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EXHIBIT 1
PICTURETEL CORPORATION
STOCK PURCHASE AND INVESTORS RIGHTS AGREEMENT
This Stock Purchase and Investors Rights Agreement (this "AGREEMENT")
is made and entered into as of July 13, 2000, by and between PictureTel
Corporation, a Delaware corporation (the "COMPANY"), Intel Corporation, a
Delaware corporation ("INTEL"), the State of Wisconsin Investment Board
("SWIB"), and the persons listed on SCHEDULE 1 attached hereto (each such
person, and Intel, being referred to herein individually as an "INVESTOR" and
collectively as the "INVESTORS").
RECITALS
WHEREAS, the Company desires to sell to the Investors, and the
Investors desire to purchase from the Company, shares of Series B Preference
Stock, par value $.01 per share, of the Company (the "SERIES B PREFERENCE
STOCK"), on the terms and conditions set forth in this Agreement; and
WHEREAS, such Series B Preference Stock will be convertible into shares
of the Common Stock, par value $.01 per share, of the Company (the "COMMON
STOCK").
NOW, THEREFORE, in consideration of the foregoing recitals, the mutual
promises hereinafter set forth, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
1. AGREEMENT TO PURCHASE AND SELL STOCK.
(a) AUTHORIZATION. The Company's Board of Directors will,
prior to the Closing, authorize the issuance, pursuant to the terms and
conditions of this Agreement, of shares of Series B Preference Stock, having the
rights, preferences, privileges and restrictions set forth in the Certificate of
Designations, Preferences and Other Rights of Series B Preference Stock in the
form attached hereto as EXHIBIT A (the "CERTIFICATE OF DESIGNATIONS") and in an
amount equal to the number of Purchased Shares (as defined in Section 1(b)), and
shall further reserve for issuance upon conversion of the Series B Preference
Stock the number of shares of Common Stock issuable upon the conversion of the
Purchased Shares.
(b) AGREEMENT TO PURCHASE AND SELL SECURITIES. The Company
hereby agrees to issue to the Investors at the Closing (as defined below), and
the Investors hereby agree to acquire from the Company at the Closing, the
number of shares of Series B Preference Stock (collectively, the "PURCHASED
SHARES") equal to Twenty-One Million Eight Hundred Forty-Five Thousand Dollars
($21,845,000) (the "PURCHASE PRICE") divided by the Per Share Purchase Price (as
defined below), rounded up to the nearest whole share. As used in this
Agreement, "PER SHARE PURCHASE PRICE" equals Two Dollars and Fifty Cents
($2.50). The allocation of the Purchase Price among the Investors is set forth
opposite such Investor's name on SCHEDULE 1 attached hereto. At the Closing,
each Investor shall receive the number of Purchased Shares equal to the Purchase
Price set forth opposite such Investor's name on SCHEDULE 1 attached hereto
divided by the Per Share Purchase Price.
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(c) USE OF PROCEEDS. The Company intends to apply the net
proceeds from the sale of the Purchased Shares for working capital and other
general corporate purposes.
2. CLOSING. The purchase and sale of the Purchased Shares shall
take place at the offices of Gibson, Dunn & Crutcher LLP, 1530 Page Mill Road,
Palo Alto, California, at 10:00 a.m. California time, within three (3) business
days after the conditions set forth in Sections 5 and 6 have been satisfied (or
waived by the party entitled to waive any such conditions), or at such other
time and place as the Company and the Investors mutually agree upon (which time
and place are referred to in this Agreement as the "CLOSING"). At the Closing,
the Company will deliver to the Investors certificates representing the
Purchased Shares against delivery to the Company by the Investors of the
Purchase Price in cash paid by wire transfer of funds to the Company. Closing
documents may be delivered by facsimile with original signature pages sent by
overnight courier. The date of the Closing is referred to herein as the Closing
Date.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
hereby represents and warrants to the Investors that the statements in this
Section 3 are true and correct, except as set forth in the Disclosure Letter (as
defined in Section 7(a)(ii)):
(a) ORGANIZATION GOOD STANDING AND QUALIFICATION. The Company
is a corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware and has all corporate power and authority required
to (a) carry on its business as presently conducted, and (b) enter into this
Agreement and the other agreements, instruments and documents contemplated
hereby, and to consummate the transactions contemplated hereby and thereby. The
Company is qualified to do business and is in good standing in each jurisdiction
in which the failure to so qualify would have a Material Adverse Effect. As used
in this Agreement, "MATERIAL ADVERSE EFFECT" means a material adverse effect on,
or a material adverse change in, or a group of such effects on or changes in,
the business, operations, financial condition, results of operations, prospects,
assets or liabilities of the applicable party and its subsidiaries, taken as a
whole.
(b) CAPITALIZATION. The capitalization of the Company, without
giving effect to the transactions contemplated by this Agreement, is as follows.
The authorized stock of the Company will consist, immediately prior to the
issuance of shares of the Series B Preference Stock under this Agreement, only
of (i) Eighty Million (80,000,000) shares of Common Stock, of which 40,966,647
shares were issued and outstanding as of July 1, 2000; and (ii) Fifteen Million
(15,000,000) shares of Preference Stock, of which 800,000 are designated Junior
Preference Stock reserved for issuance under the Rights Agreement dated as of
March 25, 1992 (the "Rights Agreement") between the Company and The First
National Bank of Boston as Rights Agent, none of which is issued and outstanding
on the date hereof, 4,500,000 are designated Series A Preference Stock, of which
4,478,708 shares are issued and outstanding as of the date hereof and 9,000,000
are designated Series B Preference Stock, of which no shares are issued and
outstanding on the date hereof. All such shares of Common Stock, Series A
Preference Stock, Series B Preference Stock and Junior Preference Stock have
been duly authorized, and all such issued and outstanding shares of Common Stock
and Series A Preference Stock have been validly issued, are fully paid and
nonassessable and are free and clear of all liens, claims and encumbrances,
other than any liens, claims or encumbrances created by or imposed upon the
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holders thereof. As of the date hereof, the Company has also reserved (i)
4,478,708 shares of Common Stock for issuance upon conversion of the outstanding
Series A Preference Stock, (ii) 8,738,000 shares of Common Stock for issuance
upon conversion of the Series B Preference Stock to be purchased hereunder, and
(iii) 9,344,829 shares of Common Stock for issuance upon exercise of options or
other stock awards granted to officers, directors, employees or independent
contractors or affiliates of the Company under the Company's 1984 Stock Option
Plan, the Art Fatum Stock Option Plan, the Cathy O'Rourke Stock Option Plan, the
Lewis Jaffe Stock Option Plan, the Robert Byrnes Stock Option Plan, the 1994
Employee Purchase Plan, the 1999 International Stock Purchase Plan, the
Directors Stock Option Plan, the Equity Incentive Plan, the 1999 Equity Plan,
the MultiLink 1987 Stock Option Plan, the MultiLink 1996 Stock Option Plan and
the Starlight Stock Option Plan (collectively, the "Plans"). All shares of
Common Stock subject to issuance as aforesaid, upon issuance on the terms and
conditions specified in the instruments pursuant to which they are issuable,
will be duly authorized, validly issued, fully paid and nonassessable. Except
for warrants to purchase 2,723 shares of Common Stock issued in connection with
the Company's acquisition of Starlight Networks, there are no other equity
securities, options, warrants, calls, rights, commitments or agreements of any
character to which the Company is a party or by which it is bound obligating the
Company to issue, deliver, sell, repurchase or redeem, or cause to be issued,
delivered, sold, repurchased or redeemed, any shares of the capital stock of the
Company or obligating the Company to grant, extend or enter into any such equity
security, option, warrant, call, right, commitment or agreement. The Company
does not have any subsidiaries, nor does the Company own any capital stock,
assets comprising the business of, obligations of, or any other interest
(including any equity or partnership interest) in, or any outstanding loan or
advance to or from, any person or entity.
(c) DUE AUTHORIZATION. All corporate actions on the part of
the Company, its officers, directors and stockholders necessary for the
authorization, execution, delivery of, and the performance of all obligations of
the Company under this Agreement, and the authorization, issuance, reservation
for issuance and delivery of all of the Purchased Shares being sold under this
Agreement, and all Common Stock issuable upon conversion of the Purchased
Shares, have been or will be taken, and this Agreement constitutes the legal,
valid and binding obligation of the Company, enforceable against the Company in
accordance with their terms, except (a) as may be limited by (i) applicable
bankruptcy, insolvency, reorganization or others laws of general application
relating to or affecting the enforcement of creditors' rights generally and (ii)
the effect of rules of law governing the availability of equitable remedies and
(b) as rights to indemnity or contribution may be limited under federal or state
securities laws or by principles of public policy thereunder.
(d) VALID ISSUANCE OF STOCK.
(i) VALID ISSUANCE. The shares of Series B
Preference Stock to be issued pursuant to this Agreement, and the shares of
Common Stock issuable upon conversion thereof, will be, upon payment therefor by
the Investors in accordance with this Agreement, or conversion in accordance
with the Certificate of Designations, duly authorized, validly issued, fully
paid and non-assessable.
(ii) COMPLIANCE WITH SECURITIES LAWS. Assuming the
correctness of the representations made by the Investors in Section 4 hereof,
the Purchased Shares will be
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issued to the Investors in compliance with applicable exemptions from (A) the
registration and prospectus delivery requirements of the Securities Act of 1933,
as amended (the "SECURITIES ACT") and (B) the registration and qualification
requirements of all applicable securities laws of the states of the United
States.
(e) GOVERNMENTAL CONSENTS. No consent, approval, order or
authorization of, or registration qualification, designation, declaration or
filing with, or notice to, any federal, state or local governmental authority on
the part of the Company is required in connection with the issuance of the
Purchased Shares to the Investors, or the consummation of the other transactions
contemplated by this Agreement, except for: (i) compliance with the HSR
Requirements (as defined below) that may be required for the conversion of the
Series B Preference Stock; (ii) the listing of the Common Stock issuable upon
conversion of the Series B Preference Stock on the Nasdaq National Market, (iii)
the approval of the Company's application to Nasdaq pursuant to Rule 4460 of the
NASD Marketplace Rules, and (iv) the filing of the Certificate of Designations
with the Secretary of State of the State of Delaware. All such qualifications
and filings will, in the case of qualifications, be effective on the Closing and
will, in the case of filings, be made within the time prescribed by law. As used
herein, the term "HSR REQUIREMENTS" means compliance with the filing and other
requirements of the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended (the "HSR ACT").
(f) NON-CONTRAVENTION. The execution, delivery and performance
of this Agreement by the Company, and the consummation by the Company of the
transactions contemplated hereby (including issuance of the Purchased Shares,
and issuance of shares of Common Stock upon conversion of the Purchased Shares),
do not and will not (i) contravene or conflict with the Certificate of
Incorporation or Bylaws of the Company; (ii) constitute a violation of any
provision of any federal, state, local or foreign law binding upon or applicable
to the Company; or (iii) constitute a default or require any consent under, give
rise to any right of termination, cancellation or acceleration of, or to a loss
of any benefit to which the Company is entitled under, or result in the creation
or imposition of any lien, claim or encumbrance on any assets of the Company
under, any contract to which the Company is a party or any permit, license or
similar right relating to the Company or by which the Company may be bound or
affected.
(g) LITIGATION. There is no action, suit, proceeding, claim,
arbitration or investigation ("ACTION") pending or, to the best of the Company's
knowledge, threatened: (a) against the Company, its activities, properties or
assets, or any officer, director or employee of the Company in connection with
such officer's, director's or employee's relationship with, or actions taken on
behalf of, the Company, or (b) that seeks to prevent, enjoin, alter or delay the
transactions contemplated by this Agreement (including issuance of the Purchased
Shares). The Company is not a party to or subject to the provisions of any
order, writ, injunction, judgment or decree of any court or government agency or
instrumentality. No Action by the Company is currently pending nor does the
Company intend to initiate any Action that is reasonably likely to be material
to the Company.
(h) COMPLIANCE WITH LAW AND CHARTER DOCUMENTS. The Company is
not in violation or default of any provisions of its Certificate of
Incorporation or Bylaws, both as amended. The Company has complied in all
material respects and is in material compliance with
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all applicable statutes, laws, rules, regulations and orders of the United
States of America and all states thereof, foreign countries and other
governmental bodies and agencies having jurisdiction over the Company's business
or properties.
(i) SEC DOCUMENTS.
(1) REPORTS. The Company has furnished to the
Investors prior to the date hereof a complete and correct list of all
registration statements, reports and proxy statements filed by the Company
with the SEC on or after March 31, 2000 (the Company's Annual Report on Form
10-K for the fiscal year ended December 31, 1999, its Quarterly Reports on Form
10-Q for the fiscal quarter ended March 31, 2000 and all such other registration
statements, reports and proxy statements are collectively referred to herein as
the "SEC DOCUMENTS"). Each of the SEC Documents, as of the respective date
thereof (or if amended or superseded by a filing prior to the Closing Date, then
on the date of such filing), did not, and each of the registration statements,
reports and proxy statements filed by the Company with the SEC after the date
hereof and prior to the Closing will not, as of the date thereof (or if amended
or superseded by a filing after the date of this Agreement, then on the date of
such filing), contain any untrue statement of a material fact or omit to state a
material fact necessary in order to make the statements made therein, in light
of the circumstances under which they were made, not misleading. The Company is
not a party to any material contract, agreement or other arrangement that was
required to have been filed as an exhibit to the SEC Documents that was not so
filed.
(2) FINANCIAL STATEMENTS. The Company has
provided the Investors with copies of its audited financial statements (the
"AUDITED FINANCIAL STATEMENTS") for the fiscal year ended December 31, 1999, and
its unaudited financial statements for the three-month period ended March 31,
2000 (the "BALANCE SHEET DATE"). Since the Balance Sheet Date, the Company has
duly filed with the SEC all registration statements, reports and proxy
statements required to be filed by it under the Securities Exchange Act of 1934,
as amended (the "EXCHANGE ACT"), and the Securities Act. The audited and
unaudited consolidated financial statements of the Company included in the SEC
Documents filed prior to the date hereof fairly present, in conformity with
generally accepted accounting principles ("GAAP") (except, in the case of the
Form 10-Q's, as may otherwise be permitted by Form 10-Q) applied on a consistent
basis (except as otherwise may be stated in the notes thereto), the consolidated
financial position of the Company and its consolidated subsidiaries as at the
dates thereof and the consolidated results of their operations and cash flows
for the periods then ended (subject to normal year-end audit adjustments in the
case of unaudited interim financial statements).
(j) ABSENCE OF CERTAIN CHANGES SINCE BALANCE SHEET DATE. Since
the Balance Sheet Date, the business and operations of the Company have been
conducted in the ordinary course consistent with past practice, and there has
not been:
(i) any declaration, setting aside or payment of
any dividend or other distribution of the assets of the Company with respect to
any shares of capital stock of the Company or any repurchase, redemption or
other acquisition by the Company or any subsidiary of the Company of any
outstanding shares of the Company's capital stock;
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(ii) any damage, destruction or loss, whether or
not covered by insurance, except for such occurrences, individually and
collectively, that are not material to the Company;
(iii) any waiver by the Company of a valuable
right or of a material debt owed to it, except for such waivers, individually
and collectively, that are not material;
(iv) any material change or amendment to, or any
waiver of any material right under a material contract or arrangement by which
the Company or any of its assets or properties is bound or subject, except for
changes, amendments or waivers that are expressly provided for or disclosed in
this Agreement;
(v) any change by the Company in its accounting
principles, methods or practices or in the manner it keeps its accounting books
and records, except any such change required by a change in GAAP; or
(vi) any other event or condition of any
character, except for such events and conditions that have not resulted, and
could not reasonably be expected to result, either individually or collectively,
in a Material Adverse Effect.
(k) INVENTION ASSIGNMENT AND CONFIDENTIALITY AGREEMENT. Each
employee and consultant or independent contractor of the Company whose duties
include the development of products or Intellectual Property (as defined below),
and each former employee and consultant or independent contractor whose duties
included the development of products or Intellectual Property, has entered into
and executed an invention assignment and confidentiality agreement in customary
form or an employment or consulting agreement containing substantially similar
terms.
(l) INTELLECTUAL PROPERTY.
(i) OWNERSHIP OR RIGHT TO USE. The Company has
sole title to and owns, or is licensed or otherwise possesses legally
enforceable rights to use, all patents or patent applications, software,
know-how, registered or unregistered trademarks and service marks and any
applications therefor, registered or unregistered copyrights, trade names, and
any applications therefor, trade secrets or other confidential or proprietary
information ("INTELLECTUAL PROPERTY") necessary to enable the Company to carry
on its business as currently conducted, except where any deficiency, or group of
deficiencies, would not have a Material Adverse Effect.
(ii) LICENSES; OTHER AGREEMENTS. The Company is
not currently the licensee of any material portion of the Intellectual Property
of the Company. There are not outstanding any licenses or agreements of any kind
relating to any Intellectual Property owned by the Company, except for
agreements with customers of the Company entered into in the ordinary course of
the Company's business and other licenses and agreements that, collectively, are
not material. The Company is not obligated to pay any royalties or other
payments to third parties with respect to the marketing, sale, distribution,
manufacture, license or use of any Intellectual Property, except as the Company
may be so obligated in the ordinary course of its business, as disclosed in the
Company's SEC Documents or where the aggregate amount of such payments could not
reasonably be expected to be material.
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(iii) NO INFRINGEMENT. The Company has not
violated or infringed in any material respect, and is not currently violating or
infringing in any material respect, and the Company has not received any
communications alleging that the Company (or any of its employees or
consultants) has violated or infringed, any Intellectual Property of any other
person or entity.
(iv) EMPLOYEES AND CONSULTANTS. To the
best of the Company's knowledge, no employee of or consultant to the Company is
in material default under any term of any material employment contract,
agreement or arrangement relating to Intellectual Property of the Company or any
material non-competition arrangement, other contract or restrictive covenant
relating to the Intellectual Property of the Company. The Intellectual Property
of the Company (other than any Intellectual Property duly acquired or licensed
from third parties) was developed entirely by the employees of or consultants to
the Company during the time they were employed or retained by the Company, and
to the best knowledge of the Company, at no time during conception or reduction
to practice of such Intellectual Property of the Company were any such employees
or consultants operating under any grant from a government entity or agency or
subject to any employment agreement or invention assignment or non-disclosure
agreement or any other obligation with a third party that would materially and
adversely affect the Company's rights in the Intellectual Property of the
Company. Such Intellectual Property of the Company does not, to the best
knowledge of the Company, include any invention or other intellectual property
of such employees or consultants made prior to the time such employees or
consultants were employed or retained by the Company nor any intellectual
property of any previous employer of such employees or consultants nor the
intellectual property of any other person or entity.
(m) REGISTRATION RIGHTS. Other than as set forth in that
certain Stock Purchase and Investor Rights Agreement dated as of January 18,
1999 between the Company and Intel, the Company is not currently subject to any
agreement providing any person or entity any rights (including piggyback
registration rights) to have any securities of the Company registered with the
SEC or registered or qualified with any other governmental authority.
(n) TITLE TO PROPERTY AND ASSETS. The properties and assets of
the Company are owned by the Company free and clear of all mortgages, deeds of
trust, liens, charges, encumbrances and security interests except for statutory
liens for the payment of current taxes that are not yet delinquent and liens,
encumbrances and security interests that arise in the ordinary course of
business and do not in any material respect affect the properties and assets of
the Company. With respect to the property and assets it leases, the Company is
in compliance with such leases in all material respects.
(o) TAX MATTERS. The Company has filed all material tax
returns required to be filed, which returns are true and correct in all material
respects, and the Company has paid in full all taxes that have become due on or
prior to the date hereof (and will have paid when due all taxes that become due
after the date hereof and prior to the Closing), including penalties and
interest, assessments, fees and other charges, other than those being contested
in good faith and/or those for which adequate reserves have been provided for.
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(p) FULL DISCLOSURE. The information contained in this
Agreement, the Disclosure Letter and the SEC Documents with respect to the
business, operations, assets, results of operations and financial condition of
the Company, and the transactions contemplated by this Agreement, are true and
complete in all material respects and do not omit to state any material fact or
facts necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading.
(q) FINDER'S FEE. The Company neither is nor will be
obligated for any finder's or broker's fee or commission in connection with this
transaction.
(r) NO PERSONAL INTERESTS. To the best of its knowledge, no
officer or employee of SWIB has or will receive, directly or indirectly, a
personal interest in the Company or its property or anything of substantial
economic value for his or her private benefit from the Company, or anyone acting
on its behalf, in connection with the investment made pursuant to this
Agreement.
(s) ENFORCEMENT AND CIVIL ACTIONS. None of the Company, any of
its affiliates, or any directors or officers of the Company or any of its
affiliates is or has been the subject of, or a defendant in: (i) an enforcement
action or prosecution (or settlement in lieu thereof) brought by a governmental
authority relating to a violation of securities, tax, fiduciary or criminal
laws, or (ii) a civil action (or settlement in lieu thereof) brought by
investors in a common investment vehicle for violation of duties owed to the
investors. The Company will notify each Investor within ten days in the event
any such action or prosecution is initiated during and period in which such
Investor holds any equity securities of the Company.
4. REPRESENTATIONS, WARRANTIES AND CERTAIN AGREEMENTS OF THE
INVESTOR. Each of the Investors, severally and not jointly, hereby represents
and warrants to the Company, and agrees that:
(a) ORGANIZATION GOOD STANDING AND QUALIFICATION. If
applicable, the Investor is duly organized, validly existing and in good
standing under the laws of the state of its incorporation or organization and
has all corporate power and authority required to carry on its business as
presently conducted. If applicable, the Investor is qualified to do business and
is in good standing in each jurisdiction in which the failure to so qualify
would have a Material Adverse Effect. SWIB is an independent agency of the State
of Wisconsin.
(b) AUTHORIZATION. The execution of this Agreement has been
duly authorized by all necessary corporate, agency or other action on the part
of the Investor. This Agreement constitutes the Investor's legal, valid and
binding obligation, enforceable in accordance with its terms, except as may be
limited by (a) (i) applicable bankruptcy, insolvency, reorganization or other
laws of general application relating to or affecting the enforcement of
creditors' rights generally and (ii) the effect of rules of law governing the
availability of equitable remedies. The Investor has full corporate power and
authority to enter into this Agreement, except as rights to indemnity or
contribution may be limited under federal or state securities laws or by
principles of public policy thereunder.
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(c) GOVERNMENTAL CONSENTS. No consent, approval, order or
authorization of, or registration, qualification, designation, declaration or
filing with, any federal, state or local governmental authority on the part of
the Investor is required in connection with the purchase of the Preference
Shares by the Investor.
(d) NON-CONTRAVENTION. The execution, delivery and performance
of this Agreement by the Investor, and the consummation by the Investor of the
transactions contemplated hereby, do not and will not (i) contravene or conflict
with the Investor's Certificate of Incorporation, Bylaws or Agreement of Limited
Partnership, as applicable, or with respect to SWIB, SWIB's statutory charter;
(ii) constitute a violation of any provision of any federal, state, local or
foreign law binding upon or applicable to the Investor; or (iii) with respect to
each Investor other than SWIB, constitute a default or require any consent
under, give rise to any right of termination, cancellation or acceleration of,
or to a loss of any benefit to which the Investor is entitled under, or result
in the creation or imposition of any lien, claim or encumbrance on any assets of
the Investor under, any contract to which the Investor is a party or any permit,
license or similar right relating to the Investor or by which the Investor may
be bound or affected.
(e) LITIGATION. There is no Action pending that seeks to
prevent, enjoin, alter or delay the transactions contemplated by this Agreement.
(f) PURCHASE FOR OWN ACCOUNT. The Purchased Shares are being
acquired for investment for the Investor's own account, not as a nominee or
agent, and not with a view to the public resale or distribution thereof within
the meaning of the Securities Act, and the Investor has no present intention of
selling, granting any participation in, or otherwise distributing the same. The
Investor also represents that it has not been formed for the specific purpose of
acquiring the Purchased Shares.
(g) INVESTMENT EXPERIENCE. The Investor understands that the
purchase of the Purchased Shares involves substantial risk. The Investor has
experience as an investor in securities of companies and acknowledges that it is
able to fend for itself, can bear the economic risk of its investment in the
Purchased Shares and has such knowledge and experience in financial or business
matters that it is capable of evaluating the merits and risks of this investment
in the Purchased Shares and protecting its own interests in connection with this
investment.
(h) ACCREDITED INVESTOR STATUS. Except for the officers
and directors of the Company named on SCHEDULE 2 attached hereto, each Investor
is an "accredited investor" within the meaning of Regulation D promulgated under
the Securities Act.
(i) RESTRICTED SECURITIES. The Investor understands that the
Purchased Shares are characterized as "restricted securities" under the
Securities Act, inasmuch as they are being acquired from the Company in a
transaction not involving a public offering and that under the Securities Act
and applicable regulations thereunder such securities may be resold without
registration under the Securities Act only in certain limited circumstances. The
Investor is familiar with Rule 144 of the SEC, as presently in effect, and
understands the resale limitations imposed thereby and by the Securities Act.
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(j) LEGENDS. The Investor agrees that the certificates
for the Purchased Shares shall bear the following legend:
"The shares represented by this
certificate have not been registered
under the Securities Act of 1933 or
with any state securities commission,
and may not be transferred or
disposed of by the holder in the
absence of a registration statement
which is effective under the
Securities Act of 1933 and applicable
state laws and rules, or, unless,
immediately prior to the time set for
transfer, such transfer may be
effected without violation of the
Securities Act of 1933 and other
applicable state laws and rules."
In addition, the Investor agrees that the Company may place stop transfer orders
with its transfer agents with respect to such certificates. The appropriate
portion of the legend and the stop transfer orders will be removed promptly upon
delivery to the Company of such satisfactory evidence as reasonably may be
required by the Company that such legend or stop orders are not required to
ensure compliance with the Securities Act.
(k) FINDER'S FEE. Investor neither is nor will be
obligated for any finder's or broker's fee or commission in connection with this
transaction.
5. CONDITIONS TO THE INVESTORS' OBLIGATIONS AT CLOSING.
The obligations of the Investors under Sections l and 2 of this Agreement are
subject to the fulfillment or waiver, on or before the Closing, of each of the
following conditions:
(a) REPRESENTATIONS AND WARRANTIES TRUE. Each of the
representations and warranties of the Company contained in Section 3 shall be
true and correct in all material respects on and as of the date of the
Disclosure Letter (as defined in Section 7(a)(ii) below) and on and as of the
date of the Closing, except as set forth in the Disclosure Letter, with the same
effect as though such representations and warranties had been made as of the
Closing.
(b) PERFORMANCE. The Company shall have performed and complied
with all agreements, obligations and conditions contained in this Agreement that
are required to be performed or complied with by it on or before the Closing and
shall have obtained all approvals, consents and qualifications necessary to
complete the purchase and sale described herein.
(c) SECURITIES EXEMPTIONS. The offer and sale of the Purchased
Shares to the Investors pursuant to this Agreement shall be exempt from the
registration requirements of the Securities Act and the registration and/or
qualification requirements of all applicable state securities laws.
(d) PROCEEDINGS AND DOCUMENTS. All corporate and other
proceedings in connection with the transactions contemplated at the Closing and
all documents incident thereto shall be reasonably satisfactory in form and
substance to the Investors, and the Investors shall have received all such
counterpart originals and certified or other copies of such documents as it may
reasonably request. Such documents shall include but not be limited to the
following:
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(i) CERTIFIED CHARTER DOCUMENTS. A copy of
(i) the Certificate of Incorporation certified as of a recent date by the
Secretary of State of Delaware as a complete and correct copy thereof, (ii) a
copy of the Certificate of Designations certified as of a recent date by the
Secretary of State of Delaware, (iii) a copy of the Certificate of Decrease of
the Series A Preference Stock, in the form attached hereto as Exhibit A-1,
certified as of a recent date by the Secretary of State of Delaware, and (iv)
the Bylaws of the Company (as amended through the date of the Closing) certified
by the Secretary of the Company as a true and correct copy thereof as of the
Closing.
(ii) BOARD RESOLUTIONS. A copy, certified by
the Secretary of the Company, of the resolutions of the Board of Directors of
the Company providing for the approval of this Agreement and the issuance of the
Purchased Shares and the shares of Common Stock issuable upon conversion of the
Purchased Shares, and the other matters contemplated hereby and thereby.
(iii) REGISTRAR AND TRANSFER AGENT CERTIFICATE.
A certificate, executed by the Company's registrar and transfer agent certifying
the number of outstanding shares of Common Stock of the Company as of a recent
date reasonably acceptable to the Investors.
(iv) STOCK CERTIFICATE. Each of the Investors
shall have received prior to funding stock certificates representing the number
of Purchased Shares purchased hereunder.
(e) OPINION OF COMPANY COUNSEL. The Investors will have
received an opinion on behalf of the Company, dated as of the date of the
Closing, from each of Ropes & Gray outside counsel to the Company, in the form
attached as EXHIBIT B, and the General Counsel of the Company, in the form
attached hereto as EXHIBIT C.
(f) NO MATERIAL ADVERSE EFFECT. Between the date hereof
and the Closing, there shall not have occurred any Material Adverse Effect to
the Company.
(g) NASDAQ REQUIREMENTS. All requirement of the Nasdaq
National Market in connection with the transactions contemplated by this
Agreement shall have been complied with by the Company. The shares of Common
Stock issuable upon conversion of the Purchased Shares shall have been approved
for quotation on the Nasdaq National Market.
(h) INVESTOR SATISFACTION WITH REVIEW OF DISCLOSURE LETTER.
The Investors shall be satisfied, in the Investors discretion, with their review
of the contents of the Disclosure Letter (as defined in Section 7(a)(ii));
PROVIDED, HOWEVER, that the Investors' willingness to proceed with the Closing
shall not affect the Company's liability for the breach by the Company of any of
its representations or warranties.
(i) OTHER ACTIONS. The Company shall have executed such
certificates, agreements, instruments and other documents, and taken such other
actions as shall be customary or reasonably requested by the Investors in
connection with the transactions contemplated hereby.
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(j) OTHER AGREEMENTS.
----------------
(i) With respect solely to the obligations of
Intel hereunder, Intel or its affiliates and 1414c Inc. shall have entered into
an agreement regarding a multiyear hosting commitment, access to market cameras
and other provisions mutually acceptable to Intel or its affiliates and 1414c
Inc. In addition, Intel or its affiliates shall have received the eMedia
application service for use internal to Intel or its affiliates without charge
for 24 months.
(ii) With respect solely to the obligations of
Intel hereunder, Bedrock and the Company shall have entered into an agreement in
which the Company extends to Bedrock a 36 month commitment not to compete with
any product whose predominant function is a speakerphone.
(iii) Each Investor shall have received the number of
common shares of 1414c Inc., on a fully diluted basis, set forth opposite such
Investor's name on SCHEDULE 1 attached hereto.
(k) The aggregate amount of funds raised by the Company
pursuant to this Agreement shall be at least Twenty Million Dollars
($20,000,000) but in no event greater than Twenty-Two Million Dollars
($22,000,000). Members of the Company's Board of Directors and senior managers
of the Company shall have purchased hereunder, in the aggregate, Series B
Preference Stock with a minimum value of Eight Hundred Thousand Dollars
($800,000).
(l) All of the Purchased Shares shall have been purchased
hereunder and the Company shall have received from each Investor the full
Purchase Price set forth opposite such Investor's name on SCHEDULE 1 attached
hereto.
6. CONDITIONS TO THE COMPANY'S OBLIGATIONS AT CLOSING. The
obligations of the Company to the Investors under this Agreement are subject to
the fulfillment or waiver, on or before the Closing, of each of the following
conditions:
(a) REPRESENTATIONS AND WARRANTIES TRUE. The representations
and warranties of the Investors contained in Section 4 shall be true and correct
in all material respects on and as of the date hereof and on and as of the date
of the Closing with the same effect as though such representations and
warranties had been made as of the Closing.
(b) PERFORMANCE. The Investors shall have performed and
complied with all agreements, obligations and conditions contained in this
Agreement that are required to be performed or complied with by it on or before
the Closing and shall have obtained all approvals, consents and qualifications
necessary to complete the purchase and sale described herein.
(c) PAYMENT OF PURCHASE PRICE. The Investors shall have
delivered to the Company the Purchase Price as specified in Section 1(b).
(d) SECURITIES EXEMPTIONS. The offer and sale of the Purchased
Shares to the Investors pursuant to this Agreement shall be exempt from the
registration requirements of the
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Securities Act and the registration and/or qualification requirements of all
applicable state securities laws.
(e) PROCEEDINGS AND DOCUMENTS. All corporate and other
proceedings in connection with the transactions contemplated at the Closing and
all documents incident thereto will be reasonably satisfactory in form and
substance to the Company and to the Company's legal counsel, and the Company
will have received all such counterpart originals and certified or other copies
of such documents as it may reasonably request.
(f) NASDAQ REQUIREMENTS. All requirement of the Nasdaq
National Market in connection with the transactions contemplated by this
Agreement shall have been complied with.
(g) OTHER ACTIONS. The Investors shall have executed such
certificates, agreements, instruments and other documents, and taken such other
actions as shall be customary or reasonably requested by the Company in
connection with the transactions contemplated hereby.
7. COVENANTS OF THE PARTIES.
Except as otherwise set forth below, the Company and each of
the Investors, severally and not jointly, agree as follows:
(a) REVIEW OF THE COMPANY BY THE INVESTORS; DISCLOSURE LETTER.
(i) REVIEW OF COMPANY. Between the date hereof and
the earlier of the termination of this Agreement in accordance with its terms or
the Closing Date, each Investor's authorized agents (including its attorneys and
accountants), at such Investor's expense, shall have full authority to commence
a complete review of the Company, its assets, properties, business, operations,
prospects and condition (financial and otherwise), including records of its
counsel (except to the extent the disclosure of any such information would
likely result in loss of attorney-client privilege with respect to such
information). The Company will cooperate fully with such examination and will
make full and complete disclosure to the Investors and their representatives of
all facts relating to the Company and its assets, properties, liabilities,
business, operations, prospects and condition (financial or otherwise). The
Company understands that the purchase of the Purchased Shares by the Investors
and the other transactions contemplated by this Agreement are expressly
conditioned upon the Investors' satisfaction with the results of the examination
described in this Section 7(a)(i). The Investors agree to use all reasonable
efforts to complete their review of the Company by the date hereof.
(ii) DISCLOSURE LETTER. On or prior to the date
hereof, the Company has delivered to each Investor a disclosure letter (the
"Disclosure Letter"), which sets forth exceptions, if any, to the
representations and warranties made by the Company in Article 3 hereof. In any
determination of whether any Investor is entitled to indemnification for the
breach of any representations or warranties set forth in this Agreement, only
the Disclosure Letter shall be relevant, and the identification of any matters
on any drafts of the Disclosure Letter shall not be introduced as evidence or
otherwise used in any manner in connection therewith.
(b) [This Section Intentionally Left Blank]
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(c) INFORMATION RIGHTS.
(i) FINANCIAL INFORMATION. The Company
covenants and agrees that, commencing on the Closing and continuing for so long
as an Investor holds any Purchased Shares, the Company shall:
(A) ANNUAL REPORTS. Furnish to the
Investor promptly following the filing of such report with the SEC a copy of the
Company's Annual Report on Form 10-K for each fiscal year, which shall include a
consolidated balance sheet as of the end of such fiscal year, a consolidated
statement of income and a consolidated statement of cash flows of the Company
and its subsidiaries for such year, setting forth in each case in comparative
form the figures from the Company's previous fiscal year, all prepared in
accordance with generally accepted accounting principles and practices and
audited by nationally recognized independent certified public accountants. In
the event the Company shall no longer be required to file Annual Reports on Form
10-K, the Company shall, within ninety (90) days following the end of each
respective fiscal year, deliver to the Investor a copy of such balance sheets,
statements of income and statements of cash flows.
(B) QUARTERLY REPORTS. Furnish to the
Investor promptly following the filing of such report with the SEC, a copy of
each of the Company's Quarterly Reports on Form 10-Q, which shall include a
consolidated balance sheet as of the end of the respective fiscal quarter,
consolidated statements of income and consolidated statements of cash flows of
the Company and its subsidiaries for the respective fiscal quarter and for the
year to-date, setting forth in each case in comparative form the figures from
the comparable periods in the Company's immediately preceding fiscal year, all
prepared in accordance with generally accepted accounting principles and
practices (except, in the case of any Form 10-Q, as may otherwise be permitted
by Form 10-Q), but all of which may be unaudited. In the event the Company shall
no longer be required to file Quarterly Reports on Form 10-Q, the Company shall,
within forty-five (45) days following the end of each of the first three (3)
fiscal quarters of each fiscal year, deliver to the Investor a copy of such
balance sheets, statements of income and statements of cash flows.
(ii) SEC FILINGS. The Company shall deliver to
the Investor copies of each other document filed with the SEC on a
non-confidential basis promptly following the filing of such document with the
SEC.
(d) REGISTRATION RIGHTS.
(i) DEFINITIONS. For purposes of this Section 7(d):
(A) REGISTRATION. The terms "REGISTER,"
"REGISTERED," and "REGISTRATION" refer to a registration effected by preparing
and filing a registration statement in compliance with the Securities Act of
1933, as amended, (the "SECURITIES ACT"), and the declaration or ordering of
effectiveness of such registration statement.
(B) REGISTRABLE SECURITIES. The term
"REGISTRABLE SECURITIES" means: (x) the Purchased Shares and any shares of
Common Stock of the Company issued or issuable upon conversion of the Purchased
Shares; (y) any other shares of Common Stock of the
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<PAGE> 15
Company acquired by the Investors from the Company after the date hereof; and
(z) any shares of Common Stock of the Company or other securities of the Company
issued as (or issuable upon the conversion or exercise of any warrant, right or
other security that is issued as) a dividend or other distribution with respect
to, or in exchange for or in replacement of, any of the securities described in
the immediately preceding Clauses (x) or (y). Notwithstanding the foregoing,
"Registrable Securities" shall exclude any Registrable Securities sold by a
person in a transaction in which rights under this Section 7(d) are not assigned
in accordance with this Agreement or any Registrable Securities sold in a public
offering, whether sold pursuant to Rule 144 promulgated under the Securities
Act, or in a registered offering, or otherwise.
(C) REGISTRABLE SECURITIES THEN
OUTSTANDING. The number of shares of "REGISTRABLE SECURITIES THEN OUTSTANDING"
shall mean the number of shares of Purchased Shares, shares of Common Stock and
other securities that are Registrable Securities and are then issued and
outstanding.
(D) HOLDER. For purposes of this
Section 7(d), the term "HOLDER" means any person owning of record Registrable
Securities that have not been sold to the public or pursuant to Rule 144
promulgated under the Securities Act or any permitted assignee of record of such
Registrable Securities to whom rights under this Section 7(d) have been duly
assigned in accordance with this Agreement.
(E) FORM S-3. The term "FORM S-3" means
such form under the Securities Act as is in effect on the date hereof or any
successor registration form under the Securities Act subsequently adopted by the
SEC that permits inclusion or incorporation of substantial information by
reference to other documents filed by the Company with the SEC.
(ii) DEMAND REGISTRATION.
(A) REQUEST BY HOLDERS. If the Company
shall, following the Closing, receive a written request from the Holders of
twenty-five percent (25%) of the Purchased Shares issued as of the Closing, that
the Company file a registration statement under the Securities Act on Form S-3
or such other form as such Holders (upon the advice of the underwriters, if any,
engaged by such Holders) may request (including a "shelf" registration
statement, if requested by such Holders, during any period of time that Rule 144
is not available as an exemption for the sale in a single 90-day period of all
of the Registrable Securities that any such Holder desires to sell, in which
case the Company would maintain the effectiveness of such "shelf" registration
statement until all such Registrable Securities could be sold under Rule 144 in
a single 90-day period) covering the registration of Registrable Securities,
then the Company shall, within ten (10) business days of the receipt of such
written request, give written notice of such request ("REQUEST NOTICE") to all
Holders, and use commercially reasonable efforts to effect, as soon as
practicable, the registration under the Securities Act of all Registrable
Securities that Holders request to be registered and included in such
registration by written notice given such Holders to the Company within twenty
(20) days after receipt of the Request Notice; PROVIDED that the Company shall
not be obligated to effect any such registration if the Company has, within the
six (6) month period preceding the date of such request, already effected a
registration under the Securities Act pursuant to Section 7(d)(iii), other than
a registration from which the Registrable Securities of Holders have been
excluded with respect to all or any portion of the
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Registrable Securities the Holders requested be included in such registration;
PROVIDED, HOWEVER, that the Company shall have no obligation to cause any
registration statement contemplated by this Section 7(d)(ii) to become effective
prior to the one hundred and eightieth (180th) day after the Closing Date;
PROVIDED, FURTHER, that the Company shall have no obligation to cause any
"shelf" registration statement contemplated by this Section 7(d)(ii) to become
effective prior to the first anniversary of the Closing Date. If requested by
such Holders, upon the advice of the underwriters, if any, engaged by such
Holders, the Company shall register such Registrable Securities on Form S-1 or
any successor registration form.
(B) UNDERWRITING. If the Holders
initiating the registration request under this Section 7(d)(ii) ("INITIATING
HOLDERS") intend to distribute the Registrable Securities covered by their
request by means of an underwriting, then they shall so advise the Company as a
part of their request, and the Company shall include such information in the
written notice referred to in Section 7(d)(ii)(A). In such event, the right of
any Holder to include his or her Registrable Securities in such registration
shall be conditioned upon such Holder's participation in such underwriting and
the inclusion of such Holder's Registrable Securities in the underwriting
(unless otherwise mutually agreed by a majority in interest of the initiating
Holders and such Holder determined based on the number of Registrable Securities
held by such Holders being registered). All Holders proposing to distribute
their securities through such underwriting shall enter into an underwriting
agreement in customary form with the managing underwriter or underwriters
selected for such underwriting by the Holders of a majority of the Registrable
Securities being registered and reasonably acceptable to the Company (including
a market stand-off agreement of up to 180 days if required by such
underwriters). Notwithstanding any other provision of this Section 7(d)(ii), if
the underwriter(s) advise(s) the Company in writing that marketing factors
require a limitation of the number of securities to be underwritten then the
Company shall so advise all Holders of Registrable Securities that would
otherwise be registered and underwritten pursuant hereto, and the number of
Registrable Securities that may be included in the underwriting shall be reduced
as required by the underwriter(s) and allocated among the Holders of Registrable
Securities on a pro rata basis according to the number of Registrable Securities
then outstanding held by each Holder requesting registration (including the
initiating Holders); PROVIDED, HOWEVER, that the number of shares of Registrable
Securities to be included in such underwriting and registration shall not be
reduced unless all other securities of the Company and any selling
securityholder other than the Holders are first entirely excluded from the
underwriting and registration. Any Registrable Securities excluded and withdrawn
from such underwriting shall be withdrawn from the registration.
(C) MAXIMUM NUMBER OF DEMAND
REGISTRATIONS. The Company shall be obligated to effect only three (3) such
registration pursuant to this Section 7(d)(ii).
(D) DEFERRAL. Notwithstanding the
foregoing, if the Company shall furnish to Holders requesting the filing of a
registration statement pursuant to this Section 7(d)(ii) a certificate signed by
the President or Chief Executive Officer of the Company stating that in the good
faith judgment of the Company's Board of Directors, it would be materially
detrimental to the Company and its stockholders for such registration statement
to be filed, then the Company shall have the right to defer such filing for a
period of not more than
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ninety (90) days after receipt of the request of the initiating Holders;
PROVIDED, HOWEVER, that the Company may not utilize this right more than once in
any twelve (12) month period.
(E) EXPENSES. All expenses incurred
in connection with any registration pursuant to this Section 7(d)(ii), including
all federal and "blue sky" registration, filing and qualification fees,
printer's and accounting fees, and fees and disbursements of counsel for the
Company (but excluding underwriters' discounts and commissions relating to
shares sold by the Holders), shall be borne by the Company. Each Holder
participating in a registration pursuant to this Section 7(d)(ii) shall bear
such Holder's proportionate share (based on the total number of shares sold in
such registration other than for the account of the Company) of all discounts,
commissions or other amounts payable to underwriters or brokers in connection
with such offering by the Holders. Notwithstanding the foregoing, the Company
shall not be required to pay for any expenses of any registration proceeding
begun pursuant to this Section 7(d)(ii) if the registration request is
subsequently withdrawn at the request of the Holders of a majority of the
Registrable Securities to be registered, unless the Holders of such majority
agree that such registration constitutes the use by the Holders of one (1)
demand registration pursuant to this Section 7(d)(ii) (in which case such
registration shall also constitute the use by all Holders of Registrable
Securities of one (l) such demand registration); PROVIDED FURTHER, HOWEVER, that
if at the time of such withdrawal, the Holders have learned of a material
adverse change relating to the Company not known to the Holders at the time of
their request for such registration and have withdrawn their request for
registration after learning of such material adverse change, then the Holders
shall not be required to pay any of such expenses and such registration shall
not constitute the use of a demand registration pursuant to this Section
7(d)(ii).
(iii) PIGGYBACK REGISTRATIONS. The Company shall
notify all Holders of Registrable Securities in writing at least thirty (30)
days prior to filing any registration statement under the Securities Act for
purposes of effecting a public offering of securities of the Company (including
registration statements relating to secondary offerings of securities of the
Company, but EXCLUDING registration statements relating to any employee benefit
plan or any merger or other corporate reorganization) and will afford each such
Holder an opportunity to include in such registration statement all or any part
of the Registrable Securities then held by such Holder. Each Holder desiring to
include in any such registration statement all or any part of the Registrable
Securities held by such Holder shall within twenty (20) days after receipt of
the above-described notice from the Company, so notify the Company in writing,
and in such notice shall inform the Company of the number of Registrable
Securities such Holder wishes to include in such registration statement. If a
Holder decides not to include all of its Registrable Securities in any
registration statement thereafter filed by the Company, such Holder shall
nevertheless continue to have the right to include any Registrable Securities in
any subsequent registration statement or registration statements as may be filed
by the Company with respect to offerings of its securities, all upon the terms
and conditions set forth herein.
(A) UNDERWRITING. If a registration
statement under which the Company gives notice under this Section 7(d)(iii) is
for an underwritten offering, then the Company shall so advise the Holders of
Registrable Securities. In such event, the right of any such Holder's
Registrable Securities to be included in such a registration pursuant shall be
conditioned upon such Holder's participation in such underwriting and the
inclusion of such Holder's Registrable Securities in the underwriting to the
extent provided herein. All Holders
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proposing to distribute their Registrable Securities through such underwriting
shall enter into an underwriting agreement in customary form with the managing
underwriter or underwriters selected for such underwriting (including a market
stand-off agreement of up to 180 days if required by such underwriters);
PROVIDED, HOWEVER, that it shall not be considered customary to require any of
the Holders to provide representations and warranties regarding the Company or
indemnification of the underwriters for material misstatements or omissions in
the registration statement or prospectus for such offering. Notwithstanding any
other provision of this Agreement, if the managing underwriter determine(s) in
good faith that marketing factors require a limitation of the number of shares
to be underwritten, then the managing underwriter(s) may exclude shares from the
registration and the underwriting; PROVIDED; HOWEVER, that the securities to be
included in the registration and the underwriting shall be allocated, (1) FIRST
to the Company (PROVIDED, HOWEVER, that a minimum of twenty-five percent (25%)
of the number of Registrable Securities held by each Holder (where any
Registrable Securities that are not shares of Common Stock but are exercisable
or exchangeable for, or convertible into, shares of Common Stock, shall be
deemed to have been so exercised, exchanged or converted for such purpose) must
also in any event be included if requested by any such Holder), (2) SECOND, to
the extent the managing underwriter determines additional securities can be
included after compliance with Clause (1), to each of the Holders (to the extent
not included pursuant to Clause (1)) requesting inclusion of their Registrable
Securities in such registration statement on a pro rata basis based on the total
number of Registrable Securities and other securities entitled to registration
then held by each such Holder, and (3) THIRD, to the extent the managing
underwriter determines additional securities can be included after compliance
with Clauses (1) and (2), any other shares of Common Stock or other securities
of the Company. Any Registrable Securities excluded or withdrawn from such
underwriting shall be excluded and withdrawn from the registration. For any
Holder that is a partnership, the Holder and the partners and retired partners
of such Holder, or the estates and family members of any such partners and
retired partners and any trusts for the benefit of any of the foregoing persons,
and for any Holder that is a corporation, the Holder and all corporations that
are affiliates of such Holder, shall be deemed to be a single "Holder," and any
pro rata reduction with respect to such "Holder" shall be based upon the
aggregate amount of shares carrying registration rights owned by all entities
and individuals included in such "Holder," as defined in this sentence.
(B) EXPENSES. All expenses incurred in
connection with a registration pursuant to this Section 7(d)(iii) (excluding
underwriters' and brokers' discounts and commissions relating to shares sold by
the Holders), including all federal and "blue sky" registration, filing and
qualification fees, printers' and accounting fees, and fees and disbursements of
counsel for the Company, shall be borne by the Company.
(C) NOT DEMAND REGISTRATION.
Registration pursuant to this Section 7(d)(iii) shall not be deemed to be a
demand registration as described in Section 7(d)(ii) above. Except as otherwise
provided herein, there shall be no limit on the number of times the Holders may
request registration of Registrable Securities under this Section 7(b)(iii).
(iv) FORM S-3 REGISTRATION. If requested by an
Investor, the Company shall use all reasonable commercial efforts to cause to be
filed and become effective with the SEC a Registration Statement on Form S-3
relating to all of the Registrable Securities (in the event such registration
statement is not effective on such date, the Company shall continue to use
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all reasonable commercial efforts to cause it to become effective until it
becomes effective), such Registration Statement to be effected only for sales or
other transfers by the Investor in connection with offerings, sales and
transfers not constituting an underwritten public offering; PROVIDED, HOWEVER,
that the Company shall not be obligated to cause such registration statement to
become effective before the ninety first (91st) day following the Closing Date;
provided, further, that in the event Form S-3 is not available to the Company,
the Company shall file such other form as may be available if Holders who hold
Registrable Securities with a market value of at least One Million Dollars
($1,000,000) deliver a written request to the Company that the Company do so,
where such market value is determined as of the date of such written request.
The Company shall use its best efforts to cause any such Registration Statement
to become effective as promptly as possible after such filing (but shall not be
required to cause such Registration Statement to become effective prior to the
ninety first (91st) day following the Closing Date) and shall also use its best
efforts to obtain any related qualifications, registrations or other compliances
that may be necessary under any applicable "blue sky" laws. In connection with
such registration, the Company will:
(A) NOTICE. Promptly give written
notice to the Holders of the proposed registration and any related qualification
or compliance; and
(B) REGISTRATION. Effect such
registration and all such qualifications and compliances and as would permit or
facilitate the sale and distribution of all or such portion of such Holders or
Holders' Registrable Securities on and after the ninetieth (90th) day following
the Closing Date; PROVIDED, HOWEVER, that the Company shall not be obligated to
effect any such registration, qualification or compliance pursuant to this
Section 7(d)(iv) in any particular jurisdiction in which the Company would be
required to qualify to do business or to execute a general consent to service of
process in effecting such registration, qualification or compliance.
(C) EXPENSES. The Company shall pay all
expenses incurred in connection with each registration requested pursuant to
this Section 7(d)(iv), excluding underwriters' or brokers' discounts and
commissions relating to shares sold by the Holders, including federal and "blue
sky" registration, filing and qualification fees, printers' and accounting fees,
and fees and disbursements of counsel.
(D) DEFERRAL. Notwithstanding the
foregoing, if the Company shall furnish to Holders requesting the filing of a
registration statement pursuant to this Section 7(d)(iv), a certificate signed
by the President or Chief Executive Officer of the Company stating that in the
good faith judgment of the Company's Board of Directors, it would be materially
detrimental to the Company and its stockholders for such registration statement
to be filed, then the Company shall have the right to defer such filing for a
period of not more than ninety (90) days after receipt of the request of the
initiating Holders; PROVIDED, HOWEVER, that the Company may not utilize this
right more than once in any twelve (12) month period, and the period of time
that the Company is obligated to maintain the effectiveness of any registration
statement under Clause (F) below shall be extended for the length of any such
period of deferral.
(E) NOT DEMAND REGISTRATION. Form S-3
registrations shall not be deemed to be demand registrations as described in
Section 7(d)(ii) above.
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(F) MAINTENANCE. The Company shall use
all reasonable commercial efforts to maintain the effectiveness of any Form S-3
registration statement filed under this Section 7(d)(iv) until the earlier of:
(a) the date on which all of the Registrable Securities have been sold; and (b)
the first anniversary of the effective date of such registration statement;
PROVIDED, HOWEVER, that unless all of the Registrable Securities held by an
Investor as of such first anniversary could then be sold in a single transaction
in accordance with Rule 144 under the Securities Act without exceeding the
volume limitations thereof, if the Company receives written notice from such
Investor that such Investor may be deemed to be an "affiliate" of the Company
for purposes of the Securities Act, the date in this Clause (b) shall be
extended until such Investor advises the Company that it no longer believes it
may be deemed such an "affiliate."
(v) OBLIGATIONS OF THE COMPANY. Whenever
required to effect the registration of any Registrable Securities under this
Agreement the Company shall, as expeditiously as reasonably possible:
(A) REGISTRATION STATEMENT. Prepare and
file with the SEC a registration statement with respect to such Registrable
Securities and use commercially reasonable efforts to cause such registration
statement to become effective; PROVIDED, HOWEVER, that, except as otherwise
required by in this Section 7(d), the Company shall not be required to keep any
such registration statement effective for more than ninety (90) days.
(B) AMENDMENTS AND SUPPLEMENTS. Prepare
and file with the SEC such amendments and supplements to such registration
statement and the prospectus used in connection with such registration statement
as may be necessary to comply with the provisions of the Securities Act with
respect to the disposition of all securities covered by such registration
statement.
(C) PROSPECTUSES. Furnish to the
Holders such number of copies of a prospectus, including a preliminary
prospectus, in conformity with the requirements of the Securities Act, and such
other documents as they may reasonably request in order to facilitate the
disposition of the Registrable Securities owned by them that are included in
such registration.
(D) BLUE SKY. Use commercially
reasonable efforts to register and qualify the securities covered by such
registration statement under such other securities or Blue Sky laws of such
jurisdictions as shall be reasonably requested by the Holders, provided that the
Company shall not be required in connection therewith or as a condition thereto
to qualify to do business or to file a general consent to service of process in
any such states or jurisdictions.
(E) UNDERWRITING. In the event of any
underwritten public offering, enter into and perform its obligations under an
underwriting agreement in usual and customary form (including customary
indemnification of the underwriters by the Company), with the managing
underwriter(s) of such offering. Each Holder participating in such underwriting
shall also enter into and perform its obligations under such an agreement;
PROVIDED, HOWEVER, that it shall not be considered customary to require any of
the Holders to provide
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representations and warranties regarding the Company or indemnification of the
underwriters for material misstatements or omissions in the registration
statement or prospectus for such offering.
(F) NOTIFICATION. Notify each Holder of
Registrable Securities covered by such registration statement at any time when a
prospectus relating thereto is required to be delivered under the Securities Act
of the happening of any event as a result of which the prospectus included in
such registration statement, as then in effect, includes an untrue statement of
a material fact or omits to state a material fact required to be stated therein
or necessary to make the statements therein not misleading in the light of the
circumstances then existing.
(G) OPINION AND COMFORT LETTER.
Furnish, at the request of any Holder requesting registration of Registrable
Securities, on the date that such Registrable Securities are delivered to the
underwriters for sale, if such securities are being sold through underwriters,
or, if such securities are not being sold through underwriters, on the date that
the registration statement with respect to such securities becomes effective,
(i) an opinion, dated as of such date, of the counsel representing the Company
for the purposes of such registration, in form and substance as is customarily
given to underwriters in an underwritten public offering and reasonably
satisfactory to a majority in interest of the Holders requesting registration,
addressed to the underwriters, if any, and to the Holders requesting
registration of Registrable Securities and (ii) in the event that such
securities are being sold through underwriters, a "comfort" letter dated as of
such date, from the independent certified public accountants of the Company, in
form and substance as is customarily given by independent certified public
accountants to underwriters in an underwritten public offering and reasonably
satisfactory to a majority in interest of the Holders requesting registration,
addressed to the underwriters and to the Holders requesting registration of
Registrable Securities.
(vi) FURNISH INFORMATION. It shall be a
condition precedent to the obligations of the Company to take any action
pursuant to Sections 7(d)(ii), (iii) or (iv) that the selling Holders shall
furnish to the Company such information regarding themselves, the Registrable
Securities held by them, and the intended method of disposition of such
securities as shall be required to timely effect the registration of their
Registrable Securities.
(vii) INDEMNIFICATION. In the event any
Registrable Securities are included in a registration statement under Sections
7(d)(ii), (iii) or (iv):
(A) BY THE COMPANY. To the extent
permitted by law, the Company will indemnify and hold harmless each Holder, the
partners, officers, shareholders, employees, representatives and directors of
each Holder, any underwriter (as determined in the Securities Act) for such
Holder and each person, if any, who controls such Holder or underwriter within
the meaning of the Securities Act or the Securities Exchange Act of 1934, as
amended, against any losses, claims, damages, or Liabilities (joint or several)
to which they may become subject under the Securities Act, the Exchange Act or
other federal or state law, insofar as such losses, claims, damages, or
liabilities (or actions in respect thereof) arise out of or are based upon any
of the following statements, omissions or violations (collectively a
"VIOLATION"):
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<PAGE> 22
(x) any untrue statement or
alleged untrue statement of a material fact contained in such registration
statement, including any preliminary prospectus or final prospectus contained
therein or any amendments or supplements thereto;
(y) the omission or alleged
omission to state therein a material fact required to be stated therein, or
necessary to make the statements therein not misleading, or
(z) any violation or alleged
violation by the Company of the Securities Act, the Exchange Act, any federal or
state securities law or any rule or regulation promulgated under the Securities
Act, the Exchange Act or any federal or state securities law in connection with
the offering covered by such registration statement;
and the Company will reimburse each such Holder, partner, officer, shareholder,
employee, representative, director, underwriter or controlling person for any
legal or other expenses reasonably incurred by them, as incurred, in connection
with investigating or defending any such loss, claim, damage, liability or
action; PROVIDED, HOWEVER, that the indemnity agreement contained in this
subsection shall not apply to amounts paid in settlement of any such loss,
claim, damage, liability or action if such settlement is effected without the
consent of the Company (which consent shall not be unreasonably withheld), nor
shall the Company be liable in any such case for any such loss, claim, damage,
liability or action to the extent that it arises out of or is based upon a
Violation that occurs in reliance upon and in conformity with written
information furnished expressly for use in connection with such registration by
such Holder, partner, officer, shareholder, employee, representative, director,
underwriter or controlling person of such Holder.
(B) BY SELLING HOLDERS. To the extent
permitted by law, each selling Holder will indemnify and hold harmless the
Company, each of its directors, each of its officers who have signed the
registration statement, each person, if any, who controls the Company within the
meaning of the Securities Act, any underwriter and any other Holder selling
securities under such registration statement or any of such other Holder's
partners, officers, shareholders, employees, representatives and directors and
any person who controls such Holder within the meaning of the Securities Act or
the Exchange Act, against any losses, claims, damages or liabilities (joint or
several) to which the Company or any such officer or director, controlling
person, underwriter or other such Holder, partner, officer, shareholder,
employee, representative, director or controlling person of such other Holder
may become subject under the Securities Act, the Exchange Act or other federal
or state law, insofar as such losses, claims, damages or liabilities (or actions
in respect thereto) arise out of or are based upon any Violation, in each case
to the extent (and only to the extent) that such Violation occurs in reliance
upon and in conformity with written information furnished by such Holder
expressly for use in connection with such registration; and each such Holder
will reimburse any legal or other expenses reasonably incurred by the Company or
any such officer or director, controlling person, underwriter or other Holder,
partner, officer, shareholder, employee, representative, director or controlling
person of such other Holder in connection with investigating or defending any
such loss, claim, damage, liability or action: PROVIDED, HOWEVER, that the
indemnity agreement contained in this subsection shall not apply to amounts paid
in settlement of any such loss, claim, damage, liability or action if such
settlement is effected without the consent of the Holder, which
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<PAGE> 23
consent shall not be unreasonably withheld; and PROVIDED FURTHER, that the total
amounts payable in indemnity by a Holder under this subsection or otherwise in
respect of any and all Violations shall not exceed in the aggregate the net
proceeds received by such Holder in the registered offering out of which such
Violations arise.
(C) NOTICE. Promptly after receipt by
an indemnified party under of notice of the commencement of any action
(including any governmental action), such indemnified party will, if a claim in
respect thereof is to be made against any indemnifying party under this section,
deliver to the indemnifying party a written notice of the commencement thereof
and the indemnifying party shall have the right to participate in, and, to the
extent the indemnifying party so desires, jointly with any other indemnifying
party similarly noticed, to assume the defense thereof with counsel mutually
satisfactory to the parties; PROVIDED, HOWEVER, that an indemnified party shall
have the right to retain its own counsel, with the fees and expenses to be paid
by the indemnifying party, to the extent that representation of such indemnified
party by the counsel retained by the indemnifying party would be inappropriate
due to actual or potential conflict of interests between such indemnified party
and any other party represented by such counsel in such proceeding. The failure
to deliver written notice to the indemnifying party within a reasonable time of
the commencement of any such action shall not relieve such indemnifying party of
liability except to the extent the indemnifying party is prejudiced as a result
thereof.
(D) DEFECT ELIMINATED IN FINAL
PROSPECTUS. The foregoing indemnity \agreements of the Company and Holders are
subject to the condition that, insofar as they relate to any Violation made in a
preliminary prospectus but eliminated or remedied in the amended prospectus on
file with the SEC at the time the registration statement in question becomes
effective or the amended prospectus filed with the SEC pursuant to SEC Rule
424(b) (the "FINAL PROSPECTUS"), such indemnity agreement shall not inure to the
benefit of any person if a copy of the Final Prospectus was timely furnished to
the indemnified party and was not furnished to the person asserting the loss,
liability, claim or damage at or prior to the time such action is required by
the Securities Act.
(E) CONTRIBUTION. In order to provide
for just and equitable contribution to joint liability under the Securities Act
in any case in which either (i) any Holder exercising rights under this
Agreement, or any controlling person of any such Holder, makes a claim for
indemnification pursuant to this section, but it is judicially determined (by
the entry of a final judgment or decree by a court of competent jurisdiction and
the expiration of time to appeal or the denial of the last right of appeal) that
such indemnification may not be enforced in such case notwithstanding the fact
that this section provides for indemnification in such case, or (ii)
contribution under the Securities Act may be required on the part of any such
selling Holder or any such controlling person in circumstances for which
indemnification is provided under this section; then, and in each such case, the
Company and such Holder will contribute to the aggregate losses, claims, damages
or liabilities to which they may be subject (after contribution from others) in
such proportion so that such Holder is responsible for the portion represented
by the percentage that the public offering price of its Registrable Securities
offered by and sold under the registration statement bears to the public
offering price of all securities offered by and sold under such registration
statement, and the Company and other selling Holders are responsible for the
remaining portion; PROVIDED, HOWEVER, that, in any such case: (A) no such
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<PAGE> 24
Holder will be required to contribute any amount in excess of the public
offering price of all such Registrable Securities offered and sold by such
Holder pursuant to such registration statement; and (B) no person or entity
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the Securities Act) will be entitled to contribution from any person or entity
who was not guilty of such fraudulent misrepresentation.
(F) SURVIVAL. The obligations of the
Company and Holders under this Section 7(d)(vii) shall survive until the fifth
anniversary of the completion of any offering of Registrable Securities in a
registration statement, regardless of the expiration of any statutes of
limitation or extensions of such statutes.
(viii) TERMINATION OF THE COMPANY'S OBLIGATIONS.
The Company shall have no obligations pursuant to this Section 7(d) (other than
pursuant to Section 7(d)(vii) hereof) with respect to any Registrable Securities
proposed to be sold by a Holder in a registration pursuant to Section 7(d)(ii),
(iii) or (iv) upon the earlier to occur of (a) the date seven (7) years after
the Closing Date, and (b) such date that all shares of Registrable Securities
beneficially owned or subject to Rule 144 aggregation by such Holder may
immediately be sold under Rule 144 (without regard to Rule 144(k)) during any
90-day period.
(ix) NO REGISTRATION RIGHTS TO THIRD PARTIES.
Without the prior written consent of the Holders of at least 66 2/3% of the
Series B Preference Stock then outstanding, the Company covenants and agrees
that it shall not grant, or cause or permit to be created, for the benefit of
any person or entity any registration rights of any kind (whether similar to the
demand, "piggyback" or Form S-3 registration rights described in this Section 7,
or otherwise) relating to shares of the Company's Common Stock or any other
securities of the Company that are pari passu or superior to the rights granted
under this Section 7(d).
(x) SUSPENSION PROVISIONS. Notwithstanding the
foregoing subsections of this Section 7(d), the Company shall not be required to
take any action with respect to the registration or the declaration of
effectiveness of the registration statement following written notice to the
Holders from the Company (a "SUSPENSION NOTICE") of the existence of any state
of facts or the happening of any event (including pending negotiations relating
to, or the consummation of, a transaction, or the occurrence of any event that
the Company believes, in good faith, requires additional disclosure of material,
non-public information by the Company in the registration statement that the
Company believes it has a bona fide business purpose for preserving
confidentiality or that renders the Company unable to comply with the published
rules and regulations of the SEC promulgated under the Securities Act or the
Securities Exchange Act, as in effect at any relevant time (the "RULES AND
REGULATIONS")) that would result in (1) the registration statement, any
amendment or post-effective amendment thereto, or any document incorporated
therein by reference containing an untrue statement of a material fact or
omitting to state a material fact required to be stated therein or necessary to
make the statements therein not misleading, or (2) the prospectus issued under
the registration statement, any prospectus supplement, or any document
incorporated therein by reference including an untrue statement of material fact
or omitting to state a material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading, PROVIDED that the Company (1) shall not issue a Suspension Notice
more than once in any 12 month period, (2) shall use its best efforts to remedy,
as promptly as practicable, but in any event within
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thirty (30) days of the date on which the Suspension Notice was delivered, the
circumstances that gave rise to the Suspension Notice and deliver to the Holders
notification that the Suspension Notice is no longer in effect and (3) shall not
issue a Suspension Notice for any period during which the Company's executive
officers are not similarly restrained from disposing of shares of the Company's
Common Stock. Upon receipt of a Suspension Notice from the Company, all time
limits applicable to the Holders under this Section 7(d) shall automatically be
extended by an amount of time equal to the amount of time the Suspension Notice
is in effect, the Holders will forthwith discontinue disposition of all such
shares pursuant to the registration statement until receipt from the Company of
copies of prospectus supplements or amendments prepared by or on behalf of the
Company (which the Company shall prepare promptly), together with a notification
that the Suspension Notice is no longer in effect, and if so directed by the
Company, the Holders will deliver to the Company all copies in their possession
of the prospectus covering such shares current at the time of receipt of any
Suspension Notice.
(xi) The Company agrees (A) to file with the SEC a
registration statement covering the Series B Preference Stock and underlying
Common Stock within thirty (30) days after the Closing Date; (B) to cause the
effectiveness of such registration statement covering the Series B Preference
Stock and underlying Common Stock within 120 days after the Closing Date, and to
notify each Investor of the effectiveness of such registration statement
promptly after such effectiveness; and (C) to use all reasonable commercial
efforts to cause such registration statement to remain effective for one (1)
year following the initial effective date of such registration statement. If
such registration statement is not declared effective by the SEC within 120 days
after the Closing Date, the Company shall pay the Liquidated Damages Amount (as
defined below) to each Investor each week until such registration statement is
declared effective. For purposes of the preceding sentence, "Liquidated Damages
Amount" means an amount equal to 0.25% of the Purchase Price paid by Intel or
SWIB, as the case may be.
(e) OBLIGATIONS REGARDING CONFIDENTIAL INFORMATION. The terms
and conditions of this Agreement and any agreements or instruments related
hereto (collectively, the "FINANCING TERMS"), including their existence, shall
be considered confidential information and shall not be disclosed by any party
hereto to any third party except in accordance with the provisions set forth in
this Agreement; PROVIDED, HOWEVER, that the Financing Terms shall not include
any information that was (i) publicly known and generally available in the
public domain prior to its disclosure by the Company, (ii) becomes publicly
known and generally available in the public domain through no action or inaction
on the part of the Company or (iii) becomes publicly known by written consent or
other action of Intel and SWIB.
(i) PRESS RELEASES, ETC. No announcement
regarding the Financing Terms in a press release, conference, advertisement,
announcement, professional or trade publication, mass marketing materials or
otherwise to the general public may be made without the prior written consent of
Intel and the prior consent of SWIB. No announcement regarding Intel in a press
release, conference, advertisement, announcement, professional or trade
publication, mass marketing materials or otherwise to the general public may be
made without the prior written consent of Intel.
(ii) PERMITTED DISCLOSURES. Notwithstanding the
foregoing, (a) any party may disclose any of the Financing Terms to its current
or bona fide prospective investors,
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<PAGE> 26
employees, investment bankers, lenders, accountants and attorneys, in each case
only where such persons or entities are subject to appropriate nondisclosure
obligations; (b) Intel may disclose its investment in the Company and the
Financing Terms to third parties or to the public at its sole discretion and, if
it does so, the Company shall have the right to disclose to third parties any
such information disclosed in a press release or other public announcement by
Intel; (c) SWIB may disclose its investment in the Company and the Financing
Terms to third parties or to the public at its sole discretion and, if it does
so, the Company shall have the right to disclose to third parties any such
information disclosed in a press release or other public announcement by SWIB;
(d) the Company may disclose in its Exchange Act filings that each of SWIB and
Intel is an investor in the Company, provided that the final form of the
disclosure is approved in advance in writing by such party; and (e) SWIB may
disclose its investment or any of the Financing Terms pursuant to the
requirements of the Wisconsin Public Records Law. To the extent required by the
rules and regulations of the SEC, upon the advice of counsel, the Company may
file this Agreement as exhibits to its Exchange Act reports; provided, however,
that the Company agrees to seek confidential treatment of any portions of those
documents requested by Intel or SWIB, and provided further that the Company
provides Intel and SWIB with drafts of confidential treatment requests and
redacted copies of the agreements at least three (3) business days prior to the
filing thereof.
(iii) LEGALLY COMPELLED DISCLOSURE. In the event
that any party is requested or becomes legally compelled (including, without
limitation, pursuant to securities laws and regulations) to disclose the
existence of the Financing Terms in contravention of these provisions, such
party (the "DISCLOSING PARTY") shall provide the other parties (the
"NON-DISCLOSING PARTIES") with prompt written notice of that fact so that the
appropriate party may seek (with the cooperation and reasonable efforts of the
other parties) a protective order, confidential treatment or other appropriate
remedy. In such event, the Disclosing Party shall furnish only that portion of
the information which is legally required and shall exercise reasonable efforts
to obtain reliable assurance that confidential treatment will be accorded such
information to the extent reasonably requested by any Non-Disclosing Party.
(iv) JOINT PRESS RELEASE. Prior to the execution
of this Agreement, Intel, SWIB and the Company will agree on the content of a
joint press release announcing the existence of this Agreement, which press
release will be issued promptly following the execution of this Agreement at a
time mutually agreed upon by the parties.
(v) OTHER INFORMATION. The provisions of this
Section 7(e) shall be in addition to, and not in substitution for, the
provisions of any separate nondisclosure agreement executed by any of the
parties hereto with respect to the transactions contemplated hereby. Additional
disclosures and exchange of confidential information between the Company and
Intel (including any exchanges of information with any the Investor board
observer) shall be governed by the terms of the Corporate Non-Disclosure
Agreement No. 2722411, dated October 7, 1998, executed by the Company and the
Investor, and any Confidential Information Transmittal Records provided in
connection therewith.
(f) [This Section Intentionally Left Blank]
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(g) RIGHTS OF PARTICIPATION.
(i) GENERAL. For so long as any Investor holds
the equivalent of at least fifty percent (50%) of the Purchased Shares purchased
by such Investor hereunder (where any shares of Common Stock held by the
Investor as a result of conversion of the Purchased Shares shall be treated as
if they had not been converted for these purposes), such number to be
proportionately adjusted for stock splits, stock dividends and similar events,
such Investor and each other person or entity to whom rights under this Section
7(g) have been duly assigned (each of the Investor and each such assignee, a
"PARTICIPATION RIGHTS HOLDER") shall have a right of first refusal to purchase
such Participation Rights Holder's Pro Rata Share (as defined below) of all New
Securities (as defined below) that the Company may from time to time issue
during such period (such New Securities would be allocated among the
Participation Rights Holders who elect to exercise their right to purchase such
New Securities on a pro rata basis according to the number of Purchased Shares
held by each such Participation Rights Holder (where any shares of Common Stock
held as a result of conversion of Purchased Shares shall be deemed for these
purposes to still be Purchased Shares)). The rights described in the preceding
sentence, as further described in this Clause (g), are referred to as the "RIGHT
OF PARTICIPATION". Notwithstanding the foregoing, a Participation Rights Holder
shall not have the Right of Participation with respect to any issuance of New
Securities that would result in less than a ten percent (10%) reduction in such
Participation Rights Holder's Pro Rata Share (where prior issuances of New
Securities in which the such Participation Rights Holder was not entitled to
participate are aggregated with the issuance in question for purposes of such
ten percent (10%) calculation).
(ii) PRO RATA SHARE. "PRO RATA SHARE" means,
with respect to each Participation Rights Holder, the ratio of the following
numbers calculated immediately prior to the issuance of the New Securities
giving rise to the Right of Participation: (A) the Participant Share Number (as
defined below) for such Participation Rights Holder, to (B) the sum of (a) the
total number of shares of Common Stock, Series B Preference Stock and other
voting capital stock of the Company then outstanding, PLUS (b) the number of
shares of voting capital stock issuable upon the exercise, conversion or
exchange of any other security of the Company then outstanding.
(iii) NEW SECURITIES. "NEW SECURITIES" means any
Common Stock, Preference Stock or other voting capital stock or security of the
Company, whether now authorized or not, and rights, options or warrants to
purchase such Common Stock or Preference Stock or other voting capital stock or
security, and securities of any type whatsoever that are, or may become,
convertible into or exchangeable or exercisable for Common Stock, Preference
Stock or other voting capital stock or security; PROVIDED, HOWEVER, that the
term "New Securities" shall not include:
(A) any shares of Common Stock (or
options or warrants therefor) issued to employees, officers, directors or
consultants of the Company pursuant to any stock purchase, stock option, stock
incentive and other employee benefit plans, and agreements having similar
purpose and effect, approved by the Board or the Company's Compensation
Committee;
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(B) the Purchased Shares issued under
this Agreement;
(C) shares of Common Stock issued upon
conversion of any Purchased Shares;
(D) any securities issued in connection
with any stock split stock, dividend or other similar event in which all
Participation Rights Holders are entitled to participate on a pro rata basis;
(E) any securities issued upon the
exercise, conversion or exchange of any outstanding security if such outstanding
security constituted a New Security; or
(F) any securities issued pursuant to
the acquisition of another Person, or subsidiary or division thereof, by the
Company by consolidation, merger, purchase of assets, or other reorganization.
(iv) PARTICIPANT SHARE NUMBER. "PARTICIPANT
SHARE NUMBER", with respect to a Participant Rights Holder, means the sum of (1)
the number of Purchased Shares held by such Participant, (2) the number of
shares of Common Stock converted from Series B Preference Stock held by such
Participant, (3) the number of shares of other voting capital stock or security
of the Company held by such Participant, and (4) the number of shares of Series
B Preference Stock, Common Stock or other voting capital stock or security
issuable upon the exercise, conversion or exchange of any other security of the
Company held by such Participant.
(v) PURCHASE PRICE. The purchase price paid by
the Participant Rights Holder for the New Securities shall equal the lower of
(1) the sales price of the New Securities, and (2) the average Market Price (as
defined below) of such New Securities over the ten (10) trading days immediately
preceding the date on which the Participation Rights Holder elects to purchase
such New Securities.
(vi) ALTERNATIVE PURCHASE PRICE. At the
Company's election, if, in written opinion of the Company's independent
auditors, made available to each Participation Rights Holder upon request, the
effect of determining the purchase price after such issuance pursuant to Clause
(v) above would require the Company to take a charge against earnings in
accordance with GAAP, then for purposes of this Section 7(g), the PURCHASE PRICE
shall mean the Market Price on the date the Participation Rights Holder elects
to purchase New Securities.
(vii) PROCEDURES. If the Company proposes to
undertake an issuance of New Securities (in a single transaction or a series of
related transactions) in circumstances that entitled a Participation Rights
Holder to participate therein in accordance this Clause (g), the Company shall
give to each Participation Rights Holder written notice of its intention to
issue New Securities (the "PARTICIPATION NOTICE"), describing the amount and the
type of New Securities and the price and the general terms upon which the
Company proposes to issue such New Securities. Each Participation Rights Holder
shall have fifteen (15) business days from the date of receipt of any such
Participation Notice to agree in writing to purchase up to the maximum number of
such New Securities that such Participation Rights Holder is entitled to
purchase for the purchase price specified in Clause (v) above and upon the terms
and conditions specified in the Participation Notice by giving written notice to
the Company and stating therein
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the quantity of New Securities to be purchased (not to exceed such maximum). If
any Participation Rights Holder fails to so agree in writing within such 15
business day period, then such Participation Rights Holder shall forfeit the
right hereunder to participate in such sale of New Securities; PROVIDED,
HOWEVER, that any Participation Rights Holders that have elected to exercise
their Right of Participation shall be entitled to exercise such right with
respect to any New Securities where such right has been forfeited by such other
Participation Rights Holder(s), and the Company shall follow repeat the
procedures set forth in this Clause (g)(v) to ascertain whether the electing
Participation Rights Holders desire to purchase such other New Securities. All
sales hereunder shall be consummated concurrently with the closing of the
transaction triggering the Right of Participation.
(ix) FAILURE TO EXERCISE. Upon the expiration of
such fifteen (15) business day period, the Company shall have one hundred twenty
(120) days thereafter, subject to extensions for regulatory compliance, to sell
the New Securities described in the Participation Notice (with respect to which
the Participation Rights Holders' rights of first refusal hereunder were not
exercised), or enter into an agreement to do so within sixty (60) days
thereafter (which agreement must be consummated within one hundred twenty (120)
days after its execution, subject to extensions for regulatory compliance), at
the price (or a higher price) and upon non-price terms not materially more
favorable to the purchasers thereof than specified in the Participation Notice.
If the Company has not issued and sold such New Securities within such 120-day
period, or entered into an agreement to do so within sixty (60) days thereafter
(and consummated such agreement within such 120-day period), then the Company
shall not thereafter issue or sell any New Securities without again first
offering such New Securities to the Participation Rights Holders pursuant to
this Section 7(g).
(h) LEGAL FEES. At the Closing, the Company agrees to
pay a flat fee of $15,000 to Intel and $15,000 to SWIB for their expenses
(whether external or internal) arising in connection with the transactions
contemplated by this Agreement.
(i) COVENANT NOT TO SUE.
(A) For purposes of this Section 7(i), the following
definitions shall apply:
(1) "Assert" means to bring an action of
any nature before any legal, judicial, arbitration, administrative, executive or
other type of body or tribunal that has or claims to have authority to
adjudicate such action in whole or in part. Examples of such body or tribunal
include, without limitation, United States State and Federal Courts, the United
States International Trade Commission and any foreign counterparts of any of the
foregoing.
(2) "Chipset" means any single product
consisting of integrated circuit(s) one or more of which is designed to be
connected directly to an Intel microprocessor.
(3) "Company's Products" means all
products manufactured by or for Company other than (i) Chipsets, and (ii)
microprocessors that are hardware or software compatible with one or more Intel
microprocessors.
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(4) "Intel's Products" means (i) all
microprocessors manufactured by or for Intel, (ii) all Chipsets manufactured by
or for Intel, and (iii) all products manufactured by or for Intel that cannot be
substituted for a product first manufactured by or for Company without a loss of
some material functionality.
(5) "Patent Rights" means with respect
to a party all of such party's rights arising from or related to all classes or
types of patents, utility models and design patents and applications for these
classes or types of patent rights and any equivalent rights in all countries of
the world that are owned or controlled by such party.
(B) For so long as Intel holds any shares of
Series B Preference Stock, the Company agrees that the Company shall not Assert
any Patent Right against Intel, its subsidiaries or affiliates, or their
customers (direct or indirect), distributors (direct or indirect), agents
(direct or indirect) and contractors (direct or indirect) for the manufacture,
use, import, offer for sale or sale of any of Intel's Products or any process or
method employed in the manufacture, testing, distribution or use thereof for so
long as Intel does not Assert any Patent Right against Company, its subsidiaries
or affiliates, or their customers (direct or indirect), distributors (direct or
indirect), agents (direct or indirect) and contractors (direct or indirect) for
the manufacture, use, import, offer for sale or sale of Company's Products or
any process or method employed in the manufacture, testing, distribution or use
thereof.
(C) If Company assigns (directly or by operation
of law) ownership of any of its Patent Rights to a third party not bound by this
Agreement, then effective immediately prior to such assignment, Company agrees
that Intel shall have a nonexclusive, nontransferable license, without right of
sublicense, under such assigned Patent Rights to make, use, sell, offer for sale
and import Intel's Products. This conditional license shall survive any
termination or expiration of this Agreement and shall remain in full force and
effect until mutually agreed otherwise by the parties.
(D) The provisions of this Section 7(i) shall
be applicable only as between the Company and Intel.
(j) NASDAQ NATIONAL MARKET. The Company shall use its best
efforts to cause the shares of Common Stock issuable upon exercise of the
Purchased Shares to be approved for quotation on the Nasdaq National Market as
promptly as practicable after the date hereof.
(k) OPTION PRICING. The Company shall, within 30 days after
the Closing Date, adopt such amendments to the Company's Plans (as defined in
Section 3(b) hereof) and the Company's Bylaws to provide that: (i) the exercise
price of any option grants made under such Plans, or pursuant to other
arrangements or agreements, shall be equal to, or in excess of, the fair market
value of the Company's Common Stock on the date of such the grant; and (ii) the
Company shall not, without the approval of the holders of a majority of the
Common Stock, decrease the exercise price of any stock option grants made under
the such Plans or any other arrangements or agreements.
(l) SALES BELOW PER SHARE PURCHASE PRICE. The Company agrees
that, during the ninety (90) day period following the Closing, the Company will
not sell or issue any shares
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<PAGE> 31
of Series B Preference Stock or Common Stock at a per share price of less than
$2.50 (or for other consideration with an equivalent value).
8. INDEMNIFICATION.
(a) AGREEMENT TO INDEMNIFY.
(i) COMPANY INDEMNITY. Each Investor, its
Affiliates and Associates, and each officer, director, shareholder, employer,
representative and agent of any of the foregoing (collectively, the "INVESTOR
INDEMNITEES") shall each be indemnified and held harmless to the extent set
forth in this Section 8 by the Company with respect to any and all Damages (as
defined below) incurred by any Investor Indemnitee as a proximate result of any
inaccuracy or misrepresentation in, or breach of, any representation, warranty,
covenant or agreement made by the Company in this Agreement (including any
exhibits and schedules hereto). Indemnification claims arising from the
registration of Purchased Shares under Federal and state securities laws are
covered by Section 7(b) and not this Section 8.
(ii) INVESTOR INDEMNITY. The Company, its
respective Affiliates and Associates, and each officer, director, shareholder,
employer, representative and agent of any of the foregoing (collectively, the
"COMPANY INDEMNITEES") shall each be indemnified and held harmless to the extent
set forth in this Section 8, by an Investor, in respect of any and all Damages
incurred by any Company Indemnitee as a proximate result of any inaccuracy or
misrepresentation in, or breach of, any representation, warranty, covenant or
agreement made by such Investor in this Agreement. Indemnification claims
arising from the registration of Purchased Shares under Federal and state
securities laws are covered by Section 7(b) and not this Section 8; provided,
however, the indemnification obligations of the Investors hereunder shall be
several, and not joint and several.
(iii) EQUITABLE RELIEF. Nothing set forth in
this Section 8 shall be deemed to prohibit or limit any Investor Indemnitee's or
Company Indemnitee's right at any time before, on or after the Closing, to seek
injunctive or other equitable relief for the failure of any Indemnifying Party
to perform or comply with any covenant or agreement contained herein.
(b) SURVIVAL. All representations and warranties of the
Investors and the Company contained herein and all claims of any Investor
Indemnitee or Company Indemnitee in respect of any inaccuracy or
misrepresentation in or breach hereof, shall survive the Closing until the third
anniversary of the date of this Agreement, regardless of whether the applicable
statute of limitations, including extensions thereof, may expire. All covenants
and agreements of the Investors and the Company contained in this Agreement
shall survive the Closing in perpetuity (except to the extent any such covenant
or agreement shall expire by its terms). All claims of any Investor Indemnitee
or Company Indemnitee in respect of any breach of such covenants or agreements
shall survive the Closing until the expiration of two years following the
non-breaching party's obtaining actual knowledge of such breach.
(c) CLAIMS FOR INDEMNIFICATION. If any Investor Indemnitee or
Company Indemnitee (an "INDEMNITEE") shall believe that such Indemnitee is
entitled to indemnification pursuant to this Section 8 in respect of any
Damages, such Indemnitee shall give the appropriate
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<PAGE> 32
Indemnifying Party (which for purposes hereof, in the case of an Investor
Indemnitee, means the Company, and in the case of a Company Indemnitee, means
the Investor) prompt written notice thereof. Any such notice shall set forth in
reasonable detail and to the extent then known the basis for such claim for
indemnification. The failure of such Indemnitee to give notice of any claim for
indemnification promptly shall not adversely affect such Indemnitee's right to
indemnity hereunder except to the extent that such failure adversely affects the
right of the Indemnifying Party to assert any reasonable defense to such claim.
Each such claim for indemnity shall expressly state that the Indemnifying Party
shall have only the twenty (20) business day period referred to in the next
sentence to dispute or deny such claim. The Indemnifying Party shall have twenty
(20) business days following its receipt of such notice either (a) to acquiesce
in such claim by giving such Indemnitee written notice of such acquiescence or
(b) to object to the claim by giving such Indemnitee written notice of the
objection. If the Indemnifying Party does not object thereto within such twenty
(20) business day period, such Indemnitee shall be entitled to be indemnified
for all Damages reasonably and proximately incurred by such Indemnitee in
respect of such claim. If the Indemnifying Party objects to such claim in a
timely manner, the senior management of the Company and the Investor shall meet
to attempt to resolve such dispute. If the dispute cannot be resolved by the
senior management, either party may make a written demand for formal dispute
resolution and specify therein the scope of the dispute. Within thirty (30) days
after such written notification, the parties agree to meet for one (1) day with
an impartial mediator and consider dispute resolution alternatives other than
litigation. If an alternative method of dispute resolution is not agreed upon
within thirty days after the one day mediation, either party may begin
litigation proceedings. Nothing in this section shall be deemed to require
arbitration.
(d) DEFENSE OF CLAIMS. In connection with any claim that may
give rise to indemnity under this Section 8 resulting from or arising out of any
claim or Proceeding against an Indemnitee by a person or entity that is not a
party hereto, the Indemnifying Party may (unless such Indemnitee elects not to
seek indemnity hereunder for such claim) but shall not be obligated to, upon
written notice to the relevant Indemnitee, assume the defense of any such claim
or Proceeding if the Indemnifying Party with respect to such claim or Proceeding
acknowledges to the Indemnitee the Indemnitee's right to indemnity pursuant
hereto to the extent provided herein (as such claim may have been modified
through written agreement of the parties) and provides assurances, reasonably
satisfactory to such Indemnitee, that the Indemnifying Party will be financially
able to satisfy such claim to the extent provided herein if such claim or
Proceeding is decided adversely; PROVIDED, HOWEVER, that nothing set forth
herein shall be deemed to require the Indemnifying Party to waive any
crossclaims or counterclaims the Indemnifying Party may have against the
Indemnified Party for damages. The Indemnified Party shall be entitled to retain
separate counsel, reasonably acceptable to the Indemnifying Party, if the
Indemnified Party shall determine, upon the written advice of counsel, that an
actual or potential conflict of interest exists between the Indemnifying Party
and the Indemnified Party in connection with such Proceeding. The Indemnifying
Party shall be obligated to pay the reasonable fees and expenses of such
separate counsel to the extent the Indemnified Party is entitled to
indemnification by the Indemnifying Party with respect to such claim or
Proceeding under this Section 8(d). If the Indemnifying Party assumes the
defense of any such claim or Proceeding, the Indemnifying Party shall select
counsel reasonably acceptable to such Indemnitee to conduct the defense of such
claim or Proceeding, shall take all steps necessary in the defense or settlement
thereof and shall at all times diligently and promptly pursue the resolution
thereof. If
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<PAGE> 33
the Indemnifying Party shall have assumed the defense of any claim or Proceeding
in accordance with this Section 8(d), the Indemnifying Party shall be authorized
to consent to a settlement of, or the entry of any judgment arising from, any
such claim or Proceeding, with the prior written consent of such Indemnitee, not
to be unreasonably withheld; PROVIDED, HOWEVER, that the Indemnifying Party
shall pay or cause to be paid all amounts arising out of such settlement or
judgment concurrently with the effectiveness thereof; PROVIDED FURTHER, that the
Indemnifying party shall not be authorized to encumber any of the assets of any
Indemnitee or to agree to any restriction that would apply to any Indemnitee or
to its conduct of business; and PROVIDED FURTHER, that a condition to any such
settlement shall be a complete release of such Indemnitee and its Affiliates,
directors, officers, employees and agents with respect to such claim, including
any reasonably foreseeable collateral consequences thereof. Such Indemnitee
shall be entitled to participate in (but not control) the defense of any such
action, with its own counsel and at its own expense. Each Indemnitee shall, and
shall cause each of its Affiliates, directors, officers, employees and agents
to, cooperate fully with the Indemnifying Party in the defense of any claim or
Proceeding being defended by the Indemnifying Party pursuant to this Section
8(d). If the Indemnifying Party does not assume the defense of any claim or
Proceeding resulting therefrom in accordance with the terms of this Section
8(d), such Indemnitee may defend against such claim or Proceeding in such manner
as it may deem appropriate, including settling such claim or Proceeding after
giving notice of the same to the Indemnifying Party, on such terms as such
Indemnitee may deem appropriate. If any Indemnifying Party seeks to question the
manner in which such Indemnitee defended such claim or Proceeding or the amount
of or nature of any such settlement, such Indemnifying Party shall have the
burden to prove by a preponderance of the evidence that such Indemnitee did not
defend such claim or Proceeding in a reasonably prudent manner.
(e) CERTAIN DEFINITIONS. As used in this Section 8, (a)
"AFFILIATE" means, with respect to any person or entity, any person or entity
directly or indirectly controlling, controlled by or under direct or indirect
common control with such other person or entity; (b) "ASSOCIATE" means, when
used to indicate a relationship with any person or entity, (1) any other person
or entity of which such first person or entity is an officer, director or
partner or is, directly or indirectly, the beneficial owner of ten percent (10%)
or more of any class of equity securities, membership interests or other
comparable ownership interests issued by such other person or entity, (2) any
trust or other estate in which such first person or entity has a ten percent
(10%) or more beneficial interest or as to which such first person or entity
serves as trustee or in a similar fiduciary capacity, and (3) any relative or
spouse of such first person or entity who has the same home as such first person
or entity or who is a director or officer of such first person or entity; (c)
"DAMAGES" means all demands, claims, actions or causes of action, assessments,
losses, damages, costs, expenses, liabilities, judgments, awards, fines,
response costs, sanctions, taxes, penalties, charges and amounts paid in
settlement, including (1) interest on cash disbursements in respect of any of
the foregoing at the prime rate of Chase Manhattan Bank, as in effect from time
to time, compounded quarterly, from the date each such cash disbursement is made
until the date the party incurring such cash disbursement shall have been
indemnified in respect thereof, and (2) reasonable out-of-pocket costs, fees and
expenses (including reasonable costs, fees and expenses of attorneys,
accountants and other agents of, or other parties retained by, such party), and
(d) "PROCEEDING" means any action, suit, hearing, arbitration, audit, proceeding
(public or private) or investigation that is brought or initiated by or against
any federal, state, local or foreign governmental authority or any other person
or entity.
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<PAGE> 34
9. ASSIGNMENT. The rights of each Investor under Section 7(c)
and (d) are transferable only to a Person who acquires at least twenty percent
(20%) of the Purchased Shares issued on the Closing Date to such Investor
(subject to appropriate adjustment for all stock splits, dividends,
combinations, recapitalizations and the like where all holders of the Company's
Common Stock participate on a pro rata basis). The rights of each Investor under
Section 7(g) are transferable only to (a) subsidiary of the Investor, of which
the Investor beneficially owns, either directly or indirectly, at least fifty
percent (50%) of the voting securities and controls a majority of the Board of
Directors or other equivalent governing body or (b) a Person who acquires at
least twenty percent (20%) of the Purchased Shares issued on the Closing Date to
such Investor (subject to appropriate adjustment for all stock splits,
dividends, combinations, recapitalizations and the like where all holders of the
Company's Common Stock participate on a pro rata basis) in circumstances where
the Investor is transferring such Purchased Shares to such Person to comply with
applicable law or a request of a governmental authority (including in connection
with any approvals the Investors may be seeking from such governmental authority
relating to any acquisition, license or other business activity engaged in, or
proposed to be engaged in, by the Investors). No assignment permitted by this
Section 9 shall be effective until the Company is given written notice by the
assigning party stating the name and address of the assignee and identifying the
securities of the Company as to which the rights in question are being assigned.
In all cases, any such assignee shall receive such assigned rights subject to
all the terms and conditions of this Agreement.
10. TERMINATION. Prior to the Closing, this Agreement may be
terminated and the purchase and sale of the Shares contemplated by this
Agreement may be abandoned only in accordance with the following provisions:
(a) by mutual written consent of the Investors and the
Company;
(b) by the Investors or the Company if any court of competent
jurisdiction in the United States or other United States federal or state
governmental authority shall have issued a final order, decree or ruling, or
taken any other final action, restraining, enjoining or otherwise prohibiting
the purchase and sale of the Shares, and such order, decree, ruling or other
action is or shall have become nonappealable;
(c) by the Investors, upon five (5) days written notice to the
Company, if the Closing shall not have occurred by August 31, 2000 (the "OUTSIDE
DATE"); PROVIDED, HOWEVER, that the Investors may not terminate this Agreement
pursuant to this clause (c) if the Investors' failure to fulfill any of its
obligations under this Agreement shall have been a principal reason that the
Closing shall not have occurred on or before said date;
(d) by the Company if (i) there shall have been a breach of
any representation or warranty on the part of the Investors set forth in this
Agreement or if any representation or warranty of the Investors shall have
become untrue such that the conditions set forth in Section 6(a) would be
incapable of being satisfied by the Outside Date; PROVIDED, HOWEVER, that the
Company shall only be able to terminate this Agreement under this Clause (d)(i)
if it has not breached any of its obligations hereunder in any material respect;
or (ii) there shall have been a breach by the Investors of any of its respective
covenants or agreements hereunder in any material respect, and the Investors
have not cured such breach within ten (10) business days after
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<PAGE> 35
notice by the Company thereof; PROVIDED, HOWEVER, that the Company shall only be
able to terminate this Agreement under this Clause (d)(ii) if it has not
breached any of its obligations hereunder in any material respect; or
(e) by the Investors if (i) there shall have been a breach of
any representation or warranty on the part of the Company set forth in this
Agreement or if any representation or warranty of the Investors shall have
become untrue such that the conditions set forth in Section 5(a) would be
incapable of being satisfied by the Outside Date; PROVIDED, HOWEVER, that the
Investors shall only be able to terminate this Agreement under this Clause
(e)(i) if they have not breached any of their obligations hereunder in any
material respect; (ii) there shall have been a breach by the Company of any of
its respective covenants or agreements hereunder in any material respect, and
the Company has not cured such breach within ten (10) business days after notice
by the Investors thereof; PROVIDED, HOWEVER, that the Investors shall only be
able to terminate this Agreement under this Clause (e)(ii) if they have not
breached any of their obligations hereunder in any material respect; (iii) the
Investors do not obtain the approvals contemplated by Section 5(i).
In the event of the termination of this Agreement, this Agreement shall
forthwith become void and have no effect without any liability on the part of
any party hereto or its affiliates, directors, officers or stockholders;
PROVIDED, HOWEVER, nothing contained herein shall relieve any party from
liability for any breach of this Agreement prior to such termination.
11. MISCELLANEOUS.
(a) SUCCESSORS AND ASSIGNS. The terms and conditions of
this Agreement will inure to the benefit of and be binding upon the respective
successors and assigns of the parties.
(b) GOVERNING LAW. This Agreement will be governed by
and construed under the internal laws of the State of Delaware, without
reference to principles of conflict of laws or choice of laws.
(c) COUNTERPARTS. This Agreement may be executed in two or
more counterparts, each of which will be deemed an original, but all of which
together will constitute one and the same instrument.
(d) HEADINGS. The headings and captions used in this Agreement
are used for convenience only and are not to be considered in construing or
interpreting this Agreement. All references in this Agreement to sections,
paragraphs, exhibits and schedules will, unless otherwise provided, refer to
sections and paragraphs hereof and exhibits and schedules attached hereto, all
of which exhibits and schedules are incorporated herein by this reference.
(e) NOTICES. Any notice required or permitted under this
Agreement shall be given in writing, shall be effective when received, and shall
in any event be deemed received and effectively given upon personal delivery to
the party to be notified or three (3) business days after deposit with the
United States Post Office, by registered or certified mail, postage prepaid, or
one (1) business day after deposit with a nationally recognized courier service
such as Fedex for next business day delivery under circumstances in which such
service guarantees next business day delivery, or one (1) business day after
facsimile with copy delivered by registered
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<PAGE> 36
or certified mail, in any case, postage prepaid and addressed to the party to be
notified at the address indicated for such party on the signature page hereof or
at such other address as the Investor or the Company may designate by giving at
least ten (10) days advance written notice pursuant to this Section 11(e).
(f) NO FINDER'S FEES. Each Investor will indemnify and hold
harmless the Company from any liability for any commission or compensation in
the nature of a finders' or broker's fee for which such Investor or any of its
officers, partners, employees or consultants, or representatives is responsible.
The Company will indemnify and hold harmless each Investor from any liability
for any commission or compensation in the nature of a finder's or broker's fee
for which the Company or any of its officers, employees or consultants or
representatives is responsible.
(g) AMENDMENTS AND WAIVERS. The provisions of Section 7 and
Section 8 of this Agreement may be amended and the observance of any term of
this Agreement may be waived (either generally or in a particular instance and
either retroactively or prospectively), only with the written consent of the
Company, Intel and the holders of Purchased Shares representing at least 66 2/3%
of the total aggregate number of Purchased Shares then outstanding (excluding
any of such shares that have been sold in a transaction in which rights under
Section 7(b) are not assigned in accordance with this Agreement or sold to the
public pursuant to SEC Rule 144 or otherwise). Any amendment or waiver effected
in accordance with this Section 11(g) will be binding upon the Investors, the
Company and their respective successors and assigns.
(h) SEVERABILITY. If any provision of this Agreement is held
to be unenforceable under applicable law, such provision will be excluded from
this Agreement and the balance of the Agreement will be interpreted as if such
provision were so excluded and will be enforceable in accordance with its terms.
(i) ENTIRE AGREEMENT. This Agreement, together with all
exhibits and schedules hereto, constitutes the entire agreement and
understanding of the parties with respect to the subject matter hereof and
supersedes any and all prior negotiations, correspondence, agreements,
understandings duties or obligations between the parties with respect to the
subject matter hereof.
(j) FURTHER ASSURANCES. From and after the date of this
Agreement upon the request of the Company or the Investors, the Company and the
Investors will execute and deliver such instruments, documents or other
writings, and take such other actions, as may be reasonably necessary or
desirable to confirm and carry out and to effectuate fully the intent and
purposes of this Agreement.
(k) MEANING OF INCLUDE AND INCLUDING. Whenever in this
Agreement the word "include" or "including" is used, it shall be deemed to mean
"include, without limitation" or "including, without limitation," as the case
may be, and the language following "include" or "including" shall not be deemed
to set forth an exhaustive list.
(l) FEES, COSTS AND EXPENSES. Except as otherwise set forth in
Section 7(h), all fees, costs and expenses (including attorney's' fees and
expenses) incurred by the parties
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<PAGE> 37
hereto in connection with the preparation, negotiation and execution of this
Agreement and the consummation of the transactions contemplated hereby and
thereby (including the costs associated with any filings with, or compliance
with any of the requirements of, any governmental authorities), shall be the
sole and exclusive responsibility of such party.
(m) COMPETITION. Nothing set forth herein shall be
deemed to preclude, limit or restrict the Company's or any Investor's ability to
compete with the other.
(n) COOPERATION IN HSR ACT FILINGS.
(i) In the event of a conversion of the
Purchased Shares (or any other action by Intel with respect to any Securities of
the Company held by Intel) that would require a filing by Intel under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the "HSR ACT"), Intel and
its respective affiliates (including any "ultimate parent entity", as defined in
the HSR Act), and the Company and its respective affiliates (including any
"ultimate parent entity", as defined in the HSR Act), shall promptly prepare and
make their respective filings and thereafter shall make all required or
requested submissions under the HSR Act or any analogous applicable law, if
required. In taking such actions or making any such filings, the parties hereto
shall furnish information required in connection therewith and seek timely to
obtain any applicable actions, consents, approvals or waivers of governmental
authorities; PROVIDED, HOWEVER, that the parties hereto shall cooperate with
each other in connection with the making of all such filings to the extent
permitted by applicable law. Without limiting the generality of the foregoing,
to the extent permitted by applicable law and so long as the following will not
involve the disclosure of confidential or proprietary information of one party
hereto to another, each party shall cooperate with the other by (a) providing
copies of all documents to be filed to the non-filing party and its advisors
prior to filing and, if requested, accepting reasonable additions, deletions or
changes suggested in connection therewith and (b) providing to each other party
copies of all correspondence from and to any governmental authority in
connection with any such filing.
(ii) Notwithstanding the foregoing, neither Intel
nor any of its affiliates shall be under any obligation to comply with any
request or requirement imposed by the Federal Trade Commission (the "FTC"), the
Department of Justice (the "DOFJ") or any other governmental authority in
connection with the compliance with the requirements of the HSR Act, or any
other applicable law, if Intel, in the exercise of its reasonable discretion,
deems such request or requirement unduly burdensome. Without limiting the
generality of the foregoing, Intel shall not be obligated to comply with any
request by, or any requirement of, the FTC, the DofJ or any other governmental
authority: (i) to disclose information Intel deems it in its best interests to
keep confidential; (ii) to dispose of any assets or operations; or (iii) to
comply with any proposed restriction on the manner in which it conducts its
operations. In the event Intel shall receive a second request in respect of its
HSR Filing determined by it to be unduly burdensome and it shall prove unable to
negotiate a means satisfactory to Intel for complying with such burdensome
second request, or the Federal Trade Commission or Department of Justice shall
impose any condition on Intel or its affiliates in respect thereof deemed
unacceptable by Intel, the Company and Intel shall cooperate in good faith to
negotiate an alternative transaction that provides Intel with the economic
benefits it would receive if it
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<PAGE> 38
converted the Purchased Shares (or took any such other action referenced in the
first parenthetical in the first sentence of Clause (i)).
(o) RIGHTS PLAN. Without limiting the generality of Section
11(j), in the event that Intel desires to take any action permitted by this
Agreement, and such action would cause a "Common Stock Event" or any similar
event under the Rights Plan (including any successor plan or other plan or
mechanism adopted by the Company that has the effect or purpose of discouraging
an acquisition of all or any portion of the Company, whether by means of a
merger, tender offer, acquisition of assets or stock, or otherwise, the "Rights
Plan"), or would trigger or activate any provision of any state or other
antitakeover statute, the Company shall take all actions necessary (including
action by its Board of Directors) to permit Intel to take such permitted action
without causing any such "Common Stock Event," similar event, trigger or
activation.
(p) STOCK SPLITS, DIVIDENDS AND OTHER SIMILAR EVENTS. The
provisions of this Agreement (including the number of shares of Series B
Preference Stock, Common Stock and other securities described herein) shall be
appropriately adjusted to reflect any stock split, stock dividend,
reorganization or other similar event that may occur with respect to the Company
after the date hereof.
[THE BALANCE OF THIS PAGE IS INTENTIONALLY LEFT BLANK.]
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<PAGE> 39
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date and year first above written.
PICTURETEL CORPORATION
By: __________________________________
Name: ________________________________
Title: _______________________________
Date Signed: _________________________
Address: 100 Minuteman Road
Andover, Massachusetts 01810
Telephone No: (978) 292-5000
Facsimile No: (978) 292-3334
with copies to:
PictureTel Corporation
Attention: General Counsel
100 Minuteman Road
Andover, Massachusetts 01810
{Signature page to PictureTel Corporation Stock Purchase and Investors Rights
Agreement}
39
<PAGE> 40
INVESTOR:
INTEL CORPORATION
By: ____________________________________
Name: __________________________________
Title: _________________________________
Date Signed: ___________________________
Address: 2200 Mission College Boulevard
Santa Clara, California 95052
Attn: M&A Portfolio Manager -
M/S RN6-46
Telephone No.: (408) 765-1240
Facsimile No.: (408) 765-6038
with copies to:
Intel Corporation
Attention: General Counsel
2200 Mission College Boulevard
Santa Clara, California 95052
Fax Number: (408) 765-1859
and
Gibson, Dunn & Crutcher LLP
Attention: Lawrence Calof
1530 Page Mill Road
Palo Alto, California 94304
Telephone No.: (650) 849-5300
Facsimile No.: (650) 849-5333
{Signature page to PictureTel Corporation Stock Purchase and Investors Rights
Agreement}
<PAGE> 41
INVESTOR:
STATE OF WISCONSIN INVESTMENT BOARD
By: ____________________________________
Name: __________________________________
Title: _________________________________
Date Signed: ___________________________
Address: _______________________________
{Signature page to PictureTel Corporation Stock Purchase and Investors Rights
Agreement}
<PAGE> 42
INVESTOR:
HALPERN DENNY FUND II, L.P.
BY: HALPERN DENNY & CO. IV, L.L.C.
By: ____________________________________
Name: __________________________________
Title: _________________________________
Date Signed: ___________________________
Address: _______________________________
{Signature page to PictureTel Corporation Stock Purchase and Investors Rights
Agreement}
<PAGE> 43
INVESTOR:
________________________________________
Signature
By: ____________________________________
Name: __________________________________
Title: _________________________________
Date Signed: ___________________________
Address: _______________________________
Telephone No.:
Facsimile No.:
{Signature page to PictureTel Corporation Stock Purchase and Investors Rights
Agreement}
<PAGE> 44
SCHEDULE 1
INVESTORS, ALLOCATION OF PURCHASE PRICE AND
NUMBER OF 1414C SHARES RECEIVED
<TABLE>
<CAPTION>
NAME AMOUNT OF INVESTMENT # OF 1414C SHARES
---- -------------------- -----------------
<S> <C> <C>
1. State of Wisconsin
Investment Board $9,500,000 600,000
2. Halpern Denny Fund II, L.P. $2,000,000 126,316
3. Norman Gaut $250,000 16,419
4. Enzo Toressi $110,000 6,947
5. Carl Ledbetter $50,000 3,158
6. David Levi $150,000 9,474
7. Werner Schmucking $50,000 3,158
8. Lewis Jaffe $50,000 3,158
9. Timothy Duffy $50,000 3,158
10. David Snow $50,000 3,158
11. Amit Akkad $20,000 1,263
12. Jon Kosheff $25,000 1,579
13. Edward Semonite $25,000 1,579
14. W. Robert Kellegrew, Jr. $15,000 947
15. Intel Corporation $9,500,000 600,000
</TABLE>
--------------------------------------------------------------------------------
Note: Total 1414c shares issued to investors (including Intel) will be
1,379,684. Shares to remain with PictureTel will be 18,620,316.
<PAGE> 45
SCHEDULE 2
CERTAIN OFFICERS AND DIRECTORS WHO ARE
NON-ACCREDITED INVESTORS
Norman Gaut
Enzo Toressi
Carl Ledbetter
David Levi
Werner Schmucking
Lewis Jaffe
Timothy Duffy
David Snow
Amit Akkad
Jon Kosheff
Edward Semonite
W. Robert Kellegrew, Jr.
<PAGE> 46
EXHIBIT A
CERTIFICATE OF DESIGNATIONS, PREFERENCES AND OTHER RIGHTS
OF THE
SERIES B PREFERENCE STOCK
<PAGE> 47
EXHIBIT A-1
CERTIFICATE OF DECREASE OF THE SERIES A PREFERENCE STOCK
<PAGE> 48
EXHIBIT B
OPINION OF OUTSIDE COUNSEL TO THE COMPANY
<PAGE> 49
EXHIBIT C
OPINION OF THE GENERAL COUNSEL OF THE COMPANY
<PAGE> 50
EXHIBIT 1A
AMENDMENT TO STOCK PURCHASE AND
INVESTOR RIGHTS AGREEMENT
This Amendment to Stock Purchase and Investors Rights Agreement, dated
as of July 24, 2000 (the "AMENDMENT"), amends the Stock Purchase and Investors
Rights Agreement (the "AGREEMENT") dated as of July 13, 2000, by and between
PictureTel Corporation (the "COMPANY"), Intel Corporation ("INTEL"), the State
of Wisconsin Investment Board ("SWIB"), and the persons listed on SCHEDULE 1
attached thereto (such persons, collectively with Intel and SWIB, are
"INVESTORS", and each is an "INVESTOR"). Capitalized terms used but not
otherwise defined in this Amendment shall have the respective meanings ascribed
thereto in the Agreement.
W I T N E S S E T H:
WHEREAS, the parties wish to amend certain terms of the Agreement, such
that the amendments to the Company's Bylaws contemplated by Section 7(k) of the
Agreement (the "BYLAW AMENDMENTS") shall include a provision which prohibits the
amendment, modification, revocation, repeal or rescission of the Bylaw
Amendments without the approval of the holders of a majority of the Common Stock
and that the Bylaw Amendments and the amendments to the Company Plans shall
include an exception to the restrictions referenced in Section 7(k)(ii) of the
Agreement for the issuance of new options at a lower strike price upon the
cancellation of existing options;
NOW, THEREFORE, the Agreement is hereby amended as follows:
1. Section 7(k) of is amended by replacing the existing text of such
section in its entirety and substituting the following language:
"OPTION PRICING. The Company shall, within 30 days after the Closing
Date, adopt such amendments to the Company's Plans (as defined in Section 3(b)
hereof) and the Company's Bylaws to provide that: (i) the exercise price of any
option grants made under such Plans, or pursuant to other arrangements or
agreements, shall be equal to, or in excess of, the fair market value of the
Company's Common Stock on the date of such the grant; and (ii) the Company shall
not, without the approval of the holders of a majority of the Common Stock,
decrease the exercise price of any stock option grants made under the such Plans
or any other arrangements or agreements, PROVIDED THAT such restriction shall
not apply to the issuance of new options at a lower strike price upon the
cancellation of existing options; and (iii) such amendment to the Company's
Bylaws shall not be amended, modified, revoked, repealed or rescinded without
the approval of the holders of a majority of the Common Stock."
<PAGE> 51
2. Schedule 1 is amended by replacing the existing schedule and
replacing it in its entirety with the Schedule 1 attached hereto.
3. EFFECT OF AMENDMENT. Subject to the express provisions set forth in
this Amendment, the Agreement shall remain in full force and effect and is
hereby ratified and confirmed in all respects. The execution, delivery and
effectiveness of this side letter agreement shall not operate as a waiver of any
right, power or remedy of Intel, SWIB or any other Investor under the Agreement
or the Certificate of Designations, or constitute a waiver of any provision of
the Agreement or the Certificate of Designations.
4. GOVERNING LAW. This Amendment shall be governed by, and construed in
accordance with, the internal laws of the State of Delaware. Whenever possible,
each provision of this Amendment shall be interpreted in such a manner as to be
effective and valid under applicable law, but if any provision of this Amendment
shall be prohibited by or invalid under applicable law, such provision shall be
ineffective to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions of this
Amendment. This Amendment may be executed by facsimile copy and in any number of
counterparts and by different parties hereto in separate counterparts, each of
which when so executed and delivered shall be deemed to be an original and all
of which taken together shall constitute one instrument.
[Remainder of Page Intentionally Left Blank]
<PAGE> 52
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
the Agreement to be duly executed as of the day and year first above written.
PICTURE TEL CORPORATION
By:_____________________________________
Name:___________________________________
Title:__________________________________
INTEL CORPORATION
By:_____________________________________
Name:___________________________________
Title:_____________________________
STATE OF WISCONSIN INVESTMENT BOARD
By:_____________________________________
Name:___________________________________
Title:__________________________________
<PAGE> 53
INVESTOR
SIGNATURE:______________________________
Name:___________________________________
Title:__________________________________
<PAGE> 54
SCHEDULE 1
INVESTORS, ALLOCATION OF PURCHASE PRICE AND
NUMBER OF 1414C SHARES RECEIVED
<TABLE>
<CAPTION>
NAME AMOUNT OF INVESTMENT # OF 1414C SHARES
---- -------------------- -----------------
<S> <C> <C>
1. State of Wisconsin
Investment Board $7,600,000 480,000
2. State of Wisconsin
Investment Board $1,900,000 120,000
3. Halpern Denny Fund II, L.P. $2,000,000 126,316
4. Norman Gaut $ 250,000 15,789
5. Enzo Toressi $ 110,000 6,947
6. Carl Ledbetter $ 50,000 3,158
7. David Levi $ 150,000 9,474
8. Werner Schmucking $ 50,000 3,158
9. Lewis Jaffe $ 50,000 3,158
10. Timothy Duffy $ 50,000 3,158
11. David Snow $ 50,000 3,158
12. Amit Akkad $ 20,000 1,263
13. Jon Kosheff $ 25,000 1,579
14. Edward Semonite $ 25,000 1,579
15. W. Robert Kellegrew, Jr. $ 15,000 947
16. Intel Corporation $9,500,000 600,000
</TABLE>
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Note: Total 1414c shares issued to investors (including Intel) will be
1,379,684. Shares to remain with PictureTel will be 18,620,316.
