<PAGE> 1
UNITED STATES SECURITIES AND EXCHANGES COMMISSION
WASHINGTON D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE THIRD QUARTER ENDED SEPTEMBER 30, 1995
COMMISSION FILE NUMBER 0-22202
PAIRGAIN TECHNOLOGIES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 33-0282809
(STATE OR OTHER JURISDICTION OF (IRS EMPLOYER
INCORPORATION OF ORGANIZATION) IDENTIFICATION NO.)
14402 FRANKLIN AVENUE, TUSTIN, CALIFORNIA 92680-7013
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
(714) 832-9922
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS
REQUIRED TO BE FILED BY SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934 DURING THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE
REGISTRANT WAS REQUIRED TO FILE SUCH REPORTS ), AND (2) HAS BEEN SUBJECT TO
SUCH FILING REQUIREMENTS FOR THE PAST 90 DAYS.
YES X NO
--- ---
THERE WERE 15,076,948 SHARES OF THE REGISTRANT'S COMMON STOCK, PAR VALUE OF
$.001 PER SHARE, OUTSTANDING ON SEPTEMBER 30, 1995.
<PAGE> 2
PAIRGAIN TECHNOLOGIES, INC.
INDEX
<TABLE>
<CAPTION>
Page
<S> <C>
Part I Financial Information
Item 1. Financial Statements
Condensed Consolidated Balance Sheets
at September 30, 1995 and December 31, 1994 3
Condensed Consolidated Statements of Income for the
quarters and nine months ended September 30, 1995
and 1994 4
Condensed Consolidated Statements of Cash Flows
for the nine months ended September 30, 1995 and 1994 5
Notes to Condensed Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of Operations 9
Part II. Other Information
Item 1. Legal Proceedings 13
Item 2. Changes in Securities 13
Item 3. Defaults upon Senior Securities 13
Item 4. Submission of Matters to a Vote of Security Holders 13
Item 5. Other Information 13
Item 6. Exhibits and Reports on Form 8-K 13
Signatures 14
</TABLE>
2
<PAGE> 3
PART I: ITEM 1
FINANCIAL INFORMATION
PAIRGAIN TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1995 1994
------------- ------------
(Unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 12,945 $ 711
Short-term investments (Note 3) 55,881 52,565
Accounts receivable 11,193 10,168
Inventories (Note 4) 21,409 16,474
Other current assets and deferred taxes 3,269 3,229
-------- -------
Total current assets 104,697 83,147
Property and equipment, net 6,515 3,431
Other assets 89 47
Note receivable 1,354 --
-------- -------
Total assets $112,655 $86,625
======== =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable to bank (Note 5) $ -- $ 1,000
Accounts payable and other current liabilities 11,525 10,779
-------- -------
Total current liabilities 11,525 11,779
-------- -------
Stockholders' equity:
Preferred stock, $.001 par value:
Authorized shares - 2,000,000; Issued and
outstanding shares - None -- --
Common stock, $.001 par value:
Authorized shares - 30,000,000; Issued and outstanding shares -
15,076,948 and 12,708,636 at September 30, 1995 and December 31,
1994, respectively 15 13
Additional paid-in capital 84,180 69,513
Deferred compensation (104) (170)
Unrealized gain (loss) on marketable securities (Note 3) 89 (210)
Retained earnings 16,950 5,700
-------- -------
Total stockholders' equity 101,130 74,846
-------- -------
Total liabilities and stockholders' equity $112,655 $86,625
======== =======
</TABLE>
The accompanying notes are an integral part of these
condensed consolidated financial statements.
3
<PAGE> 4
PAIRGAIN TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
QUARTER ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------------- ---------------------------
1995 1994 1995 1994
------- ------- ------- -------
<S> <C> <C> <C> <C>
Revenues $29,602 $15,246 $72,599 $41,391
Cost of revenues 15,834 8,417 37,958 23,208
------- ------- ------- -------
Gross profit 13,768 6,829 34,641 18,183
------- ------- ------- -------
Operating expenses:
Research and development 2,804 1,469 7,565 4,010
Sales and marketing 2,736 1,339 6,827 3,851
General and administrative 1,769 1,172 4,857 3,150
------- ------- ------- -------
Total operating expenses 7,309 3,980 19,249 11,011
------- ------- ------- -------
Income from operations 6,459 2,849 15,392 7,172
Interest and other income, net 482 627 1,915 1,955
------- ------- ------- -------
Income before income taxes 6,941 3,476 17,307 9,127
Provision for income taxes (Note 6) 2,436 1,237 6,057 3,502
------- ------- ------- -------
Net income $ 4,505 $ 2,239 $11,250 $ 5,625
======= ======= ======= =======
PER SHARE DATA (Note 7):
Earnings per share $ 0.26 $ 0.15 $ 0.68 $ 0.37
======= ======= ======= =======
Weighted average number of common
and common equivalent shares
17,051 15,319 16,624 15,366
======= ======= ======= =======
</TABLE>
The accompanying notes are an integral part of these
condensed consolidated financial statements.
4
<PAGE> 5
PAIRGAIN TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
------------------------------
1995 1994
------- -------
<S> <C> <C>
OPERATING ACTIVITIES
Net income $11,250 $ 5,625
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization 1,980 597
Amortization of deferred compensation 66 65
Changes in operating assets and liabilities:
Increase in Accounts receivable (1,025) (1,868)
Increase in Inventories (4,935) (2,877)
Increase in Other current assets and deferred taxes (40) (252)
Increase in Other assets (42) (20)
Increase in Accounts payable and other current liabilities 746 4,117
------- -------
Net cash provided by operating activities 8,000 5,387
------- -------
INVESTING ACTIVITIES
Net purchases of short-term investments (2,823) (3,863)
Purchases of property and equipment (5,064) (1,269)
Increase in Notes receivable from Source-Comm (1,354) --
Other (194) --
------- -------
Net cash used in investing activities (9,435) (5,132)
------- -------
FINANCING ACTIVITIES
Payments on Notes payable to bank (1,000) --
Issuance of Common stock 14,669 121
------- -------
Net cash provided by financing activities 13,669 121
------- -------
Increase in cash and cash equivalents 12,234 376
Cash and cash equivalents at beginning of period 711 13,650
------- -------
Cash and cash equivalents at end of period $12,945 $14,026
======= =======
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Interest paid $ 18 $ 8
======= =======
Income tax paid $ 5,028 $ 3,058
======= =======
</TABLE>
The accompanying notes are an integral part of these
condensed consolidated financial statements.
5
<PAGE> 6
PAIRGAIN TECHNOLOGIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
September 30, 1995
1. INTERIM PERIOD ACCOUNTING POLICIES
In the opinion of the Company's management, the accompanying unaudited
condensed consolidated financial statements contain all normal recurring
adjustments necessary to present fairly the financial position as of September
30, 1995, and consolidated results of operations for the three and nine months
ended September 30, 1995, and September 30, 1994, and cash flows for the nine
month periods ended September 30, 1995, and September 30, 1994. Results of
operations for the three and nine months ended September 30, 1995, are not
necessarily indicative of results to be expected for the full year ending
December 31, 1995.
Although the Company believes that the disclosures in the financial statements
are adequate to make the information presented not misleading, certain
information and footnote information normally included in financial statements
prepared in accordance with generally accepted accounting principles have been
condensed or omitted pursuant to the rules and regulations of the Securities
and Exchange Commission. Accordingly, these financial statements should be
read in conjunction with the Company's audited consolidated financial
statements included in the Company's Form 10-K/A for the year ended December
31, 1994.
Certain prior year amounts have been reclassified to conform with the current
period's presentation.
2. PRINCIPLES OF CONSOLIDATION
The accompanying condensed consolidated financial statements include the
accounts of the Company, PairGain Technologies, Inc., and its wholly owned
subsidiaries, PairGain Canada, Inc., and PairGain Services Group, Inc. All
significant intercompany accounts and transactions have been eliminated in
consolidation.
3. INVESTMENTS
The Company invests primarily in tax free municipal bonds and US government
securities. Investments at September 30, 1995, and December 31, 1994, are
summarized as follows:
(continued)
6
<PAGE> 7
PAIRGAIN TECHNOLOGIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(continued)
3. INVESTMENTS (CONTINUED)
<TABLE>
<CAPTION>
(In thousands)
Gross Gross
unrealized unrealized Fair
Cost gain loss value
------- ---------- ---------- -------
<S> <C> <C> <C> <C>
SEPTEMBER 30, 1995
Tax free municipal bonds and US Government
securities $55,739 $142 $ -- $55,881
DECEMBER 31, 1994
Tax free municipal bonds and US Government
securities $52,916 $ -- $351 $52,565
</TABLE>
The unrealized gain (loss), net of tax, on investments of $89,000 and
$(210,000) are included as separate components of stockholders' equity at
September 30, 1995, and December 31, 1994, respectively.
4. INVENTORY
Inventory is stated at the lower of cost (first-in, first-out) or market and
consists of the following:
<TABLE>
<CAPTION>
(In thousands)
September 30, December 31,
1995 1994
------------- ------------
<S> <C> <C>
Raw materials $ 4,228 $ 4,743
Work in process 11,135 9,529
Finished goods 6,046 2,202
------- -------
$21,409 $16,474
======= =======
</TABLE>
5. NOTES PAYABLE TO BANK
The Company maintains an unsecured line of credit with a bank. The line allows
maximum borrowings of $10,000,000, of which up to $2,000,000 may be utilized
for the secured purchase of fixed assets (term loan), $2,000,000 for letters of
credit and $2,000,000 for foreign exchange contracts. The line bears interest
at the prime rate (8.75% at September 30, 1995) and borrowings under term loan
provisions of the agreement bear interest at prime plus 1%. At September 30,
1995, the Company had no outstanding borrowings under this line of credit.
(continued)
7
<PAGE> 8
PAIRGAIN TECHNOLOGIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(continued)
6. INCOME TAXES
Income taxes are provided at the rate expected to be in effect for the entire
year.
7. PER SHARE DATA
Earnings per share is computed using the weighted average number of shares of
common stock and common equivalent shares outstanding during the periods
presented. Common equivalent shares include the Company's stock options and
warrants outstanding during the periods presented computed using the treasury
stock method, to the extent that such inclusion is not antidilutive.
8
<PAGE> 9
PART I: ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
PAIRGAIN TECHNOLOGIES, INC.
RESULTS OF OPERATIONS (quarter and nine months ended September 30, 1995,
compared to quarter and nine months ended September 30, 1994)
REVENUES
Revenues for the quarter ended September 30, 1995, were $29.6 million, an
increase of $14.4 million or 94% compared to the third quarter of 1994.
Revenues for the 1995 nine month period were $72.6 million, an increase of 75%
compared to revenues of $41.4 million in the prior year period. Of these
increases in revenues, product revenues increased $14.5 million in the 1995
quarter compared to the 1994 quarter, and $31.8 million in the nine month
period. These increases were offset by decreases in royalty income of $88,000
and $569,000, respectively, for the quarter and nine month periods. The
increase in product revenues was due primarily to increases in unit sales
volume of the Company's HiGain, PG-2, and Campus products. These increases
were marginally offset by a decline in the average selling prices due to
competitive pressures. The decrease in royalty income was due to a reduction
of fees generated by licenses for the use of the Company's HDSL technology.
GROSS PROFIT
Gross profit increased $6.9 million or 102% to $13.8 million in the quarter
ended September 30, 1995. Gross Profit for the nine month period was $34.6
million compared to $18.2 million in the prior year period. Gross profit as a
percentage of revenues was 47% for the quarter ended September 30, 1995
compared to 45% in the 1994 quarter. For the nine months ended September 30,
1995 gross profit as a percentage of revenues was 48% compared to 44% in the
1994 period. These improvements in gross profit percentage are attributable to
the Company's continuing engineering design changes, reduced prices for
components, increased manufacturing efficiencies, and increases in volume. For
the 1995 reporting periods, cost reductions more than offset declines in
average selling prices, as compared with the 1994 periods.
The Company expects that increased competition will continue to place downward
pressure on the average sales prices of its existing products. Declining
average sales prices may adversely affect gross product margins on the
Company's existing products if the Company is unable to fully offset such price
reductions by reductions in the Company's per unit cost. The Company's ability
to mitigate future declines in its gross product margin will depend in part
upon its ability to introduce and sell new products with higher gross product
margins and further reduce its per unit costs.
9
<PAGE> 10
RESEARCH AND DEVELOPMENT
Research and development expenses increased to $2.8 million in the quarter
ended September 30, 1995, compared to $1.5 million in the prior year period.
Research and development expenses were $7.6 million compared to $4.0 million
for the nine months ended September 30, 1995, and 1994, respectively. The 1995
increases in expenses were primarily due to the addition of personnel,
depreciation on additional capital equipment, prototype expenditures and
payments to outside consultants. As a percentage of revenues, research and
development expenses were approximately 10% during the quarter and nine month
periods ended September 30, 1995 and 1994.
SALES AND MARKETING
Sales and marketing expenses increased $1.4 million or 104% to $2.7 million and
increased $3.0 million or 77% to $6.8 million, respectively, for the quarter
and nine months ended September 30, 1995, as compared with the same periods in
the prior year. The 1995 increases were primarily due to the addition of sales
and marketing support personnel, commissions related to higher revenue levels,
and increased advertising and travel. As a percentage of revenues, sales and
marketing expenses were approximately 9% during the quarter and nine month
periods ended September 30, 1995 and 1994.
GENERAL AND ADMINISTRATIVE
General and administrative expenses increased $0.6 million or 51% and $1.7
million or 54%, respectively, for the quarter and nine months ended September
30, 1995, as compared with the 1994 periods. These increases were primarily due
to the addition of personnel, payments to outside consultants related to the
implementation of an information systems upgrade, and additional bad debt
provisions. As a percentage of revenues, general and administrative expenses
decreased to 6% and 7%, respectively, for the quarter and nine months ended
September 30, 1995 compared to 8% for the quarter and nine months ended
September 30, 1994.
INTEREST AND OTHER INCOME, NET
Interest and other income includes net interest income and net gain or loss on
sales of investments. Interest and other income decreased $145,000 and $40,000,
respectively, for the quarter and nine months ended September 30, 1995, as
compared with the same periods in the prior year, largely due to lower net
gains on sales of investments in the current year periods.
10
<PAGE> 11
PROVISION FOR INCOME TAXES
The provision for income taxes increased $1.2 million and $2.6 million,
respectively, for the quarter and nine months ended September 30, 1995, as
compared with the same periods in the prior year due to large increases in
pre-tax income.
NET INCOME
As a result of the foregoing, the Company's net income increased $2.3 million
to $4.5 million for the quarter ended September 30, 1995. Net income for the
nine months ended September 30, 1995 was $11.3 million, an increase of 100%
compared to the prior year's income of $5.6 million. Earnings per share for
the quarter ended September 30, 1995 were $0.26 compared to $0.15 in the 1994
quarter. Earnings per share for the nine months ended September 30, 1995 were
$0.68 compared to $0.37 for the nine months ended September 30, 1994. The
weighted average number of common and common equivalent shares outstanding were
17.1 million and 15.3 million for the quarters ended September 30, 1995 and
1994, respectively. The weighted average number of common and common
equivalent shares for the nine months ended September 30, 1995 and 1994, were
16.6 million and 15.4 million, respectively. These increases in common and
common equivalent shares are primarily attributed to the issuance of 500,000
shares in the Company's secondary offering in March 1995, the granting of
options to key employees of the Company, and the reduction in the number of
shares assumed to be repurchased upon the exercise of options and warrants,
using the treasury stock method, as a result of the Company's higher stock
price in 1995 over 1994.
11
<PAGE> 12
LIQUIDITY AND CAPITAL RESOURCES
As of September 30, 1995, the Company had $68.8 million in cash, cash
equivalents and short-term investments and $93.2 million in working capital.
These figures represent an increase of $15.6 million in cash, cash equivalents
and short-term investments and $21.9 million in working capital over the
December 31, 1994 amounts. These increases are primarily due to the receipt of
$13.2 million in cash from the Company's secondary stock offering that took
place in March 1995. Although accounts receivable collection days at September
30, 1995, decreased to 35 days compared to 53 days at December 31, 1994, the
Company's accounts receivable balance increased to $11.5 million from $10.2
million at the end of 1994 as a result of increased sales levels during the
third quarter of 1995. Inventory increased to $21.4 million at September 30,
1995, compared to $16.5 million at December 31, 1994, due to higher shipment
levels. However, inventory turns increased to 3.0 at the end of the third
quarter, compared to 2.4 at the end of 1994.
Capital expenditures during the nine month period ended September 30, 1995 were
$4.8 million compared to $1.3 million for the comparable period in 1994. The
increase in capital spending was primarily due to tenant improvements at the
Company's Tustin facility totaling $849,000 and the purchase of computer
equipment, test equipment and software. The Company has entered into an
agreement to purchase software and equipment to upgrade its information system
capabilities. The total commitment thereunder is approximately $750,000, of
which $561,000 has been invested as of September 30, 1995.
In May 1995, the Company amended the Loan and Security Agreement with its bank
which provides for a revolving unsecured credit facility of $10 million,
subject to sublimits for amounts utilized for term loans, letters of credit and
foreign exchange contracts. The Loan Agreement contains operating covenants,
including limitations on the ability to take certain corporate actions. The
Loan Agreement also requires the Company to be in compliance with certain
financial ratios. At September 30, 1995 the Company had no outstanding
borrowings under the Loan Agreement and was in compliance with all financial
and operating covenants. The amended Loan Agreement expires May 1, 1996.
On July 20, 1995, the Company entered into certain agreements with Source-Comm
Corporation of Valencia, California ("Source-Comm"). Source- Comm is a
cost/performance leader in remote networking devices which enable the
integration of Ethernet local area networks with wide area networking over
copper wire. The agreements provide for the incorporation of Source-Comm's
networking technology into the Company's current and future transmission
products. Under the terms of the agreements, the Company will lend Source-Comm
$2.7 million and has rights to obtain a minority ownership position. During
the third quarter, the Company advanced $1.4 million to Source-Comm. The
remainder is to be funded during the fourth quarter of 1995.
The Company has no other material near-term commitments for its funds, which
are currently held in investment grade, interest-bearing securities. The
Company believes that cash generated from operations will be sufficient to fund
anticipated operating expenses for the foreseeable future, although cash
requirements in certain quarters may exceed internally-generated funds.
12
<PAGE> 13
PART II. OTHER INFORMATION
PAIRGAIN TECHNOLOGIES, INC.
Item 1. Legal Proceedings
None.
Item 2. Changes in Securities
None.
Item 3. Defaults upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders
None.
Item 5. Other Information
Mr. Brian Kouri, a director of the Company since August 1992,
resigned effective September 15, 1995. There were no disagreements
between Mr. Kouri and the Company. Mr. Kouri's decision to resign was
based solely upon the fact that during the third quarter of 1995, BCE
Venture Capital, Inc., of which Mr. Kouri is an executive officer,
disposed of the majority of its shares in the Company. As a result,
BCE is no longer a significant stockholder in the Company.
Accordingly, Mr. Kouri decided to focus his attention on BCE's other
investments and businesses.
Item 6. Exhibits and Reports on Form 8-K
(A) Exhibits:
<TABLE>
<CAPTION>
Exhibit No.
<S> <C>
10.34 PairGain Technologies, Inc. Common Stock Purchase Warrant
dated May 10, 1995, issued to Brobeck, Phleger & Harrison
10.35 PairGain Technologies, Inc. Common Stock Purchase Warrant
dated August 3, 1995, issued to Nexus Applied Research, Inc.
10.36 Amendment to Loan and Security Agreement dated May 3,
1995, between the Registrant and Silicon Valley Bank
11.1 Computation of Per Share Earnings
27 Financial Data Schedule
</TABLE>
(B) Reports filed on Form 8-K during the period:
None.
13
<PAGE> 14
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
PairGain Technologies, Inc.
------------------------------------------
(Registrant)
Date: November 6, 1995 /s/ Charles W. McBrayer
---------------------- ------------------------------------------
Charles W. McBrayer
Vice President, Finance and Administration
Chief Financial Officer
(Duly Authorized Officer)
Date: November 6, 1995 /s/ Robert R. Price
---------------------- ------------------------------------------
Robert R. Price
Corporate Controller
(Chief Accounting Officer)
14
<PAGE> 1
EXHIBIT 10.34
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933 AS AMENDED (THE"ACT") NOR QUALIFIED UNDER THE
SECURITIES LAWS OF ANY STATE, AND MAY NOT BE SOLD, ASSIGNED, TRANSFERRED,
PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE ACT AND QUALIFICATION UNDER APPLICABLE STATE
SECURITIES LAWS, OR AN OPINION OF COUNSEL SATISFACTORY IN FORM AND SUBSTANCE
TO THE COMPANY TO THE EFFECT THAT SUCH REGISTRATION AND QUALIFICATION ARE NOT
REQUIRED.
Date of Issuance: May 10, 1995
PAIRGAIN TECHNOLOGIES, INC.
COMMON STOCK PURCHASE WARRANT
THIS CERTIFIES THAT, for value received, BROBECK, PHLEGER &
HARRISON (the "Holder") is entitled, upon the terms and subject to the
conditions hereinafter set forth, at any time or from time to time, prior to
5:00 p.m. Pacific Time on May 10, 1998, to subscribe for and purchase from
PairGain Technologies, Inc., a California corporation (the "Company"), Five
Thousand (5,000) fully paid and non-assessable shares of the Common Stock of
the Company for the aggregate exercise price of One Hundred Thousand and No/100
Dollars ($100,000). Hereinafter, (i) the Common Stock of the Company, together
with any other equity securities which may be issued by the Company in
substitution therefor, is referred to as the "Common Stock," (ii) the shares of
the Common Stock purchasable hereunder are referred to as the "Warrant Shares,"
(iii) the aggregate exercise price payable for all of the Warrant Shares is
referred to as the "Aggregate Exercise Price," and (iv) the price payable
hereunder for each of the Warrant Shares is referred to as the "Per Share
Exercise Price," which shall initially be Twenty and No/100 Dollars ($20.00)
per share. The Per Share Exercise Price and the number of Warrant Shares are
subject to adjustment as hereinafter provided.
1. Exercisability.
1.1 Exercise of Warrant. This Warrant may be exercised,
in whole at any time or in part from time to time, prior to 5:00 p.m. Pacific
Time on May 10, 1998 (subject to earlier termination as hereinafter provided),
by the Holder (the "Holder") by the surrender of this Warrant (with the
subscription form at the end hereof duly executed) at the principal office of
the Company, which is currently located at 14402 Franklin Avenue, Tustin,
California 92680, together with proper payment of the Per Share Exercise Price
for each of the Warrant Shares as to which the Warrant is being exercised.
Payment for Warrant Shares shall be made by certified or bank cashier's check,
payable to the order of the Company.
<PAGE> 2
If this Warrant is exercised in part, this Warrant must be
exercised for a number of whole shares of the Common Stock and the Holder shall
be entitled to receive a new Warrant covering the number of Warrant Shares with
respect to which this Warrant has not been exercised. Upon such surrender of
this Warrant, together with the subscription form at the end hereof duly
executed and proper payment of the Per Share Exercise Price for each of the
Warrant Shares as to which the Warrant is being exercised, the Company will (i)
issue, or cause the Company's transfer agent to issue, a certificate or
certificates in the name of the Holder for the largest number of whole shares
of the Common Stock to which the Holder shall be entitled and, if this Warrant
is exercised in whole, in lieu of any fractional share of the Common Stock to
which the Holder shall be entitled, cash equal to the fair value of such
fractional share (as determined by the last reported selling price of the
Common Stock on the last business day before the date the Warrant is
exercised), and (ii) deliver the other securities and properties receivable
upon the exercise of this Warrant, if any, or the proportionate part thereof if
this Warrant is exercised in part, pursuant to the provisions of this Warrant.
1.2 Net Issue Election. The Holder may elect to receive,
without the payment by the Holder of any additional consideration, shares equal
to the value of this Warrant or any portion hereof by the surrender of this
Warrant or such portion to the Company, with the net issue election notice
annexed hereto duly executed, at the office of the Company. Thereupon, the
Company shall issue to the Holder such number of fully paid and nonassessable
shares of Common Stock as is computed using the following formula:
X = Y (A-B)
-------
A
where:
X = the number of shares to be issued to the Holder pursuant to
this Section 1.2.
Y = the number of shares covered by this Warrant in respect of
which the net issue election is made pursuant to this Section
1.2.
A = the fair market value of one share of Common Stock, as
determined in accordance with the provisions of this Section
1.2.
B = the Per Share Exercise Price in effect under this Warrant at
the time the net issue election is made pursuant to this
Section 1.2.
For purposes of this Section 1.2, the "fair market value" per share of the
Company's Common Stock shall mean the last reported sale price of the Common
Stock on the last business day before the effective date of exercise of the net
issue election.
2
<PAGE> 3
2. Reservation of Warrant Shares. The Company agrees that, prior
to the expiration of this Warrant, the Company will at all times have
authorized and in reserve, and will keep available, solely for issuance or
delivery upon the exercise of this Warrant, the shares of the Common Stock and
other securities and properties as from time to time shall be receivable upon
the exercise of this Warrant.
3. Adjustments.
3.1 Distribution With Respect to Common Stock. If, at
any time or from time to time after the date of this Warrant, the Company shall
distribute to the holders of the Common Stock, without payment therefor, (i)
securities, other than shares of the Common Stock, or (ii) property, other than
cash, with respect to the Common Stock, then, and in each such case, subject to
Section 3.4 below, the Holder, upon the exercise of this Warrant, shall be
entitled to receive the securities and properties which the Holder would hold
on the date of such exercise if, on the date of such distribution, the Holder
had been the holder of record of the number of shares of the Common Stock
subscribed for upon such exercise and, during the period from the date of such
distribution to and including the date of such exercise, had retained such
shares and the securities and properties receivable by the Holder during such
period.
3.2 Stock Splits, Etc. If, at any time or from time to
time after the date of this Warrant, the Company shall issue to the holders of
the Common Stock shares of the Common Stock by way of a stock dividend or stock
split, then, and in each such case, the Per Share Exercise Price shall be
adjusted, or further adjusted, to a price (to the nearest whole cent)
determined by dividing (1) an amount equal to the number of shares of the
Common Stock outstanding immediately prior to such issuance multiplied by the
Per Share Exercise Price as it existed immediately prior to such issuance by
(ii) the total number of shares of the Common Stock outstanding immediately
after such issuance. Upon each such adjustment in the Per Share Exercise
Price, the number of Warrant Shares shall be adjusted by dividing the Aggregate
Exercise Price by the Per Share Exercise Price in effect immediately after such
adjustment.
3.3 Reverse Splits, Etc. If, at any time or from time to
time after the date of this Warrant, the number of shares of Common Stock
outstanding is decreased by way of combination of shares or reserve split,
then, and in each such case, the Per Share Exercise Price shall be adjusted, or
further adjusted, to a price (to the nearest whole cent) determined by dividing
(i) an amount equal to the number of shares of the Common Stock outstanding
immediately prior to such event multiplied by the Per Share Exercise Price as
it existed immediately prior to such event by (ii) the total number of shares
of the Common Stock outstanding immediately after such event. Upon each such
adjustment in the Per Share Exercise Price, the number of Warrant Shares shall
be adjusted by dividing the Aggregate Exercise Price by the Per Share Exercise
Price in effect immediately after such adjustment.
3
<PAGE> 4
3.4. Adjustment for Reorganization, Consolidation, Merger,
etc.
a. Reorganization, Consolidation, Merger, etc.
In case at any time or from time to time, the Company shall (i) effect a
reorganization, (ii) consolidate with or merge into any other entity or person,
or (iii) transfer all or substantially all of its properties or assets to any
other entity or person under any plan or arrangement contemplating the
dissolution of the Company, then, in each such case, the Holder, on the
exercise hereof as provided in Section 1 at any time after the consummation of
such reorganization, consolidation or merger or the effective date of such
reorganization, consolidation or merger, as the case may be, shall receive, in
lieu of the Common Stock (or other securities) issuable on such exercise prior
to such consummation or such effective date, the stock and other securities and
property (including cash) to which the Holder would have been entitled upon
such consummation or in connection with such dissolution, as the case may be,
if the Holder had so exercised this Warrant, immediately prior thereto, all
subject to further adjustment thereafter as provided in this Section 3.
b. Dissolution. In the event of any dissolution
of the Company following the transfer of all or substantially all of its
properties or assets, the Company, prior to such dissolution, shall at its
expense deliver or cause to be delivered the stock and other securities and
property (including cash, where applicable) receivable by the Holder after the
effective date of such dissolution pursuant to this Section 3.4 to a bank or
trust company having its principal office in Orange County, California, as
trustee for the Holder.
c. Continuation of Terms. Upon any
reorganization, consolidation, merger or transfer (and any dissolution
following any transfer) referred to in this Section 3.4, this Warrant shall
continue in full force and effect, subject to expiration in accordance with
Section 1 hereof, and the terms hereof shall be applicable to the shares of
stock and other securities and property receivable on the exercise of this
Warrant after the consummation of such reorganization, consolidation or merger
or the effective date of dissolution following any such transfer, as the case
may be, and shall be binding upon the issuer of any such stock or other
securities, including, in the case of any such transfer, the entity or person
acquiring all or substantially all of the properties or assets of the Company,
whether or not such entity or person shall have expressly assumed the terms of
this Warrant.
d. Notice. The Company shall provide advance
notice to the Holder of any reorganization, consolidation, merger, dissolution
or other such transaction as soon as practicable, but in no event less than 20
days prior to the consummation of any such transaction.
4. Fully Paid Stock; Taxes. The Company agrees that the shares
of the Common Stock represented by each and every certificate for Warrant
Shares delivered on the exercise of this Warrant shall, at the time of such
delivery, be validly issued and outstanding, fully paid and non-assessable.
The Company further covenants and agrees that it will pay, when due and
payable, any and all federal and state stamp, original issue or similar taxes
which may be payable in respect of the issue of any Warrant Share or
certificate therefor; provided,
4
<PAGE> 5
however, that the Company shall not be required to pay any tax which may be
payable in respect of any transfer involved in the issuance of any certificate
for Warrant Shares in a name other than that of the Holder upon any exercise of
this Warrant.
5. Restrictions on Transferability of Securities; Compliance with
Securities Act.
5.1 Restrictions on Transferability. The transferability
of this Warrant and the Warrant Shares (as well as any other securities issued
in respect of the Warrant Shares upon any stock split, stock dividend,
recapitalization, merger, consolidation or similar event) shall be subject to
the conditions specified in this Section 5, which conditions are intended to
ensure compliance with the provisions of the Securities Act of 1933 (the "Act")
and applicable state securities laws. The Holder, and any transferee of this
Warrant or the Warrant Shares, by its acceptance hereof or thereof, agrees that
this Warrant and the Warrant Shares will be taken and held subject to the
provisions and upon the conditions specified in this Section 5.
5.2 Restrictive Legend. This Warrant and each
certificate representing (i) the Warrant Shares or (ii) any other securities
issued in respect of the Warrant Shares upon any stock split, stock dividend,
recapitalization, merger, consolidation or similar event, shall (unless
otherwise permitted or unless the securities evidenced by such certificate
shall have been registered under the Act) be stamped or otherwise imprinted
with a legend substantially in the following form (in addition to any legend
required under applicable state securities laws), and shall be subject to the
provisions thereof:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, (THE "ACT"), OR
QUALIFIED UNDER THE SECURITIES LAWS OF ANY STATE, AND MAY NOT
BE SOLD, ASSIGNED, TRANSFERRED, PLEDGED, HYPOTHECATED OR
OTHERWISE DISPOSED OF IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE ACT AND QUALIFICATION UNDER
APPLICABLE STATE SECURITIES LAWS, OR AN OPINION OF COUNSEL
SATISFACTORY TO THE COMPANY TO THE EFFECT THAT SUCH
REGISTRATION AND QUALIFICATION ARE NOT REQUIRED.
6. Warrant Register. This Warrant is transferable only upon the
books of the Company which it shall cause to be maintained for such purpose.
The Company may treat the registered holder of this Warrant as he, she or it
appears on the Company's books at any time as the Holder for all purposes,
notwithstanding the Company's receipt of any notice to the contrary.
5
<PAGE> 6
7. Loss, Etc., of Warrant. Upon receipt of evidence satisfactory
to the Company of the loss, theft, destruction or mutilation of this Warrant,
and of indemnity reasonably satisfactory to the Company, if lost, stolen or
destroyed, and upon surrender and cancellation of this Warrant if mutilated,
and upon reimbursement of the Company's reasonable incidental expenses, the
Company shall execute and deliver to the Holder a new Warrant of like date,
tenor and denomination.
8. Warrant Holder Has No Shareholder Rights. This Warrant does
not confer upon the Holder any right to vote or to consent or to receive notice
as a stockholder of the Company, as such, with respect to any matters
whatsoever, or any other rights or liabilities as a stockholder, prior to the
exercise thereof.
9. Communication. Any notice required or permitted to be given
hereunder shall be in writing and shall be deemed to have been given
forty-eight (48) hours after having been deposited in the United States mail,
postage prepaid, registered or certified, return receipt requested, addressed
to each party in the following manner:
To the Company: PairGain Technologies, Inc.
14402 Franklin Avenue
Tustin, California 92680
Attn: Chief Financial Officer
To Holder: Brobeck, Phleger & Harrison
4675 MacArthur Court
Suite 1000
Newport Beach, California 92660-1846
Attn: Bruce R. Hallett
The Company and the Holder may change the address to which
such notices are to be addressed to them by giving the other party notice in
the manner set forth herein.
10. Headings. The headings of this Warrant have been inserted as
a matter of convenience and shall not affect the construction hereof.
11. Applicable Law. This Warrant shall be governed by and
construed in accordance with the internal laws of the State of California.
6
<PAGE> 7
IN WITNESS WHEREOF, PairGain Technologies, Inc. has caused
this Warrant to be executed by its officers thereunto authorized.
Dated: June 13, 1995 PAIRGAIN TECHNOLOGIES, INC.
By: /s/ CHARLES S. STRAUCH
-------------------------
Charles S. Strauch
Chief Executive Officer
ATTEST:
By: /s/ CHARLES W. McBRAYER
------------------------
Charles W. McBrayer
Secretary
7
<PAGE> 8
FORM OF ASSIGNMENT
(To Be Signed Only Upon Assignment)
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and
transfers unto ________________________________________________________ the
right to purchase ____________ shares of Common Stock evidenced by the within
Warrant, and hereby appoints __________________________________ to transfer
the same on the books of PairGain Technologies, Inc. with full power of
substitution in the premises.
Date: , 199
--------------- --
-------------------------------------
(Signature)
Note: Signature must conform in all respects to the name of the
Warrant Holder as specified on the face of this Warrant in every
particular, without alteration or enlargement or any change
whatsoever, and the signature must be guaranteed in the usual manner.
Signature Guaranteed:
-------------------------------------
<PAGE> 9
EXERCISE FORM
(To Be Executed By The Warrant Holder If The Holder Desires
To Exercise The Warrant In Whole Or In Part)
TO: PairGain Technologies, Inc.
The undersigned hereby irrevocably elects to exercise the
right of purchase represented by the within Warrant for, and for purchase
thereunder, _____________________________ shares of Common Stock provided for
therein and tenders payment herewith to the order of PairGain Technologies,
Inc. in the amount of $______________. The undersigned requested that
certificates for such shares of Common Stock be issued as follows:
Name:
Address:
Deliver to:
Address:
Date: , 199
------------- --
--------------------------------
(Signature)
Note: Signature must conform in all respects to the name of the
Warrant Holder as specified on the face of this Warrant in every
particular, without alteration or enlargement or any change
whatsoever, and the signature must be guaranteed in the usual manner.
Signature Guaranteed:
--------------------------------
<PAGE> 10
NET ISSUE ELECTION NOTICE
To: PairGain Technologies, Inc.
The undersigned hereby elects, pursuant to Section 1.2 of the attached
Warrant, to surrender the right to purchase ___________ shares of Common Stock.
The Certificate(s) for the shares issuable upon such net issue election shall
be issued in the name of the undersigned or as otherwise indicated below.
Date:
-------------------- ------------------------------
Signature
------------------------------
Name for Registration
------------------------------
Mailing Address
<PAGE> 1
EXHIBIT 10.35
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), NOR QUALIFIED UNDER THE
SECURITIES LAWS OF ANY STATE, AND MAY NOT BE SOLD, ASSIGNED, TRANSFERRED,
PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE ACT AND QUALIFICATION UNDER APPLICABLE STATE
SECURITIES LAWS, OR AN OPINION OF COUNSEL SATISFACTORY IN FORM AND SUBSTANCE TO
THE COMPANY TO THE EFFECT THAT SUCH REGISTRATION AND QUALIFICATION ARE NOT
REQUIRED.
Date of Issuance: August 3, 1995
PAIRGAIN TECHNOLOGIES, INC.
COMMON STOCK PURCHASE WARRANT
THIS CERTIFIES THAT, for value received, NEXUS APPLIED
RESEARCH, INC. (the "Holder") is entitled, upon the terms and subject to the
conditions hereinafter set forth, at any time or from time to time, prior to
5:00 p.m. Pacific Time on September 1, 1999, to subscribe for and purchase from
PairGain Technologies, Inc., a California corporation (the "Company"), Five
Thousand (5,000) fully paid and non- assessable shares of the Common Stock of
the Company for the aggregate exercise price of One Hundred Twenty-five
Thousand Dollars ($125,000). Hereinafter, (i) the Common Stock of the Company,
together with any other equity securities which may be issued by the Company in
substitution therefor, is referred to as the "Common Stock," (ii) the shares of
the Common Stock purchasable hereunder are referred to as the "Warrant Shares,"
(iii) the aggregate exercise price payable for all of the Warrant Shares is
referred to as the "Aggregate Exercise Price," and (iv) the price payable
hereunder for each of the Warrant Shares is referred to as the "Per Share
Exercise Price," which shall initially be Twenty- five Dollars ($25.00) per
share. The Per Share Exercise Price and the number of Warrant Shares are
subject to adjustment as hereinafter provided.
1. Exercisability.
1.1 Exercise of Warrant. This Warrant may be exercised,
in whole at any time or in part from time to time, prior to 5:00 p.m. Pacific
Time on September 1, 1999 (subject to earlier termination as hereinafter
provided), by the Holder (the "Holder") by the surrender of this Warrant (with
the subscription form at the end hereof duly executed) at the principal office
of the Company, which is currently located at 14402 Franklin Avenue, Tustin,
California 92680, together with proper payment of the Per Share Exercise Price
for each of the Warrant Shares as to which the Warrant is being exercised.
Payment for Warrant Shares shall be made by certified or bank cashier's check,
payable to the order of the Company.
<PAGE> 2
If this Warrant is exercised in part, this Warrant must be
exercised for a number of whole shares of the Common Stock and the Holder shall
be entitled to receive a new Warrant covering the number of Warrant Shares with
respect to which this Warrant has not been exercised. Upon such surrender of
this Warrant, together with the subscription form at the end hereof duly
executed and proper payment of the Per Share Exercise Price for each of the
Warrant Shares as to which the Warrant is being exercised, the Company will (i)
issue, or cause the Company's transfer agent to issue, a certificate or
certificates in the name of the Holder for the largest number of whole shares
of the Common Stock to which the Holder shall be entitled and, if this Warrant
is exercised in whole, in lieu of any fractional share of the Common Stock to
which the Holder shall be entitled, cash equal to the fair value of such
fractional share (as determined by the last reported selling price of the
Common Stock on the last business day before the date the Warrant is
exercised), and (ii) deliver the other securities and properties receivable
upon the exercise of this Warrant, if any, or the proportionate part thereof if
this Warrant is exercised in part, pursuant to the provisions of this Warrant.
1.2 Net Issue Election. The Holder may elect to receive,
without the payment by the Holder of any additional consideration, shares equal
to the value of this Warrant or any portion hereof by the surrender of this
Warrant or such portion to the Company, with the net issue election notice
annexed hereto duly executed, at the office of the Company. Thereupon, the
Company shall issue to the Holder such number of fully paid and nonassessable
shares of Common Stock as is computed using the following formula:
X = Y (A-B)
-------
A
where:
X = the number of shares to be issued to the Holder pursuant to
this Section 1.2.
Y = the number of shares covered by this Warrant in respect of
which the net issue election is made pursuant to this
Section 1.2.
A = the fair market value of one share of Common Stock, as
determined in accordance with the provisions of this
Section 1.2.
B = the Per Share Exercise Price in effect under this Warrant at
the time the net issue election is made pursuant to this
Section 1.2.
For purposes of this Section 1.2, the "fair market value" per share of the
Company's Common Stock shall mean the last reported sale price of the Common
Stock on the last business day before the effective date of exercise of the net
issue election.
2
<PAGE> 3
2. Reservation of Warrant Shares. The Company agrees that, prior
to the expiration of this Warrant, the Company will at all times have
authorized and in reserve, and will keep available, solely for issuance or
delivery upon the exercise of this Warrant, the shares of the Common Stock and
other securities and properties as from time to time shall be receivable upon
the exercise of this Warrant.
3. Adjustments.
3.1 Distribution With Respect to Common Stock. If, at
any time or from time to time after the date of this Warrant, the Company shall
distribute to the holders of the Common Stock, without payment therefor, (i)
securities, other than shares of the Common Stock, or (ii) property, other than
cash, with respect to the Common Stock, then, and in each such case, subject to
Section 3.4 below, the Holder, upon the exercise of this Warrant, shall be
entitled to receive the securities and properties which the Holder would hold
on the date of such exercise if, on the date of such distribution, the Holder
had been the holder of record of the number of shares of the Common Stock
subscribed for upon such exercise and, during the period from the date of such
distribution to and including the date of such exercise, had retained such
shares and the securities and properties receivable by the Holder during such
period.
3.2 Stock Splits, Etc. If, at any time or from time to
time after the date of this Warrant, the Company shall issue to the holders of
the Common Stock shares of the Common Stock by way of a stock dividend or stock
split, then, and in each such case, the Per Share Exercise Price shall be
adjusted, or further adjusted, to a price (to the nearest whole cent)
determined by dividing (i) an amount equal to the number of shares of the
Common Stock outstanding immediately prior to such issuance multiplied by the
Per Share Exercise Price as it existed immediately prior to such issuance by
(ii) the total number of shares of the Common Stock outstanding immediately
after such issuance. Upon each such adjustment in the Per Share Exercise
Price, the number of Warrant Shares shall be adjusted by dividing the Aggregate
Exercise Price by the Per Share Exercise Price in effect immediately after such
adjustment.
3.3 Reverse Splits, Etc. If, at any time or from time to
time after the date of this Warrant, the number of shares of Common Stock
outstanding is decreased by way of combination of shares or reserve split,
then, and in each such case, the Per Share Exercise Price shall be adjusted, or
further adjusted, to a price (to the nearest whole cent) determined by dividing
(i) an amount equal to the number of shares of the Common Stock outstanding
immediately prior to such event multiplied by the Per Share Exercise Price as
it existed immediately prior to such event by (ii) the total number of shares
of the Common Stock outstanding immediately after such event. Upon each such
adjustment in the Per Share Exercise Price, the number of Warrant Shares shall
be adjusted by dividing the Aggregate Exercise Price by the Per Share Exercise
Price in effect immediately after such adjustment.
3
<PAGE> 4
3.4. Adjustment for Reorganization, Consolidation, Merger,
etc.
a. Reorganization, Consolidation, Merger, etc.
In case at any time or from time to time, the Company shall (i) effect a
reorganization, (ii) consolidate with or merge into any other entity or person,
or (iii) transfer all or substantially all of its properties or assets to any
other entity or person under any plan or arrangement contemplating the
dissolution of the Company, then, in each such case, the Holder, on the
exercise hereof as provided in Section 1 at any time after the consummation of
such reorganization, consolidation or merger or the effective date of such
reorganization, consolidation or merger, as the case may be, shall receive, in
lieu of the Common Stock (or other securities) issuable on such exercise prior
to such consummation or such effective date, the stock and other securities and
property (including cash) to which the Holder would have been entitled upon
such consummation or in connection with such dissolution, as the case may be,
if the Holder had so exercised this Warrant, immediately prior thereto, all
subject to further adjustment thereafter as provided in this Section 3.
b. Dissolution. In the event of any dissolution
of the Company following the transfer of all or substantially all of its
properties or assets, the Company, prior to such dissolution, shall at its
expense deliver or cause to be delivered the stock and other securities and
property (including cash, where applicable) receivable by the Holder after the
effective date of such dissolution pursuant to this Section 3.4 to a bank or
trust company having its principal office in Orange County, California, as
trustee for the Holder.
c. Continuation of Terms. Upon any
reorganization, consolidation, merger or transfer (and any dissolution
following any transfer) referred to in this Section 3.4, this Warrant shall
continue in full force and effect, subject to expiration in accordance with
Section 1 hereof, and the terms hereof shall be applicable to the shares of
stock and other securities and property receivable on the exercise of this
Warrant after the consummation of such reorganization, consolidation or merger
or the effective date of dissolution following any such transfer, as the case
may be, and shall be binding upon the issuer of any such stock or other
securities, including, in the case of any such transfer, the entity or person
acquiring all or substantially all of the properties or assets of the Company,
whether or not such entity or person shall have expressly assumed the terms of
this Warrant.
d. Notice. The Company shall provide advance
notice to the Holder of any reorganization, consolidation, merger, dissolution
or other such transaction as soon as practicable, but in no event less than 20
days prior to the consummation of any such transaction.
4. Fully Paid Stock; Taxes. The Company agrees that the shares
of the Common Stock represented by each and every certificate for Warrant
Shares delivered on the exercise of this Warrant shall, at the time of such
delivery, be validly issued and outstanding, fully paid and non-assessable.
The Company further covenants and agrees that it will pay, when due and
payable, any and all federal and state stamp, original issue or similar taxes
which may be payable in respect of the issue of any Warrant Share or
certificate therefor; provided,
4
<PAGE> 5
however, that the Company shall not be required to pay any tax which may be
payable in respect of any transfer involved in the issuance of any certificate
for Warrant Shares in a name other than that of the Holder upon any exercise
of this Warrant.
5. Restrictions on Transferability of Securities; Compliance with
Securities Act.
5.1 Restrictions on Transferability. The transferability
of this Warrant and the Warrant Shares (as well as any other securities issued
in respect of the Warrant Shares upon any stock split, stock dividend,
recapitalization, merger, consolidation or similar event) shall be subject to
the conditions specified in this Section 5, which conditions are intended to
ensure compliance with the provisions of the Securities Act of 1933 (the "Act")
and applicable state securities laws. The Holder, and any transferee of this
Warrant or the Warrant Shares, by its acceptance hereof or thereof, agrees that
this Warrant and the Warrant Shares will be taken and held subject to the
provisions and upon the conditions specified in this Section 5.
5.2 Restrictive Legend. This Warrant and each
certificate representing (i) the Warrant Shares or (ii) any other securities
issued in respect of the Warrant Shares upon any stock split, stock dividend,
recapitalization, merger, consolidation or similar event, shall (unless
otherwise permitted or unless the securities evidenced by such certificate
shall have been registered under the Act) be stamped or otherwise imprinted
with a legend substantially in the following form (in addition to any legend
required under applicable state securities laws), and shall be subject to the
provisions thereof:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, (THE "ACT"), OR
QUALIFIED UNDER THE SECURITIES LAWS OF ANY STATE, AND MAY NOT
BE SOLD, ASSIGNED, TRANSFERRED, PLEDGED, HYPOTHECATED OR
OTHERWISE DISPOSED OF IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE ACT AND QUALIFICATION UNDER
APPLICABLE STATE SECURITIES LAWS, OR AN OPINION OF COUNSEL
SATISFACTORY TO THE COMPANY TO THE EFFECT THAT SUCH
REGISTRATION AND QUALIFICATION ARE NOT REQUIRED.
6. Warrant Register. This Warrant is transferable only upon the
books of the Company which it shall cause to be maintained for such purpose.
The Company may treat the registered holder of this Warrant as he, she or it
appears on the Company's books at any time as the Holder for all purposes,
notwithstanding the Company's receipt of any notice to the contrary.
5
<PAGE> 6
7. Loss, Etc., of Warrant. Upon receipt of evidence satisfactory
to the Company of the loss, theft, destruction or mutilation of this Warrant,
and of indemnity reasonably satisfactory to the Company, if lost, stolen or
destroyed, and upon surrender and cancellation of this Warrant if mutilated,
and upon reimbursement of the Company's reasonable incidental expenses, the
Company shall execute and deliver to the Holder a new Warrant of like date,
tenor and denomination.
8. Warrant Holder Has No Shareholder Rights. This Warrant does
not confer upon the Holder any right to vote or to consent or to receive notice
as a stockholder of the Company, as such, with respect to any matters
whatsoever, or any other rights or liabilities as a stockholder, prior to the
exercise thereof.
9. Communication. Any notice required or permitted to be given
hereunder shall be in writing and shall be deemed to have been given
forty-eight (48) hours after having been deposited in the United States mail,
postage prepaid, registered or certified, return receipt requested, addressed
to each party in the following manner:
To the Company: PairGain Technologies, Inc.
14402 Franklin Avenue
Tustin, California 92680
Attn: Chief Financial Officer
To Holder: Nexus Applied Research, Inc.
2010 Veda Ranch Road
Auburn, California 95603
The Company and the Holder may change the address to which
such notices are to be addressed to them by giving the other party notice in
the manner set forth herein.
10. Headings. The headings of this Warrant have been inserted as
a matter of convenience and shall not affect the construction hereof.
11. Applicable Law. This Warrant shall be governed by and
construed in accordance with the internal laws of the State of California.
6
<PAGE> 7
IN WITNESS WHEREOF, PairGain Technologies, Inc. has caused
this Warrant to be executed by its officers thereunto authorized.
Dated: September 1, 1995 PAIRGAIN TECHNOLOGIES, INC.
By: /s/ CHARLES S. STRAUCH
------------------------------
Charles S. Strauch
Chief Executive Officer
ATTEST:
By: /s/ CHARLES W. McBRAYER
-------------------------
Charles W. McBrayer
Secretary
7
<PAGE> 8
FORM OF ASSIGNMENT
(To Be Signed Only Upon Assignment)
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and
transfers unto ________________________________________________________ the
right to purchase ____________ shares of Common Stock evidenced by the within
Warrant, and hereby appoints _____________________________________ to transfer
the same on the books of PairGain Technologies, Inc. with full power of
substitution in the premises.
Date: , 199
-------------- --
-------------------------------------
(Signature)
Note: Signature must conform in all respects to the name of the
Warrant Holder as specified on the face of this Warrant in every
particular, without alteration or enlargement or any change
whatsoever, and the signature must be guaranteed in the usual manner.
Signature Guaranteed:
-------------------------------------
<PAGE> 9
EXERCISE FORM
(To Be Executed By The Warrant Holder If The Holder Desires
To Exercise The Warrant In Whole Or In Part)
TO: PairGain Technologies, Inc.
The undersigned hereby irrevocably elects to exercise the
right of purchase represented by the within Warrant for, and for purchase
thereunder, _____________________________ shares of Common Stock provided for
therein and tenders payment herewith to the order of PairGain Technologies,
Inc. in the amount of $________________. The undersigned requested that
certificates for such shares of Common Stock be issued as follows:
Name:
Address:
Deliver to:
Address:
Date: , 199
-------------- --
----------------------------------
(Signature)
Note: Signature must conform in all respects to the name of the
Warrant Holder as specified on the face of this Warrant in every
particular, without alteration or enlargement or any change
whatsoever, and the signature must be guaranteed in the usual manner.
Signature Guaranteed:
----------------------------------
<PAGE> 10
NET ISSUE ELECTION NOTICE
To: PairGain Technologies, Inc.
The undersigned hereby elects, pursuant to Section 1.2 of the attached
Warrant, to surrender the right to purchase ___________ shares of Common Stock.
The Certificate(s) for the shares issuable upon such net issue election shall
be issued in the name of the undersigned or as otherwise indicated below.
Date:
----------------------- ---------------------------
Signature
---------------------------
Name for Registration
---------------------------
Mailing Address
<PAGE> 1
EXHIBIT 10.36
[LOGO] Silicon Valley Bank
Amendment to Loan and Security Agreement
Borrower: Pairgain Technologies, Inc.
Address: 14402 Franklin Avenue
Tustin, California 92680
Date: May 3, 1995
THIS AMENDMENT TO LOAN AND SECURITY AGREEMENT is entered into between
SILICON VALLEY BANK ("Silicon") and the borrower named above (the "Borrower").
The Parties agree to amend the Loan and Security Agreement between
them, dated December 22, 1993, as amended by that certain Amendment to Loan
Agreement dated January 26, 1994 (as amended, the "Loan Agreement"), as
follows. (Capitalized terms used but not defined in this Amendment, shall have
the meanings set forth in the Loan Agreement.)
1. AMENDED SCHEDULE. The Schedule to Loan and Security Agreement
is amended effective on the date hereof, to read as set forth on the Amended
Schedule to Loan and Security Agreement attached hereto.
2. FACILITY FEE. Borrower shall pay to Silicon concurrently
herewith a facility fee of $10,000, which shall be in addition to all interest
and all other fees payable to Silicon and shall be non-refundable.
3. REPRESENTATIONS TRUE. Borrower represents and warrants to
Silicon that all representations and warranties set forth in the Loan
Agreement, as amended hereby, are true and correct.
4. GENERAL PROVISIONS. This Amendment, the Loan Agreement, any
prior written amendments to the Loan Agreement signed by Silicon and the
Borrower, and the other written documents and agreements between Silicon and
the Borrower set forth in full all of the representations and agreements of the
parties with respect to the subject matter hereof and supersede all prior
discussions, representations, agreements and understandings between the parties
with respect to the subject hereof. Except as herein expressly amended, all of
the terms and provisions of the Loan Agreement, and all other documents and
agreements between Silicon
<PAGE> 2
and the Borrower shall continue in full force and effect and the same are
hereby ratified and confirmed.
BORROWER: SILICON:
PAIRGAIN TECHNOLOGIES, INC. SILICON VALLEY BANK
BY /s/ CHARLES S. STRAUCH
------------------------------- BY /s/ JERRY L. DALE
PRESIDENT OR VICE PRESIDENT -------------------------------
TITLE Vice President
----------------------------
BY /s/ CHARLES W. McBRAYER
-------------------------------
SECRETARY OR ASS'T SECRETARY
<PAGE> 3
[LOGO] SILICON VALLEY BANK
AMENDED SCHEDULE TO
LOAN AND SECURITY AGREEMENT
BORROWER: PAIRGAIN TECHNOLOGIES, INC.
ADDRESS: 14402 FRANKLIN AVENUE
TUSTIN, CALIFORNIA 92680
DATE: MAY 3, 1995
THIS SCHEDULE is an integral part of the Loan and Security Agreement
between Silicon Valley Bank ("Silicon") and the above-named borrower (the
"Borrower") of even date.
CREDIT LIMIT
(Section 1.1): Loans in a total amount not to exceed
$10,000,000 outstanding at any one time,
provided that Term Loans, Letters of Credit
and the Exchange Contracts are subject to the
sublimits set forth below.
TERM LOAN FACILITY
SUBLIMIT
An amount up to $2,000,000 (such aggregate
amount as reduced as from time to time upon
the making of advances is referred to as the
"Term Loan Facility", and an advance is
referred to individually as a "Term Loan" and
advances are collectively referred to as
"Term Loans") to be utilized by the Borrower
on or before the Maturity Date for the
purchase of new fixed assets to be located in
the United States (such purchase to be
evidenced by documentation reasonably
acceptable to Silicon); provided, however,
that the amount of a Term Loan advance
hereunder shall not exceed 100% of the
invoice price of the items purchased, with
applicable freight and installation charges
and taxes to be additional items not
financed; provided, further, the minimum
amount of a Term Loan shall be $250,000;
provided, further, that Borrower shall
provide to Silicon such UCC-1 Financing
Statements relating to the assets being
purchased for filing in such jurisdictions as
Silicon determines is necessary or desirable
and an amendment to this Agreement relating
to the definition of Term Loan Collateral
relating thereto, in such form and containing
such language and other provisions as are
satisfactory to Silicon in its discretion;
provided, further, that on the date a Term
Loan is to be made, Borrower has available to
it Loans in an amount equal to or greater
than the amount of the then proposed Term
Loan; and, provided, further, that the Credit
Limit set forth above and the Loans available
under this Agreement at any time shall be
reduced by the aggregate amount of Term Loans
from time to time outstanding.
- 1 -
<PAGE> 4
The amount available under the Term Loan
Facility shall be permanently reduced by the
original principal amount of each Term Loan
at the time that such Term Loan is made.
Commencing upon the making of any Term Loan
and continuing until all Term Loans are
repaid in full, Borrower shall pay to
Silicon, on a monthly basis, interest
accruing on the aggregate principal amount of
all Term Loans outstanding from time to time
at the Term Loan Rate (as referred to below).
In addition to making monthly interest
payments to Silicon, Borrower shall repay to
Silicon the aggregate principal amount of
each Term Loan outstanding in 48 equal
monthly payments of principal, the first
payment of which shall be due on the date
that is one month immediately after the
making of the Term Loan, with succeeding
payments due on the same day of each month
thereafter for the following 47 months, on
which date such Term Loan, all accrued and
unpaid interest thereon and all other
Obligations relating thereto shall be paid in
full.
LETTER OF CREDIT
SUBLIMIT Silicon, in its reasonable discretion, will
from time to time during the term of this
Agreement issue letters of credit for the
account of the Borrower ("Letters of
Credit"), in an aggregate amount at any one
time outstanding not to exceed $10,000,000,
upon the request of the Borrower, provided
that, on the date the Letters of Credit are
to be issued, Borrower has available to it
Loans in an amount equal to or greater than
the face amount of the Letters of Credit to
be issued. Prior to the issuance of any
Letters of Credit, Borrower shall execute and
deliver to Silicon Applications for Letters
of Credit and such other documentation as
Silicon shall specify (the "Letter of Credit
Documentation"). Fees for the Letters of
Credit shall be as provided in the Letter of
Credit Documentation. Letters of Credit may
have a maturity date up to twelve months
beyond the Maturity Date in effect from time
to time, provided that if, on the Maturity
Date, or on any earlier effective date of
termination, there are any outstanding
letters of credit issued by Silicon or issued
by another institution based upon an
application, guarantee, indemnity or similar
agreement on the part of Silicon, then on
such date Borrower shall provide to Silicon
cash collateral in an amount equal to the
face amount of all such letters of credit
plus all interest, fees and costs due or to
become due in connection therewith, to secure
all of the Obligations relating to said
letters of credit, pursuant to Silicon's then
standard form cash pledge agreement.
The Credit Limit set forth above and the
Loans available under this Agreement at any
time shall be reduced by the face amount of
Letters of Credit from time to time
outstanding.
FOREIGN EXCHANGE
CONTRACT SUBLIMIT Up to $2,000,000 of the Credit Limit may be
utilized for spot and future foreign exchange
contracts (the "Exchange Contracts"). The
Credit Limit available at any time shall be
reduced by the following amounts (the
"Foreign Exchange Reserve") on each day (the
"Determination Date"): (i) on all
outstanding Exchange Contracts on which
delivery is to be effected or settlement
allowed more than two business days from the
Determination Date, 20% of the gross amount
of the Exchange Contracts; plus (ii) on all
outstanding Exchange Contracts on which
delivery is to be effected or settlement
allowed
- 2 -
<PAGE> 5
within two business days after the
Determination Date, 100% of the gross amount
of the Exchange Contracts. In lieu of the
Foreign Exchange Reserve for 100% of the
gross amount of any Exchange Contract, the
Borrower may request that Silicon debit the
Borrower's bank account with Silicon for such
amount, provided Borrower has immediately
available funds in such amount in its bank
account.
Borrower may provide, by written notification
to Silicon, instructions to terminate any of
the Exchange Contracts, except that Borrower
may not terminate an Exchange Contract within
two business days of the date delivery is to
be effected or settlement allowed. Further,
Silicon may, in its discretion, terminate the
Exchange Contracts at any time (a) that an
Event of Default occurs or (b) that there is
not sufficient availability under the Credit
Limit and Borrower does not have available
funds in its bank account to satisfy the
Foreign Exchange Reserve. If either Silicon
or Borrower terminates the Exchange
Contracts, and without limitation of the FX
Indemnity Provisions (as referred to below),
Borrower agrees to reimburse Silicon for any
and all fees, costs and expenses relating
thereto or arising in connection therewith.
Borrower shall not permit the total gross
amount of all Exchange Contracts on which
delivery is to be effected and settlement
allowed in any two business day period to be
more than $1,000,000, nor shall Borrower
permit the total gross amount of all Exchange
Contracts to which Borrower is a party,
outstanding at any one time, to exceed
$2,000,000.
The Borrower shall execute all standard form
applications and agreements of Silicon in
connection with the Exchange Contracts, and
without limiting any of the terms of such
applications and agreements, the Borrower
will pay all standard fees and charges of
Silicon in connection with the Exchange
Contracts.
Without limiting any of the other terms of
this Loan Agreement or any such standard form
applications and agreements of Silicon,
Borrower agrees to indemnify Silicon and hold
it harmless, from and against any and all
claims, debts, liabilities, demands,
obligations, actions, costs and expenses
(including, without limitation, attorneys'
fees of counsel of Silicon's choice), of
every nature and description, which it may
sustain or incur, based upon, arising out of,
or in any way relating to any of the Exchange
Contracts or any transactions relating
thereto or contemplated thereby (collectively
referred to as the "FX Indemnity
Provisions").
The Exchange Contracts shall have maturity
dates no later than the Maturity Date with
respect to all Obligations other than for the
Term Loans.
For all purposes hereof, Loans shall include,
without limitation, Term Loans, Letters of
Credit and Exchange Contracts, provided that
with respect to Exchange Contracts and the
Credit Limit, the Credit Limit shall be
reduced in accordance with the Exchange
Reserve provisions set forth above.
- 3 -
<PAGE> 6
INTEREST RATE (Section 1.2): A rate equal to the "Prime Rate" in effect
from time to time, provided that with respect
to Term Loans the interest rate shall be a
rate equal to the "Prime Rate" in effect from
time to time plus 1.00% per annum (the "Term
Loan Rate"). Interest shall be calculated on
the basis of a 360-day year for the actual
number of days elapsed. "Prime Rate" means
the rate announced from time to time by
Silicon as its "prime rate;" it is a base
rate upon which other rates charged by
Silicon are based, and it is not necessarily
the best rate available at Silicon. The
interest rate applicable to the Obligations
shall change on each date there is a change
in the Prime Rate.
LOAN ORIGINATION FEE
(Section 1.3): SEE AMENDMENT TO LOAN AND SECURITY AGREEMENT
OF EVEN DATE.
MATURITY DATE
(Section 5.1): MAY 1, 1996, provided that Terms Loans shall
have a maturity as set forth in the Section
1.1 hereof.
PRIOR NAMES OF BORROWER
(Section 3.2): NONE
TRADE NAMES OF BORROWER
(Section 3.2): NONE
OTHER LOCATIONS AND ADDRESSES
(Section 3.3): 2120 RITCHEY STREET, SANTA ANA, CA 92705
MATERIAL ADVERSE LITIGATION
(Section 3.10): NONE
NEGATIVE COVENANTS-EXCEPTIONS
(Section 4.6): Without Silicon's prior written consent,
Borrower may do the following, provided that,
after giving effect thereto, no Event of
Default has occurred and no event has
occurred which, with notice or passage of
time or both, would constitute an Event of
Default, and provided that the following are
done in compliance with all applicable laws,
rules and regulations: (i) repurchase shares
of Borrower's stock pursuant to any employee
stock purchase or benefit plan, provided that
the total amount paid by Borrower for such
stock does not exceed $50,000 in any fiscal
year.
FINANCIAL COVENANTS
(Section 4.1): Borrower shall comply with all of the
following covenants. Compliance shall be
determined as of the end of each quarter,
except as otherwise specifically provided
below:
QUICK ASSET RATIO: Borrower shall maintain a ratio of "Quick
Assets" to current liabilities of not less
than 1.50 to 1.
TANGIBLE NET WORTH: Borrower shall maintain a tangible net worth
of not less than $70,000,000.
DEBT TO TANGIBLE
NET WORTH RATIO: Borrower shall maintain a ratio of total
liabilities to tangible net worth of not more
than .75 to 1.
PROFITABILITY Borrower shall not incur a loss (after taxes)
for any fiscal quarter.
- 4 -
<PAGE> 7
DEFINITIONS: "Current assets," and "current liabilities"
shall have the meanings ascribed to them in
accordance with generally accepted accounting
principles.
"Tangible net worth" means the excess of
total assets over total liabilities,
determined in accordance with generally
accepted accounting principles, excluding
however all assets which would be classified
as intangible assets under generally accepted
accounting principles, including without
limitation goodwill, licenses, patents,
trademarks, trade names, copyrights,
capitalized software and organizational
costs, licences and franchises.
"Quick Assets" means cash on hand or on
deposit in banks, readily marketable
securities issued by the United States,
readily marketable commercial paper rated
"A-1" by Standard & Poor's Corporation (or a
similar rating by a similar rating
organization), certificates of deposit and
banker's acceptances, and accounts receivable
(net of allowance for doubtful accounts).
DEFERRED REVENUES: For purposes of the above quick asset ratio,
deferred revenues shall not be counted as
current liabilities. For purposes of the
above debt to tangible net worth ratio,
deferred revenues shall not be counted in
determining total liabilities but shall be
counted in determining tangible net worth for
purposes of such ratio. For all other
purposes deferred revenues shall be counted
as liabilities in accordance with generally
accepted accounting principles.
SUBORDINATED DEBT: "Liabilities" for purposes of the foregoing
covenants do not include indebtedness which
is subordinated to the indebtedness to
Silicon under a subordination agreement in
form specified by Silicon or by language in
the instrument evidencing the indebtedness
which is acceptable to Silicon.
OTHER COVENANTS
(Section 4.1): Borrower shall at all times comply with all
of the following additional covenants:
1. BANKING RELATIONSHIP. Borrower shall at
all times maintain its primary banking
relationship with Silicon. Borrower agrees
and acknowledges that it will arrange for the
refinancing of all outstanding Term Loans at
such time that Borrower no longer maintains
its primary banking relationship with
Silicon.
2. INDEBTEDNESS. Without limiting any
of the foregoing terms or provisions of this
Agreement, Borrower shall not in the future
incur indebtedness for borrowed money, except
for (i) indebtedness to Silicon, and (ii)
indebtedness incurred in the future for the
purchase price of or lease of equipment in an
aggregate amount not exceeding $1,000,000 at
any time outstanding.
3. NEGATIVE PLEDGE. Except as otherwise
permitted hereunder, Borrower shall not
hereafter grant a security interest in, or
permit to exist any lien or encumbrance of
any nature with respect to, any present or
future Collateral, other than for Permitted
Liens and other than for those pre-existing
liens on Borrower's fixed assets that have
been incurred in the usual course of the
Borrower's business that are acceptable to
Silicon.
4. ANNUAL CLEAN-UP PERIOD. Borrower
agrees that there shall be one thirty day
period during each calendar year in which
there shall be no Loans outstanding
hereunder, other than for Obligations, if
any,
- 5 -
<PAGE> 8
relating to the Term Loans, Letters of
Credit and Foreign Exchange Contracts.
BORROWER:
PAIRGAIN TECHNOLOGIES, INC.
BY /s/ CHARLES S. STRAUCH
------------------------------
PRESIDENT OR VICE PRESIDENT
BY /s/ CHARLES W. McBRAYER
------------------------------
SECRETARY OR ASS'T SECRETARY
SILICON:
SILICON VALLEY BANK
BY /s/ JERRY L. DALE
------------------------------
TITLE Vice President
---------------------------
- 6 -
<PAGE> 1
PART II. OTHER INFORMATION
ITEM 6(A) EXHIBIT 11.1
PAIRGAIN TECHNOLOGIES, INC.
COMPUTATION OF PER SHARE EARNINGS
(UNAUDITED)
(IN THOUSANDS EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
QUARTER ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
----------------------- ----------------------
1995 1994 1995 1994
-------- ------- ------- -------
<S> <C> <C> <C> <C>
PRIMARY
Earnings:
Net income $ 4,505 $ 2,239 $11,250 $ 5,625
======= ======= ======= =======
Shares:
Weighted average number of common shares outstanding 14,516 12,587 14,009 12,488
Weighted average number of common shares issued
pursuant to secondary offering 500 -- 356 --
Effect of dilutive options and warrants
(as determined by the treasury stock method) 2,035 2,732 2,259 2,878
------- ------- ------- -------
As adjusted weighted average number of common shares
outstanding 17,051 15,319 16,624 15,366
======= ======= ======= =======
Primary earnings per share $ 0.26 $ 0.15 $ 0.68 $ 0.37
======= ======= ======= =======
FULLY DILUTED*
Shares:
Weighted average number of common shares outstanding
per primary calculation 17,051 15,319 16,624 15,366
Incremental effect of dilutive options and warrants
(as determined by the treasury stock method) 143 -- 96 --
------- ------- ------- -------
As adjusted weighted average number of common shares
outstanding 17,194 15,319 16,720 15,366
======= ======= ======= =======
Fully diluted earnings per share $ 0.26 $ 0.15 $ 0.67 $ 0.37
======= ======= ======= =======
</TABLE>
* This calculation is submitted in accordance with Regulation S-K item 601
(6)(11), although not required by footnote 2 to paragraph 14 of APB Opinion
No. 15 because it is either antidilutive or results in dilution of less than
3%.
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> SEP-01-1995
<EXCHANGE-RATE> 1
<CASH> 12,945
<SECURITIES> 55,881
<RECEIVABLES> 11,193
<ALLOWANCES> 0
<INVENTORY> 21,409
<CURRENT-ASSETS> 104,697
<PP&E> 6,515
<DEPRECIATION> 0
<TOTAL-ASSETS> 112,655
<CURRENT-LIABILITIES> 11,525
<BONDS> 0
<COMMON> 15
0
0
<OTHER-SE> 101,115
<TOTAL-LIABILITY-AND-EQUITY> 112,655
<SALES> 72,599
<TOTAL-REVENUES> 72,599
<CGS> 37,958
<TOTAL-COSTS> 37,958
<OTHER-EXPENSES> 19,249
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 17,307
<INCOME-TAX> 6,057
<INCOME-CONTINUING> 11,250
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 11,250
<EPS-PRIMARY> 0.68
<EPS-DILUTED> 0.67
</TABLE>
