each closing
under any such underwriting or similar agreement or as to the extent
required thereunder.
(c) The Company shall make available for inspection and review by
the Holders, a representative or representatives of the Holders, any
underwriter participating in any disposition pursuant to a Registration
Statement, and any attorney or accountant retained by such Holders or
underwriter, any such Registration Statement or amendment or supplement or
any blue sky, NASD or other filing, all financial and other records,
pertinent corporate documents and properties of the Company, as they may
reasonably request for the purpose, and cause the Company's officers,
directors and employees to supply all information reasonably requested by any
such representative, underwriter, attorney or accountant in connection with
such Registration Statement; PROVIDED, HOWEVER, that the Holders shall first
agree in writing with the Company that any information that is reasonably and
in good faith designated by the Company in writing as confidential at the
time of delivery of such information shall be kept confidential by the
Holders and that the Holders will use reasonable efforts to cause its
representatives and such other persons so to keep such information
confidential, unless (i) disclosure of such information is required by court
or administrative order or is necessary to respond to inquiries of regulatory
authorities, (ii) disclosure of such information is required by law
(including any disclosure requirements pursuant to Federal securities laws
in connection with the filing of any Registration Statement or the use of any
prospectus referred to in this Registration Rights Agreement), (iii) such
information becomes generally available to the public, other than as a
result of a disclosure or failure to safeguard by any such person, (iv) such
information becomes available to any such person from a source other than
the Company and such source, to the knowledge of such persons, is not bound
by a confidentiality agreement with the Company, or (v) such information was
known to or is developed by such persons without reference to such
confidential information of the Company.
4
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3. UNDERWRITTEN DISTRIBUTION. If the Holders intend to distribute the
Registrable Securities covered by a Registration Statement by means of an
underwriting, the Holders shall so advise the Company and, subject to the
provisions of Section 7 hereof, within 30 days of the date thereof and
without limiting the generality of the other provisions hereof, the Company
will prepare and file such amendment or amendments to the Registration
Statement and make such other filings as may be necessary or appropriate to
effect any such underwritten distribution.
4. MULTIPLE HOLDERS. Except as specifically provided herein, if there
is more than one Holder, such Holders shall act with respect to their rights
under this Agreement according to the vote of a majority-in-interest.
5. EXPENSES OF REGISTRATION. All Registration Expenses incurred in
connection with any registration, qualification or compliance pursuant to
this Registration Rights Agreement shall be borne by the Company, and all
Selling Expenses shall be borne by the Holders.
6. REGISTRATION PROCEDURES. In the case of each registration effected
by the Company pursuant to this Registration Rights Agreement, the Company
will keep the Holders advised in writing as to initiation of each
registration and as to the completion thereof. At its expense, the Company
will use its reasonable best efforts to:
(a) Keep such registration effective for the period ending (i)
sixty (60) months after the Registration Statement is declared effective by
the Commission; or (ii) when the Holders have completed the distribution of
the Registrable Securities described in the Registration Statement relating
thereto, whichever first occurs; and
(b) Furnish such number of prospectuses and other documents
incident thereto as the Holders from time to time may reasonably request.
7. SUSPENSION OF USE OF REGISTRATION STATEMENT. The Holders agree
that, upon receipt of any notice from the Company of (A) the happening of any
event which makes any statements made in the Registration Statement(s) or
related prospectus(es) filed pursuant to this Registration Rights Agreement,
or any document incorporated or deemed to be incorporated therein by
reference, untrue in any material respect or which requires the making of any
changes in such Registration Statement(s) or prospectus(es) so that, in the
case of such Registration Statement(s), it will not contain any untrue
statement of a material fact or omit to state any material fact required to
be stated therein or necessary to make the statements therein, in light of
the circumstance under which they were made, not misleading or (B) that, in
the judgment of the Company's Board of Directors, it is advisable to suspend
use of the prospectus(es) for a discrete period of time due to pending
corporate developments which are or may be material to the Company but have
not been disclosed in the Registration Statement(s) or in relevant public
filings with the SEC, or (C) the SEC has issued a stop order suspending the
effectiveness of the Registration Statement(s), the Holders will forthwith
discontinue disposition of such shares covered by such Registration
Statement(s) or
5
<PAGE>
prospectus(es) until it is advised in writing by the Company that use of the
applicable prospectus may be resumed, and has received copies of any
additional or supplemented filings that are incorporated or deemed to be
incorporated by reference in such prospectus(es). The Company shall use all
reasonable best efforts to insure that the use of the prospectus(es) may be
resumed as soon as practicable, and in any event shall not be entitled to
require the Holders to suspend use of the prospectus(es) for more than thirty
(30) consecutive days on any one occasion, more than forty-five (45)
consecutive days in the aggregate on two occasions which are not at least
ninety (90) days apart or more than an aggregate of sixty (60) days in any
twelve month period.
8. INDEMNIFICATION.
(a) COMPANY INDEMNITY. The Company will indemnify each of the
Holders, each of their respective officers, directors, trustees and partners,
and each person controlling any Holder within the meaning of Section 15 of
the Securities Act and the rules and regulations thereunder, with respect to
which registration, qualification or compliance has been effected pursuant to
this Registration Rights Agreement, and each underwriter, if any, and each
person who controls, within the meaning of Section 15 of the Securities Act
and the rules and regulations thereunder, any underwriter, against all
claims, losses, damages and liabilities (or actions in respect thereof)
arising out of or based on any untrue statement (or alleged untrue statement)
of a material fact contained in any prospectus, offering circular or other
document (including any related Registration Statement, notification or the
like) incident to any such registration, qualification or compliance, or
based on any omission (or alleged omission) to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, or any violation by the Company of the Securities Act or any
state securities law or in either case, any rule or regulation thereunder
applicable to the Company and relating to action or inaction required of the
Company in connection with any such registration, qualification or
compliance, and will reimburse each Holder, each of their respective
officers, directors, trustees and partners, and each person controlling any
Holder, each such underwriter and each person who controls any such
underwriter, for any legal and any other expenses reasonably incurred in
connection with investigating and defending any such claim, loss, damage,
liability or action, provided that the Company will not be liable in any such
case to the extent that any such claim, loss, damage, liability or expense
arises out of or is based on any untrue statement or omission (or alleged
untrue statement or omission) based upon written information furnished to the
Company by the Holder or the underwriter and stated to be specifically for
use therein. The indemnity contained in this Section 8(a) shall not apply to
amounts paid by the Holders in settlement of any such loss, claim, damage,
liability or action if such settlement if effected without the consent of the
Company (which consent will not be unreasonably withheld).
(b) HOLDER INDEMNITY. The Holders will, if Registrable Securities
held by them are included in the securities as to which such registration,
qualification or compliance is being effected, indemnify the Company, each of
its directors, officers, partners, and each underwriter, if any, of the
Company's securities covered by such a registration statement, each person
who controls
6
<PAGE>
the Company or such underwriter within the meaning of Section 15 of the
Securities Act and the rules and regulations thereunder (a "Control Person"),
against all claims, losses, damages and liabilities (or actions in respect
thereof) arising out of or based on any untrue statement (or alleged untrue
statement) of a material fact contained in any such registration statement,
prospectus, offering circular or other document, or any omission (or alleged
omission) to state therein a material fact required to be stated therein or
necessary to make the statement therein not misleading, and will reimburse
the Company and its directors, officers and partners, underwriters or Control
Persons for any legal or any other expenses reasonably incurred in connection
with investigating or defending any such claim, loss, damage, liability or
action, in each case to the extent, but only to the extent, that such untrue
statement (or alleged untrue statement) or omission (or alleged omission) is
made in such Registration Statement, prospectus, offering circular or other
document in reliance upon and in conformity with written information
furnished to the Company by the Holders and stated to be specifically for use
therein; provided, however, that (i) the obligations of a Holder shall not
apply to amounts paid in settlement of any such claims, losses, damages or
liabilities if such settlement is effected without the consent of such Holder
(which consent shall not be unreasonably withheld) and (ii) the obligation
each selling Holder shall be limited to an amount equal to the proceeds to
such Holder from the Registrable Securities sold in connection with such
registration.
(c) PROCEDURE. Each party entitled to indemnification under this
Section 8 (the "Indemnified Party") shall give notice to the party required
to provide indemnification (the "Indemnifying Party") promptly after such
Indemnified Party has actual knowledge of any claims as to which indemnity
may be sought, and shall permit the Indemnifying Party to assume the defense
of any such claim in any obligation resulting therefrom, provided that
counsel for the Indemnifying Party, who shall conduct the defense of such
claim or any litigation resulting therefrom, shall be approved by the
Indemnified Party (whose approval shall not be unreasonably withheld), and
the Indemnified Party may participate in such defense at such party's
expense, and provided further that the Indemnifying Party shall pay such
expense if representation of such Indemnified Party by the counsel retained
by the Indemnifying Party would be inappropriate due to actual or potential
differing interests between the Indemnified Party and any other party
represented by such counsel in such proceeding. The failure of any
Indemnified Party to give notice as provided herein shall not relieve the
Indemnifying Party of its obligations under this Section 8 except to the
extent that the Indemnifying Party is actually prejudiced by such failure to
provide notice. No Indemnifying Party, in the defense of any such claim or
litigation, shall, except with the consent of each Indemnified Party, consent
to entry of any judgment or enter into any settlement which does not include
as an unconditional term thereof the giving by the claimant or plaintiff to
such Indemnified Party of a release from all liability in respect to such
claim or litigation. Each Indemnified Party shall furnish such information
regarding itself of the claim in question as an Indemnifying Party may
reasonably request in writing and as shall be reasonably required in
connection with the defense of such claim and litigation resulting therefrom.
7
<PAGE>
9. CONTRIBUTION. If the indemnification provided for in Section 8 of
this Registration Rights Agreement is held by a court of competent
jurisdiction to be unavailable to the Indemnified Parties in respect of any
losses, claims, damages or liabilities referred to herein, then each such
Indemnifying Party, in lieu of indemnifying such Indemnified Party, shall
contribute to the amount paid or payable by such Indemnified Party as a
result of such losses, claims, damages or liabilities (i) as between the
Company on the one hand and the Indemnified Parties on the other, in such
proportion as is appropriate to reflect the relative benefits received by the
Company on the one hand and the Indemnified Parties, as the case may be, on
the other from the offering of the Registrable Securities, or (ii) if such
allocation is not permitted by applicable law, in such proportion as is
appropriate to reflect not only such relative benefits but also the relative
fault of the Company on the one hand and of the Indemnified Parties, as the
case may be, on the other, in connection with the statements or omissions
which resulted in such losses, claims, damages or liabilities, as well as any
other relevant equitable considerations. In no event shall the obligation of
any Indemnifying Party to contribute under this Section 9 exceed the amount
that such Indemnifying Party would have been obligated to pay by way of
indemnification if the Indemnification provided for under Section 8(a) or
8(b) of this Registration Rights Agreement had been available under the
circumstances. The Company and the Holders agree that it would not be just
and equitable if contribution pursuant to this Section 9 were determined by
pro rata allocation (even if the Indemnified Parties were treated as one
entity for such purpose) or by any other method of allocation which does not
take account of the equitable considerations referred to in the immediately
preceding paragraphs. The amount paid or payable by an Indemnified Party as a
result of the losses, claims, damages and liabilities referred to in the
immediately preceding paragraphs shall be deemed to include, subject to the
eliminations set forth above, any legal or other expenses reasonably incurred
by such Indemnified Party in connection with investigating or defending any
such action or claim. Notwithstanding the provisions of this Section 9, no
Indemnified Party shall be required to contribute any amount in excess of the
amount by which (i) in the case of the Holder, the net proceeds received by
the Holder from the sale of Registrable Securities or (ii) in the case of an
underwriter, the total price at which the Registrable Securities purchased by
it and distributed to the public were offered to the public exceeds, in any
such case, the amount of any damages that the Holder or underwriter has
otherwise been required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation.
10. SURVIVAL. The indemnity and contribution agreements contained in
Sections 8 and 9 of this Registration Rights Agreement and the
representations and warranties of the Company referred to in Section 2(b)(i)
of this Registration Rights Agreement shall remain operative and in full
force and effect regardless of (i) any termination of this Registration
Rights Agreement or any underwriting agreement, (ii) any investigation made
by or on behalf of the Company, and (iii) the consummation of the sale or
successive resales of the Registrable Securities.
8
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11. INFORMATION BY A HOLDER AND ANY UNDERWRITERS. Each Holder and the
underwriters, if any, shall furnish to the Company, within twenty (20) business
days of the Company's request therefor, such information regarding such Holder
or underwriters, as the case may be, and the distribution proposed by such
Holder or underwriters, as the Company may reasonably request in writing as
shall be reasonably required in connection with any registration, qualification
or compliance referred to in this Registration Rights Agreement.
12. TRANSFER OR ASSIGNMENT OF REGISTRATION RIGHTS. This Registration
Rights Agreement, and the rights and obligations of a Holder hereunder, may
be assigned by such Holder to any person or entity to which Shares are
transferred by such Holder, and such transferee shall be deemed a "Holder"
for purposes of this Registration Rights Agreement; provided that the
transferee provides written notice of such assignment to the Company and
agrees to be subject to all restrictions and obligations of this Registration
Rights Agreement.
13. TERMINATION OF REGISTRATION RIGHTS. The right of any Holder to
request registration pursuant to Section 2 hereof shall terminate upon the
earlier of (i) six (6) years from the date hereof or (ii) the date upon which
all Registrable Securities have been sold to the public through a
Registration Statement pursuant to Section 2 hereof or pursuant to Rule 144
of the Securities Act.
14. MISCELLANEOUS.
(a) ENTIRE AGREEMENT. This Registration Rights Agreement contains
the entire understanding and agreement of the parties with respect to the
subject matter hereof, and may not be amended, a provision hereunder waived,
modified or terminated except by a written agreement signed by (i) the
Company and (ii) the holders of a majority of the Registrable Securities
hereunder. Any amendment, modification, termination or waiver effected in
accordance with this Section 14(a) shall be binding upon each holder of any
Registrable Securities then outstanding and each future holder of any such
Registrable Securities of the Company.
(b) NOTICES. Any notice or other communication given or permitted
under this Registration Rights 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) 623-4484 or at
such other address or addresses as may have been furnished in writing by the
Company to the Purchasers, with a copy to Eric C. Jensen, Esq., Cooley
Godward LLP, 5 Palo Alto Square, 4th Floor, 3000 El Camino Real, Palo Alto,
California 94306-2155, Facsimile No: (650) 857-0663;
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
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Henry P. Massey, Jr., Esq., Wilson Sonsini Goodrich & Rosati, 650 Page Mill
Road, Palo Alto, California 94304, Facsimile No: (650) 493-6811.
If to a Holder other than a Purchaser, at such address or
addresses as may have been furnished to the Company in writing by such Holder.
(c) GENDER OF TERMS. All terms used herein shall be deemed to
include the feminine and the neuter, and the singular and the plural, as the
context required.
(d) GOVERNING LAW; CONSENT OF JURISDICTION. This Registration
Rights Agreement and the validity and performance of the terms hereof shall
be governed by and construed in accordance with the laws of the State of
California, except to the extent that the law of the State of Delaware
regulates the Company's issuance of securities. The parties hereto hereby
consent to, and waive any objection to the exercise of, personal jurisdiction
in the State of California with respect to any action or proceeding arising
out of this Registration Rights Agreement.
(e) TITLE. The titles used in this Registration Rights Agreement
are used for convenience only and are not be to considered in construing or
interpreting this Registration Rights Agreement.
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IN WITNESS WHEREOF, the parties hereto have caused this Registration
Rights Agreement to be duly executed as of the date first above written.
GATEFIELD CORPORATION
By: James R. Fiebiger
-------------------------------------
(Print Name)
By: /s/ James R. Fiebiger
-------------------------------------
(Sign Name)
Title: Chief Executive Officer
-------------------------------------
(Position, if applicable)
PURCHASER:
ACTEL CORPORATION
By: John C. East
-------------------------------------
(Print Name)
By: /s/ John C. East
-------------------------------------
(Sign Name)
Title: President & Chief Executive Officer
-------------------------------------
(Position, if applicable)
<PAGE>
EXHIBIT A
LIST OF PURCHASERS
Actel Corporation
955 East Arques Avenue
Sunnyvale, California 94086-4533
Attn: David Van De Hey, Esq.
Facsimile No: (408) 739-0706
<PAGE>
RESTATED CERTIFICATE OF INCORPORATION
OF
GATEFIELD CORPORATION
TIMOTHY SAXE AND MICHAEL J. KUCHA hereby certify that:
ONE: The original name of this corporation was Zycad Corporation.
The original Certificate of Incorporation was filed with the Secretary of
State of the State of Delaware on June 22, 1981. The name of the corporation
was changed to GateField Corporation (the "Corporation" or the "Company") on
August 1, 1997.
TWO: They are the duly elected and acting President and Secretary,
respectively, of GateField Corporation, a Delaware corporation.
THREE: The following Articles restating the Corporation's Certificate
of Incorporation were duly adopted by the Corporation's Board of Directors in
accordance with Section 245 of the General Corporation Law of the State of
Delaware. This restatement of the Corporation's Certificate of Incorporation
restates and integrates but does not further amend the provisions of the
Corporation's Certificate of Incorporation as heretofore amended and
supplemented and no discrepancy exists between such provisions and the
provisions of this Restated Certificate of Incorporation. The Certificate of
Incorporation of GateField Corporation is hereby restated in accordance with
Section 245 of the General Corporation Law of the State of Delaware to read
as follows:
I.
The name of the corporation is GATEFIELD CORPORATION.
II.
The address of its registered office in the State of Delaware is No. 100
West Tenth Street, in the City of Wilmington, County of New Castle. The name
of its registered agent at such address is The Corporation Trust Company.
III.
The nature of the business or purposes to be conducted or promoted is:
To engage in any lawful act or activity for which corporations may be
organized under the General Corporation Law of Delaware.
IV.
A. The Corporation is authorized to issue a total of 67,000,000 shares of
all classes of stock, of which, 65,000,000 shall be shares of Common Stock
with a par value of $.10 per share and 2,000,000 shall be shares of series
preferred stock with a par value of $.10 per share.
B. Each holder of record of Common Stock shall be entitled to one vote for
each share of such stock standing in his name on the books of the Corporation.
1.
<PAGE>
C. The Board of Directors is authorized to issue series preferred stock
from time to time in one or more series. Each series shall be distinctively
designated. Except as otherwise stated and expressed pursuant to the
provisions of this Article, all series of series preferred stock shall rank
equally and be identical in all respects. The resolution or resolutions
providing for the issue of series preferred stock shall specify the voting
powers, if any, and the designations, preferences and relative,
participating, optional or other special rights, and the qualifications,
limitations, or restrictions thereof, of such series, including, but not
limited to:
1. the number of shares to constitute the series and the distinctive
designation thereof;
2. the voting powers, full or limited, or no voting powers;
3. the redemption price or prices, if any, and the terms and
conditions on which shares of such series shall be redeemable at the option
of the holders thereof or of the Corporation or on the occurrence of a
specified event;
4. the rate of dividends payable on shares of such series; the
conditions on which and the times when such dividends are payable; the
preference to, or the relation to, the payment of the dividends on any other
class or classes or any other series of stock, whether cumulative or
non-cumulative, and, if cumulative, the dates from which dividends on shares
of such series shall be cumulative.
5. the rights of shares of such series upon the liquidation,
dissolution or winding up of, or upon any distribution of the assets of, the
Corporation;
6. the rights, if any, of the holders of shares of such series or of
the Corporation to convert such shares into, or exchange such shares for,
shares of any other class or classes or of any other series of the same or
any other class or classes of stock of the Corporation, or the conversion or
exchange of shares of such series into such other shares upon the occurrence
of a specified event; and the price or prices or the rates of exchange and
the adjustments at which such shares shall be convertible or exchangeable;
and any other terms and conditions of such conversion or exchange; and
7. the sinking fund requirements, if any, be applied to the purchase
or redemption of shares of such series, including the amount of such fund or
funds and the manner of application.
D. The rights, preferences and privileges of the Series B Preferred Stock
are as follows:
1. DIVIDENDS.
a. The holders of shares of Series B Preferred Stock shall be
entitled to receive dividends of $0.137475 per share per annum (subject to
appropriate adjustment in the event of any stock dividend, stock split,
combination or other similar recapitalization affecting such shares), payable
when and as declared by the Board of Directors of the Corporation. The right
to receive dividends on Series B Preferred Stock shall accrue and shall be
cumulative from the date of issuance of each share of Series B Preferred
Stock, whether or not declared.
b. The Corporation shall not declare or pay any distributions (as
defined below) on shares of Common Stock until the holders of the Series B
Preferred Stock then outstanding shall have first received a distribution at
the rate specified in paragraph (a) of this Section 1.
c. For purposes of this Section 1, unless the context requires
otherwise, "distribution" shall mean the transfer of cash or property without
consideration, whether by way of
2.
<PAGE>
dividend or otherwise, payable other than in Common Stock or other securities
of the Corporation, or the purchase or redemption of shares of the
Corporation (other than repurchases of Common Stock held by employees or
directors of, or consultants to, the Corporation upon termination of their
employment or services pursuant to agreements providing for such repurchase
at a price equal to the original issue price of such shares and other than
redemptions in liquidation or dissolution of the Corporation) for cash or
property, including any such transfer, purchase or redemption by a subsidiary
of this Corporation.
2. LIQUIDATION, DISSOLUTION OR WINDING UP; CERTAIN MERGERS,
CONSOLIDATIONS AND ASSET SALES.
a. In the event of any voluntary or involuntary liquidation,
dissolution or winding up of the Corporation, including any insolvency or
bankruptcy proceeding affecting the Company which is not dismissed within
sixty (60) days of the filing thereof, the holders of shares of Series B
Preferred Stock then outstanding shall be entitled to be paid out of the
assets of the Corporation available for distribution to its stockholders,
before any payment shall be made to the holders of Common Stock or any other
class or series of stock ranking on liquidation junior to the Series B
Preferred Stock (such Common Stock and other stock being collectively
referred to as "Junior Stock") by reason of their ownership thereof, an
amount equal to the greater of (i) $9.165 per share (subject to appropriate
adjustment in the event of any stock dividend, stock split, combination or
other similar recapitalization affecting such shares), plus any accrued and
unpaid dividends, whether declared or not, or (ii) such amount per share as
would have been payable had each such share been converted into Common Stock
pursuant to Section 4 immediately prior to such liquidation, dissolution or
winding up. If upon any such liquidation, dissolution or winding up of the
Corporation the remaining assets of the Corporation available for
distribution to its stockholders shall be insufficient to pay the holders of
shares of Series B Preferred Stock the full amount to which they shall be
entitled, the holders of shares of Series B Preferred Stock and any class or
series of stock ranking on liquidation on a parity with the Series B
Preferred Stock shall share ratably in any distribution of the remaining
assets and funds of the Corporation in proportion to the respective amounts
which would otherwise be payable in respect of the shares held by them upon
such distribution if all amounts payable on or with respect to such shares
were paid in full.
b. After the payment of all preferential amounts required to be
paid to the holders of Series B Preferred Stock and any other class or series
of stock of the Corporation ranking on liquidation on a parity with the
Series B Preferred Stock, upon the dissolution, liquidation or winding up of
the Corporation, the holders of shares of Junior Stock then outstanding shall
be entitled to receive the remaining assets and funds of the Corporation
available for distribution to its stockholders.
c. In the event of any merger or consolidation of the Corporation
into or with another corporation (except one in which the holders of capital
stock of the Corporation immediately prior to such merger or consolidation
continue to hold at least 80% by voting power of the capital stock of the
surviving corporation), or the sale of all or substantially all the assets of
the Corporation, if the holders of at least 51% of the then outstanding
shares of Series B Preferred Stock so elect by giving written notice thereof
to the Corporation at least three days before the effective date of such
event, then such merger, consolidation or asset sale shall be deemed to be a
liquidation of the Corporation, and all consideration payable to the
stockholders of the Corporation (in the case of a merger or consolidation),
or all consideration payable to the Corporation, together with all other
available assets of the Corporation (in the case of an asset sale), shall be
distributed to the holders of capital stock of the Corporation in accordance
with Subsections 2(a) and 2(b) above. The Corporation shall promptly provide
to the holders of shares of Series B Preferred Stock such information
concerning the terms of such merger, consolidation or asset sale and the
value of the assets of the Corporation as may reasonably be requested by the
holders of Series B Preferred Stock in order to assist them in determining
whether to make such an election. If the holders of the Series B Preferred
Stock make such an election, the Corporation shall use
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its best efforts to amend the agreement or plan of merger or consolidation to
adjust the rate at which the shares of capital stock of the Corporation are
converted into or exchanged for cash, new securities or other property to
give effect to such election. The amount deemed distributed to the holders
of Series B Preferred Stock upon any such merger or consolidation shall be
the cash or the value of the property, rights or securities distributed to
such holders by the acquiring person, firm or other entity. The value of
such property, rights or other securities shall be determined in good faith
by the Board of Directors of the Corporation. If no notice of the election
permitted by this Subsection (c) is given, the provisions of Subsection 4(h)
shall apply.
3. VOTING.
a. Each holder of outstanding shares of Series B Preferred Stock
shall be entitled to the number of votes equal to the number of whole shares
of Common Stock into which the shares of Series B Preferred Stock held by
such holder are then convertible (as adjusted from time to time pursuant to
Section 4 hereof), at each meeting of stockholders of the Corporation (and
written actions of stockholders in lieu of meetings) with respect to any and
all matters presented to the stockholders of the Corporation for their action
or consideration. Except as provided by law, by the provisions of Subsection
3(b) or Subsection 3(c) below or by the provisions establishing any other
series of Preferred Stock, holders of Series B Preferred Stock and of any
other outstanding series of Preferred Stock shall vote together with the
holders of Common Stock as a single class.
b. The Corporation shall not amend, alter or repeal the
preferences, special rights or other powers of the Series B Preferred Stock
so as to affect adversely the Series B Preferred Stock, without the written
consent or affirmative vote of the holders of a majority of the then
outstanding shares of Series B Preferred Stock, given in writing or by vote
at a meeting, consenting or voting (as the case may be) separately as a
class. For this purpose, without limiting the generality of the foregoing,
the authorization of any shares of capital stock on a parity with, or with
priority or preference over, the Series B Preferred Stock as to the right to
receive either dividends or amounts distributable upon liquidation,
dissolution or winding up of the Corporation shall be deemed to affect
adversely the Series B Preferred Stock.
c. In addition to any other rights provided by law, so long as at
least 500,000 shares of Series B Preferred Stock shall be outstanding
(subject to appropriate adjustment in the event of any stock dividend, stock
split, combination or other similar recapitalization affecting such shares),
the Corporation shall not, without first obtaining the affirmative vote or
written consent of the holders of not less than 50% of the then outstanding
shares of Series B Preferred Stock:
(i) Amend or repeal any provision of, or add any provision
to, the Corporation's Certificate of Incorporation or By-Laws, if such action
would adversely affect the preferences, rights, privileges or powers of, or
the restrictions provided for the benefit of, Series B Preferred Stock;
(ii) Authorize or issue any new or existing class or classes
or series of capital stock, EXCLUDING, HOWEVER, shares of Common Stock issued
(A) for a per share consideration greater than the Conversion Price (as
defined in Section 4(a)), or (B) upon the exercise of options and warrants to
acquire Common Stock which were outstanding prior to the Original Issue Date
(as defined in Section 4(d)), other than the stock warrant to acquire Common
Stock granted to Siemens Aktiengesellschaft ("Siemens") pursuant to Section
5.2 of that certain License Agreement, dated as of October 22, 1997, between
the Company and Siemens;
(iii) Authorize or issue shares of stock of any class or any
bonds, debentures,
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notes or other obligations convertible into or exchangeable for, or having
rights to purchase, any shares of stock of the Corporation;
(iv) Reclassify any Common Stock or any new or existing class
or classes or series of capital stock;
(v) Pay or declare any dividend or distribution on any
shares of its capital stock (except dividends payable solely in shares of
Common Stock), or apply any of its assets to the redemption, retirement,
purchase or acquisition, directly or indirectly, through subsidiaries or
otherwise, of any shares or its capital stock; or
(vi) Issue any options, warrants or other securities
exercisable or exchangeable for or convertible into shares of stock of the
Corporation, EXCLUDING, HOWEVER, options and warrants to purchase Common
Stock for a per share consideration (including for this purpose the
consideration paid for any such warrants plus the consideration, if any, paid
upon the acquisition of such shares of Common Stock) of greater than the
Conversion Price (as defined in Section 4(a)).
4. OPTIONAL CONVERSION. The holders of the Series B Preferred Stock
shall have conversion rights as follows (the "Conversion Rights"):
a. RIGHT TO CONVERT. Each share of Series B Preferred Stock
shall be convertible, at the option of the holder thereof, at any time and
from time to time, and without the payment of additional consideration by the
holder thereof, into such number of fully paid and nonassessable shares of
Common Stock as is determined by dividing $4.5825 by the Conversion Price (as
defined below) in effect at the time of conversion. The "Conversion Price"
shall initially be $1.00 per share or if the election is made to reduce the
Conversion Price pursuant to the provisions of Section 5(a) hereof, $.75 per
share. Such initial Conversion Price, and the rate at which shares of Series
B Preferred Stock may be converted into shares of Common Stock, shall be
subject to adjustment as provided below. In addition, any accrued and unpaid
dividends in respect of shares of Series B Preferred Stock surrendered for
conversion shall be convertible into such number of fully paid and
nonassessable shares of Common Stock as is determined by dividing the
aggregate dollar amount of such accrued and unpaid dividends by the
Conversion Price.
In the event of a notice of redemption of any shares of Series B
Preferred Stock pursuant to Section 5 hereof, the Conversion Rights of the
shares designated for redemption shall terminate at the close of business on
the fifth business day preceding the date fixed for redemption, unless the
redemption price is not paid when due, in which case the Conversion Rights
for such shares shall continue until such price is paid in full. In the
event of a liquidation of the Corporation, the Conversion Rights shall
terminate at the close of business on the first full day preceding the date
fixed for the payment of any amounts distributable on liquidation to the
holders of Series B Preferred Stock.
b. FRACTIONAL SHARES. No fractional shares of Common Stock shall
be issued upon conversion of the Series B Preferred Stock. In lieu of any
fractional shares to which the holder would otherwise be entitled, the
Corporation shall pay cash equal to such fraction multiplied by the then
effective Conversion Price.
c. MECHANICS OF CONVERSION.
(i) In order for a holder of Series B Preferred Stock to
convert shares of Series B Preferred Stock into shares of Common Stock, such
holder shall surrender the certificate or certificates for such shares of
Series B Preferred Stock, at the office of the transfer agent for the Series
B Preferred Stock (or at the principal office of the Corporation if the
Corporation serves as its own transfer
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agent), together with written notice that such holder elects to convert all
or any number of the shares of the Series B Preferred Stock represented by
such certificate or certificates. Such notice shall state such holder's name
or the names of the nominees in which such holder wishes the certificate or
certificates for shares of Common Stock to be issued. If required by the
Corporation, certificates surrendered for conversion shall be endorsed or
accompanied by a written instrument or instruments of transfer, in form
satisfactory to the Corporation, duly executed by the registered holder or
his or its attorney duly authorized in writing. The date of receipt of such
certificates and notice by the transfer agent (or by the Corporation if the
Corporation serves as its own transfer agent) shall be the conversion date
("Conversion Date"). The Corporation shall, as soon as practicable after the
Conversion Date, issue and deliver at such office to such holder of Series B
Preferred Stock, or to his or its nominees, a certificate or certificates for
the number of shares of Common Stock to which such holder shall be entitled,
together with cash in lieu of any fraction of a share.
(ii) The Corporation shall at all times when the Series B
Preferred Stock shall be outstanding, reserve and keep available out of its
authorized but unissued stock, for the purpose of effecting the conversion of
the Series B Preferred Stock, such number of its duly authorized shares of
Common Stock as shall from time to time be sufficient to effect the
conversion of all outstanding Series B Preferred Stock. Before taking any
action which would cause an adjustment reducing the Conversion Price below
the then par value of the shares of Common Stock issuable upon conversion of
the Series B Preferred Stock, the Corporation will take any corporate action
which may, in the opinion of its counsel, be necessary in order that the
Corporation may validly and legally issue fully paid and nonassessable shares
of Common Stock at such adjusted Conversion Price.
(iii) Upon any such conversion, all accrued and unpaid
dividends on the shares of Series B Preferred Stock surrendered for
conversion shall be paid to the holders thereof.
(iv) All shares of Series B Preferred Stock which shall have
been surrendered for conversion as herein provided shall no longer be deemed
to be outstanding and all rights with respect to such shares, including the
rights, if any, to receive notices and to vote, shall immediately cease and
terminate on the Conversion Date, except only the right of the holders
thereof to receive shares of Common Stock in exchange therefor and payment of
any dividends declared but unpaid thereon. Any shares of Series B Preferred
Stock so converted shall be retired and cancelled and shall not be reissued,
and the Corporation (without the need for stockholder action) may from time
to time take such appropriate action as may be necessary to reduce the
authorized Series B Preferred Stock accordingly.
(v) The Corporation shall pay any and all issue and other
taxes that may be payable in respect of any issuance or delivery of shares of
Common Stock upon conversion of shares of Series B Preferred Stock pursuant
to this Section 4. The Corporation shall not, however, be required to pay
any tax which may be payable in respect of any transfer involved in the
issuance and delivery of shares of Common Stock in a name other than that in
which the shares of Series B Preferred Stock so converted were registered,
and no such issuance or delivery shall be made unless and until the person or
entity requesting such issuance has paid to the Corporation the amount of any
such tax or has established, to the satisfaction of the Corporation, that
such tax has been paid.
d. ADJUSTMENT FOR STOCK SPLITS AND COMBINATIONS. If the
Corporation shall at any time or from time to time after the date on which a
share of Series B Preferred Stock was first issued ("Original Issue Date")
effect a subdivision of the outstanding Common Stock, the Conversion Price
then in effect immediately before that subdivision shall be proportionately
decreased. If the Corporation shall at any time or from time to time after
the Original Issue Date combine the outstanding shares of Common Stock, the
Conversion Price then in effect immediately before the combination shall be
proportionately increased. Any adjustment under this paragraph shall become
effective at the close of business on the
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date the subdivision or combination becomes effective.
e. ADJUSTMENT FOR CERTAIN DIVIDENDS AND DISTRIBUTIONS. In the
event the Corporation at any time, or from time to time after the Original
Issue Date shall make or issue, or fix a record date for the determination of
holders of Common Stock entitled to receive, a dividend or other distribution
payable in additional shares of Common Stock, then and in each such event the
Conversion Price for the Series B Preferred Stock then in effect shall be
decreased as of the time of such issuance or, in the event such a record date
shall have been fixed, as of the close of business on such record date, by
multiplying the Conversion Price for the Series B Preferred Stock then in
effect by a fraction:
(i) the numerator of which shall be the total number of
shares of Common Stock issued and outstanding immediately prior to the time
of such issuance or the close of business on such record date, and
(ii) the denominator of which shall be the total number of
shares of Common Stock issued and outstanding immediately prior to the time
of such issuance or the close of business on such record date plus the number
of shares of Common Stock issuable in payment of such dividend or
distribution; provided, however, if such record date shall have been fixed
and such dividend is not fully paid or if such distribution is not fully made
on the date fixed therefor, the Conversion Price for the Series B Preferred
Stock shall be recomputed accordingly as of the close of business on such
record date and thereafter the Conversion Price for the Series B Preferred
Stock shall be adjusted pursuant to this paragraph as of the time of actual
payment of such dividends or distributions; and provided further, however,
that no such adjustment shall be made if the holders of Series B Preferred
Stock simultaneously receive a dividend or other distribution of shares of
Common Stock in a number equal to the number of shares of Common Stock as
they would have received if all outstanding shares of Series B Preferred
Stock had been converted into Common Stock on the date of such event.
f. ADJUSTMENTS FOR OTHER DIVIDENDS AND DISTRIBUTIONS. In the
event the Corporation at any time or from time to time after the Original
Issue Date for the Series B Preferred Stock shall make or issue, or fix a
record date for the determination of holders of Common Stock entitled to
receive, a dividend or other distribution payable in securities of the
Corporation other than shares of Common Stock, then and in each such event
provision shall be made so that the holders of the Series B Preferred Stock
shall receive upon conversion thereof in addition to the number of shares of
Common Stock receivable thereupon, the amount of securities of the
Corporation that they would have received had the Series B Preferred Stock
been converted into Common Stock on the date of such event and had they
thereafter, during the period from the date of such event to and including
the conversion date, retained such securities receivable by them as aforesaid
during such period, giving application to all adjustments called for during
such period under this paragraph with respect to the rights of the holders of
the Series B Preferred Stock; and provided further, however, that no such
adjustment shall be made if the holders of Series B Preferred Stock
simultaneously receive a dividend or other distribution of such securities in
an amount equal to the amount of such securities as they would have received
if all outstanding shares of Series B Preferred Stock had been converted into
Common Stock on the date of such event.
g. ADJUSTMENT FOR RECLASSIFICATION, EXCHANGE OR SUBSTITUTION. If
the Common Stock issuable upon the conversion of the Series B Preferred Stock
shall be changed into the same or a different number of shares of any class
or classes of stock, whether by capital reorganization, reclassification, or
otherwise (other than a subdivision or combination of shares or stock
dividend provided for above, or a reorganization, merger, consolidation, or
sale of assets provided for below), then and in each such event the holder of
each such share of Series B Preferred Stock shall have the right thereafter
to convert such share into the kind and amount of shares of stock and other
securities and property receivable upon such reorganization,
reclassification, or other change, by holders of the number
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of shares of Common Stock into which such shares of Series B Preferred Stock
might have been converted immediately prior to such reorganization,
reclassification, or change, all subject to further adjustment as provided
herein.
h. ADJUSTMENT FOR MERGER OR REORGANIZATION, ETC. In case of any
consolidation or merger of the Corporation with or into another corporation
or the sale of all or substantially all of the assets of the Corporation to
another corporation (other than a consolidation, merger or sale which is
covered by Subsection 2(c)), each share of Series B Preferred Stock shall
thereafter be convertible (or shall be converted into a security which shall
be convertible) into the kind and amount of shares of stock or other
securities or property to which a holder of the number of shares of Common
Stock of the Corporation deliverable upon conversion of such Series B
Preferred Stock would have been entitled upon such consolidation, merger or
sale; and, in such case, appropriate adjustment (as determined in good faith
by the Board of Directors) shall be made in the application of the provisions
in this Section 4 set forth with respect to the rights and interest
thereafter of the holders of the Series B Preferred Stock, to the end that
the provisions set forth in this Section 4 (including provisions with respect
to changes in and other adjustments of the Conversion Price) shall thereafter
be applicable, as nearly as reasonably may be, in relation to any shares of
stock or other property thereafter deliverable upon the conversion of the
Series B Preferred Stock.
i. NO IMPAIRMENT. The Corporation will not, by amendment of its
Certificate of Incorporation or through any reorganization, transfer of
assets, consolidation, merger, dissolution, issue or sale of securities or
any other voluntary action, avoid or seek to avoid the observance or
performance of any of the terms to be observed or performed hereunder by the
Corporation, but will at all times in good faith assist in the carrying out
of all the provisions of this Section 4 and in the taking of all such action
as may be necessary or appropriate in order to protect the Conversion Rights
of the holders of the Series B Preferred Stock against impairment.
j. CERTIFICATE AS TO ADJUSTMENTS. Upon the occurrence of each
adjustment or readjustment of the Conversion Price pursuant to this Section
4, the Corporation at its expense shall promptly compute such adjustment or
readjustment in accordance with the terms hereof and furnish to each holder
of Series B Preferred Stock a certificate setting forth such adjustment or
readjustment and showing in detail the facts upon which such adjustment or
readjustment is based. The Corporation shall, upon the written request at any
time of any holder of Series B Preferred Stock, furnish or cause to be
furnished to such holder a similar certificate setting forth (i) such
adjustments and readjustments, (ii) the Conversion Price then in effect, and
(iii) the number of shares of Common Stock and the amount, if any, of other
property which then would be received upon the conversion of Series B
Preferred Stock.
k. NOTICE OF RECORD DATE. In the event:
(i) that the Corporation declares a dividend (or any other
distribution) on its Common Stock payable in Common Stock or other securities
of the Corporation;
(ii) that the Corporation subdivides or combines its
outstanding shares of Common Stock;
(iii) of any reclassification of the Common Stock of the
Corporation (other than a subdivision or combination of its outstanding
shares of Common Stock or a stock dividend or stock distribution thereon), or
of any consolidation or merger of the Corporation into or with another
corporation, or of the sale of all or substantially all of the assets of the
Corporation; or
(iv) of the involuntary or voluntary dissolution,
liquidation or winding up of
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the Corporation; then the Corporation shall cause to be filed at its
principal office or at the office of the transfer agent of the Series B
Preferred Stock, and shall cause to be mailed to the holders of the Series B
Preferred Stock at their last addresses as shown on the records of the
Corporation or such transfer agent, at least ten days prior to the date
specified in (A) below or twenty days before the date specified in (B) below,
a notice stating
(a) the record date of such dividend, distribution,
subdivision or combination, or, if a record is not to be taken, the date as
of which the holders of Common Stock of record to be entitled to such
dividend, distribution, subdivision or combination are to be determined, or
(b) the date on which such reclassification,
consolidation, merger, sale, dissolution, liquidation or winding up is
expected to become effective, and the date as of which it is expected that
holders of Common Stock of record shall be entitled to exchange their shares
of Common Stock for securities or other property deliverable upon such
reclassification, consolidation, merger, sale, dissolution or winding up.
5. REDEMPTION FOR FAILURE TO OBTAIN STOCKHOLDER APPROVAL AND EVENT OF
NONCOMPLIANCE.
a. In the event that:
(i) the Corporation's stockholders do not, prior to December
19, 1997, approve (x) an amendment to the Corporation's Certificate of
Incorporation providing for the classification of the Board of Directors of
the Corporation into three classes, with members of each class serving
staggered three-year terms, and the election of one Director designated by
the holders of Series B Preferred Stock as a Class II Director with an
initial term of two years and one Director designated by the holders of
Series B Preferred Stock as a Class III Director with an initial term of
three years, (y) 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 (z) the sale to Idanta Partners Ltd., the
Dunn Family Trust and the Perscilla Faily Trust of shares of Common Stock
which, together with the shares of Series B Preferred Stock owned by such
entities, represent more than twenty percent (20%) of the Company's
outstanding Common Stock (on an as-converted basis), or
(ii) an Event of Noncompliance (as defined below) occurs, the
holders of at least 51% of the then outstanding shares of Series B Preferred
Stock may elect to either (A) cause the Company to redeem the shares of
Series B Preferred Stock, in whole or in part, at a redemption price equal to
$4.5825 per share plus accrued and unpaid dividends thereon (subject to
adjustment for stock splits, stock dividends, combinations or similar
recapitalizations affecting such shares) in cash for each share of Series B
Preferred Stock then redeemed (the "Redemption Price") or (B) reduce the
Conversion Price as to all shares of Series B Preferred Stock from $1.00 to
$.75 per share. If the election is made to reduce the Conversion Price, it
shall be evidenced by a written notice delivered to the Company by such
holders and such reduction shall automatically be effective on the date of
delivery of such notice to the Company.
b. At least fifteen (15) days prior to the date fixed by holders
electing to redeem their shares of Series B Preferred Stock ("Redeeming
Holders"), for any redemption of Series B Preferred Stock (hereinafter the
"Redemption Date"), the Redeeming Holders shall send the Corporation written
notice that notifies the Corporation of their election to redeem such shares,
specifying the Redemption Date and the number of shares to be redeemed and
calling upon the Corporation to pay the Redemption Price (such notice
hereinafter referred to as the "Redemption Notice"). On or prior to the
Redemption Date, each Redeeming Holder shall surrender his or its certificate
or certificates representing such shares
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to the Corporation, and thereupon the Redemption Price of such shares shall
be payable to the order of the person whose name appears on such certificate
or certificates as the owner thereof and each surrendered certificate shall
be cancelled. In the event less than all the shares represented by any such
certificate are redeemed, a new certificate shall be issued representing the
unredeemed shares. From and after the Redemption Date, unless there shall
have been a default in payment of the Redemption Price, all rights of the
holders of the Series B Preferred Stock designated for redemption in the
Redemption Notice as holders of Series B Preferred Stock of the Corporation
(except the right to receive the Redemption Price without interest upon
surrender of their certificate or certificates) shall cease with respect to
such shares, and such shares shall not thereafter be transferred on the books
of the Corporation or be deemed to be outstanding for any purpose whatsoever.
c. "Event of Noncompliance", as used herein, means any of the
following:
(i) Any of the representations or warranties made by the
Corporation in the Stock Purchase Agreement between the Corporation and the
purchaser of the Series B Preferred Stock dated November 10, 1997 ("Stock
Purchase Agreement"), or in any certificate or financial or other written
statements of the Corporation furnished by or on behalf of the Corporation in
connection with the execution and delivery of the Stock Purchase Agreement
and the closings of the purchase of the securities contemplated thereby shall
be false or (when taken together with other information furnished by or on
behalf of the Corporation, including reports and/or filings made with the
Securities and Exchange Commission) misleading in any material respect at the
time made; or
(ii) The Corporation shall fail to perform or observe any
covenant or agreement in the Stock Purchase Agreement, or any other covenant,
term, provision, condition, agreement or obligations of the Corporation under
the terms hereof and such failure shall continue uncured for a period of ten
(10) business days after notice from any holder of Series B Preferred Stock
of such failure; or (iii) The Corporation shall (i) become insolvent; (ii)
admit in writing its inability to pay its debts generally as they mature;
(iii) make a general assignment for the benefit of creditors or commence
proceedings for its dissolution; or (iv) apply for or consent to the
appointment of a trustee, liquidator or receiver for it or for a substantial
part of its property or business; or
(iii) A trustee, liquidator or receiver shall be appointed
for the Corporation or for a substantial part of its property or business
without its consent and shall not be discharged within sixty (60) days after
such appointment; or
(iv) Any governmental agency or any court of competent
jurisdiction at the instance of any governmental agency shall assume custody
or control of the whole or any substantial portion of the properties or
assets of the Corporation and shall not be dismissed within sixty (60) days
thereafter; or
(v) Any money judgment, writ or warrant of attachment, or
similar process in excess of Five Hundred Thousand Dollars ($500,000) in the
aggregate shall be entered or filed against the Corporation or any of its
properties or other assets and shall remain unpaid, unvacated, unbonded and
unstayed for a period of forty-five (45) days or in any event later than ten
(10) days prior to the date of any proposed sale thereunder; or
(vi) Bankruptcy, reorganization, insolvency or liquidation
proceedings or other proceedings, or relief under any bankruptcy law or any
law for the relief of debt shall be instituted by or against the Corporation
and, if instituted against the Corporation, shall not be dismissed within
sixty (60) days after such institution or the Corporation shall by any action
or answer approve of, consent to, or acquiesce in any such proceedings or
admit to any material allegations of, or default in answering a
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petition filed in, any such proceeding; or
(vii) If prior to full conversion or redemption of the Series
B Preferred Stock, trading in the shares of the Common Stock on the Nasdaq
National Market shall be suspended for a period of five (5) consecutive
trading days, other than as a result of the suspension of trading in
securities in general, or if such shares are delisted and not relisted on the
Nasdaq National Market within thirty (30) days thereafter; or
(viii) If the Corporation has not, if requested by the holders
of Series B Preferred Stock to do so, in accordance with the Registration
Rights Agreement between the Corporation and the holders of the Series B
Preferred Stock, caused a registration statement relating to the resale of
the Common Stock issuable upon conversion of the Series B Preferred Stock to
be filed with the Securities and Exchange Commission and used its best
efforts after such filing to cause said registration statement to be declared
effective, as promptly as possible and in no event later than 60 days after
request by such holders, by the Securities and Exchange Commission.
6. REDEMPTION FOR FAILURE TO RESERVE SUFFICIENT SHARES OF COMMON STOCK.
a. In the event that at any time after October 31, 1999 all
outstanding shares of Series B Preferred Stock cannot be fully converted into
Common Stock at any time because the Corporation has failed to reserve or
otherwise provide a sufficient number of shares of Common Stock to effect
such conversion, the holders of at least 51% of the then outstanding shares
of Series B Preferred Stock may elect to cause the Company to redeem the
shares of Series B Preferred Stock, in whole or in part, at a redemption
price per share (the "Section 6 Redemption Price") equal to the greater of
(i) the Redemption Price and (ii) the result obtained by multiplying the Fair
Market Value per share of Common Stock (as defined below) by the number of
shares of Common Stock into which each share of Series B Preferred may then
be converted.
b. The "Fair Market Value per share of Common Stock" shall be
deemed to be the last reported sale price per share of Common Stock on a
national securities exchange, the Nasdaq National Market, or another
nationally recognized exchange or trading system on the date immediately
preceding the date of delivery of the Section 6 Redemption Notice; or, if no
such price is reported on such date, such price on the next preceding trading
day on which such price is reported.
c. Holders electing to redeem their shares of Series B Preferred
Stock pursuant to this Section 6 (the "Section 6 Redeeming Holders"), shall
send the Corporation written notice that notifies the Corporation of their
election to redeem such shares in accordance with this Section 6, specifying
the date (not less than ten days after the date of delivery of such notice)
fixed by the Section 6 Redeeming Holders for the redemption of Series B
Preferred Stock (hereinafter the "Section 6 Redemption Date"), and the number
of shares to be redeemed and calling upon the Corporation to pay the Section
6 Redemption Price (such notice hereinafter referred to as the "Section 6
Redemption Notice").
d. On or prior to the Section 6 Redemption Date, each Section 6
Redeeming Holder shall surrender his or its certificate or certificates
representing such shares to the Corporation, and thereupon the Section 6
Redemption Price of such shares shall be payable to the order of the person
whose name appears on such certificate or certificates as the owner thereof
and each surrendered certificate shall be cancelled. In the event less than
all the shares represented by any such certificate are redeemed, a new
certificate shall be issued representing the unredeemed shares. From and
after the Section 6 Redemption Date, unless there shall have been a default
in payment of the Section 6 Redemption Price, all rights of the holders of
the Series B Preferred Stock designated for redemption in the Section 6
Redemption Notice as holders of Series B Preferred Stock of the Corporation
(except the
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right to receive the Section 6 Redemption Price without interest upon
surrender of their certificate or certificates) shall cease with respect to
such shares, and such shares shall not thereafter be transferred on the books
of the Corporation or be deemed to be outstanding for any purpose whatsoever.
E. The rights, preferences and privileges of the Series C Preferred Stock
are as follows:
1. DIVIDENDS.
a. The holders of shares of Series C Preferred Stock shall be
entitled to receive dividends of $0.30 per share per annum (subject to
appropriate adjustment in the event of any stock dividend, stock split,
combination or other similar recapitalization affecting such shares), payable
only when, as and if declared by the Board of Directors. Such dividends
shall not be cumulative and no right to such dividends shall accrue to the
holders of shares of Series C Preferred Stock unless declared by the Board of
Directors.
b. The Corporation shall not declare or pay any distributions (as
defined below) on shares of Common Stock unless the Corporation has paid or
set apart dividends with respect to the Series C Preferred Stock equal in the
aggregate to not less than the total amount of dividends which would have
been payable with respect to the shares of Series C Preferred Stock from
their respective dates of issuance if dividends under paragraph (a) of this
Section 1 were mandatory and cumulative.
c. For purposes of this Section 1, unless the context requires
otherwise, "distribution" shall mean the transfer of cash or property without
consideration, whether by way of dividend or otherwise, payable other than in
Common Stock or other securities of the Corporation, or the purchase or
redemption of shares of the Corporation (other than repurchases of Common
Stock held by employees or directors of, or consultants to, the Corporation
upon termination of their employment or services pursuant to agreements
providing for such repurchase at a price equal to the original issue price of
such shares and other than redemptions in liquidation or dissolution of the
Corporation) for cash or property, including any such transfer, purchase or
redemption by a subsidiary of this Corporation.
2. LIQUIDATION, DISSOLUTION OR WINDING UP; CERTAIN MERGERS,
CONSOLIDATIONS AND ASSET SALES.
a. In the event of any voluntary or involuntary liquidation,
dissolution or winding up of the Corporation, including any insolvency or
bankruptcy proceeding affecting the Company which is not dismissed within
sixty (60) days of the filing thereof, the holders of shares of Series C
Preferred Stock then outstanding shall be entitled to be paid out of the
assets of the Corporation available for distribution to its stockholders,
after and subject to the payment in full of all amounts required to be
distributed to the holders of Series B Convertible Preferred Stock (the
"Series B Preferred Stock") and the holders of any other class or series of
stock of the Corporation ranking on liquidation prior and in preference to
the Series C Preferred Stock, but before any payment shall be made to the
holders of Common Stock or any other class or series of stock ranking on
liquidation junior to the Series C Preferred Stock (such Common Stock and
other stock being collectively referred to as "Junior Stock") by reason of
their ownership thereof, an amount equal to the greater of (i) $10.00 per
share (subject to appropriate adjustment in the event of any stock dividend,
stock split, combination or other similar recapitalization affecting such
shares), plus any declared and unpaid dividends, or (ii) such amount per
share as would have been payable had each such share been converted into
Common Stock pursuant to Section 4 immediately prior to such liquidation,
dissolution or winding up. If upon any such liquidation, dissolution or
winding up of the Corporation the remaining assets of the Corporation
available for distribution to its stockholders shall be insufficient to pay
the holders of shares of Series C Preferred Stock the full amount to which
they shall be entitled, the holders of shares of Series C Preferred Stock and
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any class or series of stock ranking on liquidation on a parity with the
Series C Preferred Stock shall share ratably in any distribution of the
remaining assets and funds of the Corporation in proportion to the respective
amounts which would otherwise be payable in respect of the shares held by
them upon such distribution if all amounts payable on or with respect to such
shares were paid in full.
b. After the payment of all preferential amounts required to be
paid to the holders of Series B Preferred Stock, the holders of any other
class or series of stock of the Corporation ranking on liquidation on a
parity with the Series B Preferred Stock, the holders of Series C Preferred
Stock and the holders of any other class or series of stock of the
Corporation ranking on liquidation on a parity with the Series C Preferred
Stock, upon the dissolution, liquidation or winding up of the Corporation,
the holders of shares of Junior Stock then outstanding shall be entitled to
receive the remaining assets and funds of the Corporation available for
distribution to its stockholders.
c. In the event of any merger or consolidation of the Corporation
into or with another corporation (except one in which the holders of capital
stock of the Corporation immediately prior to such merger or consolidation
continue to hold at least 80% by voting power of the capital stock of the
surviving corporation), or the sale of all or substantially all the assets of
the Corporation, if the holders of at least 51% of the then outstanding
shares of Series B Preferred Stock so elect by giving written notice thereof
to the Corporation at least three days before the effective date of such
event, then such merger, consolidation or asset sale shall be deemed to be a
liquidation of the Corporation, and all consideration payable to the
stockholders of the Corporation (in the case of a merger or consolidation),
or all consideration payable to the Corporation, together with all other
available assets of the Corporation (in the case of an asset sale), shall be
distributed to the holders of capital stock of the Corporation in accordance
with Subsections 2(a) and 2(b) above. The Corporation shall promptly provide
to the holders of shares of Series C Preferred Stock such information
concerning the terms of such merger, consolidation or asset sale and the
value of the assets of the Corporation as may reasonably be requested by the
holders of Series C Preferred Stock. If the holders of the Series B
Preferred Stock make such an election, the Corporation shall use its best
efforts to amend the agreement or plan of merger or consolidation to adjust
the rate at which the shares of capital stock of the Corporation are
converted into or exchanged for cash, new securities or other property to
give effect to such election. The amount deemed distributed to the holders
of Series C Preferred Stock upon any such merger or consolidation shall be
the cash or the value of the property, rights or securities distributed to
such holders by the acquiring person, firm or other entity. The value of
such property, rights or other securities shall be determined in good faith
by the Board of Directors of the Corporation. If no notice of the election
permitted by this Subsection (c) is given, the provisions of Subsection 4(h)
shall apply.
3. VOTING.
a. Each holder of outstanding shares of Series C Preferred Stock
shall be entitled to the number of votes equal to the number of whole shares
of Common Stock into which the shares of Series C Preferred Stock held by
such holder are then convertible (as adjusted from time to time pursuant to
Section 4 hereof), at each meeting of stockholders of the Corporation (and
written actions of stockholders in lieu of meetings) with respect to any and
all matters presented to the stockholders of the Corporation for their action
or consideration. Except as provided by law, by the provisions of Subsection
3(b) or Subsection 3(c) below or by the provisions establishing any other
series of Preferred Stock, holders of Series C Preferred Stock and of any
other outstanding series of Preferred Stock shall vote together with the
holders of Common Stock as a single class.
b. The Corporation shall not amend, alter or repeal the
preferences, special rights or other powers of the Series C Preferred Stock
so as to affect adversely the Series C Preferred Stock without the written
consent or affirmative vote of the holders of a majority of the then
outstanding shares
13.
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of Series C Preferred Stock given in writing or by vote at a meeting,
consenting or voting (as the case may be) separately as a class. For this
purpose, without limiting the generality of the foregoing, the authorization
of any shares of capital stock on a parity with, or with priority or
preference over, the Series C Preferred Stock as to the right to receive
either dividends or amounts distributable upon liquidation, dissolution or
winding up of the Corporation shall be deemed to affect adversely the Series
C Preferred Stock.
4. OPTIONAL CONVERSION. The holders of the Series C Preferred Stock
shall have conversion rights as follows (the "Conversion Rights"):
a. RIGHT TO CONVERT. Each share of Series C Preferred Stock
shall be convertible, at the option of the holder thereof, at any time and
from time to time, and without the payment of additional consideration by the
holder thereof, into such number of fully paid and nonassessable shares of
Common Stock as is determined by dividing $10.00 by the Conversion Price (as
defined below) in effect at the time of conversion. The "Conversion Price"
shall initially be $1.50 per share. Such initial Conversion Price, and the
rate at which shares of Series C Preferred Stock may be converted into shares
of Common Stock, shall be subject to adjustment as provided below. In
addition, any declared and unpaid dividends in respect of shares of Series C
Preferred Stock surrendered for conversion shall be convertible into such
number of fully paid and nonassessable shares of Common Stock as is
determined by dividing the aggregate dollar amount of such declared and
unpaid dividends by the Conversion Price.
In the event of a notice of redemption of any shares of Series C
Preferred Stock pursuant to Section 5 hereof, the Conversion Rights of the
shares designated for redemption shall terminate at the close of business on
the fifth business day preceding the date fixed for redemption, unless the
redemption price is not paid when due, in which case the Conversion Rights
for such shares shall continue until such price is paid in full. In the
event of a liquidation of the Corporation, the Conversion Rights shall
terminate at the close of business on the first full day preceding the date
fixed for the payment of any amounts distributable on liquidation to the
holders of Series C Preferred Stock.
b. FRACTIONAL SHARES. No fractional shares of Common Stock shall
be issued upon conversion of the Series C Preferred Stock. In lieu of any
fractional shares to which the holder would otherwise be entitled, the
Corporation shall pay cash equal to such fraction multiplied by the then
effective Conversion Price.
c. MECHANICS OF CONVERSION.
(i) In order for a holder of Series C Preferred Stock to
convert shares of Series C Preferred Stock into shares of Common Stock, such
holder shall surrender the certificate or certificates for such shares of
Series C Preferred Stock, at the office of the transfer agent for the Series
C Preferred Stock (or at the principal office of the Corporation if the
Corporation serves as its own transfer agent), together with written notice
that such holder elects to convert all or any number of the shares of the
Series C Preferred Stock represented by such certificate or certificates.
Such notice shall state such holder's name or the names of the nominees in
which such holder wishes the certificate or certificates for shares of Common
Stock to be issued. If required by the Corporation, certificates surrendered
for conversion shall be endorsed or accompanied by a written instrument or
instruments of transfer, in form satisfactory to the Corporation, duly
executed by the registered holder or his or its attorney duly authorized in
writing. The date of receipt of such certificates and notice by the transfer
agent (or by the Corporation if the Corporation serves as its own transfer
agent) shall be the conversion date ("Conversion Date"). The Corporation
shall, as soon as practicable after the Conversion Date, issue and deliver at
such office to such holder of Series C Preferred Stock, or to his or its
nominees, a certificate or certificates for the number of shares of Common
Stock to which such holder shall be entitled, together with cash in lieu
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of any fraction of a share.
(ii) The Corporation shall at all times when the Series C
Preferred Stock shall be outstanding, reserve and keep available out of its
authorized but unissued stock, for the purpose of effecting the conversion of
the Series C Preferred Stock, such number of its duly authorized shares of
Common Stock as shall from time to time be sufficient to effect the
conversion of all outstanding Series C Preferred Stock. Before taking any
action which would cause an adjustment reducing the Conversion Price below
the then par value of the shares of Common Stock issuable upon conversion of
the Series C Preferred Stock, the Corporation will take any corporate action
which may, in the opinion of its counsel, be necessary in order that the
Corporation may validly and legally issue fully paid and nonassessable shares
of Common Stock at such adjusted Conversion Price.
(iii) Subject to Subsection 4(a) above, upon any such
conversion, all declared and unpaid dividends on the shares of Series C
Preferred Stock surrendered for conversion shall be paid to the holders
thereof.
(iv) All shares of Series C Preferred Stock which shall have
been surrendered for conversion as herein provided shall no longer be deemed
to be outstanding and all rights with respect to such shares, including the
rights, if any, to receive notices and to vote, shall immediately cease and
terminate on the Conversion Date, except only the right of the holders
thereof to receive shares of Common Stock in exchange therefor and payment of
any dividends declared but unpaid thereon. Any shares of Series C Preferred
Stock so converted shall be retired and canceled and shall not be reissued,
and the Corporation (without the need for stockholder action) may from time
to time take such appropriate action as may be necessary to reduce the
authorized Series C Preferred Stock accordingly.
(v) The Corporation shall pay any and all issue and other
taxes that may be payable in respect of any issuance or delivery of shares of
Common Stock upon conversion of shares of Series C Preferred Stock pursuant
to this Section 4. The Corporation shall not, however, be required to pay
any tax which may be payable in respect of any transfer involved in the
issuance and delivery of shares of Common Stock in a name other than that in
which the shares of Series C Preferred Stock so converted were registered,
and no such issuance or delivery shall be made unless and until the person or
entity requesting such issuance has paid to the Corporation the amount of any
such tax or has established, to the satisfaction of the Corporation, that
such tax has been paid.
d. ADJUSTMENT FOR STOCK SPLITS AND COMBINATIONS. If the
Corporation shall at any time or from time to time after the date on which a
share of Series C Preferred Stock was first issued ("Original Issue Date")
effect a subdivision of the outstanding Common Stock, the Conversion Price
then in effect immediately before that subdivision shall be proportionately
decreased. If the Corporation shall at any time or from time to time after
the Original Issue Date combine the outstanding shares of Common Stock, the
Conversion Price then in effect immediately before the combination shall be
proportionately increased. Any adjustment under this paragraph shall become
effective at the close of business on the date the subdivision or combination
becomes effective.
e. ADJUSTMENT FOR CERTAIN DIVIDENDS AND DISTRIBUTIONS. In the
event the Corporation at any time, or from time to time after the Original
Issue Date shall make or issue, or fix a record date for the determination of
holders of Common Stock entitled to receive, a dividend or other distribution
payable in additional shares of Common Stock, then and in each such event the
Conversion Price for the Series C Preferred Stock then in effect shall be
decreased as of the time of such issuance or, in the event such a record date
shall have been fixed, as of the close of business on such record date, by
multiplying the Conversion Price for the Series C Preferred Stock then in
effect by a fraction:
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(i) the numerator of which shall be the total number of
shares of Common Stock issued and outstanding immediately prior to the time
of such issuance or the close of business on such record date, and
(ii) the denominator of which shall be the total number of
shares of Common Stock issued and outstanding immediately prior to the time
of such issuance or the close of business on such record date plus the number
of shares of Common Stock issuable in payment of such dividend or
distribution; provided, however, if such record date shall have been fixed
and such dividend is not fully paid or if such distribution is not fully made
on the date fixed therefor, the Conversion Price for the Series C Preferred
Stock shall be recomputed accordingly as of the close of business on such
record date and thereafter the Conversion Price for the Series C Preferred
Stock shall be adjusted pursuant to this paragraph as of the time of actual
payment of such dividends or distributions; and provided further, however,
that no such adjustment shall be made if the holders of Series C Preferred
Stock simultaneously receive a dividend or other distribution of shares of
Common Stock in a number equal to the number of shares of Common Stock as
they would have received if all outstanding shares of Series C Preferred
Stock had been converted into Common Stock on the date of such event.
f. ADJUSTMENTS FOR OTHER DIVIDENDS AND DISTRIBUTIONS. In the
event the Corporation at any time or from time to time after the Original
Issue Date for the Series C Preferred Stock shall make or issue, or fix a
record date for the determination of holders of Common Stock entitled to
receive, a dividend or other distribution payable in securities of the
Corporation other than shares of Common Stock, then and in each such event
provision shall be made so that the holders of the Series C Preferred Stock
shall receive upon conversion thereof in addition to the number of shares of
Common Stock receivable thereupon, the amount of securities of the
Corporation that they would have received had the Series C Preferred Stock
been converted into Common Stock on the date of such event and had they
thereafter, during the period from the date of such event to and including
the conversion date, retained such securities receivable by them as aforesaid
during such period, giving application to all adjustments called for during
such period under this paragraph with respect to the rights of the holders of
the Series C Preferred Stock; and provided further, however, that no such
adjustment shall be made if the holders of Series C Preferred Stock
simultaneously receive a dividend or other distribution of such securities in
an amount equal to the amount of such securities as they would have received
if all outstanding shares of Series C Preferred Stock had been converted into
Common Stock on the date of such event.
g. ADJUSTMENT FOR RECLASSIFICATION, EXCHANGE OR SUBSTITUTION. If
the Common Stock issuable upon the conversion of the Series C Preferred Stock
shall be changed into the same or a different number of shares of any class
or classes of stock, whether by capital reorganization, reclassification, or
otherwise (other than a subdivision or combination of shares or stock
dividend provided for above, or a reorganization, merger, consolidation, or
sale of assets provided for below or in Subsection 2(c) hereof), then and in
each such event the holder of each such share of Series C Preferred Stock
shall have the right thereafter to convert each such share into the kind and
amount of shares of stock and other securities and property receivable upon
such reorganization, reclassification, or other change, by holders of the
number of shares of Common Stock into which such shares of Series C Preferred
Stock might have been converted immediately prior to such reorganization,
reclassification, or change, all subject to further adjustment as provided
herein.
h. ADJUSTMENT FOR MERGER OR REORGANIZATION, ETC. In case of any
consolidation or merger of the Corporation with or into another corporation
or the sale of all or substantially all of the assets of the Corporation to
another corporation (other than a consolidation, merger or sale which is
covered by Subsection 2(c)), each share of Series C Preferred Stock shall
thereafter be convertible (or shall be converted into a security which shall
be convertible) into the kind and amount of shares of stock or other
securities or property to which a holder of the number of shares of Common
Stock of the
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Corporation deliverable upon conversion of such Series C Preferred Stock
would have been entitled upon such consolidation, merger or sale; and, in
such case, appropriate adjustment (as determined in good faith by the Board
of Directors) shall be made in the application of the provisions in this
Section 4 set forth with respect to the rights and interest thereafter of the
holders of the Series C Preferred Stock, to the end that the provisions set
forth in this Section 4 (including provisions with respect to changes in and
other adjustments of the Conversion Price) shall thereafter be applicable, as
nearly as reasonably may be, in relation to any shares of stock or other
property thereafter deliverable upon the conversion of the Series C Preferred
Stock.
i. NO IMPAIRMENT. Without the consent of the holders of a
majority of the Series C Preferred Stock the Corporation will not, by
amendment of its Certificate of Incorporation or through any reorganization,
transfer of assets, consolidation, merger, dissolution, issue or sale of
securities or any other voluntary action, avoid or seek to avoid the
observance or performance of any of the terms to be observed or performed
hereunder by the Corporation, but will at all times in good faith assist in
the carrying out of all the provisions of this Section 4 and in the taking of
all such action as may be necessary or appropriate in order to protect the
Conversion Rights of the holders of the Series C Preferred Stock against
impairment.
j. CERTIFICATE AS TO ADJUSTMENTS. Upon the occurrence of each
adjustment or readjustment of the Conversion Price pursuant to this Section
4, the Corporation at its expense shall promptly compute such adjustment or
readjustment in accordance with the terms hereof and furnish to each holder
of Series C Preferred Stock a certificate setting forth such adjustment or
readjustment and showing in detail the facts upon which such adjustment or
readjustment is based. The Corporation shall, upon the written request at any
time of any holder of Series C Preferred Stock, furnish or cause to be
furnished to such holder a similar certificate setting forth (i) such
adjustments and readjustments, (ii) the Conversion Price then in effect, and
(iii) the number of shares of Common Stock and the amount, if any, of other
property which then would be received upon the conversion of Series C
Preferred Stock.
k. NOTICE OF RECORD DATE. In the event:
(i) that the Corporation declares a dividend (or any other
distribution) on its Common Stock payable in Common Stock or other securities
of the Corporation;
(ii) that the Corporation subdivides or combines its
outstanding shares of Common Stock;
(iii) of any reclassification of the Common Stock of the
Corporation (other than a subdivision or combination of its outstanding
shares of Common Stock or a stock dividend or stock distribution thereon), or
of any consolidation or merger of the Corporation into or with another
corporation, or of the sale of all or substantially all of the assets of the
Corporation; or
(iv) of the involuntary or voluntary dissolution, liquidation
or winding up of the Corporation;
then the Corporation shall cause to be filed at its principal
office or at the office of the transfer agent of the Series C Preferred
Stock, and shall cause to be mailed to the holders of the Series C Preferred
Stock at their last addresses as shown on the records of the Corporation or
such transfer agent, at least ten days prior to the date specified in (A)
below or twenty days before the date specified in (B) below, a notice stating
(a) the record date of such dividend, distribution,
subdivision or
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combination, or, if a record is not to be taken, the date as of which the
holders of Common Stock of record to be entitled to such dividend,
distribution, subdivision or combination are to be determined, or
(b) the date on which such reclassification,
consolidation, merger, sale, dissolution, liquidation or winding up is
expected to become effective, and the date as of which it is expected that
holders of Common Stock of record shall be entitled to exchange their shares
of Common Stock for securities or other property deliverable upon such
reclassification, consolidation, merger, sale, dissolution or winding up.
1. REDEMPTION IN EVENT OF SERIES B PREFERRED STOCK REDEMPTION.
(a) In the event that holders of at least 51% of the Company's
Series B Preferred stock elect to redeem any Series B Preferred Stock
pursuant to Section 5 of the Certificate of Designations of the Series B
Preferred Stock of the Company, the holders of at least 51% of the then
outstanding shares of Series C Preferred Stock may elect to either cause the
Company to redeem the shares of Series C Preferred Stock, in whole or in
part, at a redemption price equal to $10.00 per share plus declared and
unpaid dividends thereon (subject to adjustment for stock splits, stock
dividends, combinations or similar recapitalizations affecting such shares)
in cash for each share of Series C Preferred Stock then redeemed (the
"Redemption Price"), PROVIDED, HOWEVER, that the holders of shares of Series
C Preferred Stock shall not be entitled to cause the Company to redeem the
shares of Series C Preferred Stock until the holders of shares of Series B
Preferred Stock entitled to cause the Company to redeem the shares of Series
B Preferred Stock and electing to so cause the Company to redeem the shares
of Series B Preferred Stock have received their full redemption price for the
shares they have elected to have redeemed.
(b) At least fifteen (15) days prior to the date fixed by holders
electing to redeem their shares of Series C Preferred Stock ("Redeeming
Holders"), for any redemption of Series C Preferred Stock (hereinafter the
"Redemption Date"), the Redeeming Holders shall send the Corporation written
notice that notifies the Corporation of their election to redeem such shares,
specifying the Redemption Date and the number of shares to be redeemed and
calling upon the Corporation to pay the Redemption Price (such notice
hereinafter referred to as the "Redemption Notice"). On or prior to the
Redemption Date, each Redeeming Holder shall surrender his or its certificate
or certificates representing such shares to the Corporation, and thereupon
the Redemption Price of such shares shall be payable to the order of the
person whose name appears on such certificate or certificates as the owner
thereof and each surrendered certificate shall be canceled. In the event
less than all the shares represented by any such certificate are redeemed, a
new certificate shall be issued representing the unredeemed shares. From and
after the Redemption Date, unless there shall have been a default in payment
of the Redemption Price, all rights of the holders of the Series C Preferred
Stock designated for redemption in the Redemption Notice as holders of Series
C Preferred Stock of the Corporation (except the right to receive the
Redemption Price without interest upon surrender of their certificate or
certificates) shall cease with respect to such shares, and such shares shall
not thereafter be transferred on the books of the Corporation or be deemed to
be outstanding for any purpose whatsoever.
V.
[Intentionally omitted as is permitted by Section 245(c) of the General
Corporation Law of the State of Delaware].
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VI.
The Corporation is to have perpetual existence.
VII.
In furtherance and not in limitation of the powers conferred by statute,
and by this Certificate of Incorporation, the Board of Directors is hereby
expressly authorized to make, alter or repeal the By-Laws of the Corporation.
VIII.
Meetings of stockholders may be held within or without the State of
Delaware, as the By-Laws may provide. The books of the Corporation may be
kept (subject to any provision contained in the statutes) outside the State
of Delaware at such place or places as may be designated from time to time by
the Board of Directors or in the By-Laws of the Corporation. Elections of
directors need not be by written ballot unless the By-Laws of the Corporation
shall so provide.
IX.
The Corporation reserves the right to amend, alter, change or repeal any
provision contained in this Certificate of Incorporation, in the manner now
or hereafter prescribed by statute, and all rights conferred upon
stockholders herein are granted subject to this reservation.
X.
No Director of the Corporation shall be personally liable to the
Corporation or its stockholders for monetary damages for breach of fiduciary
duty by such Director as a Director, provided, however, that this Article 10
shall not eliminate or limit the liability of a Director to the extent
provided by applicable law (i) for any breach of the Director's duty of
loyalty to the Corporation or its stockholders, (ii) for acts or omissions
not in good faith or which involve intentional misconduct or a knowing
violation of law; (iii) under Section 174 of the General Corporation Law of
the State of Delaware, or (iv) for any transaction from which the Director
derived an improper personal benefit. No amendment to or repeal of this
Article 10 shall apply to or have any effect on the liability or alleged
liability of any Director of the Corporation for or with respect to any acts
or omissions of such Director occurring prior to such amendment or repeal.
XI.
This Article 11 is inserted for the management of the business and for the
conduct of the affairs of the Corporation.
A. NUMBER OF DIRECTORS. The number of directors of the Corporation shall
not be less than three. The exact number of directors within the limitations
specified in the preceding sentence shall be fixed from time to time pursuant
to a resolution adopted by the Board of Directors.
B. CLASSES OF DIRECTORS. The Board of Directors shall be and is divided
into three classes:
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Class I, Class II and Class III. No one class shall have more than one
director more than any other class. If a fraction is contained in the
quotient arrived at by dividing the authorized number of directors by three,
then, if such fraction is one-third, the extra director shall be a member of
Class I, and if such a fraction is two-thirds, one of the extra directors
shall be a member of Class II, unless otherwise provided for from time to
time by resolution adopted by a majority of the Board of Directors.
C. TERMS OF OFFICE. Each director shall serve for a term ending on the
date of the third annual meeting following the annual meeting at which such
director was elected; provided, that each initial director in Class I shall
serve for a term ending on the date of the annual meeting next following the
end of the Corporation's fiscal year ending December 31, 1997; each initial
director in Class 11 shall serve for a term ending on the date of the annual
meeting next following the end of the Corporation's fiscal year ending
December 31, 1998; and each initial director in Class III shall serve for a
term ending on the date of the annual meeting next following the fiscal year
ending December 31, 1999; and provided further, that the term of each
director shall continue until the election and qualification of his successor
and shall be subject to his earlier death, resignation or removal.
D. ALLOCATION OF DIRECTORS AMONG CLASSES IN THE EVENT OF INCREASES OR
DECREASES IN THE NUMBER OF DIRECTORS. In the event of any increase or
decrease in the authorized number of directors, (i) each director then
serving as such shall nevertheless continue as a director of the class of
which he is a member until the expiration of his current term, subject to his
earlier death, resignation or removal, and (ii) the newly created or
eliminated directorships resulting from such increase or decrease shall be
apportioned by the Board of Directors among the three classes of director in
accordance with the provisions of Article XI(B) above.
E. QUORUM; ACTION AT MEETING. A majority of the total number of directors
then in office shall constitute a quorum at all meetings of the Board of
Directors. In the event one or more of the directors shall be disqualified
to vote at any meeting, then the required quorum shall be reduced by one for
each such director so disqualified; PROVIDED, HOWEVER, that in no case shall
less than one-third of the number of directors fixed pursuant to ArticleXI(A)
above constitute a quorum. If at any meeting of the Board of Directors there
shall be less than such a quorum, a majority of those present may adjourn the
meeting from time to time. Every act or decision done or made by a majority
of the directors present at a meeting duly held at which a quorum is present
shall be regarded as the act of the Board of Directors unless a greater
number is required by law, by the By-Laws of the Corporation or by this
Certificate of Incorporation.
F. REMOVAL. If and for so long as the Board of Directors is classified
pursuant to Section 141(d) of the General Corporation Law of Delaware,
stockholders may effect the removal of a director or the entire Board of
Directors only for cause, unless this Certificate of Incorporation provides
otherwise.
G. VACANCIES. Unless and until filled by the stockholders, any vacancy in
the Board of Directors, however occurring, including a vacancy resulting from
the enlargement of the Board, may be filled by a vote of a majority of the
directors then in office, although less than a quorum, or by a sole remaining
director. A director elected to fill a vacancy shall be elected to hold
office until the next election of the class for which such director shall
have been chosen, subject to the election and qualification of his successor
and to his earlier death, resignation or removal.
H. AMENDMENTS. Notwithstanding any other provisions of law, this
Certificate of Incorporation or the By-Laws of the Corporation, and
notwithstanding the fact that a lesser percentage may be specified by law,
the affirmative vote of the holders of at least seventy-five percent (75%) of
the votes which all of the stockholders would be entitled to cast at an
annual election of directors or class of directors shall be required to
amend, repeal or to adopt any provision inconsistent with, this Article 11.
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IN WITNESS WHEREOF, GateField Corporation has caused this Restated
Certificate of Incorporation to be signed by the President and Secretary in
Fremont, California this 28th day of August 1998.
GATEFIELD CORPORATION
By: /s/ Timothy Saxe
President
ATTEST:
By: /s/ Michael J. Kucha
Secretary
<PAGE>
AGREEMENT FOR WAFER PRODUCTION AND TESTING
BETWEEN
GATEFIELD CORPORATION
AND
SIEMENS AKTIENGESELLSCHAFT
This Agreement ("Agreement") is entered into by GATEFIELD CORPORATION
having its principal place of business at Fremont, California, United States
of America (hereinafter referred to as "GateField") and SIEMENS
AKTIENGESELLSCHAFT having its principal place of business at Berlin and
Munich, Federal Republic of Germany (hereinafter referred to as "Siemens").
RECITALS
WHEREAS GateField has designed integrated circuits requiring a 0,25
Flash process and wishes to have external manufacturing resources for such
integrated circuits; and
WHEREAS Siemens will have developed a 0,25 Flash process (C9FL) and
will produce integrated circuits for wafers using that process and wishes to
offer such wafers to GateField as silicon foundry; and
WHEREAS both parties seek to enter into a long-term business
relationship where Siemens manufactures such integrated circuits for
GateField.
NOW, THEREFORE, the parties agree as follows:
1. DEFINITIONS
1.1 "INTEGRATED CIRCUIT PRODUCTS" shall mean types of integrated
circuits listed and specified in Exhibit 1, to be manufactured by Siemens or
any of its Subsidiaries and sold by Siemens to GateField exclusively.
Exhibit 1 may be amended or modified in number and types from time to time by
written agreement between GateField and Siemens.
1.2 "DESIGN INFORMATION PACKAGE" shall mean the technical information
(e.g. geometrical design rules, electrical design rules, etc.) as specified
in Exhibit 2 to be provided by Siemens to GateField for the purpose of design
of Integrated Circuit Products.
1.3 "PRODUCTS INFORMATION PACKAGE" shall mean the technical information
(e.g. data base tape, test program, etc.) and hardware utilities specified in
Exhibit 3 to be provided by GateField to Siemens for each Integrated Circuit
Product.
1.4 "PRODUCT TECHNOLOGY" shall mean technology as applied for Siemens'
own products relating to Integrated Circuit Products, for which Siemens has
manufacturing capability and which shall non-exclusively be used by Siemens
for the purpose of manufacturing of Wafers.
1.5 "WAFERS" shall mean 8-inch silicon wafers with Integrated Circuit
Products manufactured by Siemens or any of its Subsidiaries using the Product
Information Package.
1.
<PAGE>
1.6 "GOOD DIE" shall mean a die on a Wafer which meets the
specifications as per Exhibit 4 and which fully satisfies the relevant test
program for the test of Wafers as supplied by GateField and described in
Exhibit 3.
1.7 "PROPRIETARY INFORMATION" shall mean any and all information
exchanged between the parties including but not limited to technical
information, database tapes, specifications, test tapes and supporting
documentation provided either orally, in writing, or in machine readable
format and reticles or masks; provided that all such information is marked
"Confidential" or similarly, or if oral, identified as proprietary at time of
disclosure and reduced to writing within thirty (30) days thereafter.
Notwithstanding the foregoing Proprietary Information does not include
information generally available to the public, information independently
developed or known by the receiving party without reference to information
disclosed hereunder, information rightfully received from a third party
without confidentiality obligations, or information authorized in writing for
release by the disclosing party hereunder.
1.8 "RISK START" shall mean production of Wafers before qualification,
defined in Section 2.3, has been completed.
1.9 "SUBSIDIARY" shall mean any corporation, partnership or other legal
entity, more than fifty per cent (50%) of whose outstanding shares or stocks
entitled to vote for the election of directors (other than any shares and
stocks whose voting rights are subject to restriction) are owned or
controlled by either party hereto, directly or indirectly, now or hereafter,
provided that such corporation, partnership or legal entity shall be deemed
to be a Subsidiary for the purpose of this Agreement only so long as such
ownership or control by reason of the foregoing exists.
2. PRODUCT TECHNOLOGY, TESTING CAPABILITY AND QUALIFICATION
2.1 PRODUCT TECHNOLOGY
2.1.1 Siemens shall provide GateField with the Design
Information Package for each Product Technology as more fully described in
Exhibit 2 for the purpose of specifying the Product Technology related design
requirements for establishing the Product Information Package in accordance
with Section 2.1.2. GateField shall be entitled to use the Design Information
Package to develop and design the Integrated Circuit Products.
2.1.2 GateField shall provide Siemens with the Product
Information Package for each Integrated Circuit Product as more fully
described in Exhibit 3 for the purpose of specifying the tooling for
manufacturing of Wafers.
2.2 MASKS
2.2.1 Siemens shall provide for each Integrated Circuit Product
the masks which are necessary for production of Wafers. The masks shall be
produced by using the data base tape and if necessary other technical
information as provided with the relevant Product Information Packages as
more fully described in Exhibit 3.
2.2.2 For each Integrated Circuit Product GateField shall pay
for all qualification masks and Risk Start masks, if different from
production masks and for the first set
2.
<PAGE>
of production masks, and any subsequent redesigned mask layers, including
those for modified/redesigned Integrated Circuit Product if such
modification/redesign is GateField' responsibility or has been conducted upon
GateField' request. Except as provided above all further masks necessary to
produce Wafers shall be at Siemens' charge, if not agreed otherwise.
2.2.3 Siemens may subcontract to a third party to produce the
masks in accordance with this Agreement for Siemens. Prior to any
subcontracting Siemens shall be obligated to conclude a written agreement
with its subcontractor stipulating its obligations not less severe as laid
down in this Agreement, especially with regard to nondisclosure and the use
of the Product Information Package. After such an agreement has been
concluded between Siemens and its subcontractor Siemens may provide the
subcontractor with the necessary parts of the Product Information Package.
2.3 VERIFICATION AND QUALIFICATION
2.3.1 The completed verification pursuant section 2.3.2 of each
individual Integrated Circuit Product and the qualification approval by
GateField for each individual Integrated Circuit Product, manufactured by
Siemens or any of its Subsidiaries, is a prerequisite for ordering and
delivery of Wafers. This section 2.3.1 is not applicable in the case of Risk
Starts or for ordering and delivery pursuant sections 2.3.2 and 2.3.3.
2.3.2 For the purpose of verification of the design of an
Integrated Circuit Product and for the purpose of verification, that Wafers
can be manufactured using the Product Technology and the test program
according to section 2.4 of this Agreement, GateField shall order and pay and
Siemens shall deliver an agreed upon number of engineering lots of Wafers in
accordance with Exhibits 5 and 6. The verification is completed, when
GateField demonstrates that Wafers out of engineering lots with parametric
splits which are tested with the testprogramme according to section 2.4 of
this Agreement are capable of reasonable and stable chip probe yields and
Siemens agrees that such chip probe yields are reasonable in comparison to
the probe yields of Siemens' own products manufactured with the Product
Technology.
2.3.3 For the purpose of qualification as specified in Exhibit
4 GateField shall order and pay and Siemens shall deliver an agreed upon
number of lots of Wafers in accordance with Exhibits 5 and 6. Such Wafers
delivered for qualification must also meet all agreed standards,
specifications and requirements defined in the Exhibits 1 and 4 provided
however, that if failures occur due to reasons, for which GateField is
responsible, Siemens shall be paid 100% of the Wafer price as more specified
in Exhibit 5. GateField shall in accordance with an agreed schedule deliver
to Siemens the documents and reports as defined in Exhibit 4.
2.3.4 Prior to completion of the qualification, GateField may,
in accordance with Exhibits 5 and 6, send Siemens a written request that
Siemens provides Wafers out of "Risk Starts." Within five business days of
such Risk Start requests, Siemens will notify GateField whether Siemens
accepts or refuses such Risk Start request(s). If Siemens accepts such Risk
Start, Siemens will provide these Wafers out of Risk Starts to GateField at
the prices as more specified in Exhibit 5. Notwithstanding anything to the
contrary, if Siemens does not accept such Risk Start requests and GateField
nevertheless wishes to start such Risk Wafers, GateField may send Siemens a
binding purchase order according to Exhibit 6 for such Risk Start Wafers.
3.
<PAGE>
If GateField sends Siemens such an order, Siemens will process these Wafers
out of Risk Starts as required under this Agreement, and, once Sie1mens
starts such Risk Start Wafers pursuant to such a purchase order, GateField
shall be responsible to pay 100% of the Wafer price as described in Exhibit 5.
2.3.5 During qualification, as specified in Exhibit 4,
GateField may stop production of Wafers for any or all GateField Integrated
Circuit Products by giving written notice to Siemens. Siemens will stop
production at suitable production steps following completion of the process
step at which the Wafer reside at the time of Siemens' receipt of such
notification. Siemens shall invoice and GateField shall pay for all Wafers
started prior to Siemens receiving such notice. Prices for such Wafers will
be based on the stage of production of the Wafers as defined in Exhibit 5.
2.3.6 Changes of a Product Technology or of the manufacturing
processes of a Product Technology may be carried out in accordance with the
Process Change Notification Procedure as defined in Exhibit 4.
2.3.7 In case a re-qualification of the Product Technology
according to this Section 2.3 is necessary Siemens shall provide GateField
with the necessary Wafers for such re-qualification free of charge.
2.3.8 The specifications and requirements specified in Exhibits
4 can only be modified upon mutual written agreement between Siemens and
GateField.
2.3.9 If GateField determines that modifications to the
specifications of Integrated Circuit Products are required, including
modifications to mask tooling or a Product Technology, Siemens shall perform
such modifications at GateField' cost which shall be fair and reasonable,
provided that modifications to a Product Technology shall require Siemens'
consent in advance. The parties will negotiate adjustment to production
price and delivery schedule in advance if price or delivery schedule are
affected by such modifications.
2.4 TESTING CAPABILITY
2.4.1 The testing of Wafers will be carried out by Siemens or
any of its Subsidiaries or will be carried out for Siemens under contractual
agreements.
2.4.2 Siemens may subcontract to a third party to test the
Wafers in accordance with this Agreement for Siemens. Prior to any
subcontracting Siemens shall be obliged to conclude a written agreement with
its subcontractor stipulating its obligations not less severe as laid down in
this Agreement, especially with regard to nondisclosure and the use of the
Product Information Package. After such an agreement has been concluded
between Siemens and its subcontractor Siemens
(a) will notify GateField in writing of its intention to have
the Wafers tested by the subcontractor and
(b) may provide the subcontractor with the necessary parts of
the Product Information Package.
4.
<PAGE>
2.4.3 For the purpose of testing the Wafers, GateField will
provide for each Integrated Circuit Product a testprogramme and additional
test information as more specified in Exhibit 3.
2.4.4 The pricing of Wafer testing is based on hourly rates as
described in Exhibit 5. In case adaptions to the test programme become
necessary Siemens will send a quotation to GateField concerning such
adaptions. In addition Siemens will send a quotation to GateField for the
first set of probecard and loadboard (the later if different from
standard-loadboards) for each Integrated Circuit Product.
2.4.5 If Siemens wants to transfer the testing of Wafers to a
location different from the location where the initial set up of the
testprogramme was performed by GateField, Siemens shall be responsible for
the transfer and setting up of the testing capability at the new location and
shall provide correlation Wafers to GateField fee of charge.
2.4.6 In case GateField is interested to perform the testing of
Wafers of subcontract the testing of Wafers to a third party under its own
responsibility, Siemens is willing to negotiate the terms and conditions of
such option.
3. PRODUCTION, FORECAST/ORDERING
3.1 Upon written notice from GateField of successful completion of the
qualification as described in Section 2 and having received a purchase order
from GateField, Siemens or any of its Subsidiaries shall deliver Wafers
according to the terms of this Agreement and as described in more detail in
Exhibit 1, 4, 5, and 6.
3.2 The business for each Integrated Circuit Product will be conducted
in two phases. In phase 1, forecasting, ordering as well as pricing will be
based on Wafers. In phase 2, the pricing will change to Good Dies, as more
specified in Exhibit 5, ordering, delivery and forecasting will remain on
Wafer base.
3.3 As a basis for a mutual cooperation, both parties will define a
model which extends the mutual commitment with respect to number of Wafers to
be purchased by GateField and to be delivered by Siemens beyond the timeframe
of individual purchase orders. Such model shall be applied, if the volume
ordered by GateField for all Integrated Circuit Products exceeds one thousand
(1000) Wafers out per month for more than 3 consecutive months.
3.4 GateField and Siemens agree on the forecast and ordering procedure
in accordance with Exhibit 6.
3.5 GateField may at any time add or substitute integrated circuits
similar to the Integrated Circuit Products listed in Exhibit 1 to be
manufactured and delivered under this Agreement with reasonable prior written
notice. A similar integrated circuit is one which is manufactured using the
same Product Technology as Integrated Circuit Products, and in accordance
with the same qualification plan as and with risk start quantities comparable
to GateField Integrated Circuit Products currently manufactured under this
Agreement. Section 3.5 applies for such added or substituted Integrated
Circuit Product only if engineering splits have proven, that such Integrated
Circuit Product is capable of reasonable chip probe yields.
5.
<PAGE>
3.6 In order to ensure traceability, processing and delivery of Wafers
shall be performed lot by lot, unless agreed upon otherwise. Production
Wafer lots shall not have requirements for splitting neither for parameters
nor for production stops.
3.7 In the case of technical problems arising in the manufacturing of
Wafers, especially with regard to yield, quality and reliability, Siemens
shall inform GateField forthwith in writing. Notwithstanding any right
GateField may have, GateField will assist Siemens to identify the root cause
of the above mentioned problems.
3.8 Both parties shall immediately advise one another whenever they
have reason to believe that Wafers may not conform to the applicable
specifications.
3.9 In case any technical problem, defect or malfunction should occur,
which Siemens will be informed about, Siemens will immediately start
investigations and supply a first substantiated answer or status report
within ten (10) working-days after receipt of GateField' notification of such
matter. Such investigations may require GateField' support according to
Section 3.7.
3.10 GateField may stop production of Wafers for any or all GateField
Integrated Circuit Products by giving written notice to Siemens. Siemens
will stop production at the next suitable process step following completion
of the process step at which the Wafer reside at the time of Siemens' receipt
of written notification.
If such stop of production is due to any reason(s) not attributable to a
failure by Siemens to fulfil its obligations under this Agreement; Siemens
shall invoice and GateField shall pay for the Wafers as stated in Exhibit 5.
If such stop of production is due to reasons attributable to a failure
by Siemens to fulfill its obligations under this Agreement, only those wafers
which meet the criteria applicable to production Wafers pursuant to Section
2.3.3 and delivered and invoiced to GateField shall be paid for by GateField
with 100% of the Wafer price as specified for Production Wafers in Exhibit 5.
Notwithstanding anything to the contrary, and subject to the terms of
this Section 3.10 with respect to payment, Siemens may, at its discretion and
expense, elect to proceed with production as to which GateField has requested
a stop by providing GateField advance written notice of the Wafers involved.
3.11 Siemens shall cooperate with GateField in order to continuously
improve the outgoing quality by agreed upon quality improvements programs.
3.12 If Siemens wants to terminate the manufacturing of Wafers using a
specific Product Technology, Siemens will notify GateField thereof in writing
six (6) months prior to the planned termination of manufacturing. In such
case GateField may order and Siemens will deliver the remaining end of life
demand for such Wafers according to the terms of this Agreement.
6.
<PAGE>
4. PRICES, PAYMENT, DELIVERIES AND SHIPMENTS
4.1 Pricing for Wafers / Good Dies are specified in Exhibit 5. Prices
are quoted in US currency.
4.2 Prices will be renegotiated in accordance with Exhibit 5.
4.3 Payment shall be effective 45 days net after receipt of Wafers by
the freight forwarder and/or carrier pursuant section 4.1 and receipt by
GateField of the respective invoice from Siemens.
4.4 If any circumstances should arise which are reasonably likely to
result in a delayed delivery to the freight forwarder and / or carrier
pursuant section 4.1, Siemens shall promptly notify GateField hereof in
writing.
5. ON-SITE INSPECTION
5.1 Subject to mutually agreeable confidentiality protections and to
Siemens' standard safety and manufacturing procedures and upon GateField'
written request reasonable in advance, Siemens will allow GateField
representatives and/or GateField customers to perform an audit of Siemens
production site and quality system for Wafers in accordance with the
International Standards in ISO 9001. The documents which are necessary to
perform such audits shall be made available to GateField and/or GateField'
customers.
5.2 Section 5.1 also applies to Siemens' Subsidiaries and
subcontractors, subject to their respective standard safety and manufacturing
procedures.
5.3 Such audits shall not occur more than 2 times per year nor more
than 1 time per quarter unless otherwise agreed by the Siemens. Siemens will
reasonably try to accommodate such additional audit requests.
6. WARRANT AND LIABILITY
6.1 Siemens warrants that all Wafers delivered hereunder will meet the
applicable specifications and requirements in Exhibits 1 and 4.
6.2 If any Wafer supplied by Siemens hereunder fails to conform with
this warranty Siemens shall, at its sole cost, replace such Wafer without
delay after receipt of GateField' return shipment thereof pursuant to a
mutually agreed upon procedure.
6.3 The warranty period for Wafers shall end fifty-two (52) weeks from
the date of receipt of the Wafers by the freight forwarder/carrier as
specified in Section 4.1.
6.4 If Wafers fail to meet specifications in Exhibits 1 and 4, and in
GateField reasonable opinion such failure is material, GateField may request
Siemens to stop production of affected orders. If Siemens is unable to
determine the cause of failure and implement action to correct such failures
within 45 days after first written notification, GateField may cancel such
particular orders at no cost to GateField.
7.
<PAGE>
6.5 THE FOREGOING WARRANTY CONSTITUTES SIEMENS' EXCLUSIVE WARRANTY, AND
THE EXCLUSIVE REMEDY OF GATEFIELD, FOR ANY BREACH OF ANY WARRANTY OR ANY
NONCONFORMITY OF THE WAFERS TO THE SPECIFICATIONS AND REQUIREMENTS. THIS
WARRANTY IS EXCLUSIVE AND IN LIEU OF ALL OTHER WARRANTIES, EXPRESS, IMPLIED
OR STATUTORY, INCLUDING BUT NOT LIMITED TO THE WARRANTIES FOR MERCHANTABILITY
AND FITNESS FOR A PARTICULAR PURPOSE, WHICH ARE HEREBY EXPRESSLY DISCLAIMED.
6.6 NOTWITHSTANDING ANYTHING TO THE CONTRARY, NEITHER PARTY SHALL BE
LIABLE, ON ANY THEORY, CONTRACT, TORT, STATUTORY OR OTHERWISE, FOR SPECIAL,
INCIDENTAL AND/OR CONSEQUENTIAL DAMAGES, FOR LOSS OF USE, PROFITS,
OPPORTUNITY, POTENTIAL AND/OR REPUTATION AND/OR FOR COSTS OF SUBSTITUTES,
EXCEPT AS PROVIDED FOR, AND LIMITED TO THE EXTENT SET FORTH IN SECTION 6.2 OR
IN CASES OF INTENT OR PERSONAL INJURY.
7. FORCE MAJEURE, LATE DELIVERIES
7.1 Neither party shall be liable to the other for failure or delay in
the performance of any of its obligations under this Agreement for the time
and to the extent such failure or delay is caused by Force Majeure such as,
but not limited to, riots, civil commotions, wars, hostilities between
nations, governmental laws, orders or regulations, actions by the government
or any agency thereof, storms, fires, strikes, lockouts, sabotages or any
other contingencies beyond the reasonable control of the respective party, of
its Subsidiaries and of its sub-contractors. In such events, the affected
party shall immediately inform the other party of such circumstances together
with documents of proof and the performance of obligations hereunder shall be
suspended during, but not longer than, the period of existence of such cause
and the period reasonably required to perform the obligations in such cases.
7.2 In case of a delay of delivery by more than 45 days caused by
whatever reason including late deliveries of Siemens' subcontractors,
GateField shall only be entitled to cancel the order delayed, in whole or in
part, without incurring any liability. Any further claims for damages due to
late deliveries shall be excluded according to section 6.6.
8. PROPRIETARY INFORMATION
8.1 Both GateField and Siemens agree that Proprietary Information of
the other will be used by them exclusively for the purpose of manufacturing
Wafers hereunder and will not be disclosed to any third part without the
prior written permission of the disclosing party. Additionally the parties
agree that this Agreement and its Exhibits as such and the content thereof
shall be kept confidential, except for the provisions in section 8.4
8.2 Each receiving party agrees to use the same degree of care as it
uses to protect its own Proprietary Information of like importance but at
least reasonable degree of care to maintain in confidence Proprietary
Information furnished by the disclosing party hereunder, not to make use
thereof other than for the purposes set forth in this Agreement, and not to
distribute, disclose
8.
<PAGE>
or disseminate Proprietary information in any way or form to anyone except
its own employees and Siemens' Subsidiaries' employees who have a reasonable
need to know the same, provided however that this Agreement shall impose no
obligation on the receiving party with respect to any Proprietary Information
which
(a) the receiving party can demonstrate, is already in the public
domain or becomes available to the public through no breach by the receiving
party;
(b) was rightfully in the receiving party's possession without
obligation of confidence prior to receipt from the disclosing party as proved
by the receiving party's written records;
(c) can be proved to have been rightfully received by the
receiving party from a third party without obligation of confidence;
(d) is independently developed by the receiving party as proved by
its written records;
(e) is approved for release by written agreement of the disclosing
party.
8.3 Siemens shall destroy all defective Wafers and masks unless
otherwise requested by GateField in writing. In the case of idle masks or
excessive Wafers Siemens will inform GateField in writing and GateField will
give the disposition within 30 days.
8.4 No press-release or any publication of the existence of this
Agreement shall be allowed unless first approved by the other party in
writing, provided however, that Siemens shall approve and agree to such
disclosures as are required for GateField by the applicable state and federal
securities laws.
8.5 Upon respective written request by the disclosing party, the
receiving party shall return all written Proprietary Information received, as
well all copies made of such Proprietary Information.
8.6 All Proprietary Information of the disclosing party shall remain
the property of that party. Any masks generated by Siemens from GateField
database tapes shall be the property of GateField, will be returned to
GateField on GateField' request, and will be used exclusively to produce
Wafers for GateField. Except as expressly state, nothing contained in this
Agreement shall be construed as granting any license or rights under any
proprietary right whether present or future. The disclosure of Proprietary
Information shall not result in any obligation to grant either party rights
therein.
8.7 Upon termination or expiration of this Agreement for whatever
reason, the receiving party shall return to the other party the original and
all copies of any Proprietary Information and/or destroy all such it
GateField and will not make any further use of such Proprietary Information
and will not manufacture or have manufactured any product incorporating the
other parties Proprietary Information.
9.
<PAGE>
9. INTELLECTUAL PROPERTY INDEMNITY
9.1 It is GateField' responsibility to defend or to otherwise solve at
GateField' expense any dispute arising from a claim that the Integrated
Circuit Products infringe a third party's patent, trademark, copyright, mask
work rights, trade secret or other intellectual properties (hereafter
referred to as "Protective Rights") due to the GateField Product Information
Package and incorporated in Integrated Circuit Products processed by Siemens.
9.2 If a third party raises legally justifiable claims against
GateField for infringement of Protective Rights by the Product Technology or
the manufacturing processes of the Product Technology used by Siemens or its
Subsidiaries to process the Wafers or the information provided according to
Section 2.1.1, Siemens will, at its own cost, obtain for GateField a right to
use the Wafers and sell the Integrated Circuit Products. If it should prove
impossible to do so under financially acceptable conditions, Siemens may
choose to modify the Product Technology or the manufacturing processes of the
Product Technology used by Siemens or its Subsidiaries to process the Wafers
or the information provided according to Section 2.1.1 so that it no longer
infringes the Protective Rights, or will take back the Wafers and reimburse
the price paid to Siemens.
9.3 The obligations on Siemens identified under section 9.2 above will
apply only if GateField advises Siemens without delay in writing of any
claims for such infringement of Protective Rights, does not accept any such
claim, and conducts any discussions, including out-of-court settlement, only
in agreement with Siemens.
9.4 The above liability shall be the sole and exclusive remedies
between the parties with respect to intellectual property indemnity.
10. EXPORT REGULATIONS
10.1 GateField' Product Information Package as well as supplies to be
performed under this Agreement are subject to governmental export
regulations. Consequently, these obligations may be subject to the approval
by the respective governmental authorities.
10.2 Both parities will comply with their respective governmental law
and regulations.
11. ASSIGNMENT
11.1 Neither party shall delegate any obligations under this Agreement
or assign this Agreement or any interest or rights hereunder without the
prior written consent of the other, except incident to the sales or transfer
of substantially all of such party's business.
11.2 Siemens may have discharged its obligations covered under this
Agreement by its Subsidiaries, provided however, that any assignment or
delegation by Siemens to any of its Subsidiaries shall not relieve Siemens of
ultimate responsibility for the performance of its obligations under this
Agreement.
10.
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12. TERM AND TERMINATION
12.1 This Agreement becomes effective with the execution hereof by both
parties and continues to be valid for an unlimited period of time. Each
party may terminate the Agreement with at least twelve (12) months prior
written notice with effective termination date as of the end of a quarter of
a calendar year, and no such termination may be effective prior to December
31, 2000.
12.2 This Agreement may be terminated immediately by one party if the
other party
(i) breaches any material provision of this Agreement and does not
remedy such breach within thirty (30) days written notice of breach; or
(ii) becomes insolvent or otherwise subject to insolvency
procedures;
12.3 Siemens and GateField, by mutual decision, may terminate this
Agreement if the first Integrated Circuit Products does not pass GateField'
qualification criteria (Exhibit 4) before October 30, 1999.
12.4 The provisions of Section 6, 8, 9, 13 and 14 shall also apply after
termination of this Agreement.
13. ARBITRATION
13.1 Any difference or disputes arising out of or in connection with
this Agreement including any question regarding its existence validity or
termination shall be finally and exclusively settled under the Rules of
California and Arbitration of the International Chamber of Commerce in Paris
(Rules) by three independent arbitrators appointed in accordance with the
Rules.
13.2 The place of arbitration shall be Zurich, Switzerland. The
procedural law of this place shall apply where the rules are silent.
13.3 The arbitral award shall be substantiated in writing. The arbitral
tribunal shall also decide on the matter of costs of the arbitration.
13.4 The arbitration procedure shall be conducted in the English
language. Evidence can be translated into English, as appropriate.
14. SUBSTANTIVE LAW
All disputes shall be settled in accordance with the provisions of this
Agreement and all other agreements regarding its performance, otherwise in
accordance with the substantive law in force in the Federal Republic of
Germany without reference to other law. The United Nations Convention on
Contracts for the International Sale of Goods of April 11, 1980 shall not
apply.
SHOULD ANY PART OR PROVISION OF THIS AGREEMENT BE HELD UNENFORCEABLE OR
IN CONFLICT WITH THE APPLIANCE LAW, OR IF SUCH LAW
11.
<PAGE>
ALTERS THE EXPRESS MEANING OF ANY MATERIAL TERM OF THIS AGREEMENT AND/OR
ADVERSELY IMPAIRS OR AFFECTS THE RIGHTS; RESPONSIBILITIES AND/OR BENEFITS OF
EITHER PARTY; THE VALIDITY OF THE REMAINING PARTS OR PROVISIONS SHALL NOT BE
AFFECTED BY SUCH HOLDING, UNLESS SUCH UNENFORCEABILITY IMPAIRS THE BENEFIT OF
THE REMAINING PORTION OF THE AGREEMENT. THE UNENFORCEABLE OR CONFLICTING
PROVISIONS SHALL BE REFORMED TO THE EXTENT LEGALLY PRACTICAL TO ACCOMPLISH AS
MOST NEARLY AS POSSIBLE THE PARTIES' INTENT IN ENTERING INTO THIS AGREEMENT
AND SUCH REFORMED PROVISION SHALL BE DEEMED A PROVISION OF THIS AGREEMENT AS
IF ORIGINALLY INCLUDED HEREIN.
15. NOTICES
All notices required to be sent by either party under this Agreement
will be sent to the addresses set forth below or to such other address as any
may subsequently be designated in writing:
If to GateField:
GateField Corporation
President Office
47100 Bayside Parkway
Fremont, CA 94538-9942
United States of America
If to Siemens:
Siemens Aktiengesellschaft
Rechtsabteilung 2
Hofmammstrasse 51
81359 Munchen
Federal Republic of Germany
The addresses for GateField and Siemens for notices and communications
concerning purchase orders, technical problems, etc. shall be fixed
separately in writing between GateField and Siemens.
16. ENTIRE AGREEMENT
This document is the entire understanding between Siemens and GateField
with respect to the subject matter hereof and merges all prior agreements,
dealings, and negotiations. The terms of this Agreement shall govern the
sales and purchase of Wafers. Any terms or conditions printed on the face or
the reverse side of the purchase order sheet or the Siemens acknowledgement
form shall neither be part of this Agreement nor constitute the terms and
conditions of the sales of the Wafers even in case such purchase order sheet
or acknowledgement form is signed and returned by GateField to Siemens or by
Siemens to GateField, unless both parties hereto expressly agree in writing
to include any such terms or conditions in this Agreement. The parties
recognize that the Exhibits to this Agreement will have to be amended
12.
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or exchanged, as the case may be, from time to time but such amendments or
exchanges shall only be effective in writing and signed by the parties. No
modification, alternation or amendment shall be effective unless in writing
and signed by both parties. No waiver of any breach shall be held to be a
waiver of any other or subsequent breach.
AGREED TO:
<TABLE>
<S> <C> <C>
By: /s/ James R. Fiebiger By: /s/ K. Reichow By: /s/ Dr. B. Fritzler
------------------------------ ------------------------------ ------------------------------
Name: Dr. James R. Fiebiger Name: K. Reichow Name: Dr. B. Fritzler
Title: President and CEO Director Title: Vice President Title: Director
Date: May 28, 1998 Date: May 28, 1998 Date: May 28, 1998
</TABLE>
13.
