<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 6, 1997
REGISTRATION NO. 333-
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- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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RAMBUS INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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DELAWARE 3674 77-0449233
(STATE OR OTHER (PRIMARY STANDARD (I.R.S. EMPLOYER
JURISDICTION OF INDUSTRIAL IDENTIFICATION NUMBER)
INCORPORATION OR CLASSIFICATION CODE
ORGANIZATION) NUMBER)
2465 LATHAM STREET
MOUNTAIN VIEW, CA 94040
(415) 903-3800
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
----------------
GARY HARMON
VICE PRESIDENT AND CHIEF FINANCIAL OFFICER
RAMBUS INC.
2465 LATHAM STREET
MOUNTAIN VIEW, CA 94040
(415) 903-3800
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
----------------
COPIES TO:
RICHARD J. CHAR, ESQ. GORDON K. DAVIDSON, ESQ.
GAIL C. HUSICK, ESQ. EILEEN DUFFY ROBINETT, ESQ.
J. MICHAEL ARRINGTON, ESQ. JEFFERY L. DONOVAN, ESQ.
WILSON SONSINI GOODRICH & ROSATI FENWICK & WEST LLP
PROFESSIONAL CORPORATION TWO PALO ALTO SQUARE
650 PAGE MILL ROAD PALO ALTO, CALIFORNIA 94306
PALO ALTO, CALIFORNIA 94304 (415) 494-0600
(415) 493-9300
----------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 145 under the Securities Act of
1933, check the following box. [_]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration number of the earlier effective
registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration number of the earlier effective registration statement for the
same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
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CALCULATION OF REGISTRATION FEE
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<TABLE>
<CAPTION>
PROPOSED
MAXIMUM
TITLE OF EACH CLASS OF AGGREGATE OFFERING AMOUNT OF
SECURITIES TO BE REGISTERED PRICE(1) REGISTRATION FEE
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<S> <C> <C>
Common Stock, $.001 par value per share... $34,500,000 $10,455
</TABLE>
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(1) Estimated pursuant to Rule 457(a) solely for purposes of calculating the
registration fee.
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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SUCH
SECTION 8(A), MAY DETERMINE.
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<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY JURISDICTION IN WHICH SUCH OFFER, SOLICITATION OR SALE +
+WOULD BE UNLAWFUL PRIOR TO THE REGISTRATION OR QUALIFICATION UNDER THE +
+SECURITIES LAWS OF ANY SUCH JURISDICTION. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
PROSPECTUS (Subject to Completion)
Issued March 6, 1997
Shares
[RAMBUS LOGO]
RAMBUS INC.
COMMON STOCK
-----------
ALL OF THE SHARES OF COMMON STOCK OFFERED HEREBY ARE BEING SOLD BY THE
COMPANY. PRIOR TO THIS OFFERING, THERE HAS BEEN NO PUBLIC MARKET FOR THE
COMMON STOCK OF THE COMPANY. IT IS CURRENTLY ESTIMATED THAT THE INITIAL
PUBLIC OFFERING PRICE WILL BE BETWEEN $ AND $ PER SHARE. SEE
"UNDERWRITERS" FOR A DISCUSSION OF THE FACTORS CONSIDERED IN
DETERMINING THE INITIAL PUBLIC OFFERING PRICE. APPLICATION HAS
BEEN MADE TO HAVE THE COMMON STOCK APPROVED FOR QUOTATION ON
THE NASDAQ NATIONAL MARKET UNDER THE SYMBOL "RMBS."
-----------
THIS OFFERING INVOLVES A HIGH DEGREE OF RISK. SEE "RISK
FACTORS" COMMENCING ON PAGE 6 HEREOF.
-----------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
-----------
PRICE $ A SHARE
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<TABLE>
<CAPTION>
UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC COMMISSIONS(1) COMPANY(2)
-------- -------------- -----------
<S> <C> <C> <C>
Per Share................................... $ $ $
Total(3).................................... $ $ $
</TABLE>
- -----
(1)See "Underwriters" for information regarding indemnification of the
Underwriters and other matters.
(2)Before deducting expenses of the offering payable by the Company estimated
at $ .
(3) The Company has granted the Underwriters an option, exercisable within 30
days of the date hereof, to purchase up to an aggregate of additional
Shares at the price to public less underwriting discounts and commissions
for the purpose of covering over-allotments, if any. If the Underwriters
exercise such option in full, the total price to public, underwriting
discounts and commissions and proceeds to Company will be $ , $ and
$ , respectively. See "Underwriters."
-----------
The Shares are offered, subject to prior sale, when, as and if accepted by
the Underwriters named herein and subject to approval of certain legal matters
by Fenwick & West LLP, counsel for the Underwriters. It is expected that
delivery of the Shares will be made on or about , 1997, at the office of
Morgan Stanley & Co. Incorporated, New York, N.Y., against payment therefor in
immediately available funds.
-----------
MORGAN STANLEY & CO.
Incorporated
HAMBRECHT & QUIST
ROBERTSON, STEPHENS & COMPANY
, 1997
<PAGE>
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK.
SPECIFICALLY, THE UNDERWRITERS MAY OVERALLOT IN CONNECTION WITH THE OFFERING,
AND MAY BID FOR, AND PURCHASE, SHARES OF COMMON STOCK IN THE OPEN MARKET. FOR
A DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITERS."
2
<PAGE>
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS IN CONNECTION WITH THIS OFFERING OTHER THAN THOSE CONTAINED IN
THIS PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS
MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY
UNDERWRITER. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A
SOLICITATION OF AN OFFER TO BUY, ANY SECURITIES OTHER THAN THE REGISTERED
SECURITIES TO WHICH IT RELATES OR AN OFFER TO, OR A SOLICITATION OF, ANY
PERSON IN ANY JURISDICTION WHERE SUCH AN OFFER OR SOLICITATION WOULD BE
UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER
SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO
CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE
INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE
HEREOF.
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UNTIL , 1997 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL DEALERS
EFFECTING TRANSACTIONS IN THE REGISTERED SECURITIES, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS DELIVERY REQUIREMENT IS IN ADDITION TO THE OBLIGATION OF DEALERS TO
DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR
UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary....................................................... 4
The Company.............................................................. 5
Risk Factors............................................................. 6
Use of Proceeds.......................................................... 15
Dividend Policy.......................................................... 15
Capitalization........................................................... 16
Dilution................................................................. 17
Selected Consolidated Financial Data..................................... 18
Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................... 19
Business................................................................. 29
Management............................................................... 43
Certain Transactions..................................................... 52
Principal Stockholders................................................... 55
Description of Capital Stock............................................. 58
Shares Eligible for Future Sale.......................................... 64
Underwriters............................................................. 66
Legal Matters............................................................ 68
Experts.................................................................. 68
Additional Information................................................... 68
Index to Consolidated Financial Statements............................... F-1
</TABLE>
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The Company intends to furnish to its stockholders annual reports containing
consolidated financial statements audited by its independent auditors and
quarterly reports containing unaudited consolidated financial data for the
first three quarters of each fiscal year.
----------------
RDRAM and the Rambus logo are registered trademarks, and Rambus, RAC, Rambus
Channel, RModule and RSocket are trademarks of the Company. This Prospectus
also includes product names and other trade names and trademarks of the
Company and of other organizations.
----------------
Unless otherwise indicated, the information in this Prospectus: (i) gives
effect to the conversion of all outstanding shares of Preferred Stock into
shares of Common Stock upon completion of this offering and (ii) does not give
effect to exercise of the Underwriters' over-allotment option.
3
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and the Consolidated Financial Statements and Notes thereto
appearing elsewhere in this Prospectus.
THE COMPANY
Rambus Inc. ("Rambus" or the "Company") designs, develops, licenses and
markets high-speed chip-to-chip interface technology to enhance the performance
and cost-effectiveness of consumer electronics, computer systems and other
electronic systems. The Company licenses semiconductor companies to manufacture
and sell memory and logic ICs incorporating Rambus interface technology and
markets its solution to systems companies to encourage them to design Rambus
interface technology into their products. The Company's technology cost-
effectively increases the data transfer rate or "memory bandwidth," allowing
semiconductor memory devices to keep pace with faster generations of processors
and controllers, and thus supports the accelerating data transfer requirements
of multimedia and other high-bandwidth applications.
The high-speed interface technology Rambus has developed is applicable to
data transfer between most semiconductor chips. The Company has initially
chosen to concentrate the application of its technology on the interface
between logic ICs and memory devices because of the acute performance needs and
the relevant market sizes. The Company believes that the systems which will
best utilize the high bandwidth provided by current Rambus technology are the
relatively high-volume, low-cost systems in which the cost of the memory
subsystems represents a significant portion of the selling price. To date, the
principal applications for the Company's technology have been in the consumer
multimedia, PC multimedia and workstation multimedia markets. These areas
accounted for the sale of approximately $13,000, $11 million, and $444 million
of Rambus ICs by Rambus licensees in calendar 1994, 1995 and 1996,
respectively. Systems companies utilizing Rambus technology in these multimedia
markets include Nintendo, Silicon Graphics, Chromatic Research and Creative
Labs. The Company's licensees include Cirrus Logic, Hitachi, Hyundai
Electronics, IBM, LG Semicon, LSI Logic, NEC, Oki Electric Industry, Samsung
Electronics, SGS-THOMSON and Toshiba. Other applications currently being
developed for Rambus technology include multifunction peripheral controllers
for combination fax/copier/scanner/laser printer devices, and networking
equipment such as high-speed ethernet switches. In addition, the Company and
Intel Corporation have entered into a development and license agreement and are
working together to develop an extension of the Rambus interface technology
optimized for the PC main memory market segment.
THE OFFERING
<TABLE>
<S> <C>
Common Stock offered........ shares
Common Stock to be outstand-
ing after the offering..... shares(1)
For general corporate purposes, including working
Use of proceeds............. capital and capital expenditures
Proposed Nasdaq National
Market symbol.............. RMBS
</TABLE>
SUMMARY CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED SEPTEMBER 30, DECEMBER 31,
------------------------------------------- --------------------
1992 1993 1994 1995 1996 1995 1996
------- ------- ------- ------- ------- --------- ---------
CONSOLIDATED STATEMENTS
OF OPERATIONS DATA: (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
Total revenues.......... $ 1,916 $ 3,371 $ 5,000 $ 7,364 $11,270 $ 2,510 $ 5,491
Total costs and
expenses............... 7,663 9,333 11,197 13,417 15,838 3,666 5,388
Operating income
(loss)................. (5,747) (5,962) (6,197) (6,053) (4,568) (1,156) 103
Net income (loss)....... (6,594) (6,336) (6,629) (7,020) (4,415) (1,126) 92
Pro forma net income
(loss) per share(2).... $ (0.25) $ 0.01
Pro forma shares used in
per share
calculations(2)........ 17,432 20,018
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, 1996
------------------------
ACTUAL AS ADJUSTED(3)
-------- --------------
CONSOLIDATED BALANCE
SHEET DATA: (UNAUDITED)
<S> <C> <C>
Cash, cash equivalents
and marketable
securities............. $ 10,928 $
Total assets............ 18,703
Total debt(4)........... 1,932
Stockholders' deficit... (11,657)
</TABLE>
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(1) Based on the number of shares of Common Stock outstanding as of December
31, 1996. Excludes 3,302,041 shares of Common Stock issuable upon the
exercise of options outstanding under the Company's 1990 Stock Plan at
December 31, 1996, with a weighted average exercise price of $1.62 per
share, and 116,500 shares of Common Stock issuable upon the exercise of
options granted under the Company's 1990 Stock Plan subsequent to December
31, 1996, with a weighted average exercise price of $7.73 per share. Also
excludes (i) 1,000,000 shares of Common Stock reserved for issuance under
the Company's 1997 Stock Plan, (ii) 400,000 shares of Common Stock reserved
for issuance under the Company's 1997 Employee Stock Purchase Plan and
(iii) 1,000,000 shares of Common Stock issuable upon exercise of an
outstanding warrant at an exercise price of $10.00 per share. See
"Capitalization," "Management--Stock Plans" and Notes 10 and 17 of Notes to
Consolidated Financial Statements.
(2) See Note 2 of Notes to Consolidated Financial Statements for an explanation
of the determination of pro forma net income (loss) per share and the pro
forma shares used in per share calculations.
(3) Adjusted to reflect the sale by the Company of shares of Common
Stock offered hereby at an assumed initial public offering price of $
per share, and after deducting estimated underwriting discounts and
commissions and estimated offering expenses payable by the Company. See
"Use of Proceeds" and "Capitalization."
(4) Total debt includes indebtedness for borrowed money and capital lease
obligations.
4
<PAGE>
THE COMPANY
Rambus designs, develops, licenses and markets high-speed chip-to-chip
interface technology to enhance the performance and cost-effectiveness of
consumer electronics, computer systems and other electronic systems. The
Company licenses semiconductor companies to manufacture and sell memory and
logic ICs incorporating Rambus interface technology and markets its solution
to systems companies to encourage them to design Rambus interface technology
into their products. The Company's technology cost-effectively increases the
data transfer rate, or "memory bandwidth," allowing semiconductor memory
devices to keep pace with faster generations of processors and controllers and
thus supports the accelerating data transfer requirements of multimedia and
other high-bandwidth applications.
The performance of a computer or other electronic system is typically
constrained by the speed of its slowest element. In the past, that element was
the logic IC that controlled the system's specific functions and performed
calculations--the microprocessor. In recent years, however, new generations of
microprocessors have become substantially faster and more powerful, and
increasingly the bottleneck in system performance is becoming the component
that stores the instructions and data needed by the microprocessor--the DRAM.
Since 1980, the typical operating frequency of Intel and other mainstream
microprocessors has increased approximately 40 times from 5 MHz (million
cycles per second) to 200 MHz. During this same period, the typical operating
frequency of DRAMs has increased by approximately ten times. This growing
disparity between the frequency of microprocessors and DRAMs is termed the
"Performance Gap."
Rambus has created a revolutionary chip-to-chip interface architecture,
which allows data to be transferred through a simplified bus at significantly
higher frequencies than permitted by conventional technologies. Rambus has
focused the application of its interface technology on the Performance Gap and
licenses its interface technology to memory and logic semiconductor
manufacturers, which incorporate this interface technology into their IC
designs to supply systems companies with Rambus ICs. The key elements of the
Rambus interface are Rambus-based DRAMs ("RDRAMs"), Rambus ASIC cells ("RACs")
and the interconnecting circuitry known as the "Rambus Channel." While Rambus
technology can be used to address a wide variety of chip-to-chip data transfer
requirements, the largest immediate application is to connect logic circuits
to memory in home video games, PCs, workstations and other electronic systems.
To date, the principal applications for the Company's technology have been
in the consumer multimedia, PC multimedia and workstation multimedia markets.
These areas accounted for the sale of approximately $13,000, $11 million, and
$444 million of Rambus ICs by Rambus licensees in calendar 1994, 1995 and
1996, respectively. Systems companies utilizing Rambus technology in these
multimedia markets include Nintendo, Silicon Graphics, Chromatic Research and
Creative Labs. The Company's licensees include Cirrus Logic, Hitachi, Hyundai
Electronics, IBM, LG Semicon, LSI Logic, NEC, Oki Electric Industry, Samsung
Electronics, SGS-THOMSON and Toshiba. Other applications currently being
developed for Rambus technology include multifunction peripheral controllers
for combination fax/copier/scanner/laser printer devices, and networking
equipment such as high-speed ethernet switches. In addition, the Company and
Intel Corporation have entered into a development and license agreement and
are working together to develop an extension of the Rambus interface
technology optimized for the PC main memory market segment.
The Company was incorporated in California in March 1990 and reincorporated
in Delaware in March 1997. The Company's principal executive offices are
located at 2465 Latham Street, Mountain View, CA 94040. Its telephone number
is (415) 903-3800. The Company's home page can be located on the Internet at
http://www.rambus.com. Information contained on the Company's Web site does
not constitute part of this Prospectus.
5
<PAGE>
RISK FACTORS
In addition to the other information in this Prospectus, the following
factors should be considered carefully in evaluating an investment in the
shares of Common Stock offered hereby. This Prospectus contains forward-
looking statements that involve risks and uncertainties. The Company's actual
results may differ materially from the results discussed in such forward-
looking statements. Factors that may cause such a difference include, but are
not limited to, those discussed below and in the section entitled
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
Unpredictable and Fluctuating Operating Results. Because many of the
Company's revenue components fluctuate and are difficult to predict, and its
expenses are largely independent of revenues in any particular period, it is
difficult for the Company to accurately forecast revenues and profits or
losses. Historically, contract revenues have represented the largest portion
of the Company's revenues. The Company recognizes contract revenues ratably
over the period during which post-contract customer support is expected to be
provided. While this means that contract revenues from current licenses are
relatively stable, accurate prediction of revenues from new licenses is
difficult because the development of a business relationship with a potential
licensee is a lengthy process, frequently spanning a year or more, and the
fiscal period in which a new license agreement will be entered into, if at
all, and the financial terms of such an agreement are difficult to predict. In
addition to license fees, contract revenues include fees for engineering
services, which are dependent upon the varying level of assistance desired by
licensees and, therefore, the revenue from these services is also difficult to
predict. Adding to the complexity of making accurate financial forecasts is
the fact that certain expenses associated with a particular contract are
typically front-end loaded, except for expenses associated with upgrades and
enhancements, whereas contract fees associated with that contract are
recognized ratably over the period during which the post-contract customer
support is expected to be provided.
The Company believes that royalties will represent an increasing portion of
total revenue in future periods, which may add to the difficulty in making
accurate financial forecasts. Such royalties (other than nonrefundable prepaid
royalties) are recognized in the quarter in which the Company receives a
report from a licensee regarding the shipment of Rambus ICs in the prior
quarter, and are dependent upon fluctuating sales volumes and prices of chips
containing Rambus technology, all of which are beyond the Company's ability to
control or assess in advance. A few contracts include nonrefundable prepaid
royalties, which are recognized ratably over the period during which post-
contract customer support is expected to be provided, and are not related to
the actual rate at which Rambus ICs are shipped by the licensee. Accordingly,
the amount of nonrefundable, prepaid royalties recognized in a period is not
necessarily representative of the rate at which the nonrefundable, prepaid
royalties are being offset by royalties earned on shipments made. The Company
believes that its continued success will be substantially dependent upon
royalties increasing at a rate which more than offsets decreases in the
recognition of deferred revenue under existing contracts as their recognition
periods expire, as well as the Company's ability to add new licensees and to
license new generations of its technology to its existing licensees. Because a
systems company can change its source of Rambus ICs at any time, and because
the new Rambus license source could have a considerable nonrefundable, prepaid
royalty balance as well as different royalty rates, any such change by a
systems company, particularly one which accounts for substantial volumes of
Rambus ICs, could have a sudden and significant adverse effect on the
Company's revenues.
The Company's business is subject to a variety of additional risks that
could materially adversely affect quarterly and annual operating results,
including market acceptance of the Company's technology; systems companies'
acceptance of Rambus ICs produced by the Company's licensees; market
acceptance of the products of systems companies which have adopted the
Company's technology; the loss of any strategic relationships with systems
companies or licensees; announcements or introductions of new technologies or
products by the Company or the Company's competitors; delays or problems in
the introduction or performance of enhancements or future generations of the
Company's technology; fluctuations in the market price and demand for DRAMs
and logic ICs into which the Company's technology has been incorporated;
competitive pressures resulting in lower contract revenues or royalty rates;
changes in the Company's and system companies' development schedules and
levels of expenditure on research and development; personnel changes,
particularly those
6
<PAGE>
involving engineering and technical personnel; costs associated with
protecting the Company's intellectual property; changes in Company strategies;
foreign exchange rate fluctuations or other changes in the international
business climate; and general economic trends and other factors.
The Company has granted to Intel Corporation a warrant for the purchase of
1,000,000 shares of Common Stock at an exercise price of $10.00 per share. The
warrant will become exercisable only upon the achievement of certain
milestones, which will result in a charge to the statement of operations at
the time achievement of the milestones becomes probable for the excess of the
then fair value of the warrant over the exercise price.
In future quarters, the Company's operating results may not meet the
expectations of public market analysts or investors. In such an event, the
market price of the Common Stock would be materially adversely affected. See
"--Dependence upon Limited Number of Licensees," "--Dependence upon Systems
Companies," "--No Assurance of Adoption of Rambus Technology as an Industry
Standard" and "Management's Discussion and Analysis of Financial Condition and
Results of Operations."
History of Losses; No Assurance of Profitability. As of December 31, 1996,
the Company's accumulated deficit was approximately $34.4 million. While the
Company generated net income for the first time in the quarter ended December
31, 1996, it incurred significant losses in each quarter of fiscal 1996 and in
each quarter of its prior fiscal years. There can be no assurance that in the
future the Company will be profitable on a quarterly or annual basis. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
Dependence upon Limited Number of Licensees. The Company neither
manufactures nor sells devices containing its interface technology. Rather,
the Company licenses its technology to semiconductor companies which in turn
manufacture and sell Rambus ICs to systems companies which incorporate Rambus
technology into their products. The Company's strategy to become an industry
standard is dependent upon the Company's ability to make its technology widely
available to systems companies through multiple semiconductor manufacturers,
and there can be no assurance that the Company will be successful in
maintaining its relationships with its current licensees or in entering into
new relationships with additional licensees. The Company faces numerous risks
in successfully obtaining licensees on terms consistent with the Company's
business model, including, among others, the lengthy and expensive process of
building a relationship with a potential licensee before there is any
assurance of a license agreement with such party; persuading large
semiconductor companies to work with, to rely for critical technology on, and
to disclose proprietary manufacturing technology to, a smaller company such as
Rambus; persuading potential licensees to bear certain development costs
associated with Rambus technology and to make the necessary investment to
successfully produce Rambus ICs; and successfully transferring technical know-
how to licensees. In addition, there are a relatively limited number of larger
semiconductor companies to which the Company could license its interface
technology in a manner consistent with its business model. The Company
believes that its principal competition may come from its licensees and
prospective licensees, many of which are evaluating and developing products
based on alternative technologies. See "--Competition" and "Business--Rambus
Licensees."
Dependence upon Systems Companies. Although sales of Rambus ICs to systems
companies which have adopted the Company's technology for their products are
not made directly by the Company, such sales directly affect the amount of
royalties received by the Company. Therefore, the Company's success is
substantially dependent upon the adoption of the Company's interface
technology by systems companies, particularly those which develop and market
high-volume business and consumer products such as home video games and PCs.
The Company is subject to many risks beyond its control that influence the
success or failure of a particular systems company, including among others
competition faced by the systems company in its particular industry; market
acceptance of the systems company's products; the engineering, sales and
marketing and management capabilities of the systems company; technical
challenges unrelated to Rambus technology faced by the systems company in
developing its products; and the financial and other resources of the systems
company. The process of persuading systems companies to adopt the Company's
technology can be lengthy and, even if adopted, there can be no assurance that
the Rambus technology will be used in a product that is ultimately brought to
market,
7
<PAGE>
achieves commercial acceptance or results in significant royalties to the
Company. Rambus must dedicate substantial resources to market to and support
systems companies, in addition to supporting the sales and marketing and
technical efforts of its licensees in promoting Rambus technology to systems
companies. To date, the Company has not charged systems companies for
technical support. Because the Company does not control the business practices
of its licensees, it has no ability to establish the prices at which its
technology is made available to systems companies or the degree to which its
licensees promote Rambus technology to systems companies. See "Business--The
Rambus Solution," "--Target Markets and Applications" and "--Rambus Business
Model and Strategy."
No Assurance of Adoption of Rambus Technology as an Industry Standard. An
important part of the Company's strategy to become an industry standard is to
penetrate new markets by targeting leaders in those markets. This strategy is
designed to encourage other participants in those markets to follow such
leaders in adopting Rambus technology. Should a high profile industry
participant adopt Rambus technology for one or more of its products but fail
to achieve success with those products, other industry participants'
perception of Rambus technology could be adversely affected. Any such event
could reduce future sales of Rambus ICs. Likewise, were a market leader to
adopt and achieve success with a competing technology, the Company's
reputation and sales could be adversely affected. In addition, some industry
participants have adopted, and others may in the future adopt, a strategy of
disparaging the Rambus solution adopted by their competitors. See "--
Competition", "Business--Target Markets and Applications" and "--Competition."
Future Dependence upon PC Main Memory Market Segment and Intel. An important
part of the Company's strategy is to penetrate the market for PC main memory
segment. Rambus believes that PC main memory currently accounts for
approximately one-half of all DRAMs sold. In November 1996, Rambus signed a
development and license contract with Intel Corporation which provides for the
parties to cooperate in the development of a specification for an extension of
the RDRAM optimized for PC main memory applications. The contract also calls
for Intel to use reasonable best efforts to develop a PC main memory
controller designed for use with such RDRAMs. The anticipated development
period for the new RDRAM technology is at least two years and there are a
number of technological issues which must be successfully resolved prior to
implementation. There can be no assurance that Intel will successfully develop
a controller for use with RDRAMs in time to meet market requirements, or at
all. Under the contract, Intel can terminate its relationship with Rambus at
any time. Even if such development efforts are completed, there is no
assurance that RDRAMs will be built by the Company's licensees and purchased
by PC manufacturers in sufficient quantity to become a standard for PC main
memory. The Company established a relationship with Intel several years ago,
but Intel did not at that time pursue development relating to Rambus
technology. There can be no assurance that Intel's current emphasis or
priorities will not change in the future, resulting in less attention and
fewer resources being devoted to the current Rambus relationship. Although
certain aspects of the current relationship between the two companies are
contractual in nature, many important aspects depend on the continued
cooperation of the two companies. There can be no assurance that Rambus and
Intel will be able to work together successfully over an extended period of
time. In addition, there can be no assurance that Intel will not develop or
adopt competing technologies in the future. See "Business--Target Markets and
Applications--PC Main Memory" and "--Rambus Business Model and Strategy."
Revenue Concentration. The Company is subject to revenue concentration risks
at both the licensee and the systems company levels. In fiscal 1994, 1995 and
1996 and the first quarter of fiscal 1997, revenues from the Company's top
five licensees accounted for approximately 86%, 70%, 65% and 72% of the
Company's revenues, respectively. In the first quarter of fiscal 1997, NEC
accounted for approximately 33% of revenues and LG Semiconductor accounted for
approximately 11% of revenues. Because the revenues derived from various
licensees vary from period to period depending on the addition of new
contracts, the expiration of deferred revenue schedules under existing
contracts and the volumes and prices at which the licensees have recently sold
Rambus ICs to systems companies, the particular licensees which account for
revenue concentration have varied from period to period. These variations are
expected to continue in the foreseeable future although the Company
anticipates the revenue will continue to be concentrated in a limited number
of licensees.
8
<PAGE>
The royalties received by the Company are a function of the adoption of
Rambus technology at the systems company level. Systems companies purchase
semiconductors containing Rambus technology from Rambus licensees, and
generally do not have a direct contractual relationship with the Company. The
Company's licensees generally do not provide detail as to the identity of, or
volume of Rambus ICs purchased by, particular systems companies. As a result,
the Company faces difficulty in analyzing the extent to which its future
revenues will be dependent upon particular systems companies.
The profitability first attained by the Company in the period ended December
31, 1996 was attributable primarily to an increase in royalties from NEC,
which the Company believes was largely due to royalties on Rambus technology
incorporated into the Nintendo 64 video game system. For reasons described in
the foregoing paragraph, the Company cannot precisely quantify this amount,
because its licensees generally are not required to identify the particular
products that incorporate, or the particular systems companies which purchase,
Rambus ICs. The Company anticipates that sales from its licensees to Nintendo
will continue to generate a substantial portion of royalties in fiscal 1997.
Nintendo faces intense competitive pressure in the video game market, which is
characterized by extreme volatility, frequent new product introductions and
rapidly shifting consumer preferences, and there can be no assurance as to the
unit volumes of Rambus ICs that will be purchased by Nintendo in the future or
the level of royalty-bearing revenues that the Company's licensees will
receive from Nintendo.
The Company believes its potential to generate royalties in fiscal 1997 is
largely dependent on system sales by Nintendo and sales of multimedia
controller chips by Cirrus Logic and Chromatic. None of these companies is
under any obligation to continue using Rambus technology in its current
product or to incorporate Rambus technology into its future products. There
can be no assurance that a significant number of other systems companies will
adopt the Company's technology or that the Company's dependence upon
particular systems companies will decrease in the future. See "--Unpredictable
and Fluctuating Operating Results," "--Dependence upon Limited Number of
Licensees," "--Dependence upon Systems Companies" and "--No Assurance of
Adoption of Rambus Technology as an Industry Standard," "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
"Business--Rambus Licensees."
Reliance upon DRAM Market; Declines in DRAM Price and Unit Volume per
System. In the fourth quarter of fiscal 1996, a significant percentage of the
Company's revenues was in the form of royalties and the Company's business
model assumes an increasing percentage of total revenues from royalties. To
date, a majority of the Company's royalties has been derived from the sale of
logic ICs incorporating RACs. If the Company is successful in its strategy to
penetrate the PC main memory market, the Company expects that royalties from
the sale of RDRAMs will eventually account for the largest portion of
royalties. Royalties on RDRAMs are based on the volumes and prices of RDRAMs
manufactured and sold by the Company's licensees. The royalties received by
the Company therefore are influenced by many of the risks faced by the DRAM
market in general, including constraints on the volumes shipped during periods
of shortage and reduced average selling prices. The DRAM market is intensely
competitive and generally is characterized by declining average selling prices
over the life of a generation of chips. Such price decreases, and the
corresponding decreases in per unit royalties received by the Company, can be
sudden and dramatic. Compounding the effect of price decreases is the fact
that, under certain of the Company's license agreements, royalty rates
decrease as a function of time or volume. With the introduction of each new
generation of higher density RDRAMs, the Company generally expects higher
prices resulting in higher royalties per device, but with correspondingly
fewer devices required per system. There can be no assurance that decreases in
DRAM prices or in the Company's royalty rates will not have a material adverse
effect on the Company's business, results of operations and financial
condition. There can be no assurance that the Company will be successful in
maintaining or increasing its share of any market. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
Rapid Technological Change; Reliance on Fundamental Technology; Importance
of Timely New Product Development. The semiconductor industry is characterized
by rapid technological change, with new generations of semiconductors being
introduced periodically and with ongoing evolutionary improvements. Since
beginning operations in 1990, the Company has derived all of its revenue from
its interface technology and expects that
9
<PAGE>
this dependence on its fundamental technology will continue for the
foreseeable future. Accordingly, broad acceptance of the Company's interface
technology is critical to the Company's future success. The introduction or
market acceptance of competing technology which renders the Company's
interface technology less desirable or obsolete would have a rapid and
material adverse effect on the Company's business, results of operations and
financial condition. The introduction of new products by the Company, such as
the "Direct Rambus" technology which is under development, could cause
licensees or systems companies to delay or defer entering into arrangements
for the use of the Company's technology, which could have a material adverse
effect on the Company's business, results of operations and financial
condition.
The Company's operating results will depend to a significant extent on its
ability to introduce enhancements and new generations of its interface
technology which keep pace with other changes in the semiconductor industry
and which achieve rapid market acceptance. The Company must continually devote
significant engineering resources to addressing the ever-increasing need for
memory bandwidth associated with increases in the speed of microprocessors and
other controllers. Technical innovations of the type that will be required for
the Company to be successful are inherently complex and require long
development cycles, and there can be no assurance that the Company's
development efforts will ultimately be successful. In addition, these
innovations must be completed before changes in the semiconductor industry
have rendered them obsolete, must be available when systems companies require
these innovations, and must be sufficiently compelling to cause semiconductor
manufacturers to enter into licensing arrangements with Rambus for the new
technology. There can be no assurance that Rambus will be able to meet these
requirements. Moreover, significant technological innovations generally
require a substantial investment before their commercial viability can be
determined. There can be no assurance that the Company will have the financial
resources necessary to fund future development, that the Company's licensees
will continue to share certain research and development costs with the Company
as they have in the past, or that revenues from enhancements or new
generations of the Company's technology, even if successfully developed, will
exceed the costs of development. See "--Competition" and "Management's
Discussion and Analysis of Financial Condition and Results of Operations,"
"Business--Rambus Business Model and Strategy" and "--Research and
Development."
Competition. The semiconductor industry is intensely competitive and has
been characterized by price erosion, rapid technological change, short product
life cycles, cyclical market patterns and increasing foreign and domestic
competition. Most major DRAM manufacturers are developing higher-frequency
versions of standard DRAMs such as EDO, SDRAMs and SGRAMs which compete with
RDRAMs. These DRAM manufacturers include most Rambus DRAM licensees, as well
as other major DRAM manufacturers such as IBM, Texas Instruments Inc. and
Micron Technologies, Inc. Most of these companies are much larger and have
better access to financial, certain technical and other resources than Rambus.
Additional high-speed DRAMs have recently been introduced by other
semiconductor companies for specialized applications.
The Company believes that its principal competition may come from its
licensees and prospective licensees, many of which are evaluating and
developing products based on alternative technologies and are beginning to
take a systems approach similar to the Company's in solving the application
needs of systems companies. Many DRAM suppliers have indicated that they are
developing a new technology called Double Data Rate ("DDR") SDRAMs, aimed at
doubling the memory bandwidth from SDRAMs without increasing the clock
frequency. In addition, a consortium including both large DRAM manufacturers
and systems companies is promoting a specification for an alternative high-
speed interface standard called SyncLink. To the extent that these alternative
technologies provide comparable system performance at lower cost than RDRAMs,
or do not require the payment of comparable royalties, the Company's licensees
and prospective licensees may adopt and promote the alternative technologies.
There can be no assurance that the Company's future competition will not have
a material adverse effect on the Company's business, results of operations and
financial condition. In addition, certain semiconductor companies have
recently introduced a new kind of IC which combines logic and DRAM on the same
chip. Such chips, called "embedded DRAM," eliminate the need for any chip-to-
chip interface and are primarily being used for graphics applications.
Embedded DRAMs are well suited for applications where
10
<PAGE>
component space saving and power consumption are important, such as in the
graphics subsystems of notebook PCs. There can be no assurance that
competition from embedded DRAMs will not increase in the future. See
"Business--Competition."
Limited Protection of Intellectual Property; Likelihood of Potential
Litigation. The Company has an active program to protect its proprietary
technology through the filing of patents. At February 28, 1997, the Company
held 29 United States patents on various aspects of its technology, with
expiration dates ranging from 2010 to 2014. At February 28, 1997, the Company
had applications for 32 United States patents pending. The Company's United
States patents do not prevent the manufacture or sale of Rambus-based ICs
abroad. At February 28, 1997, the Company held six foreign patents and had
additional foreign patent applications pending in Taiwan, Korea, Japan and
various other jurisdictions. There can be no assurance that the Company's
pending United States or foreign patent applications or any future United
States or foreign patent applications will be approved, that any issued
patents will protect the Company's intellectual property or will not be
challenged by third parties, or that the patents of others will not have an
adverse effect on the Company's ability to do business. Furthermore, there can
be no assurance that others will not independently develop similar or
competing technology or design around any patents that may be issued to the
Company.
The Company attempts to protect its trade secrets and other proprietary
information through agreements with licensees and systems companies,
proprietary information agreements with employees and consultants and other
security measures. The Company also relies on trademarks and trade secret laws
to protect its intellectual property. Despite these efforts, there can be no
assurance that others will not gain access to the Company's trade secrets, or
that the Company can meaningfully protect its intellectual property. In
addition, effective trade secret protection may be unavailable or limited in
certain foreign countries. Although the Company intends to protect its rights
vigorously, there can be no assurance that such measures will be successful.
Rambus believes that it is important to develop and maintain a uniform RDRAM
memory interface standard. The Company's contracts generally prevent a
licensee from using licensee-developed patented improvements related to Rambus
technology to block other licensees from using the improvements or requiring
them to pay additional royalties related to their use of Rambus interface
technology. Specifically, the contracts generally require licensees to grant
to Rambus a royalty-free cross-license on patented licensee intellectual
property related to the implementation of Rambus interface technology, which
Rambus sublicenses to other licensees which have entered into similar
arrangements. Not all licensees have granted Rambus cross-licenses and there
is no assurance that such a blocking arrangement will not occur in the future.
The semiconductor industry is characterized by frequent litigation regarding
patent and other intellectual property rights. While the Company has not
received formal notice of any infringement of the rights of any third party,
questions of infringement in the semiconductor field involve highly technical
and subjective analyses. Litigation may be necessary in the future to enforce
the Company's patents and other intellectual property rights, to protect the
Company's trade secrets, to determine the validity and scope of the
proprietary rights of others, or to defend against claims of infringement or
invalidity, and there can be no assurance that the Company would prevail in
any future litigation. Any such litigation, whether or not determined in the
Company's favor or settled by the Company, would be costly and would divert
the efforts and attention of the Company's management and technical personnel
from normal business operations, which would have a material adverse effect on
the Company's business, financial condition and results of operations. Adverse
determinations in litigation could result in the loss of the Company's
proprietary rights, subject the Company to significant liabilities, require
the Company to seek licenses from third parties or prevent the Company from
licensing its technology, any of which could have a material adverse effect on
the Company's business, financial condition and results of operations.
In any potential dispute involving the Company's patents or other
intellectual property, the Company's licensees could also become the target of
litigation. While the Company generally does not indemnify its licensees, some
of its license agreements require the Company to provide technical support and
information to a licensee which is involved in litigation involving use of
Rambus technology. The Company is bound to indemnify certain licensees under
the terms of certain license agreements, and the Company may agree to
indemnify others in the future. The Company's support and indemnification
obligations could result in substantial
11
<PAGE>
expenses to the Company. In addition to the time and expense required for the
Company to supply such support or indemnification to its licensees, a
licensee's development, marketing and sales of Rambus ICs could be severely
disrupted or shut down as a result of litigation, which in turn could have a
material adverse effect on the Company's business, financial condition and
results of operations. See "Business--Patents and Intellectual Property
Protection."
Risks Associated with International Licenses. To date, companies based in
Japan and Korea have accounted for the substantial majority of the Company's
revenues, and nearly all of its international revenues. In fiscal 1994, 1995
and 1996 and the first quarter of fiscal 1997, international revenues
constituted approximately 90%, 90%, 86% and 85% of the Company's net revenues,
respectively. The Company expects that revenues derived from international
licensees will continue to represent a significant portion of its total
revenues in the future. All of the revenues from international licensees have
to date been denominated in United States dollars. However, to the extent that
such licensees' sales to systems companies are not denominated in United
States dollars, any royalties that the Company receives as a result of such
sales could be subject to fluctuations in currency exchange rates. In
addition, international operations and demand for the products of the
Company's licensees are subject to a variety of risks, including tariffs,
import restrictions and other trade barriers, changes in regulatory
requirements, longer accounts receivable payment cycles, adverse tax
consequences, export license requirements, foreign government regulation,
political and economic instability and changes in diplomatic and trade
relationships. In particular, the laws of certain countries in which the
Company currently licenses or may in the future license its technology require
significant withholding taxes on payments for intellectual property, which the
Company may not be able to offset fully against its United States tax
obligations. The Company is subject to the further risk of the tax authorities
in those countries recharacterizing certain engineering fees as license fees,
which could result in increased tax withholdings and penalties. The Company's
licensees are subject to many of the risks described above with respect to
systems companies which are located in different countries, particularly video
game and PC manufacturers located in Asia and elsewhere. There can be no
assurance that one or more of the risks associated with international licenses
of the Company's technology will not have a direct or indirect material
adverse effect on the Company's business, financial condition and results of
operations. Moreover, the laws of certain foreign countries in which the
Company's technology is or may in the future be licensed may not protect the
Company's intellectual property rights to the same extent as the laws of the
United States, thus increasing the possibility of infringement of the
Company's intellectual property. See "--Limited Protection of Intellectual
Property; Likelihood of Potential Litigation" and "Management's Discussion and
Analysis of Financial Condition and Results of Operations."
Dependence on Key Personnel. The Company's success depends to a significant
extent on its ability to identify, attract, motivate and retain qualified
technical, sales, marketing, finance and executive personnel. Because the
future success of the Company is dependent upon its ability to continue
enhancing and introducing new generations of such technology, the Company is
particularly dependent upon its ability to identify, attract, motivate and
retain qualified engineers with the requisite educational background and
industry experience. Approximately three quarters of the Company's personnel
have technical degrees, and over half of the Company's personnel have graduate
level technical degrees. Competition for qualified engineers, particularly
those with significant industry experience, is intense. The Company is also
dependent upon its senior management personnel, most of whom have worked
together at the Company for several years. The loss of the services of any of
the senior management personnel or a significant number of the Company's
engineers could be disruptive to the Company's development efforts or business
relationships and could have a material adverse effect on the Company's
business, financial condition and results of operations. The Company does not
have employment contracts with any of its employees. The Company does not plan
to maintain key person life insurance in the future. See "Business--Employees"
and "Management--Executive Officers, Directors and Key Personnel."
Management of Expanded Operations. The Company is not experienced in
managing rapid growth. The Company may not be equipped to successfully manage
any future periods of rapid growth or expansion, which could be expected to
place a significant strain on the Company's limited managerial, financial,
engineering and
12
<PAGE>
other resources. The Company's licensees and systems companies rely heavily on
the Company's technological expertise in designing, testing and manufacturing
products incorporating the Company's interface technologies. Relationships
with new licensees or systems companies generally require significant
engineering support. As a result, any increases in adoption of the Company's
technology will increase the strain on the Company's resources, particularly
the Company's engineers. Any delays or difficulties in the Company's research
and development process caused by these factors or others could make it
difficult for the Company to develop future generations of its interface
technology and to remain competitive. In addition, the rapid rate of hiring
new employees could be disruptive and adversely affect the efficiency of the
Company's research and development process. The rate of the Company's future
expansion, if any, in combination with the complexity of the technology
involved in the Company's licensee-based business model, may demand an
unusually high level of managerial effectiveness in anticipating, planning,
coordinating and meeting the operational needs of the Company as well as the
needs of the licensees and systems companies. Additionally, the Company may be
required to reorganize its managerial structure in order to more effectively
respond to the needs of customers. Given the small pool of potential licensees
and target systems companies, the adverse effect on the Company resulting from
a lack of effective management in any of these areas will be magnified.
Inability to manage the expansion of the Company's business would have a
material adverse effect on its business, financial condition and results of
operations. See "Management."
No Prior Public Market; Volatility of Stock Price. Prior to this Offering,
there has been no public market for the Company's Common Stock, and there can
be no assurance that an active public market for the Company's Common Stock
will develop or be sustained after the Offering. The initial public offering
price will be determined through negotiations between the Company and the
Underwriters and may not be indicative of the market price of the Common Stock
after the Offering. The trading price of the Company's Common Stock could be
subject to wide fluctuations in response to quarterly variations in operating
results, announcements of technological innovations or new products by the
Company, its licensees or its competitors, developments with respect to
patents or proprietary rights, changes in financial estimates by securities
analysts and other events or factors. In addition, the equity markets have
experienced volatility that has particularly affected the market prices of
equity securities of many high technology companies and that often has been
unrelated or disproportionate to the operating performance of such companies.
These broad market fluctuations may adversely affect the market price of the
Company's Common Stock. See "Underwriters."
Concentration of Ownership. The Company's officers, directors and their
affiliates will, in the aggregate, beneficially own approximately % of the
Company's outstanding shares after the Offering. As a result, these
stockholders, if acting together, would be able effectively to control
substantially all matters requiring approval by the stockholders of the
Company, including the election of directors. This ability may have the effect
of delaying or preventing a change in control of the Company, or causing a
change in control of the Company which may not be favored by the Company's
other stockholders. See "Principal Stockholders."
Certain Anti-Takeover Provisions. Upon completion of this offering, the
Company's Board of Directors will have the authority to issue up to 5,000,000
shares of Preferred Stock (less 40,000 shares which have been designated
"Series E Preferred Stock" pursuant to the stockholder rights plan recently
adopted by the Board of Directors) and to determine the price, rights,
preferences, privileges and restrictions, including voting rights, of those
shares without any further vote or action by the stockholders. The rights of
the holders of Common Stock will be subject to, and may be adversely affected
by, the rights of the holders of any Preferred Stock that may be issued in the
future. The issuance of Preferred Stock, while providing flexibility in
connection with possible financings or acquisitions or other corporate
purposes, could have the effect of making it more difficult for a third party
to acquire a majority of the outstanding voting stock of the Company. The
Company has no current plans to issue shares of Preferred Stock. The Company's
Bylaws and indemnity agreements provide that the Company will indemnify
officers and directors against losses they may incur in legal proceedings
resulting from their service to the Company. In addition, the Company recently
amended its Certificate of Incorporation to provide for a classified Board of
Directors, and eliminate the ability of stockholders to call special meetings
of the stockholders, bring certain matters before a meeting of the
stockholders without prior notice to the Board, or
13
<PAGE>
amend or repeal certain of the provisions of the Certificate or Bylaws by a
vote of less than two thirds of the outstanding stock, and, effective upon the
completion of this offering, eliminate the ability of stockholders to take
action by written consent. In addition, Section 203 of the Delaware General
Corporation Law restricts certain business combinations with any "interested
stockholder" as defined by such statute. These provisions and the stockholder
rights plan are designed to encourage potential acquirors to negotiate with
the Company's Board of Directors and give the Board sufficient opportunity to
consider various alternatives to maximize stockholder value. These provisions
and the stockholder rights plan are also intended to discourage certain
tactics that may be used in proxy fights. However, the stockholder rights plan
and each of these provisions of the Company's charter documents could
discourage potential acquisition proposals and could delay or prevent a change
in control of the Company and, as a consequence, they also may adversely
affect the market price of the Company's Common Stock. Such provisions also
may have the effect of preventing changes in the management of the Company.
See "Description of Capital Stock."
In addition, Intel has a contractual right to make a competitive bid in
connection with certain types of potential third-party acquisitions of Rambus.
While Rambus is not required to accept any such competing offer, certain
penalties would apply upon consummation of a third-party transaction following
rejection of a bona fide competing offer from Intel. This arrangement with
Intel may significantly discourage future acquisition attempts, even where
such acquisitions might be in the best interests of the Rambus stockholders.
See "Certain Transactions."
Shares Eligible for Future Sale. Upon completion of this offering (based on
shares outstanding at December 31, 1996), the Company will have outstanding an
aggregate of shares of Common Stock, assuming no exercise of the Underwriters'
over-allotment option and no exercise of outstanding options. Of theses
shares, the shares sold in this offering will be freely tradeable without
restriction or further registration under the Securities Act, unless such
shares are purchased by "affiliates" of the Company as that term is defined in
Rule 144 under the Act (the "Affiliates"). The remaining 17,375,480 shares of
Common Stock held by existing stockholders are "restricted securities" as that
term is defined in Rule 144 under the Securities Act ("Restricted Shares").
Restricted Shares may be sold in the public market only if registered or if
they qualify for an exemption from registration under Rules 144, 144(k) or 701
promulgated under the Securities Act. As a result of the contractual
restrictions described below and the provisions of Rules 144, 144(k) and 701,
the Restricted Shares will be available for sale in the public market as
follows: (i) no shares will be eligible for immediate sale on the date of this
Prospectus; and (ii) 17,375,480 shares will be eligible for sale upon
expiration of the lock-up agreements 180 days after the date of this
Prospectus. All officers, directors, stockholders and option holders of the
Company have agreed not to offer, pledge, sell, contract to sell, sell any
option or contract to purchase, purchase any option or contract to sell, grant
any option, right or warrant to purchase, or otherwise transfer or dispose of,
directly or indirectly (or enter into any swap or other arrangement that
transfers to another, in whole or in part, any of the economic consequences of
ownership of), any shares of Common Stock or any securities convertible into
or exercisable or exchangeable for shares of Common Stock, for a period of 180
days after the date of this Prospectus, without the prior written consent of
Morgan Stanley & Co. Incorporated. The Company intends to file a registration
statement on Form S-8 which would allow shares issuable upon exercise of
options previously granted to be freely tradeable following release of such
lock-up obligations, subject to compliance with Rule 144 in the case of
affiliates of the Company. See "Description of Capital Stock--Registration
Rights" and "Shares Eligible for Future Sale."
Dilution. Investors participating in the Offering will incur immediate,
substantial dilution. To the extent that options or warrants to purchase the
Company's Common Stock are exercised, there will be further dilution. See
"Dilution."
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<PAGE>
USE OF PROCEEDS
The net proceeds to the Company from the sale of the shares of Common
Stock offered by the Company hereby are estimated to be approximately $
million (approximately $ million if the Underwriters' over-allotment option
is exercised in full), at an assumed initial public offering price of $ per
share and after deducting estimated underwriting discounts and commissions and
estimated offering expenses payable by the Company. The principal purposes of
this offering are to obtain additional capital, create a public market for the
Company's Common Stock and facilitate future access by the Company to public
equity markets. The Company expects to use the net proceeds from this offering
for general corporate purposes, including the funding of working capital
requirements. A portion of the net proceeds may also be used to acquire or
invest in complementary businesses or products or to obtain the right to use
complementary technologies. There are no present understandings, commitments
or agreements with respect to any material acquisition of other businesses,
products or technologies. Pending such uses, the Company will invest the net
proceeds received by it in this offering in short-term, interest-bearing,
investment-grade securities.
DIVIDEND POLICY
The Company has never paid or declared any cash dividends on its Common
Stock or other securities and does not anticipate paying cash dividends in the
foreseeable future.
15
<PAGE>
CAPITALIZATION
The following table sets forth the consolidated capitalization and deferred
revenue of the Company (i) as of December 31, 1996, and (ii) as adjusted to
reflect the automatic conversion of all outstanding shares of Preferred Stock
into Common Stock upon the closing of this offering and the receipt by the
Company of the estimated net proceeds from the sale of the shares of Common
Stock offered by the Company at an assumed initial public offering price of
$ per share and after deducting estimated underwriting discounts and
commissions and estimated offering expenses payable by the Company. Since
inception, the Company has funded its operations primarily from contract fees
and, to a lesser extent, the sale of capital stock. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations--
Liquidity and Capital Resources."
<TABLE>
<CAPTION>
DECEMBER 31, 1996
---------------------
ACTUAL AS ADJUSTED
-------- -----------
(IN THOUSANDS,
EXCEPT SHARE DATA)
<S> <C> <C>
Deferred revenue......................................... $ 26,669 $26,669
-------- -------
Total long-term debt(1).................................. $ 1,105 $ 1,105
-------- -------
Stockholders' equity (deficit):
Convertible preferred stock, $.001 par value:
Authorized: 11,336,096 shares;
Issued and outstanding: 11,296,822 shares actual and no
shares as adjusted ................................... 11 --
Common stock, $.001 par value:
Authorized: 22,500,000 shares;
Issued and outstanding: 6,078,658 shares actual and
shares as adjusted(2)............................ 6
Additional paid-in capital............................... 22,744
Accumulated deficit...................................... (34,400)
Cumulative translation adjustment........................ (18)
-------- -------
Total stockholders' equity (deficit) ................ $(11,657) $
-------- -------
Total capitalization................................. $(10,552) $
-------- -------
Total capitalization and deferred revenue............ $ 16,117 $
======== =======
</TABLE>
- --------
(1) Total long-term debt includes indebtedness for borrowed money and capital
lease obligations, both excluding current portion. See Notes 5 and 17 of
Notes to Consolidated Financial Statements.
(2) Excludes 3,302,041 shares of Common Stock issuable upon the exercise of
options outstanding under the Company's 1990 Stock Plan at December 31,
1996, with a weighted average exercise price of $1.62 per share and
116,500 shares of Common Stock issuable upon the exercise of options
granted under the Company's 1990 Stock Plan subsequent to December 31,
1996, with a weighted average exercise price of $7.73 per share. Also
excludes (i) 1,000,000 shares of Common Stock reserved for issuance under
the Company's 1997 Stock Plan, (ii) 400,000 shares of Common Stock
reserved for issuance under the Company's 1997 Employee Stock Purchase
Plan, and (iii) 1,000,000 shares of Common Stock issuable upon exercise of
an outstanding warrant at an exercise price of $10.00 per share. See
"Management--Stock Plans" and Notes 10 and 17 of Notes to Consolidated
Financial Statements.
16
<PAGE>
DILUTION
The net tangible book value of the Company as of December 31, 1996 was
$(11,657,000) or $(0.67) per share of Common Stock. Net tangible book value
per share is determined by dividing the tangible book value of the Company
(total tangible assets less total liabilities) by the number of outstanding
shares of Common Stock at that date (assuming the conversion of all
outstanding shares of Preferred Stock into Common Stock). After giving effect
to the sale by the Company of the shares of Common Stock offered hereby
(at an assumed initial public offering price of $ per share and after
deducting estimated underwriting discounts and commissions and estimated
offering expenses payable by the Company), the Company's as adjusted net
tangible book value at December 31, 1996 would have been $ or $ per
share. This represents an immediate increase in net tangible book value to
existing stockholders of $ per share and an immediate dilution to new public
investors of $ per share. The following table illustrates the per share
dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share............... $
----
Net tangible book value per share as of December 31, 1996... $(0.67)
Increase in net tangible book value per share attributable
to new investors...........................................
------
As adjusted net tangible book value per share after offering..
----
Dilution per share to new public investors.................... $
====
</TABLE>
The following table sets forth on an as adjusted basis as of December 31,
1996 the difference between the number of shares of Common Stock purchased
from the Company (assuming the conversion of all outstanding shares of
Preferred Stock into Common Stock), the total consideration paid and the
average price per share paid by the existing stockholders and by the new
investors (at an assumed initial public offering price of $ per share and
before deducting estimated underwriting discounts and commissions and
estimated offering expenses payable by the Company):
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION AVERAGE
------------------ ------------------- PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
---------- ------- ----------- ------- ---------
<S> <C> <C> <C> <C> <C>
Existing stockholders.......... 17,375,480 % $22,761,000 % $1.31
New public investors...........
---------- ---- ----------- ----
Total........................ 100% 100%
========== ==== =========== ====
</TABLE>
The foregoing analysis assumes no exercise of the Underwriters' over-
allotment option and no exercise of stock options and a warrant outstanding at
December 31, 1996. As of December 31, 1996, there were options outstanding to
purchase a total of 3,302,041 shares of Common Stock at a weighted average
exercise price of 1.62 per share and 1,000,000 shares of Common Stock issuable
upon the exercise of the warrant outstanding as of December 31, 1996 at an
exercise price of $10.00 per share. In addition, in February 1997, the Board
of Directors adopted the 1997 Stock Plan and the 1997 Employee Stock Purchase
Plan, pursuant to which 1,000,000 and 400,000 shares, respectively, were
reserved for issuance thereunder. As of December 31, 1996, no options or
shares had been issued under any of these plans. Subsequent to December 31,
1996, the Board of Directors granted options under the 1990 Stock Plan to
purchase an additional 116,500 shares of Common Stock at weighted average
exercise price of $7.73 per share. To the extent that any of these options or
the warrant is exercised, there will be further dilution to new public
investors. See "Capitalization," "Management--Stock Plans" and Notes 10 and 17
of Notes to Consolidated Financial Statements.
17
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
The following selected consolidated financial data should be read in
conjunction with the Company's consolidated financial statements and notes
thereto and "Management's Discussion and Analysis of Financial Condition and
Results of Operations" included elsewhere in this Prospectus. The consolidated
statement of operations data for the fiscal years ended September 30, 1994,
1995 and 1996 and consolidated balance sheet data as of September 30, 1995 and
1996 are derived from financial statements which have been audited by Coopers
& Lybrand L.L.P., independent auditors, included elsewhere in this Prospectus.
The consolidated statement of operations data for the years ended September
30, 1992 and 1993 and the consolidated balance sheet data as of September 30,
1992, 1993 and 1994 are derived from financial statements not included in this
Prospectus, which have also been audited by Coopers & Lybrand L.L.P. The
consolidated statement of operations data for the three months ended December
31, 1995 and 1996 and the consolidated balance sheet data as of December 31,
1996 are derived from the unaudited consolidated financial statements included
elsewhere in this Prospectus that have been prepared on the same basis as the
audited consolidated financial statements and, in the opinion of management,
contain all adjustments, consisting only of normal recurring adjustments,
necessary for a fair presentation of the Company's financial position and
results of operations for such periods. Historical results are not necessarily
indicative of the results to be expected in the future and results for interim
periods are not necessarily indicative of results for the entire year.
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
YEAR ENDED SEPTEMBER 30, DECEMBER 31,
------------------------------------------- ---------------
1992 1993 1994 1995 1996 1995 1996
------- ------- ------- ------- ------- ------- ------
(IN THOUSANDS, EXCEPT PER SHARE DATA) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT
OF OPERATIONS DATA:
Revenues:
Contract revenues...... $ 1,916 $ 3,371 $ 5,000 $ 7,364 $11,205 $ 2,510 $4,066
Royalties.............. -- -- -- -- 65 -- 1,425
------- ------- ------- ------- ------- ------- ------
Total revenues......... 1,916 3,371 5,000 7,364 11,270 2,510 5,491
------- ------- ------- ------- ------- ======= ------
Costs and expenses:
Cost of contract
revenues.............. 1,053 1,950 3,844 5,236 4,821 1,115 1,037
Research and
development........... 3,546 4,291 3,067 3,117 5,218 1,142 2,263
Sales and marketing.... 1,250 1,798 2,569 3,376 4,052 955 1,485
General and
administrative........ 1,814 1,294 1,717 1,688 1,747 454 603
------- ------- ------- ------- ------- ------- ------
Total costs and
expenses.............. 7,663 9,333 11,197 13,417 15,838 3,666 5,388
------- ------- ------- ------- ------- ------- ------
Operating income
(loss)................. (5,747) (5,962) (6,197) (6,053) (4,568) (1,156) 103
Other income (expense).. 115 (123) (81) 322 439 112 45
------- ------- ------- ------- ------- ------- ------
Income (loss) before
income taxes........... (5,632) (6,085) (6,278) (5,731) (4,129) (1,044) 148
Provision for income
taxes.................. 962 251 351 1,289 286 82 56
------- ------- ------- ------- ------- ------- ------
Net income (loss)....... $(6,594) $(6,336) $(6,629) $(7,020) $(4,415) $(1,126) $ 92
======= ======= ======= ======= ======= ======= ======
Pro forma net income
(loss) per share(1).... $ (0.25) $ 0.01
======= ======
Pro forma shares used in
per share
calculations(1)........ 17,432 20,018
======= ======
</TABLE>
<TABLE>
<CAPTION>
SEPTEMBER 30,
---------------------------------------------- DECEMBER 31,
1992 1993 1994 1995 1996 1996
------- ------- -------- -------- -------- ------------
(IN THOUSANDS) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
CONSOLIDATED BALANCE
SHEET DATA:
Cash, cash equivalents
and marketable
securities............. $ 1,866 $ 2,459 $ 5,046 $ 14,150 $ 8,554 $ 10,928
Total assets............ 5,300 7,807 8,395 18,307 12,868 18,703
Total debt(2)........... 1,055 1,698 1,655 1,616 1,297 1,932
Stockholders' deficit... (7,061) (8,351) (10,006) (7,936) (12,144) (11,657)
</TABLE>
- --------
(1) For an explanation of pro forma net income (loss) per share and pro forma
shares used in per share calculations, see Note 2 of the Notes to
Consolidated Financial Statements included elsewhere in this Prospectus.
(2) Total debt consists of indebtedness for borrowed money and capital lease
obligations.
18
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the Consolidated
Financial Statements and Notes thereto included elsewhere in this Prospectus.
The following discussion contains forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933, as amended, and Section
21E of the Securities Exchange Act of 1934, as amended. The Company's actual
results may differ significantly from those projected in the forward-looking
statements. Factors that might cause future actual results to differ
materially from the Company's recent results or those projected in the
forward-looking statements include, but are not limited to, those discussed in
"Risk Factors" and below. The Company assumes no obligation to update the
forward-looking statements or such factors.
OVERVIEW
Since its founding in March 1990, Rambus has been engaged in the development
of high-speed chip-to-chip interface technology which can be used to enhance
the performance and cost-effectiveness of consumer electronics, computer
systems and other electronic systems. The Company neither manufactures nor
sells semiconductors incorporating the Company's technology. Rather, the
Company licenses its technology on a nonexclusive and worldwide basis to
semiconductor companies which manufacture and sell RDRAMs and logic ICs
containing RACs to systems companies which have adopted Rambus technology.
Systems companies are not required to obtain a Rambus license to incorporate
Rambus ICs into their products. See "Business."
REVENUES
The Company's revenues consist of contract fees and royalties. Contract fees
are comprised of license fees, engineering service fees and nonrefundable,
prepaid royalties, and have represented substantially all of the Company's
revenues to date. The Company's contracts generally require a licensee to pay
a contract fee to Rambus typically ranging from a few hundred thousand dollars
for a narrow license covering a single logic product to millions of dollars
for a license with broad coverage of Rambus technology. Part of these fees may
be due upon the achievement of certain milestones, such as provision of
certain deliverables by Rambus or production of chips by the licensee. All
contract fees are nonrefundable. See "Business--Rambus Licensees" and "--
Rambus Business Model and Strategy."
In a few cases, the Company has received nonrefundable, prepaid royalties
which offset the earliest royalty payments otherwise due from the licensee. As
of December 31, 1996, $2.7 million of such nonrefundable, prepaid royalties
had offset initial royalties, and the Company had a balance of $4.1 million
remaining to be offset against future royalties.
Royalties, which are generally a percentage of the revenues received by a
licensee on its sales of Rambus ICs, are normally payable by the licensee on
sales occurring during the life of the Rambus patents being licensed. For a
typical application of Rambus technology, the Company receives royalties from
the sale of both RDRAMs and logic ICs containing RACs. Royalty rates range up
to approximately 2.5% for RDRAMs and 5% for logic ICs, and in some cases may
decline based on the passage of time or on the total volume of Rambus ICs
shipped by a licensee. The exact rate and structure of a royalty arrangement
with a particular licensee depend on a number of factors, including the amount
of the contract fee paid by the licensee and the marketing and engineering
commitment made by the licensee.
Substantially all of the license fees, engineering service fees and
nonrefundable, prepaid royalties are bundled together as contract fees because
the Company generally does not provide or price these components separately.
The contracts also include rights to upgrades and enhancements. Accordingly,
Rambus recognizes contract revenues ratably over the period during which post-
contract customer support is expected to be provided. The excess of contract
fees received over contract revenue recognized is shown on the Company's
balance sheet
19
<PAGE>
as "deferred revenue." As of December 31, 1996, the Company's deferred revenue
was $26.7 million, substantially all of which is scheduled to be recognized in
varying amounts over the next five years.
Rambus recognizes royalties from a licensee in the quarter in which it
receives the report detailing shipments of Rambus ICs by such licensee in the
prior quarter. The first sale of Rambus ICs by a licensee occurred during the
fourth quarter of fiscal 1994. However, due to a combination of the one-
quarter reporting delay and nonrefundable, prepaid royalty offsets, the first
royalties were not reported by the Company until the third quarter of fiscal
1996. Although royalties have represented a small portion of the Company's
revenues to date, the Company believes that royalties will become an
increasing portion of revenues in the future. See Note 2 of Notes to
Consolidated Financial Statements.
In the past, certain components of the Company's revenues have fluctuated
and have been difficult to predict. The Company expects that this will
continue to be the case in the future. Although the schedule for recognizing
deferred revenue under existing contracts is known, it is difficult for the
Company to predict the timing and amount of deferred revenue streams
associated with new contracts, if any, because the Company's contracts
typically involve long business development cycles and negotiated financial
terms. The Company's contract revenues may be subject to sudden increases or
decreases upon the addition of a new contract or the expiration of the
deferred revenue schedule under an existing contract. Because these events may
involve substantial amounts and do not occur with any regularity, any such
increase or decrease generally is not indicative of future period-to-period
increases or decreases. The Company believes that its continued success will
be substantially dependent upon royalties increasing at a rate which more than
offsets decreases in the recognition of deferred revenue under existing
contracts as their recognition periods expire, as well as the Company's
ability to add new licensees and to license new generations of its technology
to its existing licensees. Nonrefundable, prepaid royalties, which are bundled
into contract fees, are recognized ratably over the period during which post-
contract customer support is expected to be provided, and are not related to
the actual rate at which Rambus ICs are shipped by the licensee. Accordingly,
the amount of nonrefundable, prepaid royalties recognized in a period is not
necessarily representative of the rate at which the prepaid royalties are
being offset. In addition, the Company may experience sudden and significant
fluctuations in royalties to the extent that one or more systems companies
switches its source of Rambus ICs for a particular application to a licensee
with a different nonrefundable, prepaid royalty balance or different royalty
rate than the original source. See "Risk Factors--Unpredictable and
Fluctuating Operating Results."
To date, a majority of the Company's royalties has been derived from the
sale of logic ICs incorporating RACs. If the Company is successful in its
strategy to penetrate the PC main memory market segment, the Company expects
that royalties from the sale of RDRAMs will eventually account for the largest
portion of royalties. See "Risk Factors--Future Dependence upon PC Main Memory
Market Segment and Intel" and "--Reliance upon DRAM Market; Declines in DRAM
Price and Unit Volume per System."
As of February 28, 1997, the Company had 19 licensees. Because all of the
Company's revenues are derived from its relatively small number of licensees,
the Company's revenues tend to be highly concentrated. In fiscal 1994, 1995
and 1996 and the first quarter of fiscal 1997, revenues from the top five
licensees accounted for approximately 86%, 70%, 65% and 72% of the Company's
revenues, respectively. In the first quarter of fiscal 1997, NEC accounted for
approximately 33% of revenues and LG Semicon accounted for approximately 11%
of revenues. The Company expects that it will continue to experience
significant revenue concentration for the foreseeable future. However, the
particular licensees which account for revenue concentration may vary from
period to period depending on the addition of new contracts, the expiration of
deferred revenue schedules under existing contracts, and the volumes and
prices at which the licensees sell Rambus ICs to systems companies in any
given period. See "Risk Factors--Revenue Concentration" and Note 3 of Notes to
Consolidated Financial Statements.
The royalties received by the Company are also a function of the adoption of
Rambus technology by systems companies and the acceptance of the systems
companies' products by end users. The Company generally does not have a direct
contractual relationship with systems companies, and the royalty reports
submitted by the
20
<PAGE>
Company's licensees generally do not disclose the identity of, or unit volume
of Rambus ICs purchased by, particular systems companies. As a result, it is
difficult for the Company to predict the extent to which its future revenues
will be dependent upon particular systems companies. See "Risk Factors--
Dependence upon Systems Companies."
To date, companies based in Japan and Korea have accounted for the
substantial majority of the Company's revenues, and nearly all of its
international revenues. In fiscal 1994, 1995 and 1996 and the first quarter of
fiscal 1997, international revenues comprised approximately 90%, 90%, 86% and
85% of the Company's net revenues, respectively. The Company expects that
revenues derived from international licensees will continue to represent a
significant portion of its total revenues in the future. All of the revenues
from international licensees to date have been denominated in United States
dollars. See "Risk Factors--Risks Associated with International Licenses" and
Note 14 of Notes to Consolidated Financial Statements.
EXPENSES
Since the Company's inception in March 1990, its engineering costs (which
consist of cost of contract revenues and research and development expenses)
and sales and marketing expenses have continually increased as the Company has
added personnel and ramped up its activities in these areas. Engineering costs
and sales and marketing expenses generally have decreased as a percentage of
revenues throughout this period due to the relatively rapid revenue base
expansion which the Company experienced as it began entering into license
agreements. The Company intends to continue making significant expenditures
associated with engineering and sales and marketing, and expects that these
costs and expenses will continue to be a significant percentage of revenues in
future periods. Whether such expenses increase or decrease as a percentage of
revenues will be substantially dependent upon the rate at which the Company's
revenues change. See Note 2 of Notes to Consolidated Financial Statements.
Engineering costs are allocated between cost of contract revenues and
research and development expenses. Cost of contract revenues is determined
based on the portion of engineering costs which have been incurred during the
period for the adaptation of Rambus interface technology for specific licensee
processes. The balance of engineering costs, incurred for general development
of Rambus technology, is charged to research and development. In a given
period, the allocation of engineering costs between these two components is a
function of the timing of development and implementation cycles. As a
generation of technology matures from the development stage through
implementation, the majority of engineering costs shifts from research and
development expenses to cost of contract revenues. Engineering costs are
recognized as incurred and do not correspond to the recognition of revenues
under the related contracts. See "Business--Technology and Products" and
"Research and Development."
Sales and marketing expenses include salaries, travel expenses and costs
associated with trade shows, advertising and other marketing efforts. Costs of
technical support for systems companies, including applications engineering,
are also expensed to sales and marketing. Consistent with the Company's
business model, sales and marketing activities are focused on developing
relationships with potential licensees and on participating with existing
licensees in marketing, sales and technical efforts directed to systems
companies. In many cases, Rambus must dedicate substantial resources to market
to and support systems companies. Due to the long business development cycles
faced by the Company, as well as the fact that the Company does not have a
commission compensation structure, sales and marketing expenses in a given
period generally are unrelated to the level of revenues in that period or in
recent or near-term future periods. See "Business--Rambus Business Model and
Strategy" and "Sales and Marketing."
TAXES
The Company has incurred cumulative net operating losses for federal tax
purposes of approximately $8.9 million through September 30, 1996. Net
operating losses for state tax purposes were approximately $3.5 million
21
<PAGE>
through September 30, 1996. The Company also has foreign tax credit
carryforwards of approximately $2.4 million, and research and development
credit carryforwards of $867,000 through September 30, 1996.
The Company reports certain items of income and expense for financial
statement purposes in different years than they are reported in the tax
return. Specifically, the Company reports contract fees and royalties when
received for tax purposes, as required by tax law. For financial reporting
purposes, the Company records revenues from contract fees over the period
post-contract support is expected to be provided. Accordingly, the Company's
net operating loss for tax purposes is less than the cumulative operating
deficit recorded for financial statement purposes. See Notes 2 and 12 of Notes
to Consolidated Financial Statements.
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, the percentage of
total revenues represented by certain items reflected in the Company's
consolidated statements of operations:
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
YEARS ENDED SEPTEMBER 30, DECEMBER 31,
------------------------------- ---------------
1994 1995 1996 1995 1996
--------- -------- -------- ------ ------
<S> <C> <C> <C> <C> <C>
Revenues:
Contract revenues........ 100.0% 100.0% 99.4% 100.0% 74.0%
Royalties................ -- -- 0.6 -- 26.0
--------- -------- -------- ------ ------
Total revenues......... 100.0% 100.0% 100.0% 100.0% 100.0%
========= ======== ======== ====== ======
Costs and Expenses:
Cost of contract
revenues................ 76.9 71.1 42.8 44.4 18.9
Research and
development............. 61.3 42.3 46.3 45.5 41.2
Sales and marketing...... 51.4 45.8 36.0 38.0 27.0
General and
administrative.......... 34.3 22.9 15.5 18.1 11.0
--------- -------- -------- ------ ------
Total costs and
expenses.............. 223.9 182.2 140.5 146.1 98.1
--------- -------- -------- ------ ------
Operating income (loss).... (123.9) (82.2) (40.5) (46.1) 1.9
Other income (expense)..... (1.6) 4.4 3.9 4.5 0.8
--------- -------- -------- ------ ------
Income (loss) before income
taxes..................... (125.6) (77.8) (36.6) (41.6) 2.7
Provision for income
taxes..................... 7.0 17.5 2.5 3.3 1.0
--------- -------- -------- ------ ------
Net income (loss).......... (132.6)% (95.3)% (39.2)% (44.9)% 1.7%
========= ======== ======== ====== ======
</TABLE>
THREE MONTHS ENDED DECEMBER 31, 1995 AND 1996
Revenues. Revenues were $2.5 million and $5.5 million in the first quarter
of fiscal 1996 and fiscal 1997, respectively. Contract revenues increased
62.0%, from $2.5 million in the first quarter of fiscal 1996 to $4.1 million
in the first quarter of fiscal 1997. This increase was a result of the
Company's entering into contracts with new licensees and additional contracts
with current licensees for new developments, especially for an extension of
the Company's technology to provide a higher bandwidth interface for future PC
main memory applications.
The Company recorded its first significant royalties in the first quarter of
fiscal 1997, consisting primarily of royalties from NEC, which the Company
believes were largely based on sales of Rambus ICs for use in the Nintendo 64
home video game system. The Company anticipates that its potential to generate
royalties in the remainder of fiscal 1997 is largely dependent on system sales
by Nintendo and, to a lesser extent, sales by Cirrus Logic and Chromatic.
Nintendo faces intense competitive pressure in the home video game market,
which is characterized by extreme volatility, frequent new product
introductions and rapidly shifting consumer preferences, and there can be no
assurance as to the unit volumes of Rambus ICs that will be purchased by
22
<PAGE>
Nintendo in the future or the level of royalty-bearing revenues that the
Company's licensees will receive from Nintendo. None of the systems companies
currently incorporating Rambus interface technology into their products is
contractually obligated to continue using Rambus ICs. See "Risk Factors--
Dependence upon Systems Companies," "--Revenue Concentration," "Business--
Rambus Licensees" and "--Rambus Business Model and Strategy."
Engineering Costs. Engineering costs, consisting of cost of contract
revenues and research and development expenses, were $2.3 million and $3.3
million, which represented 89.9% and 60.1% of revenues, in the first quarter
of fiscal 1996 and fiscal 1997, respectively. The increase in engineering
costs was due primarily to an increase in engineering personnel, and the
decrease as a percentage of revenues was primarily the result of the Company's
growth in revenues.
Cost of Contract Revenues. Cost of contract revenues was $1.1 million and
$1.0 million, which represented 44.4% and 18.9% of revenues, in the first
quarter of fiscal 1996 and fiscal 1997, respectively. Cost of contract
revenues decreased 7.0% in the first quarter of fiscal 1997 compared to the
first quarter of fiscal 1996 due to several of the Company's licensees
reaching the production phase during the latter part of fiscal 1996, thus
reducing the implementation, customization, support and enhancement services
required of the Company. The decrease in cost of contract revenues as a
percentage of revenues from the first quarter of fiscal 1996 to the first
quarter of fiscal 1997 was primarily the result of the Company's growth in
revenues. The Company believes that the level of cost of contract revenues
will continue to fluctuate in the future, both in absolute dollars and as a
percentage of revenues, as new generations of Rambus ICs go through the normal
development and implementation phases.
Research and Development. Research and development expenses were $1.1
million and $2.3 million, which represented 45.5% and 41.2% of revenues, in
the first quarter of fiscal 1996 and fiscal 1997, respectively. Research and
development expenses increased 98.2% in the first quarter of fiscal 1997
compared to the same period in fiscal 1996 due to development efforts related
to a new generation of 64 Mbit RDRAMs and associated RACs, including an
extension of the Company's technology to provide a higher bandwidth interface
for future PC main memory applications. The higher costs were primarily due to
increased engineering personnel. The Company expects research and development
expenses to increase over time as it enhances and improves its technology and
applies it to new generations of ICs.
Sales and Marketing. Sales and marketing expenses were $1.0 million and $1.5
million, which represented 38.0% and 27.0% of revenues, in the first quarter
of fiscal 1996 and fiscal 1997, respectively. Sales and marketing expenses
increased 55.5% in the first quarter of fiscal 1997 compared to the same
period in fiscal 1996 due to a buildup of the marketing and sales teams in
both the U.S. and Japan as well as increased costs associated with
applications engineering and other technical support for systems companies,
trade shows, advertising and other marketing efforts. The decrease in sales
and marketing expenses as a percentage of revenues reflects the increased
revenue base. The Company expects sales and marketing expenses to increase in
the future as the Company puts additional effort into marketing its technology
and assisting systems companies to adapt this technology to new generations of
products.
General and Administrative. General and administrative expenses were
$454,000 and $603,000, which represented 18.1% and 11.0% of revenues, in the
first quarter of fiscal 1996 and fiscal 1997, respectively. General and
administrative expenses increased 32.8% in the first quarter of fiscal 1997
compared to the first quarter of fiscal 1996 as the Company added headcount to
support an increasing number of employees and licensees. As a percentage of
revenues, general and administrative expenses decreased, reflecting the
increased revenue base. The Company anticipates incurring additional general
and administrative expenses in the future as required to support an increasing
number of employees and licensees and as a result of becoming a public
company.
Other Income (Expense). Net other income consists primarily of interest
income from the Company's short-term cash investments, offset by interest
expense on leases and other equipment financing. Net other income was $112,000
and $45,000, which represented 4.5% and 0.8% of revenues, in the first quarter
of fiscal
23
<PAGE>
1996 and fiscal 1997, respectively. Net other income decreased 59.8% in the
first quarter of fiscal 1997 compared to the first quarter of fiscal 1996 due
to lower interest income on a lower average cash investment balance in the
fiscal 1997 period. The Company expects net other income to increase in the
future due to additional interest income on higher cash balances.
Provision for Income Taxes. The Company recorded a provision for income
taxes of $56,000 in the first quarter of fiscal 1997, a decrease of 31.7% from
the $82,000 recorded in the first quarter of fiscal 1996. The difference is
due to a reduction in foreign withholding taxes on license revenue, offset by
an increase in estimated provision for federal and state taxes. See Notes 2
and 12 of Notes to Consolidated Financial Statements.
YEARS ENDED SEPTEMBER 30, 1994, 1995 AND 1996
Revenues. Revenues were $5.0 million, $7.4 million and $11.3 million in
fiscal 1994, 1995 and 1996, respectively. In both fiscal 1994 and fiscal 1995,
the Company had no royalties, and the 47.3% increase in fiscal 1995 compared
to fiscal 1994 was due to a combination of new license contracts and a full
year of revenues from contracts booked during fiscal 1994. While the Company
received its first royalties in fiscal 1996, most of the 53.0% increase in
revenues compared to fiscal 1995 was again due to a combination of new
contracts and a full year of revenues from contracts booked during fiscal
1995.
Engineering Costs. Engineering costs, consisting of cost of contract
revenues and research and development expenses, were $6.9 million, $8.4
million and $10.0 million, which represented 138.2%, 113.4% and 89.1% of
revenues, in fiscal 1994, 1995 and 1996, respectively. The increase in
engineering costs was due primarily to an increase in engineering personnel,
and the decrease as a percentage of revenues was primarily the result of the
Company's growth in revenues.
Cost of Contract Revenues. Cost of contract revenues was $3.8 million, $5.2
million and $4.8 million, which represented 76.9%, 71.1% and 42.8% of
revenues, in fiscal 1994, 1995 and 1996, respectively. The increase in
absolute dollars from fiscal 1994 to fiscal 1995 was due to headcount
increases and costs associated with implementation, customization, customer
support and enhancements for a growing base of technology licensees. During
fiscal 1994 and fiscal 1995, most of these licensees were in the pre-
production phase of developing 16 Mbit and 18 Mbit Rambus RDRAMs and
associated RACs, and therefore the related costs of Company implementation and
support were high. Cost of contract revenues decreased 7.9% in fiscal 1996
compared to fiscal 1995 due to several of the Company's licensees reaching the
production phase during fiscal 1996, thus reducing the implementation,
customization, support and enhancement services required of the Company. The
decrease in cost of contract revenues as a percentage of revenues from fiscal
1994 to fiscal 1996 was primarily the result of the Company's growth in
revenues.
Research and Development. Research and development expenses were $3.1
million, $3.1 million and $5.2 million, which represented 61.3%, 42.3% and
46.3% of revenues, in fiscal 1994, fiscal 1995 and fiscal 1996, respectively.
Research and development expenses remained relatively flat between fiscal 1994
and fiscal 1995 due to the requirement for the Company's engineering
department to focus on licensee-specific implementations of 16 Mbit and 18
Mbit Rambus RDRAMs and associated RACs, which is charged to cost of contract
revenues. Research and development expenses increased 67.4% in fiscal 1996
compared to fiscal 1995 due to development efforts associated with a new
generation of 64 Mbit RDRAMs and associated RACs. The higher costs were
primarily due to increased headcount.
Sales and Marketing. Sales and marketing expenses were $2.6 million, $3.4
million and $4.1 million, which represented 51.4%, 45.8% and 36.0% of
revenues, in fiscal 1994, 1995 and 1996, respectively. This increase in
absolute dollars reflected the building of the sales and marketing teams in
both the U.S. and Japan, development of an applications engineering group to
help systems companies adapt Rambus technology to their needs, costs
associated with trade shows and other marketing efforts. The decrease in sales
and marketing expenses as a percentage of revenues reflected the increased
revenue base.
24
<PAGE>
General and Administrative. General and administrative expenses remained
flat at $1.7 million, which represented 34.3%, 22.9% and 15.5% of revenues, in
fiscal 1994, 1995 and 1996, respectively. In absolute dollars, these expenses
remained relatively constant as the Company was able to increase its revenues
without significantly increasing its infrastructure. As a percentage of
revenues, general and administrative expenses decreased, reflecting the
increased revenue base.
Other Income (Expense). Net other income (expense) was $(81,000), $322,000
and $439,000, which represented (1.6)%, 4.4% and 3.9% of revenues, in fiscal
1994, 1995 and 1996, respectively. The increase in absolute dollars was due to
interest on higher average cash investment balances, offset by interest
associated with leased equipment.
Provision for Income Taxes. The Company reported a tax net operating loss of
approximately $3.6 million for fiscal 1994. For fiscal 1995, the Company
reported taxable income of approximately $2.1 million, attributable to
contract fees and royalties received during that year. While net operating
loss carryovers were available to offset this income, alternative minimum tax
of approximately $40,000 for federal purposes and approximately $14,000 for
state purposes was incurred. The Company had a tax net operating loss of
approximately $4.9 million in the year ended September 30, 1996.
For fiscal 1994, 1995 and 1996, the Company paid foreign withholding taxes
of approximately $350,000, $1.2 million and $270,000, respectively, on income
from contract fees and royalties. These taxes may potentially be claimed as
foreign-tax credits for U.S. federal tax purposes, provided the Company incurs
future U.S. tax liability, and are subject to foreign tax credit limitations
and a five year carryover restriction imposed by U.S. tax law. See Notes 2 and
12 of Notes to Consolidated Financial Statements.
25
<PAGE>
QUARTERLY RESULTS OF OPERATIONS
The following tables present certain unaudited quarterly consolidated
statements of operations data, both in absolute dollars and as a percentage of
revenues, for the five quarters ended December 31, 1996. In the opinion of
management, this information has been presented on the same basis as the
audited consolidated financial statements appearing elsewhere in this
Prospectus, and all necessary adjustments have been included in the amounts
stated below to present fairly the unaudited quarterly results when read in
conjunction with the audited consolidated financial statements of the Company.
Results of operations for any quarter are not necessarily indicative of the
results to be expected for the entire fiscal year or for any future period.
<TABLE>
<CAPTION>
QUARTER ENDED
----------------------------------------------------
DEC. 31, MAR. 31, JUNE 30, SEP. 30, DEC. 31,
1995 1996 1996 1996 1996
-------- -------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
Revenues:
Contract revenues...... $ 2,510 $ 2,562 $ 2,833 $ 3,299 $4,066
Royalties.............. -- -- 1 64 1,425
------- ------- ------- ------- ------
Total revenues....... 2,510 2,562 2,834 3,363 5,491
------- ------- ------- ------- ------
Costs and Expenses:
Cost of contract
revenues.............. 1,115 1,186 1,275 1,245 1,037
Research and
development........... 1,142 1,271 1,235 1,569 2,263
Sales and marketing.... 955 826 1,100 1,171 1,485
General and
administrative........ 454 379 397 518 603
------- ------- ------- ------- ------
Total costs and
expenses............ 3,666 3,662 4,007 4,503 5,388
------- ------- ------- ------- ------
Operating income (loss).. (1,156) (1,100) (1,173) (1,140) 103
Other income (expense)... 112 92 85 151 45
------- ------- ------- ------- ------
Income (loss) before
income taxes............ (1,044) (1,008) (1,088) (989) 148
Provision for income
taxes................... 82 101 -- 103 56
------- ------- ------- ------- ------
Net income (loss)........ $(1,126) $(1,109) $(1,088) $(1,092) $ 92
------- ------- ------- ------- ------
Pro forma net income
(loss) per share........ $ (0.07) $ (0.06) $ (0.06) $ (0.06) $ .01
======= ======= ======= ======= ======
Pro forma shares used in
per share calculation... 17,342 17,442 17,457 17,489 20,018
======= ======= ======= ======= ======
<CAPTION>
AS A PERCENTAGE OF REVENUES
----------------------------------------------------
DEC. 31, MAR. 31, JUNE 30, SEP. 30, DEC. 31,
1995 1996 1996 1996 1996
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Revenues:
Contract revenues...... 100.0% 100.0% 100.0% 98.1% 74.0%
Royalties.............. -- -- -- 1.9 26.0
------- ------- ------- ------- ------
Total revenues....... 100.0% 100.0% 100.0% 100.0% 100.0%
======= ======= ======= ======= ======
Costs and Expenses:
Cost of contract
revenues.............. 44.4 46.3 45.0 37.0 18.9
Research and
development........... 45.5 49.6 43.6 46.7 41.2
Sales and marketing.... 38.0 32.2 38.8 34.8 27.0
General and
administrative........ 18.1 14.8 14.0 15.4 11.0
------- ------- ------- ------- ------
Total costs and
expenses............ 146.1 142.9 141.4 133.9 98.1
------- ------- ------- ------- ------
Operating income (loss).. (46.1) (42.9) (41.4) (33.9) 1.9
Other income (expense)... 4.5 3.6 3.0 4.5 0.8
------- ------- ------- ------- ------
Income (loss) before
income taxes............ (41.6) (39.3) (38.4) (29.4) 2.7
Provision for income
taxes................... 3.3 3.9 -- 3.1 1.0
------- ------- ------- ------- ------
Net income (loss)........ (44.9)% (43.3)% (38.4)% (32.5)% 1.7%
======= ======= ======= ======= ======
</TABLE>
26
<PAGE>
The Company's contract revenues have increased in each of the last five
quarters due to the addition of both new licensees and new engineering
implementations for existing licensees. While quarterly revenues from existing
licenses is predictable over the contracts' respective lives, total contract
revenues will decline in the future if the Company does not continue to obtain
new licensees or if it is unsuccessful in securing new engineering
implementation work from existing licensees.
Royalties became significant only in the first quarter of fiscal 1997 and are
the primary reason the Company became profitable in that quarter. During that
quarter, the Company received royalty reports from the three licensees which
had shipped Rambus-based products during the prior quarter. Of these, one
licensee's royalties were completely offset against nonrefundable, prepaid
royalties and another, NEC, accounted for substantially all of the royalties
for the quarter. While licensee reports generally do not break down sales of
license-bearing products by customer, the Company believes that a large
percentage of the royalties from NEC for the first quarter of fiscal 1997 were
due to sales of Rambus ICs to Nintendo for incorporation in the Nintendo 64
home video game system. With such a concentration of royalties based on one
system, it is likely that royalties will vary greatly in subsequent quarters.
The Company does not expect an increase in the number of licensees providing
royalty reports during the second quarter of fiscal 1997 with respect to
shipments made during the first quarter of fiscal 1997. If royalties were to
decline, the Company would likely again become unprofitable.
Costs and expenses have generally increased in each of the five quarters
ended December 31, 1996. Cost of contract revenues has remained relatively flat
during this period, reflecting both the relative independence of this cost
element from revenue changes and the relatively flat requirement for
engineering implementation, customization, customer support and enhancements
over this period. On the other hand, research and development expenses have
generally increased over this period due principally to personnel additions
associated with application of the Company's technology to a new generation of
64 Mbit RDRAMs and associated RACs, including an extension of the Company's
technology to provide a higher bandwidth interface for future PC main memory
applications. Sales and marketing expenses also increased throughout this
period due to a buildup of the marketing and sales teams, as well as increased
costs associated with applications engineering and other technical support for
systems companies, trade shows, advertising and other marketing efforts.
General and administrative expenses increased during the last three quarters as
the Company added headcount to support an increasing number of employees and
licensees. The Company believes that engineering costs, sales and marketing
expenses and general and administrative expenses all will increase in future
quarters.
The Company has granted to Intel Corporation a warrant for the purchase of
1,000,000 shares of Common Stock at an exercise price of $10.00 per share. The
warrant will become exercisable only upon the achievement of certain
milestones, which will result in a charge to the statement of operations at the
time achievement of the milestones becomes probable for the excess of the then
fair value of the warrant over the exercise price.
The Company's business is subject to a variety of additional risks that could
materially adversely affect quarterly and annual operating results, including
market acceptance of the Company's technology; systems companies' acceptance of
Rambus ICs produced by the Company's licensees; market acceptance of the
products of systems companies which have adopted the Company's technology; the
loss of any strategic relationships with systems companies or licensees;
announcements or introductions of new technologies or products by the Company
or the Company's competitors; delays or problems in the introduction or
performance of enhancements or future generations of the Company's technology;
fluctuations in the market price and demand for DRAMs and logic ICs into which
the Company's technology has been incorporated; competitive pressures resulting
in lower contract revenues or royalty rates; changes in the Company's and
system companies' development schedules and levels of expenditure on research
and development; personnel changes, particularly those involving engineering
and technical personnel; costs associated with protecting the Company's
intellectual property; changes in Company strategies; foreign exchange rate
fluctuations or other changes in the international business climate; and
general economic trends and other factors.
27
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
Since inception, the Company has funded its operations primarily from
approximately $52.8 million in contract payments (net of foreign withholding
taxes) received through December 31, 1996, and to a lesser extent, the sale of
approximately $21.4 million of convertible preferred stock and preferred stock
purchase rights. At December 31, 1996, the Company had cash and cash
equivalents and marketable securities of $10.9 million. As of December 31,
1996, the Company had an accumulated deficit of $34.4 million and negative
working capital of $2.2 million, including a short-term component of deferred
revenue of $14.3 million. Deferred revenue represents the excess of cash
received from licensees over revenue recognized on license contracts, and the
short-term component represents the amount of this deferred revenue to be
recognized over the next twelve months. Without the deferred revenue, working
capital would have been a positive $12.1 million.
The Company's operating activities used net cash of $1.8 million in fiscal
1994, provided net cash of $1.3 million in fiscal 1995, used net cash of $3.5
million in fiscal 1996 and provided net cash of $1.9 million in the first
quarter of fiscal 1997. Cash used by operations in fiscal 1994 was due to the
net loss, adjusted for non-cash items, offset by a decrease in accounts
receivable and other assets and an increase in deferred revenue. Cash generated
by operations in fiscal 1995 was primarily the result of an increase in
deferred revenue offset by the net loss, adjusted for non-cash item and an
increase in accounts receivable. Cash used by operations in fiscal 1996 was due
to the net loss, adjusted for non-cash items, and an increase in deferred
revenue offset by a decrease in accounts receivable. Cash generated by
operations in the first quarter of fiscal 1997 was primarily the result of an
increase in deferred revenue offset by a decrease in accounts receivable.
Net cash used in investing activities was $3.6 million, $10.4 million and
$1.5 million in fiscal 1994, fiscal 1995 and the first quarter of fiscal 1997,
respectively; net cash provided by investing activities was $3.9 million in
fiscal 1996. Investing activities have consisted primarily of net purchases of
marketable securities and purchases of property and equipment. See Notes 2, 5,
8, 9 and 15 of Notes to Consolidated Financial Statements.
Net cash provided by financing activities were $4.5 million, $8.5 million and
$1.1 million in fiscal 1994, fiscal 1995 and the first quarter of fiscal 1997,
respectively; net cash used in financing activities was $546,000 in fiscal
1996. Financing activities have consisted primarily of sales of convertible
preferred stock and preferred stock purchase rights offset by principal
payments on capital leases. See Notes 2, 4 and 15 of Notes to Consolidated
Financial Statements.
The Company has incurred substantial expenditures related to the development
and marketing of its technology. Future development and marketing of extensions
of the Company's technology and further enhancements to the Company's original
technology will require substantial additional funds. While the first quarter
of fiscal 1997 was the Company's first profitable quarter, there can be no
assurance that the Company will remain profitable in the future.
The Company has a $1 million line of credit with Silicon Valley Bank. Under
the terms of the line of credit, borrowings bear interest at a rate of prime
plus 1% per annum, and the Company must comply with certain financial
covenants. At December 31, 1996, approximately $794,000 was outstanding under
the line of credit, and the Company was in compliance with all material
covenants. This line of credit expires in October 2000.
The Company presently anticipates that the net proceeds from this offering,
together with existing sources of liquidity and cash anticipated to be provided
by operations, will be adequate to meet its cash needs for at least the next
twelve months.
28
<PAGE>
BUSINESS
The key elements of the Rambus interface are RDRAMs, RACs and the
interconnecting circuitry known as the "Rambus Channel." The high-speed
interface technology Rambus has developed is applicable to data transfer
between most semiconductor chips. The Company has initially chosen to
concentrate the application of its technology on the interface between logic
ICs and memory devices because of the acute performance needs and the relevant
market sizes. The Company believes that the systems which will best utilize
the high bandwidth provided by current Rambus technology are the relatively
high-volume, low-cost systems in which the cost of the memory subsystems
represents a significant portion of the selling price. To date, the principal
applications for the Company's technology have been in the consumer
multimedia, PC multimedia and workstation multimedia markets. These areas
accounted for the sale of approximately $13,000, $11 million, and $444 million
of Rambus ICs by Rambus licensees in calendar 1994, 1995 and 1996,
respectively. Other applications currently being developed include
multifunction peripheral controllers for combination fax/copier/scanner/laser
printer devices, and networking equipment such as high-speed ethernet
switches. In addition, the Company and Intel Corporation have entered into a
development and license agreement and are working together to develop an
extension of the Rambus interface technology optimized for the PC main memory
market segment.
INDUSTRY BACKGROUND
Worldwide demand for semiconductor devices has increased significantly in
recent years due to growth in the demand for electronic systems which use
semiconductors, as well as an increase in the semiconductor content of these
systems. According to Dataquest, Inc., an independent research organization,
the worldwide market for semiconductors was $137 billion in 1996, and is
estimated to reach $290 billion by the year 2000.
Among the factors that contribute to this growth are the reduced costs and
increasing performance of home video games, PCs, workstations, servers and
networking equipment, as well as the improving price/performance ratio of
semiconductors themselves. For example, home video game consumers are
requiring increasingly sophisticated color and 3D capabilities to match those
available in large arcade machines. PC purchasers are increasingly demanding
multimedia-equipped systems which support features such as full motion video,
sophisticated 3D graphics, high-quality audio and images with greater color
depth and higher resolution. The increased performance of PCs and the
availability of sophisticated PC engineering and multimedia authoring
applications are, in turn, driving manufacturers of workstations to develop
even more sophisticated 3D graphics and other multimedia capabilities.
Similarly, evolving network technology and infrastructure are driving the
demand for performance improvements in servers and networking equipment.
Systems manufacturers are under constant pressure to introduce enhanced
capabilities and higher performance while keeping prices within reach of their
target markets.
The performance of a computer or other electronic system is typically
constrained by the speed of its slowest element. In the past, that element was
the logic IC that controlled the system's specific functions and performed
calculations--the microprocessor. In recent years, however, new generations of
microprocessors have become substantially faster and more powerful, and
increasingly the bottleneck in system performance is becoming the component
that stores the instructions and data needed by the microprocessor--the DRAM.
29
<PAGE>
Since 1980, the typical operating frequency of Intel and other mainstream
microprocessors has increased approximately 40 times from 5 MHz (million
cycles per second) to 200 MHz. During this same period, the typical operating
frequency of a standard DRAM (known as a "page mode" DRAM) has increased by
approximately five times. Even the evolutionary improvements to DRAM
technology, including the FPM (fast-page mode) DRAM, the EDO (extended-data-
out) DRAM, the SDRAM (synchronous DRAM) and the SGRAM ( a version of the SDRAM
for graphics applications), have only been able to provide an improvement of
up to approximately ten times. This growing disparity between the frequency of
microprocessors and DRAMs is termed the "Performance Gap."
[LOGO CHART OF X86 MPV]
[Description of Graph: The graph omitted in the EDGAR filing consists of a
horizontal axis representing years between 1980 and 1996, and a vertical axis
representing frequencies in MHz. The graph contains data points for x86 MPU,
SDRAMs, EDOs and Page Made DRAMs. The data points for each of these
technologies which are plotted in the graph are set forth below. In the graph,
the data points for each respective technology are connected to form a line.
x86 MPU CLOCK FREQUENCY VS. DRAM DATA TRANSFER FREQUENCY
Measuring
Period Page X86
(Year) Mode EDO SDRAM MPU
- --------- ---- --- ----- ---
1980 5 5
1981 8
1982 10
1983
1984 12
1985
1986 8 16
1987 20
1988 25
1989 18 33
1990
1991 22 50
1992 66
1993 25
1994 28 100
1995 40 150
1996 33 50 66 200
- -------
(1) The material in this description is not deemed filed with the Securities
and Exchange Commission, and is not to be incorporated by reference into
any filing of the Company under the Securities Act of 1933, as amended,
or the Securities Exchange Act of 1934, as amended, whether made before
or after the date hereof and irrespective of any general incorporation
language contained in any such filing.]
Sources--
x86MPU: Microprocessor Report
Page Mode, EDO DRAM: Micron, NEC, Texas Instruments, Toshiba data sheets
SDRAM: measured clock/data rate in Dell PC
While microprocessors have undergone both manufacturing and architectural
improvements, significant innovations for DRAMs have only occurred on the
manufacturing side. DRAM manufacturers have been successful in increasing DRAM
"density," or storage capacity, from roughly 1 Kbit (thousand bits) to 64
Mbits (million bits) per chip, thereby reducing the number of DRAMs required
for a given amount of memory. However, corresponding architectural
improvements necessary to increase DRAM data transfer rates to keep pace with
increasing microprocessor speeds have not occurred.
Systems manufacturers have attempted to bridge the Performance Gap with a
variety of performance-enhancing techniques. One approach is the use of SRAMs
(static RAMs), which are faster but more expensive than DRAMs, to build cache
memories. SRAM caches are effective for applications which repeatedly access a
particular set of data, such as scientific and spreadsheet applications, but
are not as effective for multimedia and other applications that must
continually access new data. For example, for a multimedia application to
display real-time video that is perceived as smooth motion by the human eye, a
new image must be decompressed, displayed and then discarded approximately 30
times every second. Because such an application requires a high rate of
transfer of constantly changing data and does not use data repetitively, SRAM
caches do not provide an effective solution.
30
<PAGE>
Another technique used to address the Performance Gap, the "wide bus"
approach, relies on increasing the width of the "bus," or channel, through
which data is passed to and from the processor/controller and the DRAMs. A
wider bus will transfer proportionately more data than a narrower bus. Just as
the capacity of a highway can be increased by adding more lanes, bus width can
be increased by adding more external connections, or "pins." However, use of
wider buses to increase the memory bandwidth creates several problems. First,
the routing scheme for conventional DRAMs results in the wires on the printed
circuit boards that have varying lengths and electrical loads that cause
timing problems, known as "signal skew," as well as signal integrity problems.
These problems become more pronounced with increases in pincount. Another
problem inherent in wider buses is that larger pincount packages are more
expensive to produce and require more expensive testers. Additionally, every
pin on the package must connect to a bonding "pad" on the chip itself,
typically at the edge of the chip. For smaller chips it may not be possible to
put as many pads on the chip as is desired without increasing the die size and
cost of the chip. Another problem relates to the number of DRAMs necessary to
achieve the greater memory bandwidth associated with a wider bus. DRAM
densities have been increasing rapidly and larger DRAMs typically have a lower
cost per bit. For some applications, the most cost-effective solution for
memory capacity may require only one or two DRAMs. However, limitations on the
data transfer rate of a given DRAM often require that multiple DRAMs be used
on a wide bus to provide sufficient memory bandwidth. By requiring more DRAMs
to provide the desired memory bandwidth than are required to provide the
desired memory capacity, the wide bus solution often results in the use of a
greater number of smaller capacity DRAMs, which in turn results in a higher
cost per bit.
Rambus believes that several major market trends will exacerbate the
Performance Gap in the future. The increased number and performance of
multimedia applications and other capabilities demanded by businesses and
consumers require ongoing improvements in memory bandwidth, which Rambus
believes cannot be achieved without significantly changing the DRAM interface
architecture. The memory bandwidth required by current systems, such as home
video games and PCs, can be hundreds of megabytes (million bytes) per second.
These bandwidth requirements are already taxing, and in many cases exceeding,
the limits of conventional DRAMs. The demand for memory bandwidth for PC main
memory will soon exceed one gigabyte (billion bytes) per second due to
continuing advances in microprocessor frequency, as well as software and
architecture changes that shift much of the load for multimedia processing to
the main memory subsystem. Rambus believes that these market trends have
created a significant opportunity for a high-speed, cost-effective, scalable
solution that addresses the widening Performance Gap.
31
<PAGE>
THE RAMBUS SOLUTION
Rambus has created a revolutionary chip-to-chip interface architecture,
which allows data to be transferred through a simplified bus at significantly
higher frequencies than permitted by conventional technologies. Rambus has
focused the application of its interface technology on the Performance Gap and
licenses its interface technology to memory and logic semiconductor
manufacturers, which incorporate this interface technology into their IC
designs to supply systems companies with Rambus ICs. The key elements of the
Rambus interface are RDDRAMs, RACs and the interconnecting circuitry known as
the "Rambus Channel." While Rambus technology can be used to address a wide
variety of chip-to-chip data transfer requirements, the largest immediate
application is to connect logic circuits to memory in home video games, PCs,
workstations and other electronic systems.
Key benefits of the Rambus solution are:
High Performance. Rambus interface technology currently allows data
transfers of up to 600 megabytes per second between a logic IC and DRAMs by
transferring data at a frequency of 600 MHz over a byte-wide bus known as the
"Rambus Channel." System performance can be further enhanced by applying
Rambus interface technology to multiple channels on a logic IC. For example, a
Rambus-based logic IC can utilize four channels to achieve data transfer of up
to 2.4 gigabytes per second. In addition, multiple DRAMs can be connected to
each channel on a Rambus-enabled logic device to increase memory capacity.
Rambus maintains ongoing research and development activities in conjunction
with its licensees to further improve the performance of its interface
technology.
Open Standard. Rambus interface technology is an open standard, with
compatible Rambus ICs available to systems companies from any IC manufacturer
that has obtained a license from Rambus. Rambus believes that systems
companies benefit from having compatible Rambus ICs and a consistent
implementation of the Rambus interface technology, available from multiple
sources. Rambus also believes that making its technology available from
established DRAM and logic IC companies facilitates the adoption of Rambus
technology by systems companies.
Cost-Effectiveness. Rambus technology can enable systems companies to
significantly improve system cost-effectiveness. Depending on the
implementation, Rambus technology allows a reduction in the number of pins per
logic device, the use of fewer DRAMs of greater density, a simplified circuit
board design and layout and a smaller circuit board. According to a recent
study by Mercury Research, an independent research organization, Rambus
enables the lowest-cost 2 megabyte frame buffer DRAM alternative to
traditional page mode DRAMs.
Complete Systems Solution. Rambus' solution is based on a system-wide,
rather than a chip-level, perspective. Semiconductor companies have
traditionally attempted to improve chip-level performance by increasing the
"width," or number of pins, associated with a given DRAM, but this tends to
increase the size, cost and complexity of the overall system. In contrast,
Rambus has successfully increased memory bandwidth per pin, thereby increasing
performance gains and cost savings when its technology is incorporated into a
home video game, PC, workstation or other electronic system. As part of its
complete systems solution approach, Rambus provides technical support to
systems companies that incorporate Rambus technology into their products.
TARGET MARKETS AND APPLICATIONS
The high-speed interface technology Rambus has developed is applicable to
data transfer between most semiconductor chips. The Company has initially
chosen to concentrate the application of its technology on the interface
between logic ICs and memory devices because of the acute performance needs
and the relevant market sizes. According to Dataquest, the total market for
DRAMs was $26 billion in 1996 and is expected to grow to $63 billion in 2000.
While Rambus interface technology is useful in providing increased memory
bandwidth in any electronic system, the Company believes that the systems
which will best utilize the high bandwidth provided
32
<PAGE>
by current Rambus technology are the relatively high-volume, low-cost systems
in which the cost of the memory subsystems represents a significant portion of
the selling price. To date, the principal applications for the Company's
technology have been in the consumer multimedia, PC multimedia and workstation
multimedia markets. These areas accounted for the sale of approximately
$13,000, $11 million, and $444 million of Rambus ICs by Rambus licensees in
calendar 1994, 1995 and 1996, respectively. The Company believes significant
opportunities to expand adoption of its technology exist in the PC main memory
market segment and other markets.
MULTIMEDIA/GRAPHICS
The first generation of Rambus ICs has been targeted at consumer multimedia,
PC multimedia and workstation multimedia because these are the applications
which the Company believes are in most immediate need of the performance
improvements that can be enabled by an increase in memory bandwidth. The
Company also believes that systems running these applications, particularly
high-volume, low-cost consumer electronics and PC multimedia systems, will
benefit most from the significant improvement in the price/performance ratio
that is enabled by Rambus technology.
Consumer Multimedia. Manufacturers of consumer multimedia products, such as
home video games, are under constant competitive pressure to provide more
sophisticated graphics and other multimedia features at low cost. Rambus
believes that its interface technology provides consumer multimedia systems
companies with a competitive advantage in meeting this challenge. Nintendo,
Inc.'s new Nintendo 64 video game uses Rambus interface technology to deliver
sophisticated 3D graphics and CD-quality audio at a retail selling price of
less than $200. The high bandwidth delivered by RDRAMs enables the creation of
a unified system and graphics memory subsystem. The Nintendo 64 began selling
in June 1996 in Japan and in September 1996 in the United States, and had sold
approximately 4 million units through the end of 1996.
PC Multimedia. Similarly, PC manufacturers are striving to meet market
demand for increased multimedia performance at low cost. One aspect of this
demand is the shift from 2D to 3D capability, and Mercury Research has
estimated the market for 3D graphics controllers will grow from 3 million
units in 1996 to over 100 million in 2000. In May 1996, Cirrus Logic began
commercial shipments of its Laguna graphics controller, the first product in a
planned family of VisualMedia PC graphics controllers using Rambus memory
interface technology. The Laguna graphics controller has been adopted by
Creative Labs, Inc. and others for use in add-in graphics accelerator cards
for the PC market. Another Rambus licensee, Chromatic Research, Inc., has
introduced a line of multimedia processors called Mpact. Chromatic has
licensed Toshiba Corporation, LG Semicon Co., Ltd. and SGS-THOMSON
Microelectronics, Inc., all of which are Rambus licensees, to build and sell
these Rambus-based processors.
In August 1996, Microsoft Corporation published its "Talisman" PC reference
design, which includes Rambus interface technology. Talisman is a set of
technology specifications promulgated by Microsoft to allow multimedia PC
systems running Microsoft software to provide multimedia performance
previously available only on workstations. Rambus believes that this is a
significant endorsement of its technology, although to date no commercial
applications of Talisman have been announced or released and there is no
assurance that any product will ever be developed based on this reference
design or that any products developed will include Rambus interface
technology.
Workstation Multimedia. Rambus interface technology significantly enhances
the multimedia performance of workstations in a cost-effective manner. The
first application of Rambus technology was the Impact line of 3D graphics
controllers for workstations from Silicon Graphics, Inc. ("SGI"). SGI uses
Rambus technology in the 3D graphics subsystem to help bring high-performance,
high-quality graphics to entry-level workstations. Each subsystem uses a
minimum of six RDRAMs and three Rambus-enabled logic ICs to achieve peak
bandwidth of 3 gigabytes per second.
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<PAGE>
PC MAIN MEMORY
A key element of the Company's strategy is to penetrate the market segment
for main memory in PCs. Dataquest estimates that over 72 million PCs were sold
in 1996 and that demand will grow to over 130 million units by 2000. The
Company believes that more than half of all DRAMs are currently used in PC
main memory applications.
Development with Rambus Licensees. Rambus and a majority of its DRAM
licensees are currently developing an advanced version of next-generation 64
Mbit RDRAMs which will be targeted at the PC main memory market segment. The
Company believes that these devices will offer superior bandwidth compared to
other solutions for PC main memory applications. These devices are not
scheduled for mass production until at least 1999, and there can be no
assurance that such devices will be successfully developed or that, if
developed, will be successful in penetrating the market segment for PC main
memory. See "Risk Factors--Dependence upon Limited Number of Licensees" and
"--Future Dependence upon PC Main Memory Market Segment and Intel."
Intel Contract. In November 1996, Rambus entered into a development and
license contract with Intel. The contract provides for the parties to
cooperate in the development of a specification for the RDRAM to be developed
by Rambus and its DRAM licensees which will be optimized for PC main memory
applications. The contract also calls for Intel to use reasonable best efforts
to develop a PC main memory controller designed for use with these RDRAMs.
There can be no assurance that such a controller will be designed in time to
meet market requirements or that the parties will be successful in specifying
an RDRAM that will be built by Rambus licensees at all or in sufficient
quantity to become a standard for PC main memory. See "Risk Factors--Future
Dependence upon PC Main Memory Market Segment and Intel" and "Certain
Transactions--Intel Contract."
OTHER
The Company believes that its technology, which enables high memory
bandwidth at low cost, is well suited to a broad range of other applications.
Other Rambus-based applications currently being developed include
multifunction peripheral controllers for use in combination
fax/copier/scanner/laser printer applications and networking equipment such as
high-speed ethernet switches. There can be no assurance that such devices will
be designed incorporating Rambus interface technology or that sales of such
devices will be meaningful.
RAMBUS LICENSEES
Rambus licenses its technology on a nonexclusive and worldwide basis to
semiconductor manufacturers which sell Rambus ICs to systems companies that
have adopted Rambus technology. An important element of the Company's strategy
is to license its technology broadly in order to establish Rambus interface
technology as a standard and to provide systems companies with sources from
established semiconductor companies for Rambus ICs. Rambus provides licenses
to both DRAM manufacturers and logic IC manufacturers, which can license
Rambus interface technology for use in producing RDRAMs and/or logic ICs
containing RACs. At February 28, 1997, Rambus had a total of 19 licensees. To
date, a majority of the Company's royalties has been derived from the sale of
logic ICs incorporating RACs. If the Company is successful in its strategy to
penetrate the PC main memory market, the Company expects that royalties from
the sale of RDRAMs will eventually account for the largest portion of
royalties.
Sales of Rambus ICs to systems companies, such as manufacturers of home
video games, PCs, workstations and graphics boards, are not made by Rambus,
but by semiconductor companies which are the Company's licensees. Systems
companies do not need a license to incorporate Rambus ICs in their products.
However, an important part of the Company's strategy is to maintain close ties
to these systems companies to encourage the adoption of Rambus technology. See
"Risk Factors--Dependence upon Limited Number of Licensees," "--Dependence
upon Systems Companies," "--No Assurance of Adoption of Rambus Technology as
an Industry Standard" and "Business--Target Markets and Applications."
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RDRAM LICENSEES
The DRAM business is highly competitive, with approximately 20 major
manufacturers located throughout the world. Rambus' licensees include nine
DRAM manufacturers which collectively accounted for over 70% of worldwide DRAM
sales in 1996. The Company's RDRAM licensees include:
<TABLE>
<CAPTION>
RAMBUS DATE OF INITIAL
LICENSEE RDRAM LICENSE STATUS OF DEVELOPMENT
-------- --------------- ---------------------
<S> <C> <C>
Hitachi, Ltd. September 1994 64 Mbit RDRAM in development.
Hyundai Electronics December 1995 16/18 Mbit and 64 Mbit RDRAMs in development.
Industries Co., Ltd.
LG Semicon Co., Ltd. February 1994 16/18 Mbit RDRAMs beginning production. 64 Mbit
RDRAM in development.
Monolithic System December 1996 Specialized 16 Mbit multi-bank RDRAMs
Technology, Inc. in development.
("MoSys")
NEC Corporation July 1991 16/18 Mbit RDRAMs in production. 64 Mbit
RDRAM in development.
Oki Electric Industry December 1993 16/18 Mbit RDRAMs beginning production. 64 Mbit
Co., Ltd. RDRAM in development.
Samsung Electronics Co., December 1994 16/18 Mbit and 64 Mbit RDRAMs in development.
Ltd.
Toshiba Corporation October 1990 16/18 Mbit RDRAMs in production. 64 Mbit
RDRAM in development.
</TABLE>
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<PAGE>
LOGIC IC LICENSEES
A Rambus license for logic ICs may be for all uses, or may be restricted to
certain types of ICs such as ASICs or peripherals. Many of the RACs provided
by Rambus for use in logic ICs have been developed first for a 0.5^ (micron,
one millionth of a meter) process and then migrated to a 0.35^ process. In
addition, the Company is currently working with certain licensees on 0.25^
RACs. Information regarding certain of the Company's logic IC licensees is
provided in the table below.
<TABLE>
<CAPTION>
RAMBUS DATE OF INITIAL
LICENSEE LOGIC IC LICENSE STATUS OF DEVELOPMENT
-------- ---------------- ---------------------
<S> <C> <C>
Chromatic Research, Inc. February 1994 Multimedia processors developed by
Chromatic are manufactured and sold by LG
Semicon and Toshiba. SGS-THOMSON is also
developing a multimedia processor based on
a Chromatic design.
Cirrus Logic Inc. October 1993 Graphics controllers in production.
IBM Corporation December 1995 Logic chip in development for third party
customer of ASIC design and foundry
services. RAC available as part of cell
library.
Intel Corporation November 1996 Main memory controller to be developed.
LG Semicon Co., Ltd. February 1994 Multimedia processor in production.
LSI Logic Corporation June 1994 RAC available as part of its cell library.
NEC Corporation July 1991 Logic chip in production for third party
customer of ASIC design and foundry
services. RAC available as part of cell
library.
SGS-THOMSON December 1996 Multimedia processor in development.
Microelectronics, Inc.
Toshiba Corporation October 1990 Multimedia processor in production. Logic
chip in development for third party
customer of ASIC design and foundry
services. RAC available as part of cell
library.
</TABLE>
In addition to the licensees named in the two tables above, Rambus has other
licensees who are developing proprietary products using Rambus technology and
have chosen to keep their relationships with Rambus confidential until such
products are introduced to the market.
While all current RDRAM and certain current logic IC licensees have
fabrication facilities, some current and potential future logic licensees use
third-party fabrication facilities. The Company has developed a version of its
RAC for manufacture at Taiwan Semiconductor Manufacturing Company Limited
("TSMC"), the world's largest independent foundry. While not a Rambus licensee
itself, TSMC will be able to manufacture Rambus-based ICs for fabless Rambus
licensees.
RAMBUS BUSINESS MODEL AND STRATEGY
In order to establish Rambus interface technology as an industry standard,
the Company has adopted an innovative business model in which it neither
manufactures nor sells semiconductors incorporating the Company's technology.
The Company licenses its technology on a nonexclusive and worldwide basis to
semiconductor companies which manufacture and sell RDRAMs and logic ICs
containing RACs to systems companies which have adopted Rambus technology.
Systems companies are not required to obtain a Rambus license to incorporate
Rambus ICs into their products.
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<PAGE>
The Rambus business model and strategy are designed to promote Rambus as an
industry standard and are based on the following key elements:
Target Leading Systems Companies in Multiple Large Markets. The Company
targets leading systems companies in markets that the Company believes
represent the greatest potential for Rambus IC sales. The Company believes
that making these market leaders successful in their adoption of Rambus
technology will not only validate the Rambus technology as a practical,
performance-enhancing and cost-effective solution, but will also place
competitive pressure on other industry participants to adopt Rambus
technology. The Company actively participates with its licensees in their
marketing and selling efforts to systems companies, develops applications
notes and other technical material to promote and support Rambus technology in
the marketplace, and provides technical support, generally at no charge, to
systems companies which have adopted Rambus technology. Leading systems
companies which have adopted Rambus technology to date include Nintendo in the
home video game market and SGI in the workstation market. Additionally, Rambus
seeks to establish relationships with leading technology providers, such as
Intel, Microsoft and Cirrus Logic, whose technologies have been or are
expected to become widely adopted by systems companies. See "--Target Markets
and Applications."
Provide Multiple Sources for RDRAMs. The Company licenses its technology
broadly in order to provide systems companies with multiple sources for
RDRAMs. For example, the Company currently has nine separate licensees,
representing over 70% of total worldwide DRAM sales in 1996. The Company's
license contracts generally require a licensee to develop a Rambus IC in order
to keep its license. The Company believes that systems companies will be more
inclined to adopt Rambus interface technology if it is available from
established DRAM manufacturers with which systems companies already have
relationships. The Rambus business model ensures the compatibility of all
Rambus ICs and a consistent implementation of the Rambus interface technology,
regardless of manufacturer.
Leverage Business Model by Sharing Research and Development Efforts with
Licensees. Rambus believes that cooperative development efforts with its
licensees allow the Company to improve its interface technology and bring it
to market faster, cheaper and with broader support than would be possible if
Rambus were to attempt to develop, manufacture or sell chips incorporating the
Rambus interface technology on its own. While all the development of the
fundamental technology and much of the specific process implementation has
been done by Rambus, a significant portion of the specific process
implementation has been accomplished by the partner licensees. By spreading
the cost of developing Rambus technology among all Rambus licensees, which
Rambus considers to be its partners in development, the Rambus business model
permits the Company to maintain a relatively low cost structure and devote a
relatively large portion of its resources to research and development efforts
which are directly related to the Company's fundamental technology.
Generate Revenue through a Combination of Contract Fees and
Royalties. Licensees generally pay a license fee to Rambus ranging from a few
hundred thousand dollars for a narrow license covering a single logic product
to millions of dollars for a license with broad coverage of Rambus technology.
Part of these fees may be due upon the achievement of certain milestones, such
as provision of certain deliverables by Rambus or production of chips by the
licensee. In a few cases, the Company has received nonrefundable, prepaid
royalties which will offset the earliest royalties due from the licensee.
Rambus' contracts also typically provide for engineering service fees, which
help pay the cost of developing the core technology. Licensees normally pay
additional engineering service fees if Rambus provides the modification of its
interface technology required for the licensee's specific chip manufacturing
process. All Rambus license fees and engineering service fees are
nonrefundable.
Royalties, which are generally a percentage of the revenues received by
licensees on their sales of Rambus ICs, are normally payable by a Rambus
licensee on sales occurring during the life of the Rambus patents being
licensed. For a typical systems application of Rambus technology, the Company
receives royalties from the sale of both logic ICs containing RACs and RDRAMs
as they are shipped by Rambus licensees. Royalty rates range up to
approximately 2.5% for RDRAMs and 5% for logic ICs, and in some cases may
decline based on the
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<PAGE>
passage of time or on the total volume of Rambus ICs shipped. The exact rate
and structure of a royalty arrangement with a particular licensee depend on a
number of factors, including the amount of the license fee to be paid by the
licensee and the marketing and engineering commitment made by the licensee.
Contract fees have provided the majority of the capital needed to date by
the Company to develop its fundamental technology, and the Company believes
that its business model is well suited to continue funding future development.
However, there is no assurance that the Company's current partner licensees
will generate revenue, or that the Company will be able to add new license
contracts in the future, at levels sufficient to provide significant funding
for further development activities. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations."
Maintain Technology Leadership. Rambus has pioneered a unique and
revolutionary solution to the Performance Gap. Rambus believes that the
factors which created this opportunity, including the accelerating
improvements in microprocessor speeds and DRAM densities and business and
consumer demand for ever increasing performance at lower cost, will continue
to require innovative technology. The Company is committed to continuing
research and development efforts, both internally and in conjunction with its
partner licensees, to further improve the Rambus interface technology.
Approximately three quarters of the Company's employees have technical
degrees, and more than half of the Company's employees have graduate technical
degrees. The Company plans to continue its emphasis on research and
development, and currently more than half of the Company's engineering staff
is assigned to developing future generations of the Company's fundamental
technology.
Pursue System-Level Approach. The Company believes that the value of its
technology to systems companies as a cost-effective way to improve system
performance is a result of the Company's system-level approach. Rather than
focusing exclusively on chip-level improvements, the Company designs its
technology with the goal of improving the overall performance and cost
effectiveness of systems such as home video games, PCs and workstations which
incorporate the technology. Rambus intends to continue this approach in its
future development efforts.
TECHNOLOGY AND PRODUCTS
ARCHITECTURE
Rambus has developed a revolutionary chip-to-chip interface technology which
combines a new bus architecture with major improvements in signaling
technology. Unlike other approaches, address, data and control information is
transferred together through a relatively narrow bus between a RAC and one or
more RDRAMs. To achieve a high bandwidth over the narrow bus, Rambus developed
a protocol for moving data rapidly and efficiently. To eliminate signal skew,
clock and data signals are sent in parallel over a precisely defined and
controlled route. Rambus' technological innovations, including the use of low
signal swings, data transfer on both edges of a synchronizing clock pulse and
the use of on-chip compensation circuits, all contribute to achieving a peak
memory bandwidth of 600 megabytes per second per channel. The Company believes
that its technology is scalable, and that higher peak bandwidths can be
achieved in the future.
The Company and its licensees are developing an extension of Rambus
interface technology, scheduled for introduction in mid-1997 and called
"Concurrent Rambus" technology, for both 16/18 Mbit and 64 Mbit generation
RDRAMs, which will provide more efficient use of the high peak bandwidth
currently provided by the base technology for graphics and multimedia
applications. In addition, Rambus and Intel are currently working on the
definition of another extension to the Rambus interface technology, scheduled
for introduction in late 1998 and called "Direct Rambus" technology, for 64
Mbit generation RDRAMs, which will be further optimized for PC main memory
applications.
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<PAGE>
RAMBUS DESIGN METHODOLOGY
When developing either a generalized layout database for a new product or an
optimized implementation for a specific process, Rambus designers apply a
rigorous design methodology intended to accelerate the development process,
maintain consistent quality and promote the development and sharing of design
expertise among the engineering staff. Rambus design engineers generally use a
common set of third-party and custom computer aided design tools on a network
of computer workstations in order to allow them to share common resources. The
Company has developed proprietary software to assist in the modeling,
simulation, layout and verification of circuit designs. Additionally, the
Company promotes design integrity and sharing of expertise by subjecting
designs to a series of peer reviews and simulation and verification tests at
different stages of development. When a process-specific design has been
developed by Rambus, each implementation in silicon is generally tested by the
Company on high-speed testers in order to verify the device against the design
specifications.
LICENSEE DESIGN METHODOLOGY
Rambus interface technology has been developed to allow semiconductor
companies to use familiar, widely-available design tools and conventional
techniques when designing their Rambus-enabled chips. A new Rambus licensee
receives an implementation package from the Company which contains all the
information needed to develop a Rambus IC in the licensee's process. There are
separate implementation packages for RDRAMs and for RACs. An implementation
package includes a specification, a generalized circuit layout database for
the particular version of the RDRAM or RAC which the licensee intends to
develop, test parameters and, for RDRAMs, a DRAM core interface specification.
Many licensees have contracted to have Rambus produce the specific
implementation required to optimize the generalized circuit layout for the
licensee's manufacturing process. In such cases, the licensee provides
specific design rules and transistor models which Rambus designers use to
integrate RDRAM or RAC circuits into the licensee's process. However, Rambus
anticipates that as licensees become more familiar with the Rambus technology,
they will be able to do more of the implementation work without Rambus'
assistance.
MANUFACTURING AND YIELDS
Rambus has developed its technology to be manufacturable using familiar,
industry-standard CMOS semiconductor processes. For this reason the Company
believes that the wafer fabrication yields of RDRAMs and logic products
containing RACs are consistent with those for similar products in the same
manufacturing facility. However, because of the extra Rambus interface
circuitry, an RDRAM chip is somewhat larger than a standard DRAM. Therefore, a
manufacturer will generally produce fewer RDRAMs than standard DRAMs for a
given wafer size and an RDRAM chip will be somewhat more expensive than the
standard version. Rambus believes that this cost premium is about 10% to 20%
for the current 16 Mbit generation, but will be reduced to about 5% for 64
Mbit RDRAMs. In addition, RDRAM manufacturers are responsible for their own
manufacturing processes and Rambus has no role in the manufacture of RDRAMs.
For example, Rambus has no influence on decisions in regard to any process
changes or on whether or when to "shrink" or otherwise change a design to
reduce the cost of the chips.
PACKAGING AND CIRCUIT BOARD LAYOUT
Current implementations of RDRAMs and Rambus logic ICs can be packaged in
widely available, inexpensive packaging. System companies connect RDRAMs to
Rambus logic ICs using normal printed circuit board ("PCB") materials and
manufacturing techniques. System companies are provided with detailed
specifications from Rambus on circuit board layout and construction. Circuit
boards can be fabricated and assembled using standard PCB techniques and
equipment.
39
<PAGE>
RESEARCH AND DEVELOPMENT
The ability of the Company to compete in the future will be substantially
dependent on its ability to advance its interface technology in order to meet
changing market needs. To this end, Company engineers are involved in
developing new versions of the Rambus interface technology which will allow
chip-to-chip data transfer at higher speeds as well as provide other
improvements. The Company has assembled a team of highly skilled engineers
whose activities are focused on further development of Rambus interface
technology as well as adaptation of current technology to specific licensees'
processes. Because of the complexity of these activities, the design and
development process at Rambus is a multi-disciplinary effort requiring
expertise in computer architecture, digital and analog circuit design and
layout, DRAM and logic semiconductor process characteristics, packaging, PCB
routing and high-speed testing techniques.
As of December 31, 1996, Rambus had 75 employees in the engineering
department. Approximately two thirds of these employees have advanced
technical degrees. In fiscal 1994, 1995 and 1996 and the first three months of
fiscal 1997, research and development expenses were approximately $3.1
million, $3.1 million, $5.2 million and $2.3 million, respectively. In
addition, because the Company's license agreements often call for engineering
support by Rambus, a substantial portion of the Company's total engineering
costs has been allocated to cost of contract revenues, even though these
engineering efforts have direct applicability to Rambus' technology
development. The Company expects that it will continue to invest substantial
funds on research and development activities. Currently, more than half of the
Company's technical staff is primarily focused on the development of
technologies which are not currently in production. There can be no assurance
that new versions of the Rambus interface technology can be developed and
introduced by the Company's licensees in a timely fashion or that such new
technology will be accepted by the market. Moreover, the end markets for the
Company's technology, particularly the home video game and PC markets, are
subject to rapid technological change and there can be no assurance that as
such markets change the Company's interface technology will remain current and
suitable.
COMPETITION
The semiconductor industry is intensely competitive and has been
characterized by price erosion, rapid technological change, short product life
cycles, cyclical market patterns and increasing foreign and domestic
competition. Most major DRAM manufacturers are developing higher-frequency
versions of standard DRAMs such as EDO, SDRAMs and SGRAMs which compete with
RDRAMs. These DRAM manufacturers include most Rambus DRAM licensees, as well
as other major DRAM manufacturers such as IBM, Texas Instruments Inc. and
Micron Technologies, Inc. Most of these companies are much larger and have
better access to financial, certain technical and other resources than Rambus.
Additional high-speed DRAMs have recently been introduced by other
semiconductor companies for specialized applications.
The Company believes that its success in establishing a new high-speed
memory interface has been due to the systems approach it has taken to solving
the application needs of companies in home video game, PC and other electronic
systems businesses. However, the Company believes competitors have begun to
take a similar approach. The Company believes that its principal competition
may come from its licensees and prospective licensees, many of which are
evaluating and developing products based on alternative technologies. Many
DRAM suppliers have indicated that they are developing a new technology called
Double Data Rate ("DDR") SDRAMs, aimed at doubling the memory bandwidth from
SDRAMs without increasing the clock frequency. In addition, a consortium
including both large DRAM manufacturers and systems companies is promoting a
specification for an alternative high-speed interface standard called
SyncLink. To the extent that these alternative technologies provide comparable
system performance at lower cost than RDRAMs, or do not require the payment of
comparable royalties, the Company's licensees and prospective licensees may
adopt and promote the alternative technologies. There can be no assurance that
the Company's future competition will not have a material adverse effect on
the Company's business, financial condition and results of operations. In
addition, certain semiconductor companies have recently introduced a new kind
of IC which combines logic and DRAM on the same chip. Such chips, called
"embedded DRAM," eliminate the need for any chip-to-chip interface and
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<PAGE>
are primarily being used for graphics applications. Embedded DRAMs are well
suited for applications where component space saving and power consumption are
important, such as in the graphics subsystems of notebook PCs. There can be no
assurance that competition from embedded DRAMs will not increase in the
future.
PATENTS AND INTELLECTUAL PROPERTY PROTECTION
The Company has an active program to protect its proprietary technology
through the filing of patents. At February 28, 1997, the Company held 29
United States patents on various aspects of its technology, with expiration
dates ranging from 2010 to 2014. At February 28, 1997, the Company had
applications for 32 United States patents pending. The Company's United States
patents do not prevent the manufacture or sale of Rambus-based ICs abroad. At
February 28, 1997, the Company held six foreign patents and had additional
foreign patent applications pending in Taiwan, Korea, Japan and various other
jurisdictions. There can be no assurance that the Company's pending United
States or foreign patent applications or any future United States or foreign
patent applications will be approved, that any issued patents will protect the
Company's intellectual property or will not be challenged by third parties, or
that the patents of others will not have an adverse effect on the Company's
ability to do business. Furthermore, there can be no assurance that others
will not independently develop similar or competing technology or design
around any patents that may be issued to the Company.
The Company attempts to protect its trade secrets and other proprietary
information through agreements with licensees and systems companies,
proprietary information agreements with employees and consultants and other
security measures. The Company also relies on trademarks and trade secret laws
to protect its intellectual property. Despite these efforts, there can be no
assurance that others will not gain access to the Company's trade secrets, or
that the Company can meaningfully protect its intellectual property. In
addition, effective trade secret protection may be unavailable or limited in
certain foreign countries. Although the Company intends to protect its rights
vigorously, there can be no assurance that such measures will be successful.
Rambus believes that it is important to develop and maintain a uniform RDRAM
memory interface standard. The Company's contracts generally prevent a
licensee from using licensee-developed patented improvements related to Rambus
technology to block other licensees from using the improvements or requiring
them to pay additional royalties related to their use of Rambus interface
technology. Specifically, the contracts generally require licensees to grant
to Rambus a royalty-free cross-license on patented licensee intellectual
property related to the implementation of Rambus interface technology, which
Rambus sublicenses to other licensees which have entered into similar
arrangements. Not all licensees have granted Rambus cross-licenses and there
is no assurance that such a blocking arrangement will not occur in the future.
The semiconductor industry is characterized by frequent litigation regarding
patent and other intellectual property rights. While the Company has not
received formal notice of any infringement of the rights of any third party,
questions of infringement in the semiconductor field involve highly technical
and subjective analyses. Litigation may be necessary in the future to enforce
the Company's patents and other intellectual property rights, to protect the
Company's trade secrets, to determine the validity and scope of the
proprietary rights of others, or to defend against claims of infringement or
invalidity, and there can be no assurance that the Company would prevail in
any future litigation. Any such litigation, whether or not determined in the
Company's favor or settled by the Company, would be costly and would divert
the efforts and attention of the Company's management and technical personnel
from normal business operations, which would have a material adverse effect on
the Company's business, financial condition and results of operations. Adverse
determinations in litigation could result in the loss of the Company's
proprietary rights, subject the Company to significant liabilities, require
the Company to seek licenses from third parties or prevent the Company from
licensing its technology, any of which could have a material adverse effect on
the Company's business, financial condition and results of operations.
Moreover, the laws of certain foreign countries in which the Company's
technology is or may in the future be licensed may not protect the Company's
intellectual property rights to the same extent as the laws of the United
States, thus increasing the possibility of infringement of the Company's
intellectual property.
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<PAGE>
In any potential dispute involving the Company's patents or other
intellectual property, the Company's licensees could also become the target of
litigation. While the Company generally does not indemnify its licensees, some
of its license agreements require the Company to provide technical support and
information to a licensee which is involved in litigation involving use of
Rambus technology. The Company is bound to indemnify certain licensees under
the terms of certain license agreements, and the Company may agree to
indemnify others in the future. The Company's support and indemnification
obligations could result in substantial expenses to the Company. In addition
to the time and expense required for the Company to supply such support or
indemnification to its licensees, a licensee's development, marketing and
sales of Rambus ICs could be severely disrupted or shut down as a result of
litigation, which in turn could have a material adverse effect on the
Company's business, financial condition and results of operations.
SALES AND MARKETING
Consistent with the Company's business model, sales and marketing activities
are focused on developing relationships with potential licensees and on
participating with existing licensees in marketing, sales and technical
efforts directed to systems companies. In many cases, Rambus must dedicate
substantial resources to market to and support systems companies. The
Company's sales and marketing efforts include applications engineering and
other technical support for systems companies, as well as trade shows,
advertising and other traditional marketing activities.
EMPLOYEES
As of December 31, 1996 the Company had 108 employees, including three in
Japan. Of this total, 75 were in engineering, 21 were in marketing and sales,
and 12 were in finance and administration. Overall, approximately three
quarters of the Company's employees have technical degrees, and more than half
of the Company's employees have advanced technical degrees. The Company's
future success will largely be dependent on its ability to attract, retain and
motivate highly qualified technical and management personnel who are in great
demand in the semiconductor industry. The Company's employees are not
represented by any collective bargaining agreements and the Company has never
experienced a work stoppage. The Company believes that its employee relations
are good.
FACILITIES
The Company leases approximately 31,000 square feet in one building in
Mountain View, California for its principal engineering, marketing and
administrative operations. The lease expires in February 2005, with an option
to extend the lease for an additional five years. The Company also leases
space in Tokyo for an office which provides sales and technical support to
systems companies in Japan. The Company expects that it will be required to
seek additional space to support operations within the next twelve months and
believes that it will not have difficulty in securing such additional
facilities.
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MANAGEMENT
EXECUTIVE OFFICERS, DIRECTORS AND KEY PERSONNEL
The executive officers, directors and key personnel of the Company, and
their ages and positions as of December 31, 1996, are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Geoff Tate(1)........... 42 President, Chief Executive Officer and Director
Gary Harmon............. 59 Vice President, Finance, Chief Financial Officer and Secretary
Ed Larsen............... 44 Vice President, Human Resources
David Mooring........... 38 Vice President, Business Development
Allen Roberts........... 41 Vice President, Engineering
Subodh Toprani.......... 42 Vice President, Marketing
Takahiro Kamo........... 62 Chairman, Rambus K.K.
William Davidow(2)(3)... 61 Chairman of the Board of Directors
Bruce Dunlevie(2)(3).... 40 Director
P. Michael Farmwald..... 42 Director
Charles Geschke(2)(3)... 57 Director
Mark Horowitz........... 39 Director
</TABLE>
- --------
(1) Member of the Stock Option Committee
(2) Member of the Audit Committee
(3) Member of the Compensation Committee
Geoff Tate has served as President, Chief Executive Officer and Director
since joining the Company in May 1990. From February 1989 to January 1990, Mr.
Tate served as Senior Vice President and Corporate Officer, Microprocessor and
Peripherals with Advanced Micro Devices, Inc. ("AMD"), a semiconductor
manufacturer. From 1979 to 1989, Mr. Tate served in various marketing and
product line management positions with AMD. Mr. Tate holds a B.Sc. degree in
Computer Science from the University of Alberta and an M.B.A. from the Harvard
Graduate School of Business Administration.
Gary Harmon has served as Vice President, Finance, Chief Financial Officer
and Secretary since joining the Company in March 1993. From November 1992 to
March 1993, Mr. Harmon was an independent consultant. From April 1992 to
November 1992, he served as Senior Vice President--Finance and Chief Financial
Officer for Novellus Systems Inc., a manufacturer of semiconductor equipment.
From October 1991 to March 1992, he served as Executive Vice President--
Finance and Chief Financial Officer of Digital Microwave Inc., a manufacturer
of telecommunications equipment. From 1989 to 1991, Mr. Harmon served as
Executive Vice President--Finance and Chief Financial Officer and was a co-
founder of International Golf Partners, a golf course development company.
From 1970 to 1989, Mr. Harmon served in various positions with electronics
manufacturer Avantek, Inc., including Senior Vice President--Finance,
Secretary and director. Mr. Harmon holds a B.S. degree in Electrical
Engineering from Stanford University and an M.B.A. from the Harvard Graduate
School of Business Administration.
Ed Larsen has served as Vice President, Human Resources, since joining the
Company in September 1996. From May 1995 to August 1996, he served as
Director, Human Resources for Cirrus Logic, Inc., a semiconductor
manufacturer. From June 1991 to July 1993 and May 1994 to May 1995, Mr. Larsen
was an independent consultant. From July 1993 to April 1994, he served as
Director, Human Resources for Zilog, Inc., a semiconductor manufacturer. Mr.
Larsen has also held various human resources positions with VLSI Technology
and Motorola. Mr. Larsen holds a B.S. degree in Business Administration from
the University of Minnesota.
David Mooring joined the Company in February 1991 as Vice President,
Marketing and Sales, and since May 1994 has served as Vice President, Business
Development. From 1989 to 1991, he served as Vice President of Marketing and
Sales at Vitesse Semiconductor, Inc., a semiconductor manufacturer. From 1980
to 1989,
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<PAGE>
Mr. Mooring held various marketing and sales positions at Intel Corporation.
Mr. Mooring holds a B.S. degree in Economics from the University of Santa
Clara, an M.B.A. from Pepperdine University and an M.S. degree in Computer
Engineering from the University of Southern California.
Allen Roberts has served as Vice President, Engineering since joining the
Company in February 1991. In 1986, he co-founded FTL which merged that year
with MIPS Computer Systems, Inc. ("MIPS"). He served as Director of High-End
Engineering at MIPS from 1986 until 1991. Mr. Roberts has also held various
engineering positions at Elxsi Inc., Infotek Systems and the Jet Propulsion
Laboratory. Mr. Roberts holds a B.S. degree in Electrical Engineering from
Stanford University.
Subodh Toprani has served as Vice President, Marketing since joining the
Company in May 1994. From February 1992 to April 1994, Mr. Toprani served as
Director of Marketing and Systems Engineering with the Personal Computer
Products Division of AMD. From 1982 to 1992, Mr. Toprani served in various
field engineering and marketing positions with AMD. He has also held various
engineering positions with Bally Manufacturing Corp., a manufacturer of gaming
and leisure equipment, and Gaming Devices Inc., a manufacturer of gaming
equipment. Mr. Toprani holds a B.S. degree in Physics from St. Xavier's
College of Bombay and B.S. and M.S. degrees in Electrical Engineering from the
Illinois Institute of Technology.
Takahiro "Tom" Kamo is an independent consultant and has served as Chairman
of the Company's Japanese subsidiary, Rambus K.K., since June 1991. Mr. Kamo
is not deemed an executive officer of the Company for purposes of Section 16
of the Exchange Act or Rules 144 and 701 promulgated under the Securities Act.
In 1974, Mr. Kamo established Intel Corporation's Japanese subsidiary, Intel
Japan K.K., and served as its President and Vice Chairman. In 1988, he was
elected Chairman of Intel Japan K.K. and served in this capacity until his
retirement in 1990. In 1963, Mr. Kamo co-founded Tokyo Electron Laboratories
("TEL"), a Japanese importer/exporter of electronic products. He later founded
TEL Engineering, a subsidiary of TEL involved in the design and manufacturing
of semiconductor production equipment, where he served as President until
1974. Mr. Kamo holds a B.S. degree in Electrical Engineering from Waseda
University in Tokyo.
William Davidow has served as Chairman of the Board of Directors since the
Company was founded in March 1990. Since 1985, Dr. Davidow has been a general
partner of Mohr, Davidow Ventures, a venture capital firm. From 1973 to 1985,
he held a number of management positions at Intel Corporation, including
Senior Vice President of Marketing and Sales, Vice President of the
Microcomputer Division and Vice President of the Microcomputer Systems
Division. Dr. Davidow holds A.B. and M.S. degrees in Electrical Engineering
from Dartmouth College and a Ph.D. in Electrical Engineering from Stanford
University. He also serves as a director of Vantive Corporation and several
privately held companies.
Bruce Dunlevie has served as a director of the Company since its founding in
March 1990. He has been a member of the venture capital firm Benchmark Capital
since April 1996, and a general partner of the venture capital firm Merrill,
Pickard, Anderson & Eyre since 1989. Mr. Dunlevie also served as Vice
President and General Manager of the Personal Computer Systems Division of
Everex Systems, a personal computer manufacturer. He holds a B.A. degree in
History from Rice University and an M.B.A. from Stanford University. Mr.
Dunlevie also serves as a director of Geoworks, an operating systems software
company, and several privately held companies.
P. Michael Farmwald has served as a director since co-founding the Company
in March 1990, and as Vice President and Chief Scientist from March 1990 to
November 1993. He co-founded Chromatic Research Inc., a privately held
developer of media processors for the PC industry, in November 1993, where he
currently holds the title of Visionary and serves as a director. From 1988 to
1989, Dr. Farmwald was an associate professor of Electrical and Computer
Engineering at the University of Illinois. In 1986, he co-founded FTL which
merged that year with MIPS. From 1986 to 1988, Dr. Farmwald was Chief
Scientist for High End Systems at MIPS. Dr. Farmwald holds a B.S. degree in
Mathematics from Purdue University and a Ph.D. in Computer Science from
Stanford University. He also serves as a director of a privately held company.
44
<PAGE>
Charles Geschke has served as a director of the Company since February 1996.
He is a co-founder of Adobe Systems Incorporated, a software company, and has
served as a director of that company since 1982, Chief Operating Officer from
1986 to 1995 and President since 1989. Prior to 1982, Dr. Geschke held various
positions with Xerox's Palo Alto Research Center, including Manager of the
Imaging Sciences Laboratory. He holds an A.B. degree in Classics and an M.S.
degree in Mathematics from Xavier University of Ohio, and received his Ph.D.
in Computer Science from Carnegie-Mellon University. Dr. Geschke also serves
as a director of a privately held company.
Mark Horowitz has served as a director since co-founding the Company in
March 1990 and as Vice President from March 1990 to May 1994 and currently
continues to serve in a part-time capacity as a member of the technical staff.
Dr. Horowitz has taught at Stanford University since 1984 where he is
currently professor of Electrical Engineering. He holds B.S. and M.S. degrees
in Electrical Engineering from Massachusetts Institute of Technology and
received his Ph.D. in Electrical Engineering from Stanford University.
CLASSIFIED BOARD
The Company's Amended and Restated Certificate of Incorporation provides for
a Board of Directors consisting of two classes serving two-year staggered
terms. Class I consists of Mr. Dunlevie, Dr. Geschke and Dr. Horowitz. Class
II consists of Dr. Davidow, Dr. Farmwald and Mr. Tate. The initial term of
office of the Class I directors expires at the annual meeting of stockholders
in calendar 1998. The initial term of office of the Class II directors expires
at the annual meeting of stockholders held in calendar 1999.
BOARD COMMITTEES
The Company's Board of Directors the ("Board") has an Audit Committee, a
Compensation Committee and a Stock Option Committee. The Audit Committee,
currently comprised of Dr. Davidow, Mr. Dunlevie and Dr. Geschke, reviews the
internal accounting procedures of the Company and consults with and reviews
the services provided by the Company's independent auditors. The Compensation
Committee, currently comprised of Dr. Davidow, Mr. Dunlevie and Dr. Geschke,
reviews and recommends to the Board the compensation and benefits of all
officers, directors and consultants of the Company and reviews general policy
relating to compensation and benefits of the Company. The Compensation
Committee also administers the issuance of stock options and other awards
under the Company's 1997 Stock Plan and 1997 Employee Stock Purchase Plan. The
Stock Option Committee, currently comprised of Mr. Tate, administers the grant
of stock options under the Company's 1997 Stock Plan to all employees other
than executive officers, provided that options granted by the Stock Option
Committee shall not exceed 25,000 shares per year to any employee.
DIRECTOR COMPENSATION
Board members do not receive any cash fees for their service on the Board or
any Board committee, but they are entitled to reimbursement of all reasonable
out-of-pocket expenses incurred in connection with their attendance at Board
and Board committee meetings. All Board members are eligible to receive stock
options pursuant to the discretionary option grant program in effect under the
Company's 1997 Stock Plan, and outside directors receive stock options
pursuant to the automatic option grant program in effect under the 1997 Stock
Plan. During fiscal 1996, in connection with joining the Company's Board of
Directors, Dr. Geschke was granted an option for the purchase of 50,000 shares
of Common Stock at an exercise price of $4.00 per share. In February 1997, Dr.
Davidow, Mr. Dunlevie and Dr. Geschke were granted options for the purchase of
10,000 shares, 35,000 shares and 10,000 shares of Common Stock, respectively,
at an exercise price of $8.00 per share. See "Management--Stock Plans."
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Company's Compensation Committee reviews and approves the compensation
and benefits for the Company's executive officers, administers the Company's
stock option and stock purchase plans and makes
45
<PAGE>
recommendations to the Board of Directors regarding such matters. The
Committee is currently comprised of Dr. Davidow, Mr. Dunlevie and Dr. Geschke.
No interlocking relationship exists between any member of the Company's
Compensation Committee and any member of any other company's board of
directors or compensation committee, except as set forth in "Certain
Transactions--Transactions with Directors, Executive Officers and 5% Security
Holders--Chromatic Research, Inc.".
LIMITATION OF LIABILITY AND INDEMNIFICATION MATTERS
The Company's Amended and Restated Certificate of Incorporation limits the
liability of directors to the maximum extent permitted by Delaware law.
Delaware law provides that a corporation's certificate of incorporation may
contain, and the Company's Amended and Restated Certificate of Incorporation
does contain, a provision eliminating or limiting the personal liability of a
director for monetary damages for breach of their fiduciary duties as
directors, except for liability (i) for any breach of their duty of loyalty to
the corporation or its stockholders, (ii) for acts or omissions not in good
faith for which involve intentional misconduct or a knowing violation of law,
(iii) for unlawful payments of dividends or unlawful stock repurchases or
redemptions as provided in Section 174 of the Delaware General Corporation Law
or (iv) for any transaction from which the director derived an improper
personal benefit.
The Company's Amended and Restated Bylaws provide that the Company shall
indemnify its directors, officers, employees and agents to the fullest extent
permitted by law. The Company believes that the indemnification under its
Amended and Restated Bylaws covers at least negligence and gross negligence on
the part of indemnified parties.
The Company has entered into agreements to indemnify its directors and
officers, in addition to the indemnification provided for in the Company's
Amended and Restated Bylaws. These agreements, among other things, indemnify
the Company's directors and officers for certain expenses (including attorney
fees), judgments, fines and settlement amounts incurred by any such person in
any action or proceeding, including any action by or in the right of the
Company, arising out of such person's services as a director or officer of the
company, any subsidiary of the Company or any other company or enterprise to
which the person provides services at the request of the Company. The Company
believes that these provisions and agreements are necessary to attract and
retain qualified directors and officers.
At present, there is no pending litigation or proceeding involving any
director, officer, employee or agent of the Company where indemnifications
will be required or permitted. The Company is not aware of any threatened
litigation or proceeding that might result in a claim for such
indemnification.
46
<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth certain summary information regarding the
compensation of the Company's Chief Executive Officer and each of the other
four most highly compensated executive officers (collectively, the "Named
Executive Officers") whose annual compensation (salary and bonus) for services
rendered in all capacities to the Company exceeded $100,000 for the fiscal
year ended September 30, 1996:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
------------
ANNUAL COMPENSATION SECURITIES
--------------------- UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION SALARY BONUS(1) OPTIONS(#) COMPENSATION(2)
--------------------------- ---------- ---------- ------------ ---------------
<S> <C> <C> <C> <C>
Geoff Tate.................. $ 215,000 $ 32,789 -- $2,656
President and Chief
Executive Officer
Gary Harmon................. 154,425 28,189 6,500 1,684
Vice President, Finance and
Chief Financial Officer
David Mooring............... 149,705 53,424 11,500 2,047
Vice President, Business
Development
Allen Roberts............... 178,266 26,235 15,500 2,409
Vice President, Engineering
Subodh Toprani.............. 165,000 24,721 10,500 2,331
Vice President, Marketing
</TABLE>
- --------
(1) Earned for services during year.
(2) Consists of group term life insurance premiums paid by the Company.
47
<PAGE>
OPTION GRANTS IN FISCAL 1996
The following table sets forth certain information regarding stock options
granted to each of the Named Executive Officers for the fiscal year ended
September 30, 1996.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS(1)
-------------------------------------------------
POTENTIAL REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES OF
NUMBER OF % OF STOCK PRICE
SECURITIES TOTAL OPTIONS APPRECIATION
UNDERLYING GRANTED TO EXERCISE FOR OPTION TERM(2)
OPTIONS EMPLOYEES IN PRICE EXPIRATION ---------------------
NAME GRANTED FISCAL YEAR(3) PER SHARE(4) DATE 5% 10%
---- ---------- -------------- ------------ ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Geoff Tate.............. -- -- -- -- -- --
Gary Harmon............. 6,500 2.39% $3.00 12/4/05 $ 12,263 $ 31,078
David Mooring........... 11,500 4.22 3.00 12/4/05 21,697 54,984
Allen Roberts........... 15,500 5.69 3.00 12/4/05 29,244 74,109
Subodh Toprani.......... 10,500 3.85 3.00 12/4/05 19,810 50,203
</TABLE>
- --------
(1) Each of the options listed in the table was granted on December 4, 1995
and is immediately exercisable. The shares purchasable thereunder are
subject to repurchase by the Company at the original exercise price paid
per share upon the optionee's cessation of service prior to vesting in
such shares. The repurchase right lapses and the optionee vests in the
shares subject to, or issued upon exercise of, the options in monthly
installments over the year beginning October 1, 1999.
(2) Potential realizable value is based on the assumption that the Common
Stock of the Company appreciates at the annual rate shown (compounded
annually) from the date of grant until the expiration of the ten year
term. These numbers are calculated based on Securities and Exchange
Commission requirements and do not reflect the Company's estimate of
future stock price growth.
(3) The Company granted options to purchase 272,500 shares of Common Stock to
employees during fiscal 1996.
(4) Options were granted at an exercise price equal to the fair market value
of the Company's Common Stock, as determined by the Board of Directors.
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<PAGE>
AGGREGATE OPTION EXERCISES IN FISCAL 1996 AND FISCAL YEAR-END OPTION VALUES
The following table sets forth for each of the Named Executive Officers the
shares acquired and the value realized on each exercise of stock options
during the year ended September 30, 1996 and the year-end number and value of
exercisable and unexercisable options:
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
SHARES OPTIONS AT 9/30/96(1) AT 9/30/96(2)
ACQUIRED VALUE ------------------------- -------------------------
NAME ON EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Geoff Tate.............. -- -- 497,955 213,334 $2,402,657 $981,336
Gary Harmon............. -- -- 45,000 45,500 213,750 187,750
David Mooring........... -- -- 75,208 101,292 351,257 404,043
Allen Roberts........... 50,000 $193,500 269,738 135,762 1,293,576 546,424
Subodh Toprani.......... -- -- -- 70,500 -- 288,000
</TABLE>
- --------
(1) Although each option is immediately exercisable for all the option shares,
any shares purchased under the option are subject to repurchase by the
Company, at the exercise price paid per share, in the event the optionee
ceases to provide services to the Company prior to vesting in those
shares. Accordingly, the table reflects such option shares as to which the
repurchase right has lapsed under the "exercisable" column and such option
shares subject to the repurchase right under the "unexercisable" column.
(2) Based on the fair market value of the Company's Common Stock at September
30, 1996 ($5.00 per share as determined by the Board of Directors) less
the exercise price payable for such shares.
STOCK PLANS
1990 Stock Plan
The Company's 1990 Stock Plan (the "1990 Stock Plan") provides for the grant
to employees of incentive stock options and the grant of nonstatutory stock
options to employees and consultants of the Company. Stock Purchase Rights
("SPRs") may also be granted under the 1990 Stock Plan. As of December 31,
1996, an aggregate of 6,875,000 shares of Common Stock has been reserved for
issuance under the 1990 Stock Plan, 3,024,007 shares had been issued upon the
exercise of stock options under the 1990 Plan, and options to purchase an
aggregate of 3,302,041 shares of Common Stock were outstanding under the 1990
Stock Plan. Subsequent to December 31, 1996, the Board of Directors granted
options to purchase 116,500 shares of Common Stock under the 1990 Stock Plan.
No SPRs have been granted under the 1990 Stock Plan. The Board of Directors
has determined that no further options or SPRs will be granted under the 1990
Stock Plan after this offering. Any shares underlying options granted under
the 1990 Stock Plan that expire or are cancelled, or any unvested shares that
are repurchased by the Company under the 1990 Stock Plan, will not be
reissued.
The 1990 Stock Plan may be administered by the Board of Directors or a
committee designated by the Board (the "1990 Stock Plan Administrator.").
Options and SPRs granted under the 1990 Stock Plan are not generally
transferable by the optionee except by will or by the laws of descent and
distribution and are exercisable during the life of the optionee only by the
optionee. Options granted under the 1990 Stock Plan must be exercised within
90 days of the end of the optionee's status as an employee or consultant to
the Company, or within twelve months after such optionee's death or
disability, but in no event later than the expiration of the option term. The
exercise price of all options and SPRs granted under the 1990 Stock Plan was
determined by the 1990 Stock Plan Administrator. With respect to any
participant who owns stock possessing more than ten percent of the voting
power of all classes of the Company's outstanding capital stock (a "10%
Stockholder"), the exercise price of any option granted must equal at least
110% of the fair market value on the grant date. The exercise price of
incentive stock options for all other employees shall be no less than 100% of
the fair market value per share on the date of the grant. The exercise price
of nonstatutory stock options must equal at least 85% of the fair market value
on the grant date. The maximum term of an option granted under the 1990 Stock
Plan may not exceed ten years from the date of grant (five years in the case
of an incentive stock option granted to a
49
<PAGE>
10% Stockholder). The 1990 Stock Plan Administrator determines the vesting
schedule of all options granted under the 1990 Stock Plan. The 1990 Stock Plan
requires the Board to determine the times and conditions at which options can
be exercised, and the option agreements under the 1990 Stock Plan generally
allow for early exercise of all options granted under such plan if the
optionee executes a Restricted Stock Purchase Agreement upon such early
exercise.
1997 Stock Plan
The Company's 1997 Stock Plan (the "1997 Stock Plan") was adopted by the
Board of Directors in February 1997 and approved by the stockholders in March
1997. The 1997 Stock Plan provides for the grant of incentive stock options to
employees (including officers and employee directors) and for the grant of
nonstatutory stock options and SPRs to employees, directors and consultants. A
total of 1,000,000 shares of Common Stock has been reserved for issuance under
the 1997 Stock Plan, plus an annual increase as of the first day of each
fiscal year during the term of the 1997 Stock Plan equal to the lesser of (i)
the number of shares needed to restore the maximum aggregate number of shares
which may be optioned and sold under the 1997 Stock Plan to 1,000,000 shares,
(ii) four percent (4%) of the outstanding shares on such date or (iii) a
lesser amount determined by the Board. Prior to this offering, there were no
options or SPRs outstanding under the 1997 Stock Plan.
The 1997 Stock Plan may be administered by the Board of Directors or a
committee designated by the Board (the "Administrator"). Options and SPRs
granted under the 1997 Stock Plan are not generally transferable by the
optionee except by will or by the laws of descent and distribution, and are
exercisable during the lifetime of the optionee only by such optionee. Options
granted under the 1997 Stock Plan must be exercised within three months of the
end of the optionee's status as an employee, director or consultant of the
Company, or within twelve months after such optionee's death or disability,
but in no event later than the expiration of the option term. The exercise
price of all incentive and nonstatutory stock options granted under the 1997
Stock Plan shall be determined by the Administrator. With respect to any
participant who owns stock possessing more than ten percent of the voting
power of all classes of the Company's outstanding capital stock (a "10%
Stockholder"), the exercise price of any incentive stock option granted must
equal at least 110% of the fair market value on the grant date. The exercise
price of incentive stock options and nonstatutory stock options for all other
employees shall be no less than 100% of the fair market value per share on the
date of the grant. The maximum term of an option granted under the 1997 Stock
Plan may not exceed ten years from the date of grant (five years in the case
of an incentive stock option granted to a 10% Stockholder). In the case of
SPRs, unless the Administrator determines otherwise, the Company shall have a
repurchase option exercisable upon the voluntary or involuntary termination of
the purchaser's employment with the Company for any reason (including death or
disability). Such repurchase option lapses at a rate determined by the
Administrator. The purchase price for shares repurchased by the Company shall
be the original price paid by the purchaser and may be paid by cancellation of
any indebtedness of the purchaser to the Company. In the event of a merger or
sale of substantially all of the assets of the Company, the acquiring or
successor corporation must either assume the outstanding options and SPRs
under the 1997 Stock Plan or substitute equivalent options or SPRs to purchase
shares of the acquiring or successor corporation (or a parent or subsidiary of
the acquiring or successor corporation). If an employee is involuntarily
terminated by the acquiring or successor corporation within twelve months of
the merger or asset sale (other than for cause), or if such acquiring or
successor corporation refuses to substitute or assume outstanding options or
SPRs, the employee's options and SPRs fully vest and become immediately
exercisable.
The 1997 Stock Plan also provides for an automatic grant of an option to
purchase 10,000 shares of Common Stock (the "First Option") to each non-
employee director who becomes a non-employee director after the effective date
of the 1997 Stock Plan provided that an employee director who becomes a non-
employee director is not eligible for the First Option. In addition, each non-
employee director shall automatically be granted an option to purchase 5,000
shares (a "Subsequent Option") on October 1 of each year provided he or she is
then a non-employee director and, provided further, that on such date he or
she has served on the Board for at least six months. First Options and each
Subsequent Option shall have a term of ten years. One-eighth of the shares
subject to the First Option and each of the Subsequent Options shall vest on
the date six months after the grant of the option, and an additional 1/48 of
the shares subject to the option shall become exercisable each
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<PAGE>
month thereafter, provided that the optionee continues to serve as a non-
employee director through and on such dates. The exercise price of the First
Option and each Subsequent Option shall be 100% of the fair market value per
share of the Company's Common Stock on the date of the grant of the option.
1997 Employee Stock Purchase Plan
The Company's 1997 Employee Stock Purchase Plan (the "Stock Purchase Plan")
was adopted by the Board of Directors in February 1997 and approved by the
stockholders in March 1997. The Company has reserved a total of 400,000 shares
of Common Stock for issuance under the Stock Purchase Plan, plus an annual
increase as of the last day of each fiscal year during the term of the Stock
Purchase Plan equal to the lesser of (i) the number of shares needed to
restore the maximum aggregate number of shares which may be optioned and sold
under the Stock Purchase Plan to 400,000 shares, (ii) one percent (1%) of the
outstanding shares on such date or (iii) a lesser amount determined by the
Board. The Stock Purchase Plan, which is intended to qualify under Section 423
of the Internal Revenue Code of 1986, as amended (the "Code"), permits
eligible employees of the Company to purchase shares of Common Stock through
payroll deductions of up to fifteen percent of their compensation, up to a
maximum of $25,000 worth of Common Stock (valued at the date of grant) in each
calendar year. The Stock Purchase Plan will be implemented by consecutive
overlapping 24-month offering periods (each an "Offering Period"). The initial
Offering Period will begin on the effective date of this offering and will end
on the last trading day in the period ending April 30, 1999. All employees who
work at least twenty hours per week and more than five months per calendar
year are eligible to participate in the Stock Purchase Plan.
The price of Common Stock purchased under the Stock Purchase Plan will be
85% of the lower of the fair market value of the Common Stock on the first day
of each Offering Period or the date of purchase. Employees may withdraw from
the Stock Purchase Plan at any time during an Offering Period, and the balance
of the payroll deductions will be returned to the employee. Participation in
the Stock Purchase Plan ends automatically upon termination of employment with
the Company. Rights granted under the Stock Purchase Plan are not transferable
by a participant other than by will, the laws of descent and distribution or
as otherwise provided under the Stock Purchase Plan.
The Stock Purchase Plan will be administered by the Board of Directors or by
a committee appointed by the Board. The Board may amend or modify the Stock
Purchase Plan at any time. The Stock Purchase Plan will terminate ten years
after the effective date of its adoption, unless sooner terminated by the
Board.
401(k) Plan
As of January 1, 1991, the Company adopted a tax-qualified employee savings
and retirement plan (the "401(k) Plan") covering the Company's employees.
Pursuant to the 401(k) Plan, eligible employees may elect to reduce their
current compensation by up to the lesser of 20% of their annual compensation
or the statutorily prescribed annual limit ($9,500 in calendar years 1996 and
1997) and have the amount of such reduction contributed to the 401(k) Plan.
Although the Company does not currently match contributions by employees, the
401(k) Plan allows for matching contributions to be made by the Company in an
amount determined by the Company. The trustees under the 401(k) Plan, at the
direction of each participant, invest the assets of the 401(k) Plan in
designated investment options. The 401(k) Plan is intended to qualify under
Section 401 of the Code, so that contributions to the 401(k) Plan, and income
earned on the 401(k) Plan contributions, are not taxable until withdrawn, and
so that the contributions by the Company will be deductible when made.
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<PAGE>
CERTAIN TRANSACTIONS
TRANSACTIONS WITH DIRECTORS, EXECUTIVE OFFICERS AND 5% SECURITY HOLDERS
Founders' Stock Repurchases. Founders of the Company received an aggregate
of 2,182,653 shares of Common Stock upon incorporation of the Company. These
shares were subject to the Company's assignable right of repurchase under a
Stock Restriction Agreement. During fiscal 1994, the Company amended the Stock
Restriction Agreement. In accordance with the amendment, the Company
repurchased 165,000 shares of its Common Stock at a price of $0.04 per share,
and the Company's right of repurchase with respect to the remaining shares
expired. During fiscal 1995, the Company repurchased an additional 88,000
shares of Common Stock from founders at a price of $0.04 per share.
Rambus Partners. Under an agreement signed in March 1990, the Company
secured certain patent rights and technology from its founders. The Company
committed, under this agreement, to pay to the founders up to a total of 24%
of amounts received from any licensing of the patent rights and technology to
third parties. Subsequently, the founders assigned their rights to receive
payments to Rambus Partners, an entity wholly owned by the founders. In
September 1992, the Company acquired Rambus Partners in exchange for 978,260
shares of the Company's Common Stock. In addition the Company assumed option
obligations for a total of 146,739 shares of the Company's Common Stock. In
September 1992, the Company also entered into agreements to pay certain cash
amounts to the founders. The total amounts paid to the founders under these
agreements were approximately $244,000 in each of the fiscal years 1994, 1995
and 1996. No amounts were paid during the three months ended December 31,
1996. See Note 9 of Notes to Consolidated Financial Statements.
Series C Financing. On December 23, 1993, in connection with the Company's
Series C Preferred Stock financing, the Company sold in the aggregate
1,249,998 shares of Series C Preferred Stock at a price per share of $3.00 to
the following investors which are, or which are affiliated with, directors of
the Company or entities that own more than 5% of the Company's securities,
each of which purchased the aggregate number of shares indicated:
<TABLE>
<CAPTION>
% OF
SHAREHOLDER: SHARES CLASS AGGREGATE
- ------------ ------- ----- ---------
<S> <C> <C> <C>
MPAE V Management Co.
(Bruce Dunlevie)....................................... 322,628 25.8% $967,884
WHD/LGM Partners
(William Davidow)...................................... 322,628 25.8% 967,884
Kleiner, Perkins, Caufield & Byers V.................... 322,628 25.8% 967,884
Integral Capital Management, L.P. ...................... 141,057 11.3% 423,171
Dominion Income Management Corp......................... 141,057 11.3% 423,171
</TABLE>
Series D Financing. On February 24, 1995, in connection with the Company's
Series D Preferred Stock financing, the Company sold 1,411,765 shares of
Series D Preferred Stock to Goldman, Sachs & Co. at a price per share of $4.25
or an aggregate of $6.0 million. Goldman Sachs currently owns more than 5% of
the Company's securities.
Simultaneously with the consummation of this offering, all shares of
Preferred Stock will be converted into shares of Common Stock. Holders of
Preferred Stock are entitled to certain registration rights with respect to
the Common Stock issued or issuable upon conversion thereof. See "Description
of Capital Stock--Registration Rights." The Company believes that the shares
issued in these transactions were sold at the then fair market value and that
the terms of these transactions were no less favorable than the Company could
have obtained from unaffiliated third parties.
Loans to Officers. In February 1997, in connection with the exercise of
options to purchase shares of the Company's Common Stock by Geoff Tate, David
Mooring and Ed Larsen, the Company provided full recourse
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<PAGE>
loans to such executive officers in the aggregate principal amounts of
$160,000, $198,250 and $200,000, respectively. The loans bear interest at an
annual rate of 12.0%, are evidenced by promissory notes and are secured by a
pledge of an aggregate of 400,000, 114,000 and 40,000 shares, respectively.
Principal and all accrued interest on the loans are due in September 1998.
Chromatic Research Inc. In February 1994, the Company licensed its interface
technology to Chromatic Research, Inc. ("Chromatic") a multimedia processor
design company. Under the terms of the license, Rambus received 626,053 shares
of Chromatic Series B Preferred Stock (representing 5% of the then outstanding
shares of Chromatic) and continuing royalties. Chromatic was formed in May
1993 (then called Xenon Microsystems Corporation) by, among others, Dr.
Farmwald who continues to serve as a director of, and consultant to, Chromatic
through the date hereof. Investors in Chromatic include affiliates of Mohr,
Davidow Ventures, Merrill, Pickard, Anderson & Eyre and Kleiner, Perkins,
Caufield & Byers. In connection with these investments in Chromatic, Dr.
Davidow and Mr. Dunlevie joined and continue to sit on the Board of Directors
of Chromatic. See Note 13 of Notes to Consolidated Financial Statements.
Purchase of Rambus Series A Preferred Stock from Intel Corporation. In 1990,
the Company entered into an agreement with Intel Corporation, under which it
issued 562,004 shares of Series A Preferred Stock to Intel. The shares issued
were subject to Rambus' assignable right to repurchase the shares, under
certain circumstances, at the original price paid by Intel. In fiscal 1995,
this right of repurchase was sold by the Company to entities affiliated with
Kleiner, Perkins, Caufield & Byers, Mohr, Davidow Ventures, Merrill, Pickard,
Andersen & Eyre, Integral Capital Partners and Dominion Income Management
Corp. for an aggregate of $936,012. These entities then exercised the right
and purchased the Rambus Series A Preferred Stock from Intel.
The Company believes that all related-party transactions described above
were on terms no less favorable than could have been otherwise obtained from
unrelated third parties. All future transactions between the Company and its
executive officers, directors and principal stockholders will be approved by a
majority of the independent and disinterested members of the Board of
Directors and will be on terms no less favorable than could be obtained from
unrelated third parties. In addition, the Board of Directors has voted that
any loans or guarantees in the future by the Company for its executive
officers, directors or principal stockholders will be approved by a majority
of the independent and disinterested members of the Board on the basis that
such loans or guarantees will be made only for bona fide business purposes.
1996 TRANSACTIONS WITH INTEL CORPORATION
In November 1996, the Company entered into a new license agreement with
Intel Corporation ("Intel") under which Rambus granted to Intel a worldwide,
nonexclusive license to manufacture and sell Rambus ICs (the "Intel
Contract"). Under the Intel Contract, Intel has agreed to use its reasonable
best efforts to design, develop, mass produce, market and sell a commercially
attractive PC main memory control chipset which implements certain Rambus
interface specifications. Under the Intel Contract, Intel granted to Rambus a
worldwide, royalty-free, sublicensable right to certain Intel intellectual
property for use in the implementation of the Rambus interface technology.
Under certain circumstances, the Intel Contract imposes an effective limit
of 2% on the royalty rate which the Company will receive from sales of RDRAMs
by its licensees. Because this effective limit is not triggered with respect
to a given licensee unless the licensee is shipping relatively high volumes of
RDRAMs, the Company believes that such provision will not have a material
adverse effect on its business or financial condition.
The Intel Contract grants to Intel certain rights to make a competing offer
if Rambus commences negotiations with any third party to enter into a
transaction (i) after which such third party would beneficially own more than
50% of the voting power of Rambus, (ii) in which Rambus would be a party to a
merger with such third party and Rambus would not be the surviving corporation
or (iii) Rambus would transfer all or substantially all of its business and
assets to the third party. The Intel Contract does not require that Rambus
53
<PAGE>
accept any such competing offer from Intel. However, should Rambus complete
such a transaction with a third party after receiving from Intel a bona fide
offer including money and other consideration at least equal to the money and
other consideration included in the third party offer, and on other terms and
conditions at least as favorable as those included in the third party offer,
then certain of Intel's royalty obligations would cease, the Company would be
obligated to refund to Intel certain previously paid royalties, and the
license of Rambus technology to Intel under the Intel Contract would become
fully paid, irrevocable and would survive any termination of the Intel
Contract. This provision of the Intel Contract may significantly discourage
future acquisition attempts, even where such acquisitions might be in the best
interest of Rambus stockholders. This provision of the Intel Contract will
terminate if Intel fails to maintain a specified level of shipments of Rambus
compatible ICs after a specified date.
The Intel Contract terminates upon the last to expire of the Rambus patents
licensed to Intel. The Intel Contract is subject to early termination (i) by
Intel at any time upon written notice to Rambus or (ii) by Rambus upon certain
breaches, defaults, or failures by Intel to achieve certain milestones or
provide certain support for Rambus technology.
In connection with the Intel Contract, Rambus granted to Intel a warrant for
the purchase of up to 1,000,000 shares of Rambus Common Stock at an exercise
price of $10.00 per share. Such warrant vests and becomes exercisable by Intel
only if more than 20% of the main memory chipsets shipped by Intel in each of
two consecutive calendar quarters implement certain Rambus interface
specifications, which will result in a charge to the statement of operations
at the time achievement of the milestones becomes probable for the excess of
the then fair value of the warrant over the exercise price. The warrant
expires on January 7, 2005; provided, however, that if the vesting condition
described above has not been satisfied by December 31, 2000, then the warrant
will expire on December 31, 2000. Rambus granted to Intel certain registration
rights with respect to the shares of Common Stock purchasable upon exercise of
the warrant.
Intel may designate a representative to observe meetings of the Rambus Board
of Directors at such time as 20% of the main memory chipsets shipped by Intel
during two consecutive quarters implement certain Rambus interface
specifications. Following exercise of the warrant, for so long as Intel
continues to hold at least 500,000 shares of the Company's Common Stock, Intel
may nominate a representative to the Rambus Board of Directors and the Company
must include such nominee among management's nominees to the stockholders and
must solicit stockholder votes in favor of such nominee to the same extent
that it solicits stockholder votes in favor of management's other nominees.
Intel's right to maintain a Board observer or Board member will exist during a
calendar quarter only if more than 20% of the main memory chipsets shipped by
Intel during each of the two immediately preceding calendar quarters
implemented certain Rambus interface specifications. The Rambus Board of
Directors may exclude the Intel representative from a Board meeting for
certain reasons, including discussion of transactions or potential
transactions between the Company and Intel or an affiliate or competitor of
Intel, or if in the Board's reasonable good faith judgment, such attendance
would be harmful to the Company.
54
<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information with respect to the
beneficial ownership of Common Stock of the Company as of December 31, 1996
and as adjusted to reflect the sale of the shares offered by this Prospectus
(assuming no exercise of the Underwriter's over-allotment option), by (i) all
persons known to the Company to be the beneficial owners of more than 5% of
the Company's Common Stock, (ii) Named Executive Officers, (iii) each of the
Company's directors and (iv) all directors and executive officers as a group.
The following table has been prepared in accordance with Rule 13d-3 of the
Securities Exchange Act of 1934 and discloses all securities beneficially
owned by the named persons as of December 31, 1996, plus all securities which
such persons have a right to acquire through the exercise of options or other
rights within 60 days of December 31, 1996. Certain individuals in the table
below have the right to acquire additional shares after such a 60-day period,
as indicated in the footnotes to the table.
<TABLE>
<CAPTION>
PERCENTAGE OF
SHARES BENEFICIALLY
NUMBER OF OWNED(1)
SHARES ----------------------
BENEFICIALLY BEFORE AFTER
NAME OR GROUP OF BENEFICIAL OWNERS OWNED(1) OFFERING OFFERING
---------------------------------- ------------ --------- ---------
<S> <C> <C> <C>
MPAE V Management Co.(2)................ 2,491,516 14.3% %
2480 Sand Hill Road, Suite 200
Menlo Park, CA 94025
WHD/LGM Partners (3).................... 2,491,516 14.3
3000 Sand Hill Road, Building 1 Suite
240
Menlo Park, CA 94025
Kleiner Perkins Caufield & Byers V(4)... 2,391,516 13.8
2750 Sand Hill Road
Menlo Park, CA 94025
Goldman, Sachs & Co.(5)................. 1,411,765 8.1
85 Broad Street, 19th Floor
New York, NY 10004
Integral Capital Management, L.P.(6).... 1,045,599 6.0
2750 Sand Hill Road
Menlo Park, CA 94025
Dominion Income Management Corp. ....... 1,045,598 6.0
15302 25th Drive, S.E.
Mill Creek, WA 98102
Geoff Tate(7)........................... 1,209,789 6.7
Gary Harmon(8).......................... 160,250 0.9
David Mooring(9)........................ 306,500 1.7
Allen Roberts(10)....................... 460,500 2.6
Subodh Toprani(11)...................... 195,500 1.1
William Davidow(12)..................... 2,551,516 14.7
Bruce Dunlevie(13)...................... 2,526,516 14.5
P. Michael Farmwald..................... 1,639,548 9.4
Charles A. Geschke(14).................. 60,000 0.3
Mark Horowitz........................... 968,365 5.6
All directors and executive officers as
a group (11 persons)(15)............... 10,128,484 53.3
</TABLE>
- --------
(1) Number of shares beneficially owned and percentage of shares beneficially
owned are based on: (i) 17,375,480 shares outstanding as of December 31,
1996; and (ii) after this offering, shares outstanding. Unless
otherwise indicated below, the persons and entities named in the table
have sole voting and investment power with respect to all shares
beneficially owned, subject to community property laws
55
<PAGE>
where applicable. All shares subject to options are currently exercisable
and are deemed to be outstanding and to be beneficially owned by the
person holding such options for the purpose of computing the percentage
ownership of such person, but are not deemed to be outstanding and to be
beneficially owned for the purpose of computing the percentage ownership
of any other person.
(2) Represents 2,491,516 shares held of record by Merrill, Pickard, Anderson
& Eyre V, L.P. Bruce W. Dunlevie, a director of the Company, is a general
manager of MPAE V Management Co. which is a general partner of Merrill,
Pickard, Anderson & Eyre V, L.P. and is deemed to have voting and
investment power with respect to such shares. See footnote 13 below.
(3) Represents 2,491,516 shares held of record by Mohr, Davidow Ventures II.
William Davidow, a director of the Company, is a general partner of
WHD/LGM Partners which is a general partner of Mohr, Davidow Ventures II
and is deemed to have voting and investment power with respect to such
shares. See footnote 12 below.
(4) Represents 2,314,016 shares and 77,500 shares held of record by Kleiner,
Perkins, Caufield & Byers V and Kleiner, Perkins, Caufield & Byers
Zaibatsu Fund I, respectively.
(5) Represents 1,176,471 shares, 62,292 shares, 60,175 shares, 57,471 shares
and 55,356 shares held of record by GS Capital Partners, L.P., Bridge
Street Fund 1995, L.P., Bridge Street Fund 1994, L.P., Stone Street Fund
1994, L.P. and Stone Street Fund 1995, L.P., respectively.
(6) Represents 945,251 shares and 100,348 shares held of record by Integral
Capital Partners, L.P. and Integral Capital Partners International, C.V.,
respectively. Integral Capital Management, L.P. is the sole general
partner of Integral Capital Partners, L.P. and Integral Capital Partners
International, C.V. and is deemed to have voting and investment power
with respect to such shares.
(7) Includes 784,289 shares subject to options exercisable within 60 days of
December 31, 1996 of which 529,289 shares were vested as of March 1, 1997
and 255,000 shares of which were unvested and subject to a right of
repurchase in favor of the Company which lapses over time. Also includes
15,000 shares held of record by Mr. Tate's wife, Colleen Thygesen Tate,
as Trustee for their children.
(8) Includes 65,500 shares subject to options exercisable within 60 days of
December 31, 1996 of which 25,000 shares were vested as of March 1, 1997
and 40,500 shares of which were unvested and subject to a right of
repurchase in favor of the Company which lapses over time. Also includes
2,500 shares held of record by Heather H. Harmon of which Mr. Harmon
disclaims beneficial ownership.
(9) Includes 196,500 shares subject to options exercisable within 60 days of
December 31, 1996 of which 83,125 shares were vested as of March 1, 1997
and 113,375 shares of which were unvested and subject to a right of
repurchase in favor of the Company which lapses over time.
(10) Includes 360,500 shares subject to options exercisable within 60 days of
December 31, 1996 of which 229,635 shares were vested as of March 1, 1997
and 130,865 shares of which were unvested and subject to a right of
repurchase in favor of the Company which lapses over time.
(11) Includes 80,500 shares subject to options exercisable within 60 days of
December 31, 1996 of which no shares were vested as of March 1, 1997 and
80,500 shares of which were unvested and subject to a right of repurchase
in favor of the Company which lapses over time. At March 1, 1997, 5,000
shares held by Mr. Toprani were subject to a right of repurchase in favor
of the Company which lapses over time.
(12) Includes all shares held by entities affiliated with WHD/LGM Partners.
See footnote 3 above. Mr. Davidow, as a general partner of WHD/LGM
Partners, is deemed to have voting and investment power with respect to
such Shares. Also includes 50,000 shares held of record by The Chachagua
Partnership, a California Limited Partnership, of which Mr. Davidow is a
partner and is deemed to have voting and investment power with respect to
such shares. Also includes 10,000 shares subject to options exercisable
within 60 days of December 31, 1996, of which no shares were vested as of
March 1, 1997 and 10,000 were unvested and subject to a right of
repurchase in favor of the Company which lapses over time.
56
<PAGE>
(13) Includes all shares held by entities affiliated with MPAE V Management
Co. See footnote 2 above. Mr. Dunlevie, as a general partner of MPAE V
Management Co., may be deemed to beneficially own such shares, but Mr.
Dunlevie disclaims beneficial ownership of all such shares except to the
extent of his pecuniary interest therein. Also includes 35,000 shares
subject to options exerciseable within 60 days of December 31, 1996, of
which 25,000 shares were vested as of March 1, 1997 and 10,000 shares
were unvested and subject to a right of repurchase in favor of the
Company which lapses over time.
(14) Includes 25,000 shares held of record by The Geschke Family Trust Dated
9/25/87, and 35,000 shares subject to options exercisable within 60 days
of December 31, 1996 of which 6,250 shares were vested as of March 1,
1997 and 28,750 shares of which were unvested and subject to a right of
repurchase in favor of the Company which lapses over time.
(15) Includes 1,248,000 shares subject to options exercisable within 60 days
of December 31, 1996 of which 539,010 shares were vested as of March 1,
1997 and 708,990 shares of which were unvested and subject to a right of
repurchase in favor of the Company which lapses over time.
57
<PAGE>
DESCRIPTION OF CAPITAL STOCK
The authorized capital stock of the Company consists of 60,000,000 shares of
Common Stock, $.001 par value, and 5,000,000 shares of Preferred Stock, $.001
par value. The Company has designated 40,000 shares of its Preferred Stock as
Series E Participating Preferred Stock ("Series E Preferred") for issuance
pursuant to the exercise of rights ("Rights") under a rights agreement;
currently, no shares of Preferred Stock are outstanding.
The following summary of certain provisions of the Common Stock and
Preferred Stock does not purport to be complete and is subject to, and
qualified in its entirety by, the provisions of the Company's Amended and
Restated Certificate of Incorporation which is included as an exhibit to the
Registration Statement of which this Prospectus is a part and by the
provisions of applicable law.
COMMON STOCK
As of December 31, 1996, there were 17,375,480 shares of Common Stock
outstanding that were held of record by approximately 159 stockholders. There
will be shares of Common Stock outstanding (based on the number of shares
outstanding as of December 31, 1996, and assuming no exercise of the
Underwriters' over-allotment option) after giving effect to the sale of Common
Stock offered to the public hereby.
The holders of Common Stock are entitled to one vote for each share held of
record on all matters submitted to a vote of stockholders. Subject to
preferences that may be applicable to any outstanding shares of Preferred
Stock, the holders of Common Stock are entitled to receive ratably such
dividends, if any, as may be declared by the Board of Directors out of funds
legally available for the payment of dividends. See "Dividend Policy." In the
event of a liquidation, dissolution or winding up of the Company, the holders
of Common Stock are entitled to share ratably in all assets remaining after
payment of liabilities and liquidation preferences of any outstanding shares
of Preferred Stock. Holders of Common Stock have no preemptive rights or
rights to convert their Common Stock into any other securities. There are no
redemption or sinking fund provisions applicable to the Common Stock. All
outstanding shares of Common Stock are fully paid and non-assessable, and the
shares of Common Stock to be issued upon completion of this offering will be
fully paid and non-assessable.
PREFERRED STOCK
Pursuant to the Company's Restated Certificate of Incorporation, the Board
of Directors has the authority, without further action by the stockholders, to
issue up to 5,000,000 shares of Preferred Stock (less 40,000 shares which have
been designated Series E Preferred Stock pursuant to the stockholder rights
agreement) in one or more series and to fix the designations, powers,
preferences and privileges, and relative participating, optional or special
rights and the qualifications, limitations or restrictions thereof, including
dividend rights, conversion rights, voting rights, terms of redemption and
liquidation preferences, any or all of which may be greater than the rights of
the Common Stock. The Board of Directors, without stockholder approval, can
issue Preferred Stock with voting, conversion or other rights that could
adversely affect the voting power and other rights of holders of Common Stock.
Preferred Stock could thus be issued quickly with terms calculated to delay,
or prevent a change in control of the Company or make removal of management
more difficult. Additionally, the issuance of Preferred Stock may have the
effect of decreasing the market price of the Common Stock, and may adversely
affect the voting and the other rights of the holders of Common Stock. At
present, there are no shares of Preferred Stock outstanding and the Company
has no plans to issue any of the Preferred Stock, expect as described below.
Series E Preferred purchasable upon exercise of the Rights will not be
redeemable. Each share of Series E Preferred will be entitled to an aggregate
dividend of 1,000 times the dividend declared per share of Common Stock. In
the event of liquidation, the holders of the Series E Preferred will be
entitled to 1,000 times the amount paid per share of Common Stock plus an
amount equal to accrued and unpaid dividends and distributions thereon,
whether or not declared, to the date of such payment. Each share of Series E
Preferred will have 1,000 votes, voting together with the Common Stock. These
rights are protected by customary anti-dilution provisions.
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<PAGE>
Because of the nature of the dividend, liquidation and voting rights of the
shares of Series E Preferred, the value of the one one-thousandth interest in
a share of Series E Preferred purchasable upon exercise of each Right should
approximate the value of one share of Common Stock. See "--Certain
Antitakeover Effects--Rights Plan."
REGISTRATION RIGHTS
Pursuant to an agreement between the Company and the holders (the "Holders")
of approximately 12,000,000 shares of Common Stock issuable upon conversion of
Preferred Stock or exercise of a warrant (the "Registrable Securities"), the
Holders are entitled to certain rights with respect to the registration of
such shares under the Securities Act. If the Company proposes to register any
of its securities under the Securities Act, either for its own account or for
the account of other security Holders exercising registration rights, such
Holders are entitled to notice of such registration and are entitled to
include shares of such Common Stock therein. Additionally, Holders of the
Registrable Securities are also entitled to certain demand registration rights
pursuant to which they may require the Company to file a registration
statement under the Securities Act at the Company's expense with respect to
their shares of Common Stock, and the Company is required to use its best
efforts to effect such registration. Further, the Holders of such Registrable
Securities may require the Company to file additional registration statements
on Form S-3 at the Company's expense. All of these registration rights are
subject to certain conditions and limitations, among them the right of the
underwriters of an offering to limit the number of shares included in such
registration and the right of the Company not to effect a requested
registration within nine months following an offering of the Company's
securities, including the offering made hereby.
TRANSFER AGENT AND REGISTRAR
has been appointed as the transfer agent and registrar for the
Company's Common Stock. Its telephone number for such purposes is .
CERTAIN ANTITAKEOVER EFFECTS
Certificate of Incorporation and Bylaws
The Company's Amended and Restated Certificate of Incorporation (the
"Certificate") provides that the Company's Board of Directors is classified
into two classes of directors. See "Management--Classified Board." The Amended
and Restated Certificate of Incorporation also provides that, upon the
completion of this offering, stockholders can take action only at a duly
called annual or special meeting of stockholders. Accordingly, stockholders of
the Company will not be able to take action by written consent in lieu of a
meeting. This provision may have the effect of deterring hostile takeovers or
delaying changes in control or management of the Company.
The Amended and Restated Bylaws of the Company (i) permit only a majority of
the Board of Directors to call a special meeting of the stockholders and (ii)
require prior notice of matters to be brought before meetings of the
stockholders.
Amendment
The Certificate provides that the affirmative vote of the holders of at
least two thirds of the shares entitled to vote, voting together as a single
class, is required to amend provisions of the Certificate relating to
stockholder action without a meeting and the calling of special meetings. The
Certificate further provides that the related Bylaws described above
(including the stockholder notice procedure) may be amended only by the
Company's Board or by the affirmative vote of the holders of at least two
thirds of the voting power of the outstanding shares entitled to vote.
These provisions of the Amended and Restated Certificate of Incorporation
and Amended and Restated Bylaws could discourage potential acquisition
proposals and could delay or prevent a change in control of the
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<PAGE>
Company. Such provisions also may have the effect of preventing changes in the
management of the Company. See "Risk Factors--Certain Antitakeover
Provisions."
Delaware Takeover Statute
The Company is subject to Section 203 of the Delaware General Corporation
Law ("Section 203") which, subject to certain exceptions, prohibits a Delaware
corporation from engaging in any business combination with any interested
stockholder for a period of three years following the date that such
stockholder became an interested stockholder, unless: (i) prior to such date,
the board of directors of the corporation approved either the business
combination or the transaction which resulted in the stockholder becoming an
interested stockholder; (ii) upon consummation of the transaction which
resulted in the stockholder becoming an interested stockholder, the interested
stockholder owned at least 85% of the voting stock of the corporation
outstanding at the time the transaction commenced, excluding, for purposes of
determining the number of shares outstanding, those shares owned (x) by
persons who are directors and also officers and (y) by employee stock plans in
which employee participants do not have the right to determine confidentially
whether shares held subject to the plan will be tendered in a tender or
exchange offer; or (iii) on or subsequent to such date, the business
combination is approved by the board of directors and authorized at an annual
or special meeting of stockholders, and not by written consent, by the
affirmative vote of at least two thirds of the outstanding voting stock which
is not owned by the interested stockholder.
Section 203 defines business combination to include: (i) any merger or
consolidation involving the corporation and the interested stockholder; (ii)
any sale, transfer, pledge or other disposition involving the interested
stockholder of 10% or more of the assets of the corporation; (iii) subject to
certain exceptions, any transaction which results in the issuance or transfer
by the corporation of any stock of the corporation to the interested
stockholder; or (iv) the receipt by the interested stockholder of the benefit
of any loans, advances, guarantees, pledges or other financial benefits
provided by or through the corporation. In general, Section 203 defines an
interested stockholder as any entity or person beneficially owning 15% or more
of the outstanding voting stock of the corporation and any entity or person
affiliated with or controlling or controlled by such entity or person.
Limitation of Director and Officer Liability
The Company's Amended and Restated Certificate of Incorporation and Bylaws
contain certain provisions relating to the limitation of liability and
indemnification of directors and officers. The Company's Amended and Restated
Certificate of Incorporation provides that directors of the Company may not be
held personally liable to the Company or its stockholders for a breach of
fiduciary duty, except for liability (i) for any breach of the director's duty
of loyalty to the Company or its stockholders, (ii) for acts or omissions not
in good faith or which involve intentional misconduct or a knowing violation
of the law, (iii) under Section 174 of the Delaware General Corporation Law,
relating to prohibited dividends, distributions and repurchases or redemptions
of stock, or (iv) for any transaction from which the director derives an
improper benefit. In addition, the Company's Amended and Restated Certificate
of Incorporation and Bylaws provide that the Company shall indemnify its
directors and officers to the fullest extent authorized by Delaware law.
Rights Plan
On February 28, 1997, pursuant to a Preferred Shares Rights Agreement (the
"Rights Agreement") between the Company, and , as Rights Agent (the
"Rights Agent"), the Company's Board of Directors declared a dividend of one
Right to purchase one one-thousandth share of the Company's Series E Preferred
for each outstanding share of Common Stock, $.001 par value ("Common Shares"),
of the Company. The dividend is payable on April 1, 1997 (the "Record Date")
to stockholders of record as of the close of business on that day. Each Right
entitles the registered holder to purchase from the Company one one-thousandth
of a share of Series E Preferred at an exercise price of $125.00 (the
"Purchase Price"), subject to adjustment.
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<PAGE>
The Rights will not be exercisable until the Distribution Date (defined
below). Certificates for the Rights ("Rights Certificates") will not be sent
to stockholders and the Rights will attach to and trade only together with the
Common Stock. Accordingly, Common Stock certificates outstanding on the Record
Date will evidence the Rights related thereto, and Common Stock certificates
issued after the Record Date will contain a notation incorporating the Rights
Agreement by reference. Until the Distribution Date (or earlier redemption or
expiration of the Rights), the surrender or transfer of any certificates for
Common Stock outstanding as of the Record Date, even without notation or a
copy of the Summary of Rights being attached thereto, will also constitute the
transfer of the Rights associated with the Common Stock represented by such
certificate.
The Rights will separate from the Common Stock, Rights Certificates will be
issued and the Rights will become exercisable upon the earlier of: (i) 10 days
(or such later date as may be determined by a majority of the Board of
Directors, excluding directors affiliated with the Acquiring Person, as
defined below (the "Continuing Directors")) following a public announcement
that a person or group of affiliated or associated persons (an "Acquiring
Person") has acquired, or obtained the right to acquire, beneficial ownership
of 15% or more of the outstanding shares of Common Stock; or (ii) 10 business
days (or such later date as may be determined by a majority of the Continuing
Directors) following the commencement of, or announcement of an intention to
make, a tender offer or exchange offer the consummation of which would result
in the beneficial ownership by a person or group of 15% or more of the
outstanding Common Stock. The earlier of such dates is referred to as the
"Distribution Date."
As soon as practicable following the Distribution Date, separate Rights
Certificates will be mailed to holders of record of the Common Shares as of
the close of business on the Distribution Date and such separate Rights
Certificates alone will evidence the Rights from and after the Distribution
Date. The Rights will expire on the earliest of (i) March 21, 2007 (the "Final
Expiration Date") or (ii) redemption or exchange of the Rights as described
below.
Following the Distribution Date, and until one of the further events
described below, holders of the Rights will be entitled to receive, upon
exercise and the payment of the Purchase Price, one one-thousandth of a share
of the Series E Preferred Stock.
Unless the Rights are earlier redeemed, in the event that an Acquiring
Person becomes the beneficial owner of 15% or more of the Company's Common
Stock then outstanding, then proper provision will be made so that each holder
of a Right which has not theretofore been exercised (other than Rights
beneficially owned by the Acquiring Person or any affiliate of the Acquiring
Person, which will thereafter be void) will thereafter have the right to
receive, upon exercise, shares of Common Stock having a value equal to two
times the Purchase Price. In the event that the Company does not have
sufficient Common Stock available for all Rights to be exercised, or the Board
decides that such action is necessary and not contrary to the interests of
Rights holders, the Company may instead substitute cash, assets or other
securities for the Common Stock for which the Rights would have been
exercisable.
Similarly, unless the Rights are earlier redeemed, in the event that, after
an Acquiring Person becomes the beneficial owner of 15% or more of the
Company's Common Stock then outstanding, (i) the Company is acquired in a
merger or other business combination transaction, or (ii) 50% or more of the
Company's consolidated assets or earning power are sold (other than in
transactions in the ordinary course of business), proper provision must be
made so that each holder of a Right which has not theretofore been exercised
(other than Rights beneficially owned by the Acquiring Person or any affiliate
of the Acquiring Person, which will thereafter be void) will thereafter have
the right to receive, upon exercise, shares of common stock of the acquiring
company having a value equal to two times the Purchase Price.
At any time after the acquisition by an Acquiring Person of beneficial
ownership of 15% or more of the Company's outstanding shares of Common Stock
and prior to the acquisition by any person or entity of beneficial ownership
of 50% or more of the Company's outstanding shares of Common Stock, the Board
of Directors of
61
<PAGE>
the Company may exchange the Rights (other than Rights owned by the Acquiring
Person), in whole or in part, at an exchange ratio of one Common Share per
Right.
At any time on or prior to the close of business on the earlier of (i) the
10th day following the acquisition by an Acquiring Person of beneficial
ownership of 15% or more of the Company's Common Stock or such later date as
may be determined by a majority of the Continuing Directors and publicly
announced by the Company, or (ii) the Final Expiration Date of the Rights, the
Company may redeem the Rights in whole, but not in part, at a price of $0.001
per Right.
The Purchase Price payable, the number of Rights, and the number of Series E
Preferred or Common Stock or other securities or property issuable upon
exercise of the Rights are subject to adjustment from time to time in
connection with dilutive issuances by the Company as set forth in the Rights
Agreement. With certain exceptions, no adjustment in the Purchase Price will
be required until cumulative adjustments require an adjustment of at least 1%
in such Purchase Price.
No fractional portion less than integral multiples of one share of Common
Stock or one one-thousandth of a share of Series E Preferred will be issued
upon exercise of a Right and in lieu thereof, an adjustment in cash will be
made based on the market price of the security to be so issued on the last
trading date prior to the date of exercise.
Until a Right is exercised, the holder thereof, as such, will have no rights
as a stockholder of the Company (other than any rights resulting from such
holder's ownership of Common Stock), including, without limitation, the right
to vote or to receive dividends.
The provisions of the Rights Agreement may be supplemented or amended by the
Board of Directors in any manner prior to the close of business on the date
the Rights separate from the Common Stock and become exercisable. After such
date, the provisions of the Rights Agreement may be amended by the Board in
order to cure any ambiguity, defect or inconsistency, to make changes which do
not adversely affect the interests of holders of Rights (excluding the
interests of any Acquiring Person), or to shorten or lengthen any time period
under the Rights Agreement; provided, however, that no amendment to adjust the
time period governing redemption shall be made at such time as the Rights are
not redeemable.
Series E Preferred purchasable upon exercise of the Rights will not be
redeemable. Each share of Series E Preferred will be entitled to an aggregate
dividend of 1,000 times the dividend declared per Common Share. In the event
of liquidation, the holders of the Series E Preferred will be entitled to
1,000 times the amount paid per share of Common Stock plus an amount equal to
accrued and unpaid dividends and distributions thereon, whether or not
declared, to the date of such payment. Each share of Series E Preferred will
have 1,000 votes, voting together with the Common Stock. These rights are
protected by customary anti-dilution provisions.
Because of the nature of the dividend, liquidation and voting rights of the
shares of Series E Preferred, the value of the one one-thousandth interest in
a share of Series E Preferred purchasable upon exercise of each Right should
approximate the value of one share of Common Stock.
The Rights approved by the Board are designed to protect and maximize the
value of the outstanding equity interests in the Company in the event of an
unsolicited attempt by an acquiror to take over the Company, in a manner or on
terms not approved by the Board of Directors. Takeover attempts frequently
include coercive tactics to deprive the Company's Board of Directors and its
stockholders of any real opportunity to determine the destiny of the Company.
The Rights have been declared by the Board in order to deter such tactics,
including a gradual accumulation of shares in the open market of a 15% or
greater position to be followed by a merger or a partial or two-tier tender
offer that does not treat all stockholders equally. These tactics unfairly
pressure stockholders, squeeze them out of their investment without giving
them any real choice and deprive them of the full value of their shares.
62
<PAGE>
The Rights are not intended to prevent a takeover of the Company and will
not do so. The Rights may be redeemed by the Company at $0.001 per Right
within ten days (or such later date as may be determined by a majority of the
Continuing Directors) after the accumulation of 15% or more of the Company's
shares by a single acquiror or group. Accordingly, the Rights should not
interfere with any merger or business combination approved by the Board of
Directors.
Issuance of the Rights does not in any way weaken the financial strength of
the Company or interfere with its business plans. The issuance of the Rights
themselves has no dilutive effect, will not affect reported earnings per
share, should not be taxable to the Company or to its stockholders and will
not change the way in which the Company's shares are presently traded. The
Company's Board of Directors believes that the Rights represent a sound and
reasonable means of addressing the complex issues of corporate policy created
by the current takeover environment.
However, the Rights may have the effect of rendering more difficult or
discouraging an acquisition of the Company deemed undesirable by the Board of
Directors. The Rights may cause substantial dilution to a person or group that
attempts to acquire the Company on terms or in a manner not approved by the
Company's Board of Directors, except pursuant to an offer conditioned upon the
negation, purchase or redemption of the Rights.
Intel Agreement
The Intel Contract grants to Intel certain rights to make a competing offer
if Rambus commences negotiations with any third party to enter into a
transaction (i) after which such third party would beneficially own more than
50% of the voting power of Rambus, (ii) in which Rambus would be a party to a
merger with such third party and Rambus would not be the surviving corporation
or (iii) Rambus would transfer all or substantially all of its business and
assets to the third party. The Intel Contract does not require that Rambus
accept any such competing offer from Intel. However, should Rambus complete
such a transaction with a third party after receiving from Intel a bona fide
offer including money and other consideration at least equal to the money and
other consideration included in the third party offer, and on other terms and
conditions at least as favorable as those included in the third party offer,
then certain of Intel's royalty obligations would cease, the Company would be
obligated to refund to Intel certain previously paid royalties, and the
license of Rambus technology to Intel under the Intel Contract would become
fully paid, irrevocable and would survive any termination of the Intel
Contract. This provision of the Intel Contract may significantly discourage
future acquisition attempts, even where such acquisitions might be in the best
interest of Rambus stockholders. This provision of the Intel Contract will
terminate if Intel fails to maintain a specified level of shipments of Rambus
compatible ICs after a specified date. See "Certain Transactions--1996
Transactions with Intel Corporation."
63
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
Prior to this offering, there has been no public market for the Common Stock
of the Company. Future sales of substantial amounts of Common Stock in the
public market could adversely affect prevailing market prices from time to
time. Furthermore, since only a limited number of shares will be available for
sale shortly after this offering because of certain contractual and legal
restrictions on resale (as described below), sales of substantial amounts of
Common Stock of the Company in the public market after the restrictions lapse
could adversely affect the prevailing market price and the ability of the
Company to raise equity capital in the future.
Upon completion of this offering the Company will have outstanding an
aggregate of shares of Common Stock (based upon shares outstanding at
December 31, 1996), assuming no exercise of the Underwriters' over-allotment
option and no exercise of outstanding options. Of these shares, the shares
sold in this offering will be freely tradeable without restriction or further
registration under the Securities Act, unless such shares are purchased by
"affiliates" of the Company as that term is defined in Rule 144 under the
Securities Act (the "Affiliates"). The remaining 17,375,480 shares of Common
Stock held by existing stockholders are "restricted securities" as that term
is defined in Rule 144 under the Securities Act ("Restricted Shares").
Restricted Shares may be sold in the public market only if registered or if
they qualify for an exemption from registration under Rules 144, 144(k) or 701
promulgated under the Securities Act, which rules are summarized below. As a
result of the contractual restrictions described below and the provisions of
Rules 144, 144(k) and 701, the Restricted Shares will be available for sale in
the public market as follows: (i) no shares will be eligible for immediate
sale on the date of this Prospectus; and (ii) 17,375,480 shares will be
eligible for sale upon expiration of the lock-up agreements 180 days after the
date of this Prospectus.
All officers, directors, stockholders and option holders of the Company have
agreed not to offer, pledge, sell, contract to sell, sell any option or
contract to purchase, purchase any option or contract to sell, grant any
option, right or warrant to purchase, or otherwise transfer or dispose of,
directly or indirectly (or enter into any swap or other arrangement that
transfers to another, in whole or in part, any of the economic consequences of
ownership of), any shares of Common Stock or any securities convertible into
or exercisable or exchangeable for shares of Common Stock, for a period of 180
days after the date of this Prospectus, without the prior written consent of
Morgan Stanley & Co. Incorporated.
In general, under Rule 144 as it will be in effect upon the completion of
the offering, beginning 90 days after the date of this Prospectus, a person
(or persons whose shares are aggregated) who has beneficially owned Restricted
Shares for at least one year (including the holding period of any prior owner
except an Affiliate) would be entitled to sell within any three-month period a
number of shares that does not exceed the greater of: (i) one percent of the
number of shares of Common Stock then outstanding (which will equal
approximately shares immediately after this offering); or (ii) the average
weekly trading volume of the Common Stock on the Nasdaq National Market during
the four calendar weeks preceding the filing of a notice on Form 144 with
respect to such sale. Sales under Rule 144 are also subject to certain manner
of sale provisions and notice requirements and to the availability of current
public information about the Company. Under Rule 144(k), a person who is not
deemed to have been an Affiliate of the Company at any time during the 90 days
preceding a sale, and who has beneficially owned the shares proposed to be
sold for at least two years (including the holding period of any prior owner
except an Affiliate), is entitled to sell such shares without complying with
the manner of sale, public information, volume limitation or notice provisions
of Rule 144; therefore, unless otherwise restricted, "144(k) shares" may
therefore be sold immediately upon the completion of this offering. In
general, under Rule 701 of the Securities Act as currently in effect, any
employee, consultant or advisor of the Company who purchases shares from the
Company in connection with a compensatory stock or option plan or other
written agreement is eligible to resell such shares 90 days after the
effective date of this offering in reliance on Rule 144, but without
compliance with certain restrictions, including the holding period, contained
in Rule 144.
Upon completion of this offering, the holders of 12,296,822 shares of Common
Stock issuable upon conversion of Preferred Stock or exercise of a warrant, or
their transferees, will be entitled to certain rights with respect to the
registration of such shares under the Securities Act. See "Description of
Capital Stock--
64
<PAGE>
Registration Rights." Registration of such shares under the Securities Act
would result in such shares becoming freely tradeable without restriction
under the Securities Act (except for shares purchases by affiliates)
immediately upon the effectiveness of such registration.
The Company intends to file a registration statement under the Securities
Act covering shares of Common Stock reserved for issuance under the Company's
1997 Plan and 1997 Stock Purchase Plan and shares subject to outstanding
options under the 1990 Plan. See "Management--Stock Plans." Such registration
statement is expected to be filed and become effective as soon as practicable
after the effective date of this offering. Accordingly, shares registered
under such registration statement will, subject to Rule 144 volume limitations
applicable to Affiliates, be available for sale in the open market, unless
such shares are subject to vesting restrictions with the Company or the lock-
up agreements described above. As of December 31, 1996, options to purchase
3,302,041 shares of Common Stock were issued and outstanding under the 1990
Plan, and no options to purchase shares had been granted under the Company's
1997 Plan and 1997 Stock Purchase Plan. Subsequent to December 31, 1996 the
Board of Directors granted options to purchase an additional 116,500 shares of
Common Stock at a weighted average exercise price of $7.73 per share under the
1990 Plan. See "Management--Director Compensation" and "--Stock Plans."
65
<PAGE>
UNDERWRITERS
Under the terms and subject to the conditions contained in an Underwriting
Agreement dated the date hereof, the Underwriters named below (the
"Underwriters"), for whom Morgan Stanley & Co. Incorporated, Hambrecht & Quist
LLC and Robertson, Stephens & Company LLC are serving as Representatives (the
"Representatives"), have severally agreed to purchase, and the Company has
agreed to sell to them severally the respective number of shares of Common
Stock set forth opposite their respective names below:
<TABLE>
<CAPTION>
NUMBER OF
NAME SHARES
---- ---------
<S> <C>
Morgan Stanley & Co. Incorporated..................................
Hambrecht & Quist LLC..............................................
Robertson, Stephens & Company LLC..................................
---
Total............................................................
===
</TABLE>
The Underwriting Agreement provides that the obligations of the several
Underwriters to pay for and accept delivery of the shares of Common Stock
offered hereby are subject to the approval of certain legal matters by counsel
and to certain other conditions. The Underwriters are obligated to take and
pay for all of the shares of Common Stock offered hereby (other than those
covered by the over-allotment option described below) if any are taken.
The Underwriters initially propose to offer part of the shares of Common
Stock offered hereby directly to the public at the initial public offering
price set forth on the cover page hereof and part to certain dealers at a
price which represents a concession not in excess of $ per share under the
initial public offering price. The Underwriters may allow, and such dealers
may re-allow, a concession not in excess of $ per share to other
Underwriters or to certain other dealers.
Pursuant to the Underwriting Agreement, the Company has granted to the
Underwriters an option, exercisable for 30 days from the date of this
Prospectus, to purchase up to an additional shares of Common Stock at the
initial public offering price set forth on the cover page hereof, less
underwriting discounts and commissions. The Underwriters may exercise such
option to purchase solely for the purpose of covering over-allotments, if any,
incurred in the sale of the shares of Common Stock offered hereby. To the
extent such option is exercised, each Underwriter will become obligated,
subject to certain conditions, to purchase approximately the same percentage
of such additional shares as the number set forth next to such Underwriter's
name in the preceding table bears to the total number of shares of Common
Stock offered hereby.
The Representatives have informed the Company that the Underwriters do not
intend to confirm sales in excess of five percent of the number of shares of
Common Stock offered hereby to accounts over which they exercise discretionary
authority.
The Company and the Underwriters have agreed to indemnify each other against
certain liabilities, including liabilities under the Securities Act.
66
<PAGE>
See "Shares Eligible for Future Sale" for a description of certain
arrangements by which all officers, directors, stockholders and option holders
of the Company have agreed not to sell or otherwise dispose of Common Stock or
convertible securities of the Company for up to 180 days after the date of
this Prospectus without the prior consent of Morgan Stanley & Co.
Incorporated. The Company has agreed in the Underwriting Agreement that it
will not, directly or indirectly, without the prior written consent of Morgan
Stanley & Co. Incorporated, offer, pledge, sell, contract to sell, sell any
option or contract to purchase, purchase any option or contract to sell, grant
any option, right or warrant to purchase, or otherwise transfer or dispose of
any shares of Common Stock or any securities convertible into or exchangeable
for Common Stock, for a period of 180 days after the date of this Prospectus,
except under certain circumstances.
In order to facilitate the offering of the Common Stock, the Underwriters
may engage in transactions that stabilize, maintain or otherwise affect the
price of the Common Stock. Specifically, the Underwriters may over-allot in
connection with the offering, creating a short position in the Common Stock
for their own account. In addition, to cover over-allotments or to stabilize
the price of the Common Stock, the Underwriters may bid for, and purchase,
shares of Common Stock in the open market. Finally, the underwriting syndicate
may reclaim selling concessions allowed to an underwriter or a dealer for
distributing the Common Stock in the offering, if the syndicate repurchases
previously distributed Common Stock in transactions to cover syndicate short
positions, in stabilization transactions or otherwise. Any of these activities
may stabilize or maintain the market price of the Common Stock above
independent market levels. The Underwriters are not required to engage in
these activities, and may end any of these activities at any time.
Morgan Stanley Group Inc., which is associated with Morgan Stanley & Co.
Inc., is a limited partner of the general partner of Integral Capital
Partners, L.P. and Integral Capital Partners, C.V., which in the aggregate
will own 1,045,599 shares, or % of the outstanding capital stock of the
Company, upon the closing of the offering. Morgan Stanley & Co. Inc. disclaims
beneficial ownership of the shares held by Integral Capital Partners, L.P. and
Integral Capital Partners, C.V., except to the extent of any pecuniary
interest therein.
PRICING OF THE OFFERING
Prior to this offering, there has been no public market for the Common Stock
of the Company. The initial public offering price will be determined by
negotiations between the Company and the Representatives. Among the factors
considered in determining the initial public offering price will be the future
prospects of the Company and its industry in general, sales, earnings and
certain other financial and operating information of the Company in recent
periods, and the price-earnings ratios, price-sales ratios, market prices of
securities and certain financial and operating information of companies
engaged in activities similar to those of the Company. The estimated initial
public offering price range set forth on the cover page of this Preliminary
Prospectus is subject to change as a result of market conditions and other
factors.
67
<PAGE>
LEGAL MATTERS
The validity of the Common Stock offered hereby will be passed upon for the
Company by Wilson Sonsini Goodrich & Rosati, Professional Corporation, 650 Page
Mill Road, Palo Alto, California 94304. Certain legal matters in connection
with the offering will be passed upon for the Underwriters by Fenwick & West
LLP, Two Palo Alto Square, Palo Alto, California 94306.
EXPERTS
The consolidated financial statements and schedule of the Company at
September 30, 1995 and 1996 and for each of the three years in the period ended
September 30, 1996 appearing in this Prospectus and Registration Statement have
been audited by Coopers & Lybrand L.L.P., independent auditors, as set forth in
their report thereon appearing elsewhere herein and in the Registration
Statement, and are included in reliance upon such report given upon the
authority of such firm as experts in accounting and auditing.
ADDITIONAL INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission"), Washington, D.C. 20549, a Registration Statement on Form S-1
under the Securities Act with respect to the shares of Common Stock offered
hereby. This Prospectus does not contain all of the information set forth in
the Registration Statement and the exhibits and schedules thereto. Certain
items are omitted in accordance with the rules and regulations of the
Commission. For further information with respect to the Company and the Common
Stock offered hereby, reference is made to the Registration Statement and the
exhibits and schedules filed therewith. Statements contained in this Prospectus
as to the contents of any contract or any other document referred to are not
necessarily complete, and, in each instance, reference is made to the copy of
such contract or other document filed as an exhibit to the Registration
Statement, each such statement being qualified in all respects by such
reference. A copy of the Registration Statement, and the exhibits and schedules
thereto, may be inspected without charge at the public reference facilities
maintained by the Commission in Room 1024, 450 Fifth Street, N.W., Washington,
D.C. 20549, and at the Commission's regional offices located at the
Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661 and Seven World Trade Center, 13th Floor, New York, New York
10048, and copies of all or any part of the Registration Statement may be
obtained from such offices upon the payment of the fees prescribed by the
Commission. The Commission maintains a World Wide Web site that contains
reports, proxy and information statements and other information regarding
registrants that file electronically with the Commission. The address of the
site is http://www.sec.gov.
68
<PAGE>
RAMBUS INC.
CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Accountants.......................................... F-2
Consolidated Balance Sheets................................................ F-3
Consolidated Statements of Operations...................................... F-4
Consolidated Statements of Stockholders' Deficit........................... F-5
Consolidated Statements of Cash Flows...................................... F-6
Notes to Consolidated Financial Statements................................. F-7
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders
Rambus Inc. and Subsidiary
We have audited the accompanying consolidated balance sheets of Rambus Inc.
and Subsidiary as of September 30, 1995 and 1996, and the related consolidated
statements of operations, stockholders' deficit and cash flows for each of the
three years in the period ended September 30, 1996. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Rambus Inc.
and Subsidiary as of September 30, 1995 and 1996, and the results of their
operations and their cash flows for each of the three years in the period
ended September 30, 1996 in conformity with generally accepted accounting
principles.
Coopers & Lybrand L.L.P.
San Jose, California
November 1, 1996, except for Note 17
for which the date is
February 28, 1997.
- -------------------------------------------------------------------------------
To the Board of Directors and Stockholders
Rambus Inc. and Subsidiary
The financial statements included herein have been adjusted to give effect
to the reincorporation of the Company in Delaware as described more fully in
Note 17 to the financial statements. The above report is in the form that will
be signed by Coopers & Lybrand L.L.P. upon the effectiveness of such
reincorporation assuming that from March 6, 1997 to the effective date of such
reincorporation, no other events shall have occurred that would affect the
accompanying financial statements or notes thereto.
Coopers & Lybrand L.L.P.
San Jose, California
March 6, 1997
F-2
<PAGE>
RAMBUS INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
PRO FORMA
SEPTEMBER 30, (NOTE 16)
------------------ DECEMBER 31, DECEMBER 31,
1995 1996 1996 1996
-------- -------- ------------ ------------
(UNAUDITED)
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents...... $ 977 $ 742 $ 2,108
Marketable securities.......... 13,173 7,812 8,820
Accounts receivable............ 1,206 718 2,919
Prepaids and other current
assets........................ 840 873 871
-------- -------- --------
Total current assets......... 16,196 10,145 14,718
Property and equipment, net...... 1,598 2,340 2,544
Investment....................... -- -- 1,200
Other assets..................... 513 383 241
-------- -------- --------
Total assets................. $ 18,307 $ 12,868 $ 18,703
======== ======== ========
LIABILITIES
Current liabilities:
Accounts and taxes payable,
accrued payroll and other
liabilities................... $ 1,113 $ 1,237 $ 1,759
Current portion of:
Loan.......................... -- -- 132
Capital lease obligations..... 929 753 695
Deferred revenue.............. 9,721 13,082 14,304
-------- -------- --------
Total current liabilities.... 11,763 15,072 16,890
Loan, less current portion....... -- -- 662
Capital lease obligations, less
current portion................. 687 544 443
Deferred revenue, less current
portion......................... 13,793 9,396 12,365
-------- -------- --------
Total liabilities............ 26,243 25,012 30,360
-------- -------- --------
Commitments (Note 9)
STOCKHOLDERS' DEFICIT
Convertible preferred stock,
$.001 par value:
Authorized: 11,336,096 shares;
Issued and outstanding:
11,296,822 shares at September
30, 1995 and 1996 and December
31, 1996 and no shares pro
forma......................... 11 11 11
(Liquidation value: $19,894 at
September 30, 1995 and 1996
and December 31, 1996 and none
pro forma)
Common stock, $.001 par value:
Authorized: 22,500,000 shares;
Issued and outstanding:
5,561,082 shares at September
30, 1995, 5,758,749 shares at
September 30, 1996, 6,078,658
shares at December 31, 1996
and 17,375,480 shares pro
forma......................... 6 6 6 $ 17
Additional paid-in capital....... 22,095 22,330 22,744 22,744
Accumulated deficit.............. (30,077) (34,492) (34,400) (34,400)
Cumulative translation
adjustment...................... 29 1 (18) (18)
-------- -------- -------- --------
Total stockholders' deficit.. (7,936) (12,144) (11,657) $(11,657)
-------- -------- -------- ========
Total liabilities and
stockholders' deficit..... $ 18,307 $ 12,868 $ 18,703
======== ======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-3
<PAGE>
RAMBUS INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED SEPTEMBER 30, DECEMBER 31,
---------------------------- --------------------
1994 1995 1996 1995 1996
-------- -------- -------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Contract revenues......... $ 5,000 $ 7,364 $ 11,205 $ 2,510 $ 4,066
Royalties................. 65 1,425
-------- -------- -------- --------- ---------
Total revenues........ 5,000 7,364 11,270 2,510 5,491
-------- -------- -------- --------- ---------
Costs and expenses:
Cost of contract
revenues............... 3,844 5,236 4,821 1,115 1,037
Research and
development............ 3,067 3,117 5,218 1,142 2,263
Sales and marketing..... 2,569 3,376 4,052 955 1,485
General and
administrative......... 1,717 1,688 1,747 454 603
-------- -------- -------- --------- ---------
11,197 13,417 15,838 3,666 5,388
-------- -------- -------- --------- ---------
Operating income
(loss)............... (6,197) (6,053) (4,568) (1,156) 103
Interest and other income,
net...................... 215 619 737 193 109
Interest expense.......... (296) (297) (298) (81) (64)
-------- -------- -------- --------- ---------
Income (loss) before
income taxes......... (6,278) (5,731) (4,129) (1,044) 148
Provision for income
taxes.................... 351 1,289 286 82 56
-------- -------- -------- --------- ---------
Net income (loss)..... $ (6,629) $ (7,020) $ (4,415) $ (1,126) $ 92
======== ======== ======== ========= =========
Pro forma net income
(loss) per share......... $ (0.25) $ 0.01
======== =========
Pro forma number of shares
used in per share
calculations............. 17,432 20,018
======== =========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-4
<PAGE>
RAMBUS INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT
FOR THE YEARS ENDED SEPTEMBER 30, 1994, 1995 AND 1996
AND FOR THE THREE MONTHS ENDED DECEMBER 31, 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
CONVERTIBLE
PREFERRED STOCK COMMON STOCK ADDITIONAL CUMULATIVE
----------------- -------------- PAID-IN ACCUMULATED TRANSLATION
SHARES AMOUNT SHARES AMOUNT CAPITAL DEFICIT ADJUSTMENT TOTAL
--------- ------- ------ ------ ---------- ----------- ----------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balances, September 30,
1993................... 7,697 $ 8 4,067 $ 4 $ 8,049 $(16,427) $ 15 $ (8,351)
Issuance of common
stock upon exercise of
options............... -- -- 1,248 1 226 -- -- 227
Repurchase of common
stock for cash........ -- -- (165) -- (6) -- -- (6)
Issuance of Series B
preferred stock....... 467 -- -- -- 999 -- -- 999
Issuance of Series C
preferred stock, net
of issuance costs of
$7.................... 1,250 1 -- -- 3,742 -- -- 3,743
Foreign currency
translation
adjustments........... -- -- -- -- -- -- 12 12
Net loss............... -- -- -- -- -- (6,630) -- (6,630)
--------- ------ ----- --- ------- -------- ---- --------
Balances, September 30,
1994................... 9,414 9 5,150 5 13,010 (23,057) 27 (10,006)
Issuance of common
stock upon exercise of
options............... -- -- 499 1 189 -- -- 190
Issuance of Series D
preferred stock, net
of issuance costs of
$35................... 1,883 2 -- -- 7,963 -- -- 7,965
Repurchase of common
stock for cash........ -- -- (88) -- (3) -- -- (3)
Sale of Series A
preferred stock
purchase rights....... -- -- -- -- 936 -- -- 936
Foreign currency
translation
adjustments........... -- -- -- -- -- -- 2 2
Net loss............... -- -- -- -- -- (7,020) -- (7,020)
--------- ------ ----- --- ------- -------- ---- --------
Balances, September 30,
1995................... 11,297 11 5,561 6 22,095 (30,077) 29 (7,936)
Issuance of common
stock upon exercise of
options............... -- -- 212 -- 239 -- -- 239
Repurchase of common
stock for cash........ -- -- (14) -- (4) -- -- (4)
Foreign currency
translation
adjustments........... -- -- -- -- -- -- (28) (28)
Net loss............... -- -- -- -- -- (4,415) -- (4,415)
--------- ------ ----- --- ------- -------- ---- --------
Balances, September 30,
1996................... 11,297 11 5,759 6 22,330 (34,492) 1 (12,144)
Issuance of common
stock upon exercise of
options............... -- -- 320 -- 414 -- -- 414
Foreign currency
translation
adjustments........... -- -- -- -- -- -- (19) (19)
Net income............. -- -- -- -- -- 92 -- 92
--------- ------ ----- --- ------- -------- ---- --------
Balances, December 31,
1996 (unaudited)....... 11,297 $ 11 6,079 $ 6 $22,744 $(34,400) $(18) $(11,657)
========= ====== ===== === ======= ======== ==== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-5
<PAGE>
RAMBUS INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED SEPTEMBER 30, DECEMBER 31,
---------------------------- --------------------
1994 1995 1996 1995 1996
-------- -------- -------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows from operating
activities:
Net income (loss)......... $ (6,629) $ (7,020) $ (4,415) $ (1,126) $ 92
Adjustments to reconcile
net income (loss) to net
cash provided by (used
in) operating activities:
Depreciation and
amortization........... 1,670 1,552 1,194 276 326
Other................... (37) 36 82 22 20
Change in operating
assets and liabilities:
Accounts receivable... 895 (1,096) 488 961 (2,201)
Other current assets.. 409 (226) (33) 43 2
Other assets.......... 225 191 130 56 141
Accounts and taxes
payable, accrued
payroll and other
liabilities.......... (325) (243) 54 147 503
Deferred revenue...... 1,990 8,096 (1,036) (1,415) 2,989
-------- -------- -------- --------- ---------
Net cash provided by
(used in) operating
activities......... (1,802) 1,290 (3,536) (1,036) 1,872
-------- -------- -------- --------- ---------
Cash flows from investing
activities:
Purchase of property and
equipment................ (450) (1,227) (1,952) (224) (530)
Proceeds from sale of
property and equipment... 350 516 467 59
Purchases of marketable
securities............... (12,501) (27,611) (20,050) (4,387) (6,369)
Maturities of marketable
securities............... 9,000 17,939 25,410 4,884 5,362
-------- -------- -------- --------- ---------
Net cash provided by
(used in) investing
activities......... (3,601) (10,383) 3,875 332 (1,537)
-------- -------- -------- --------- ---------
Cash flows from financing
activities:
Issuance of Series B
preferred stock.......... 1,000 -- -- -- --
Issuance of Series C
preferred stock.......... 3,743 -- -- -- --
Issuance of Series D
preferred stock.......... -- 7,965 -- -- --
Sale of convertible
preferred stock purchase
rights................... -- 936 -- -- --
Issuance of common stock.. 227 189 239 88 414
Repurchase of common
stock.................... (6) (3) (4) -- --
Proceeds from bank loans.. -- -- -- -- 794
Principal payments on
capital lease
obligations.............. (486) (565) (781) (142) (158)
-------- -------- -------- --------- ---------
Net cash provided by
(used in) financing
activities......... 4,478 8,522 (546) (54) 1,050
-------- -------- -------- --------- ---------
Foreign currency translation
adjustment................. 12 2 (28) (7) (19)
-------- -------- -------- --------- ---------
Net decrease in cash and
cash equivalents........... (913) (569) (235) (765) 1,366
Cash and cash equivalents at
beginning of period........ 2,459 1,546 977 977 742
-------- -------- -------- --------- ---------
Cash and cash equivalents at
end of period.............. $ 1,546 $ 977 $ 742 $ 212 $ 2,108
======== ======== ======== ========= =========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-6
<PAGE>
RAMBUS INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. FORMATION AND BUSINESS OF THE COMPANY:
Rambus Inc. and Subsidiary (the Company) designs, develops, licenses and
markets high-speed chip-to-chip interface technology to enhance the
performance and cost-effectiveness of consumer electronics, computer systems
and other electronic systems. The Company licenses semiconductor companies to
manufacture and sell memory and logic ICs incorporating Rambus interface
technology and markets its solution to systems vendors to encourage them to
design Rambus interface technology into their products. The Company's
technology cost-effectively increases the data transfer rate, or memory
bandwidth, allowing semiconductor memory devices to keep pace with faster
generations of processors and controllers and thus supports the accelerating
data transfer requirements of multimedia and other high-bandwidth
applications.
The Company was incorporated on March 9, 1990 in California. In February
1997, the Company's Board of Directors approved the reincorporation of the
Company in Delaware. Note 17 sets out the details of the reincorporation.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Financial Statement Presentation:
The accompanying consolidated financial statements include the accounts of
the Company and its wholly owned subsidiary, Rambus K.K., located in Tokyo,
Japan. All intercompany accounts and transactions have been eliminated in the
accompanying consolidated financial statements. Identifiable assets and
revenues of the subsidiary are not significant.
Certain reclassifications have been made to the fiscal 1994 financial
statement amounts to conform to the fiscal 1995 and 1996 presentation. The
reclassifications have no effect on previously reported net loss,
stockholders' deficit, total assets or total liabilities.
Use of Estimates:
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Revenue Recognition:
The Company has entered into nonexclusive technology agreements with
semiconductor licensees. Generally, these agreements provide a license to use
the Company's proprietary technology and to receive engineering implementation
services, customer support, and enhancements in exchange for milestone
payments during integration of the technology as well as royalties based on
product sales.
The contract fees for the services provided under these agreements are
comprised of license fees, engineering service fees and nonrefundable, prepaid
royalties. The contract fees are bundled together as the Company generally
does not provide or price these services separately. Accordingly, the revenues
from such contract fees are recognized ratably over the period during which
the post-contract customer support is expected to be provided.
The Company recognizes royalties upon notification of sale by its licensees.
F-7
<PAGE>
RAMBUS INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED):
Research and Development:
Costs incurred in research and development are expensed as incurred.
Income Taxes:
The Company accounts for income taxes under the liability method whereby
deferred tax asset or liability account balances are calculated at the balance
sheet date using current laws and rates in effect. Research and development
credits are accounted for using the flow-through method.
Computation of Historical Net Income (Loss) Per Share and Pro Forma Net
Income (Loss) Per Share:
Historical net income (loss) per share is computed using the weighted
average number of common and dilutive common equivalent shares outstanding
during the period. Dilutive common equivalent shares consist of the
incremental common shares issuable upon conversion of convertible preferred
stock (using the "if converted" method) and stock options and warrants (using
the treasury stock method) as if converted for all periods.
The Company has computed common and common equivalent shares in determining
the number of shares used in calculating net income (loss) per share for all
periods presented pursuant to the Securities and Exchange Commission Staff
Accounting Bulletin (SAB) No. 83. SAB 83 requires the Company to include all
common shares and all common share equivalents issued during the 12 month
period preceding the filing date of an initial public offering in its
calculation of the number of shares used to determine net income (loss) per
share as if the shares had been outstanding for all periods presented.
Pro forma net income (loss) per share for the year ended September 30, 1996
and the three months ended December 31, 1996 assumes the common shares
issuable upon conversion of the outstanding convertible preferred stock have
been outstanding during such periods.
Historical net income (loss) per share is as follows (in thousands, except
per share data):
<TABLE>
<CAPTION>
(UNAUDITED)
THREE MONTHS
YEAR ENDED SEPTEMBER ENDED
30, DECEMBER 31,
------------------------- ---------------
1994 1995 1996 1995 1996
------- ------- ------- ------- ------
<S> <C> <C> <C> <C> <C>
Net income (loss)............... $(6,629) $(7,020) $(4,415) $(1,126) $ 92
======= ======= ======= ======= ======
Net income (loss) per share..... $ (1.28) $ (1.23) $ (0.72) $ (0.19) $ 0.01
======= ======= ======= ======= ======
Number of shares used in per
share calculation.............. 5,172 5,713 6,135 6,045 20,018
======= ======= ======= ======= ======
</TABLE>
Cash and Cash Equivalents:
Cash equivalents are highly liquid investments with original or remaining
maturities of three months or less at the date of purchase. Cash equivalents
present risk of changes in value because of interest rate changes. The Company
maintains its cash balances with high quality financial institutions and has
not experienced any material losses relating to any investment instruments.
F-8
<PAGE>
RAMBUS INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED):
Marketable Securities:
Available-for-sale securities are carried at fair value, based on quoted
market prices, with the unrealized gains or losses, net of tax, reported in
stockholders' deficit. The amortized cost of debt securities is adjusted for
amortization of premiums and accretion of discounts to maturity, both of which
are included in interest income. Realized gains and losses are recorded on the
specific identification method.
Fair Value of Financial Instruments:
The amounts reported for cash equivalents, receivables and other financial
instruments are considered to approximate fair values based upon comparable
market information available at the respective balance sheet dates.
Property and Equipment:
Property and equipment are stated at cost and depreciated on a straight-line
basis over estimated useful lives of three to five years. Leasehold
improvements and property under capital leases are amortized on a straight-
line basis over the shorter of their estimated useful lives or the terms of
the leases. Upon disposal, assets and related accumulated depreciation are
removed from the accounts and the related gain or loss is included in results
from operations.
Foreign Currency Translation:
The functional currency for the Company's foreign operation in Japan is the
Japanese yen. The translation from the Japanese yen to U.S. dollars is
performed for balance sheet accounts using current exchange rates in effect at
the balance sheet date and for revenue and expense accounts using the weighted
average exchange rate during the period. Adjustments resulting from such
translation are reflected as a separate component of stockholders' deficit.
Gains or losses resulting from foreign currency transactions are included in
the results of operations.
Unaudited Interim Financial Information:
The accompanying interim consolidated balance sheet as of December 31, 1996
and the consolidated statements of operations and cash flows for the three
months ended December 31, 1995 and 1996 together with the related notes are
unaudited but include all adjustments, consisting of only normal recurring
adjustments, which the Company considers necessary to present fairly, in all
material aspects, the consolidated financial position, the results of
operations and cash flows for the period ended December 31, 1995 and 1996.
Results for the three months ended December 31, 1995 and 1996 are not
necessarily indicative of results for an entire year.
New Pronouncements:
During March 1995, the Financial Accounting Standards Board issued Statement
No. 121 (SFAS 121), "Accounting for the Impairment of Long-Lived Assets and
for Long-Lived Assets to Be Disposed Of," which requires the Company to review
the impairment of long-lived assets, certain identifiable intangibles, and
goodwill related to those assets whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be recoverable. SFAS 121
will become effective for the Company's 1997 fiscal year. The Company does not
expect SFAS 121 to have a material impact on the Company's financial condition
or results of operations.
Statement of Financial Accounting Standards No. 123 (SFAS 123) "Accounting
for Stock-Based Compensation," encourages, but does not require, companies to
record compensation cost for stock-based compensation plans at fair value. The
Company has chosen to continue to account for employee stock options
F-9
<PAGE>
RAMBUS INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED):
using the intrinsic value method prescribed by APB Opinion No. 25, "Accounting
for Stock Issued to Employees." Accordingly, compensation cost for stock
options is measured as the excess, if any, of the quoted market price of the
Company's stock at the date of the grant over the amount an employee must pay
to acquire the stock. The Company will provide pro forma disclosures for the
effect of this statement for the 1997 fiscal year.
3. BUSINESS RISKS AND CREDIT CONCENTRATION:
The Company operates in the intensely competitive semiconductor industry
which has been characterized by price erosion, rapid technological change,
short product life cycles, cyclical market patterns and heightened foreign and
domestic competition. Significant technological changes in the industry could
affect operating results adversely.
The Company markets and sells its technology to a narrow base of customers
and generally does not require collateral. At December 31, 1996, three
customers accounted for 52%, 25% and 17% of accounts receivable, respectively.
At September 30, 1996, three customers accounted for 59%, 21% and 17% of
accounts receivable. At September 30, 1995, three customers accounted for 42%,
41% and 17% of accounts receivable.
As of December 31, 1995 and 1996, the Company's cash and cash equivalents
are deposited with principally one financial institution in the form of demand
deposits and money market accounts.
Financial instruments that potentially subject the Company to concentrations
of credit risk comprise principally cash and cash equivalents, available-for-
sale securities and trade accounts receivable. The Company invests its excess
cash primarily in commercial paper, U.S. government agency and treasury notes
that mature within one year.
4. MARKETABLE SECURITIES:
All marketable securities are classified as available-for-sale and are
summarized as follows (in thousands):
<TABLE>
<CAPTION>
SEPTEMBER 30,
-------------- DECEMBER 31,
1995 1996 1996
------- ------ ------------
(UNAUDITED)
<S> <C> <C> <C>
United States government debt securities..... $ 4,344 $2,442 $1,473
U.S. treasury bills.......................... 3,366 -- --
Corporate debt securities.................... 5,463 5,370 7,347
------- ------ ------
$13,173 $7,812 $8,820
======= ====== ======
</TABLE>
All marketable debt securities classified as current have scheduled
maturities of less than one year. The cost of marketable securities
approximates the fair value of the securities.
F-10
<PAGE>
RAMBUS INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
5. PROPERTY AND EQUIPMENT:
Property and equipment, net is comprised of the following (in thousands):
<TABLE>
<CAPTION>
SEPTEMBER 30,
---------------- DECEMBER 31,
1995 1996 1996
------- ------- ------------
(UNAUDITED)
<S> <C> <C> <C>
Computer equipment........................ $ 2,962 $ 3,684 $ 4,088
Computer software......................... 1,977 2,771 2,894
Furniture and fixtures.................... 546 818 821
Leasehold improvements.................... 170 272 272
------- ------- -------
5,655 7,545 8,075
Less accumulated depreciation and
amortization............................. (4,057) (5,205) (5,531)
------- ------- -------
$ 1,598 $ 2,340 $ 2,544
======= ======= =======
</TABLE>
Depreciation and amortization expense was approximately $1,295,000,
$1,288,000, $1,148,000, $250,000 and $326,000 in the years ended September 30,
1994, 1995 and 1996 and the three months ended December 31, 1995 and 1996,
respectively.
Property and equipment acquired under capital leases included above is
comprised of (in thousands):
<TABLE>
<CAPTION>
SEPTEMBER 30,
---------------- DECEMBER 31,
1995 1996 1996
------- ------- ------------
(UNAUDITED)
<S> <C> <C> <C>
Computer equipment.......................... $ 2,514 $ 2,302 $ 2,302
Furniture and fixtures...................... 460 403 403
------- ------- -------
2,974 2,705 2,705
Less accumulated amortization............... (2,164) (1,989) (2,108)
------- ------- -------
$ 810 $ 716 $ 597
======= ======= =======
</TABLE>
6. INVESTMENT:
In December 1996, the Company licensed technology to Monolithic System
Technology, Inc. (MoSys) in exchange for a cash payment of $50,000 and 184,617
shares of MoSys common stock valued at $1,200,000. These shares represented a
1% equity interest in MoSys at the time of issuance.
7. ACCOUNTS AND TAXES PAYABLE, ACCRUED PAYROLL AND OTHER LIABILITIES:
Accounts and taxes payable, accrued payroll and other liabilities consist of
the following (in thousands):
<TABLE>
<CAPTION>
SEPTEMBER 30,
------------- DECEMBER 31,
1995 1996 1996
------ ------ ------------
(UNAUDITED)
<S> <C> <C> <C>
Accounts payable................................ $ 110 $ 228 $ 480
Taxes payable................................... 82 84 138
Accrued payroll and related accruals............ 231 338 609
Other liabilities............................... 690 587 532
------ ------ ------
$1,113 $1,237 $1,759
====== ====== ======
</TABLE>
F-11
<PAGE>
RAMBUS INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
8. CAPITAL LEASE OBLIGATIONS:
The Company has leased equipment under capital lease obligations maturing
through fiscal year 1999. The lease agreements require the Company to maintain
liability and property insurance.
At September 30, 1996, future minimum annual payments due under the capital
lease obligations are as follows (in thousands):
<TABLE>
<CAPTION>
FISCAL YEAR:
------------
<S> <C>
1997............................................................ $ 913
1998............................................................ 458
1999............................................................ 153
------
Minimum lease payments.......................................... 1,524
Less amount representing interest............................... (227)
------
Total minimum payments.......................................... 1,297
Less amount due in one year..................................... (753)
------
Long term amount due after one year............................. $ 544
======
</TABLE>
9. LEASE COMMITMENTS AND COMMITMENTS TO THE COMPANY'S FOUNDERS:
The Company leases its office facilities under an operating lease agreement
that expires February 28, 2005. Under the terms of this lease, the Company is
also responsible for taxes, insurance and utilities. As of September 30, 1996,
aggregate future minimum payments under this lease are (in thousands):
<TABLE>
<CAPTION>
FISCAL YEAR:
------------
<S> <C>
1997............................................................ $ 645
1998............................................................ 660
1999............................................................ 682
2000............................................................ 698
2001............................................................ 720
Thereafter...................................................... 2,589
------
Total minimum lease payments.................................... $5,994
======
</TABLE>
Rent expense was approximately $320,000, $581,000, $736,000, $185,000 and
$188,000 for the years ended September 30, 1994, 1995 and 1996 and for the
three months ended December 31, 1995 and 1996, respectively.
Rambus Partners
Under an agreement signed in March 1990, the Company secured certain patent
rights and technology from its founders. The Company committed, under this
agreement, to pay to the founders up to a total of 24% of amounts received
from any licensing of the patent rights and technology to third parties.
Subsequently, the founders assigned their rights to receive payments to Rambus
Partners, an entity wholly owned by the founders. In September 1992, the
Company acquired Rambus Partners in exchange for 978,260 shares of the
Company's common stock. In addition the Company assumed option obligations for
a total of 146,739 shares of the Company's common stock.
F-12
<PAGE>
RAMBUS INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
9. LEASE COMMITMENTS AND COMMITMENTS TO THE COMPANY'S FOUNDERS--(CONTINUED):
In September 1992, the Company also entered into agreements to pay certain
cash amounts to the founders. The total amounts paid to the founders under
these agreements were approximately $244,000 in each of the fiscal years 1994,
1995 and 1996. No amounts were paid during the three months ended December 31,
1996. Included in the accompanying balance sheets under the caption other
current liabilities are amounts payable to the founders of approximately
$244,000 at September 30, 1995, September 30, 1996 and December 31, 1996,
respectively. The associated deferred amounts to the founders totaling
$679,000, $456,000 and $400,000 at September 30, 1995 and 1996 and December
31, 1996, respectively, include $223,000 classified in other current assets
for each period with the remaining balance classified in other assets.
10. STOCKHOLDERS' DEFICIT:
Convertible Preferred Stock:
Holders of Series A, B, C and D preferred stock are entitled to preferential
noncumulative dividends generally at a rate not to exceed $.032, $.1712, $.24
and $.34 per share, respectively, if and when declared by the Board of
Directors. No dividends have been declared as of September 30, 1996. The
holders of Series A, B, C and D shares have liquidation preferences of $.40,
$2.14, $3.00 and $4.25 per share, respectively, plus an amount equal to all
declared but unpaid dividends. Preferred stockholders are entitled to one vote
for each share of common stock into which the preferred stock is convertible.
Additionally, preferred stockholders are entitled to elect two directors.
At the option of the holder, each share of preferred stock is convertible on
a one-for-one basis (subject to certain adjustments) into common stock. The
shares will automatically convert into common stock concurrent with the
closing of an underwritten public offering of common stock under the
Securities Act of 1933, as amended, with minimum proceeds of $7,500,000 and a
minimum price per share of $4.25 (subject to certain adjustments).
In 1990, the Company entered into an agreement with Intel Corporation, under
which it issued shares of Series A Preferred Stock to Intel. The shares issued
were subject to Rambus' assignable right to repurchase the shares, under
certain circumstances, at the original price paid by Intel. In 1995, this
right of repurchase was sold by the Company to entities affiliated with
Kleiner, Perkins, Caufield & Byers, Mohr, Davidow Ventures, Merrill, Pickard,
Anderson & Eyre, Integral Capital Partners and Dominion Income Management
Corp. for an aggregate of $936,012. These entities then exercised the right
and purchased the Rambus Series A Preferred Stock from Intel. The proceeds to
the Company are included in additional paid-in capital in the accompanying
balance sheet.
At September 30, 1996, convertible preferred stock consists of the following
(in thousands):
<TABLE>
<CAPTION>
COMMON
STOCK
SHARES RESERVED
SHARES ISSUED AND PROCEEDS FOR LIQUIDATION
SERIES AUTHORIZED OUTSTANDING (NET) CONVERSION VALUE
------ ---------- ----------- -------- ---------- -----------
<S> <C> <C> <C> <C> <C>
A.................. 5,400 5,361 $ 3,678 5,361 $ 2,144
B ................. 2,804 2,804 5,977 2,804 6,000
C ................. 1,250 1,250 3,743 1,250 3,750
D.................. 1,882 1,882 7,965 1,882 8,000
------ ------ ------- ------ -------
11,336 11,297 $21,363 11,297 $19,894
====== ====== ======= ====== =======
</TABLE>
F-13
<PAGE>
RAMBUS INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
10. STOCKHOLDERS' DEFICIT--(CONTINUED):
Common Stock:
Founders of the Company received an aggregate of 2,182,653 shares of common
stock upon incorporation of the Company in exchange for the assignment of
patent rights and technology. These shares were subject to the Company's right
of repurchase under a Stock Restriction Agreement. During fiscal 1994, the
Company amended the Stock Restriction Agreement. In accordance with the
amendment, the Company repurchased 165,000 shares of its common stock at $.04
per share and the Company's right of repurchase with respect to the remaining
shares expired. During fiscal 1995, the Company repurchased an additional
88,000 shares of common stock from founders at a price of $.04 per share.
As of September 30, 1996, a total of 261,283 common shares held by employees
were subject to repurchase.
In September 1996, the Company's Board of Directors, subject to stockholder
approval, increased the number of authorized shares of common stock to
22,500,000.
Stock Option Plan:
In March 1990, the Company adopted the 1990 Stock Option Plan under which
2,657,143 shares of common stock were reserved for issuance. Incentive stock
options may be granted with exercise prices of no less than fair market value,
and nonqualified stock options may be granted with exercise prices of no less
than 85% of the fair market value of the common stock on the grant date, as
determined by the Board of Directors. Grants to employees of the Company who
are also directors of the Company may not exceed 800,000 shares of common
stock. The options generally vest over a four-year period but may be exercised
immediately subject to repurchase by the Company for those options that are
not vested. Vesting periods are determined by the Board of Directors at the
date of grant.
During 1992 and 1994, the 1990 Stock Option Plan was amended to authorize
the granting of options which shall vest within one year from the date that
certain options previously granted to the optionee (as defined in the Plan)
have vested in full. Pursuant to requirements imposed by the California
Department of Corporations, these options may be granted only to those
employees whose annual compensation exceeds $60,000 per year. The total number
of shares reserved for these options is 950,000.
F-14
<PAGE>
RAMBUS INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
10. STOCKHOLDERS' DEFICIT--(CONTINUED):
At September 30, 1996 and December 31, 1996, the total number of shares
reserved for the 1990 Stock Option Plan, excluding those previously exercised
under the Plan, is 4,170,902 and 3,850,993, respectively.
A summary of options granted under the plan is as follows:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING
SHARES -----------------------
AVAILABLE NUMBER OF PRICE
FOR GRANT SHARES PER SHARE
---------- ---------- -----------
<S> <C> <C> <C>
Outstanding at September 30, 1993......... 665,807 2,606,689 $ .04-$ .25
Shares reserved........................... 967,857 -- --
Options granted........................... (1,063,700) 1,063,700 $ .25-$1.00
Options canceled.......................... 64,637 (64,637) $.25
Options exercised......................... -- (1,247,995) $ .04-$ .40
---------- ----------
Outstanding at September 30, 1994......... 634,601 2,357,757 $ .04-$1.00
Shares reserved........................... 875,000 -- --
Options granted........................... (1,204,900) 1,204,900 $1.00-$3.00
Options canceled.......................... 37,513 (37,513) $ .25-$1.00
Options exercised......................... -- (498,789) $ .13-$1.00
---------- ----------
Outstanding at September 30, 1995......... 342,214 3,026,355 $ .04-$3.00
Shares reserved........................... 1,000,000 -- --
Options granted........................... (347,500) 347,500 $3.00-$5.00
Options canceled.......................... 70,738 (70,738) $ .25-$3.00
Options exercised......................... -- (197,667) $ .04-$4.00
---------- ----------
Outstanding at September 30, 1996......... 1,065,452 3,105,450 $ .04-$5.00
Options granted........................... (516,500) 516,500 $5.00-$7.00
Options exercised......................... -- (319,909) $ .04-$5.00
---------- ----------
Outstanding at December 31, 1996
(unaudited).............................. 548,952 3,302,041 $ .04-$7.00
========== ==========
</TABLE>
At September 30, 1996 and December 31, 1996, options for the purchase of
1,385,519 and 1,287,087 shares, respectively, were exercisable without
repurchase from the Company.
11. EMPLOYEE BENEFIT PLANS:
The Company has a 401(k) Profit Sharing Plan (the "Plan") qualified under
Section 401(k) of the Internal Revenue Code of 1986. Each eligible employee
may elect to contribute up to 20% of the employee's annual compensation to the
Plan. The Company, at the discretion of its Board of Directors, may match
employee contributions to the Plan but has not done so for the years ended
September 30, 1994, 1995 and 1996.
F-15
<PAGE>
RAMBUS INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
12. INCOME TAXES:
The provision for income taxes comprises (in thousands):
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
--------------------------
1994 1995 1996
----------------- --------
<S> <C> <C> <C>
Foreign withholding tax:
Current........................................ $ 350 $ 1,235 $ 270
Federal:
Current........................................ -- 40 --
State:
Current........................................ 1 14 16
------- --------- -------
$ 351 $ 1,289 $ 286
======= ========= =======
</TABLE>
The Company's effective tax rate on pretax income differs from the U.S.
federal statutory regular tax rate as follows:
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
------------------------------
1994 1995 1996
-------- -------- --------
<S> <C> <C> <C>
Benefit at U.S. federal
statutory rate......... (34.0)% (34.0)% (34.0)%
Tax losses not currently
benefited.............. 34.0 34.0 34.0
Foreign withholding
tax.................... 5.6 21.6 6.5
Other................... -- 0.9 0.4
-------- -------- --------
5.6% 22.5% 6.9%
======== ======== ========
</TABLE>
At September 30, 1996, the Company has the following tax carryforwards which
expire as follows (in thousands):
<TABLE>
<CAPTION>
FEDERAL EXPIRES CALIFORNIA EXPIRES
------- --------- ---------- ---------
<S> <C> <C> <C> <C>
Net operating loss................. $8,900 2008-2009 $3,500 1998-2000
Foreign tax credits................ 2,440 1997-2001 -- --
Research and development credits... 562 2010 306 2010
</TABLE>
The utilization of the Company's tax carryforwards may be subject to certain
limitations in the case of an ownership change of the Company, as defined by
the tax laws.
F-16
<PAGE>
RAMBUS INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
12. INCOME TAXES--(CONTINUED):
The components of the net deferred tax assets are as follows (in thousands):
<TABLE>
<CAPTION>
SEPTEMBER 30,
------------------
1995 1996
-------- --------
<S> <C> <C>
Deferred tax assets:
Deferred revenue..................................... $ 8,909 $ 9,206
Deferred compensation................................ 185 98
Depreciation and amortization expense................ 345 174
Other liabilities and reserves....................... 590 220
Foreign tax credits.................................. 2,531 2,440
Research and development credits..................... 840 868
Net operating loss................................... 1,500 3,361
-------- --------
Total deferred tax asset........................... 14,900 16,367
Deferred tax liability:
Deferred royalty cost................................ (474) (296)
Valuation allowance.................................... (14,426) (16,071)
-------- --------
Net deferred tax asset............................. $ -- $ --
======== ========
</TABLE>
The Company has established a full valuation allowance against its deferred
tax assets due to the uncertainty surrounding the realization of such assets.
Management periodically evaluates the recoverability of the deferred tax
assets and recognizes the tax benefit only as reassessment demonstrates they
are realizable. At such time, if it is determined that it is more likely than
not that the deferred tax assets are realizable, the valuation allowance will
be reduced.
13. RELATED PARTY TRANSACTIONS:
Chromatic Research Inc. In February 1994, the Company licensed its interface
technology to Chromatic Research, Inc. ("Chromatic") a multimedia processor
design company. Under the terms of the license, Rambus received 626,053 shares
of Chromatic Series B Preferred Stock (representing 5% of the then outstanding
shares of Chromatic) and continuing royalties. Chromatic was formed in May
1993 (then called Xenon Microsystems Corporation) by, among others, Dr.
Farmwald who continues to serve as a director of, and consultant to, Chromatic
through the date hereof. Investors in Chromatic include affiliates of Mohr,
Davidow Ventures, Merrill, Pickard, Anderson & Eyre and Kleiner, Perkins,
Caufield & Byers. In connection with these investments in Chromatic, Dr.
Davidow and Mr. Dunlevie joined and continue to sit on the Board of Directors
of Chromatic. The initial valuation of the Chromatic stock, approximately
$626,000, has been fully written down by the Company. Revenue recognized as
license fees under this agreement was $69,000, $119,000 and $119,000 in the
years ended September 30, 1994, 1995 and 1996, respectively, and $30,000 for
the three months ended December 31, 1996. As of September 30, 1996 and
December 31, 1996, the remaining balance of approximately $319,000 and
$289,000, respectively, is included in deferred revenue.
F-17
<PAGE>
RAMBUS INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
14. BUSINESS SEGMENTS, EXPORTS AND MAJOR CUSTOMERS:
The Company operates in a single industry segment.
Six customers accounted for 82% and 75% of revenues in the years ended
September 30, 1995 and 1996, respectively. Four customers accounted for 76% of
revenues in the year ended September 30, 1994. Six customers accounted for 83%
and two customers accounted for 45% of revenues for the three months ended
December 31, 1995 and 1996, respectively.
The Company sells its technology to customers in the Far East and North
America. The net income and loss for all periods presented are derived
primarily from the Company's North American operations, which generates sales
to the following geographic region (in thousands):
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED SEPTEMBER 31, DECEMBER 31,
------------------------ -------------------
1994 1995 1996 1995 1996
------------------------ --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Far East...................... $ 4,499 $ 6,619 $ 9,692 $ 2,240 $ 4,671
North America................. 501 745 1,578 270 820
------- ------- -------- --------- ---------
$ 5,000 $ 7,364 $ 11,270 $ 2,510 $ 5,491
======= ======= ======== ========= =========
15. SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the periods for taxes and interest are indicated below (in
thousands):
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED SEPTEMBER 30, DECEMBER 31,
------------------------ -------------------
1994 1995 1996 1995 1996
------------------------ --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Taxes......................... $351 $ 1,266 $286 $82 $208
Interest...................... $296 $ 297 $298 $81 $ 64
</TABLE>
Supplemental schedule of noncash investing and financing activities:
The Company had no material noncash investing or financing activities in the
year ended September 30, 1996. Noncash investing and financing activities are
as follows (in thousands):
<TABLE>
<CAPTION>
YEAR ENDED THREE MONTHS
SEPTEMBER 30, ENDED
------------- DECEMBER 31,
1994 1995 1996
------------- ------------
(UNAUDITED)
<S> <C> <C> <C>
Acquisition of property equipment under
capital lease obligations.................... $ 158 $39 --
License of technology in exchange for common
stock........................................ $ 626 -- $1,200
</TABLE>
F-18
<PAGE>
RAMBUS INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONCLUDED)
16. PRO FORMA:
Upon the closing of an initial public offering of the Company's common stock
that meets the criteria set out in Note 10, all the convertible preferred
stock outstanding will convert into an aggregate of 11,296,822 shares of
common stock. At December 31, 1996, the unaudited pro forma stockholders'
deficit is adjusted for the conversion of the convertible preferred stock
outstanding at December 31, 1996 and is disclosed on the face of the
consolidated balance sheets.
17. SUBSEQUENT EVENTS:
On October 16, 1996, the Company entered into a loan and security agreement
with Silicon Valley Bank to borrow up to $1,000,000 to finance equipment and
tenant improvements. The loan matures in October 2000 and accrues interest at
prime rate plus 1%. Following the sale of equity securities with proceeds of
at least $15,000,000, the interest rate will decrease to prime rate plus 0.5%.
The loan is collateralized by the Company's assets and is subject to financial
covenants concerning liquidity, working capital, profitability and borrowings.
The Company is in compliance with such financial covenants at December 31,
1996. At December 31, 1996, the Company had borrowed approximately $794,000
under this agreement.
In November 1996, the Company entered into an agreement with Intel
Corporation for the development of high speed semiconductor memory interface
technology. As part of this agreement, the Company issued a warrant on January
7, 1997 to purchase 1,000,000 shares of common stock of the Company at a
purchase price of $10.00 per share. This warrant will become exercisable only
upon the achievement of certain specified performance milestones, which will
result in a charge to the statement of operations at the time achievement of
these milestones becomes probable for the excess of the then fair value of the
warrant over the exercise price.
In January 1997, the Board of Directors approved the reincorporation of the
Company in Delaware. Under the new Certificate of Incorporation in Delaware,
the Company is authorized to issue 60,000,000 shares of common stock and
16,336,096 shares of preferred stock at $.001 par value.
On February 28, 1997, the Board of Directors authorized management of the
Company to file a Registration Statement with the Securities and Exchange
Commission relating to a public offering of the Company's Common Stock. The
Board also approved the termination of the 1990 Stock Plan upon the completion
of the initial public offering, the adoption of a 1997 Employee Stock Purchase
Plan, and the adoption of a 1997 Stock Plan (see description below).
Additionally, the Board approved certain amendments to the Company's
Certificate of Incorporation and Bylaws (including the establishment of a
classified Board). The Board approved the creation of new Compensation
Committee, an Audit Committee and a Stock Option Committee. Finally, the Board
approved the establishment of a Stockholder Rights Plan pursuant to which each
holder of the Company's common stock shall receive a right to purchase one-
thousandth of a share of Series A Preferred Stock for $125 per right, subject
to a number of conditions. Such rights are subject to adjustment in the event
of a takeover or commencement of a tender offer not approved by the Board of
Directors.
The 1997 Employee Stock Purchase Plan authorizes the granting of stock
purchase rights to eligible employees during two-year offering periods with
exercise dates approximately every six months. The Company has reserved
400,000 shares of common stock for issuance under the plan. The first offering
period for the plan will commence on the effective date of this offering and
will end on the last trading day in the period ending April 30, 1999. Shares
are purchased through employees' payroll deductions at purchase prices equal
to 85% of the lesser of the fair market value of the Company's common stock at
either the first day of each offering period or the date of purchase.
F-19
<PAGE>
RAMBUS INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
17. SUBSEQUENT EVENTS--(CONTINUED) :
The 1997 Stock Plan authorizes the issuance of incentive stock options and
nonstatutory stock options to employees and nonstatutory stock options to
directors, employees or paid consultants of the Company. The Company has
reserved 1,000,000 shares of common stock for issuance under the plan. The
plan expires ten years after adoption, and the Board of Directors or a
committee designated by the Board of Directors has the authority to determine
to whom options will be granted, the number of shares, the vesting period and
the exercise price (which generally cannot be less than 100% of the fair
market value at the date of grant for incentive stock options). The options
are exercisable at times and in increments as specified by the Board of
Directors, and expire not more than ten years from date of grant.
F-20
<PAGE>
LOGO
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the costs and expenses, other than
underwriting discounts and commissions, payable by the Registrant in
connection with the sale of the Common Stock being registered hereby. All
amounts are estimates except the SEC registration fee and the NASD filing fee.
<TABLE>
<CAPTION>
AMOUNT TO BE
PAID BY
REGISTRANT
------------
<S> <C>
SEC Registration Fee......................................... $10,455
NASD Filing Fee.............................................. 3,950
Nasdaq National Market Application Fee....................... *
Printing..................................................... *
Legal Fees and Expenses...................................... *
Accounting Fees and Expenses................................. *
Director and Officer Liability Insurance..................... *
Blue Sky Fees and Expenses................................... *
Custodial Fees............................................... *
Transfer Agent and Registrar Fees............................ *
Miscellaneous................................................ *
-------
Total.................................................... $ *
=======
</TABLE>
- --------
* To be filed by amendment
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the Delaware General Corporation Law Code authorizes a court
to award, or a corporation's Board of Directors to grant, indemnity to
directors and officers in terms sufficiently broad to permit such
indemnification under certain circumstances for liabilities (including
reimbursement for expenses incurred) arising under the Securities Act of 1933,
as amended (the "Securities Act"). Article X of the Registrant's Amended and
Restated Certificate of Incorporation and Article VI of the Registrant's
Bylaws provide for mandatory indemnifications of its directors and officers
and permissible indemnifications of employees and offer agents to the maximum
extent permitted by the Delaware General Corporation Law. In addition, the
Registrant has entered into Indemnification Agreements with its officers and
directors. Reference is also made to Section of the Underwriting Agreement,
which provides for the indemnification of officers, directors and controlling
persons of the Registrant against certain liabilities and Section of the
Rights Agreement, which provides for the cross indemnification of certain of
the Registrant's stockholders and the Registrant, its officers and directors
against certain liabilities under the Securities Act or otherwise.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
In the three years prior to the effective date of this Registration
Statement, the Registrant has issued and sold the following unregistered
securities:
1. During the period from February 28, 1994 through February 28, 1997, the
Registrant granted options to purchase an aggregate of 2,790,900 shares
of Common Stock to directors, employees and consultants pursuant to the
Registrant's 1990 Option Plan in reliance on Rule 701 promulgated under
the Securities Act.
II-1
<PAGE>
2. On February 24, 1995, the Registrant issued and sold 1,882,353 shares of
Series D Preferred Stock in a private placement to one accredited
individual and to one institutional investor for an aggregate
consideration of $8,000,000.25 in cash. Sales of Series D Preferred
Stock were made in reliance on the exemption from registration provided
by Section 4(2) of the Securities Act.
3. On January 7, 1997, the Registrant issued a warrant to purchase up to
1,000,000 shares of Common Stock at an exercise price of $10.00 per
share to Intel Corporation in connection with the development and
licensing arrangement entered into between the two companies in November
1996. The warrant expires, if not earlier exercised, no later than
January 7, 2005.
II-2
<PAGE>
ITEM 16. EXHIBITS
(A) EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
------- -----------------------
<C> <S>
1.1 Form of Underwriting Agreement (draft dated March 5, 1997).
3.1* Form of Amended and Restated Certificate of Incorporation of
Registrant filed March , 1997.
3.2 Certificate of Designation of Rights, Preferences and Privileges of
Series E Participating Preferred Stock of Registrant.
3.3** Form of Amended and Restated Certificate of Incorporation of
Registrant to be filed upon the closing of the Offering made under
the Registration Statement.
3.4 Amended and Restated Bylaws of Registrant dated February 28, 1997.
4.1** Form of Registrant's Common Stock Certificate.
4.2 Amended and Restated Information and Registration Rights Agreement,
dated as of January 7, 1997, between Registrant and the parties
indicated therein.
4.3 Form of Preferred Shares Rights Agreement dated , 1997.
4.4 Common Stock Purchase Warrant dated January 7, 1997.
5.1** Opinion of Wilson Sonsini Goodrich & Rosati, Professional
Corporation.
10.1 Form of Indemnification Agreement entered into by Registrant with
each of its directors and executive officers.
10.2** Semiconductor Technology License Agreement, dated as of July 4,
1991, between Registrant and NEC Corporation, including supplements
and amendments thereto.
10.3** Semiconductor Technology License Agreement, dated as of December 9,
1994, between Registrant and Goldstar Electron Co., Ltd, including
supplements and amendments thereto.
10.4** Semiconductor Technology License Agreement, dated as of November 15,
1996, between Registrant and Intel Corporation.
10.5 1990 Stock Plan, as amended, and related forms of agreements.
10.6 1997 Stock Plan and related forms of agreements.
10.7 1997 Employee Stock Purchase Plan and related forms of agreements.
10.8** Facilities Lease
10.9** Form of Promissory Note between the Registrant and certain executive
officers.
11.1 Statement of computation of Net Loss Per Share and As Adjusted Net
Loss Per Share.
21.1 .Subsidiaries of the Registrant.
23.1 Consent of Coopers & Lybrand L.L.P., Independent Auditors.
23.2** Consent of Wilson Sonsini Goodrich & Rosati, Professional
Corporation (included in Exhibit 5.1)
24.1 Power of Attorney (See page II-5).
27.1 Financial Data Schedule.
</TABLE>
- --------
* Final version filed with Delaware Secretary of State to be supplied by
amendment.
** To be supplied by amendment.
II-3
<PAGE>
ITEM 17. UNDERTAKINGS
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities
Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities
(other than the payment by the Registrant of expenses incurred or paid by a
director, officer or controlling person of the Registrant in the successful
defense of any action, suit or proceeding) is asserted by such director,
officer or controlling person in connection with the securities being
registered hereunder, the Registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question of whether such indemnification
by it is against public policy as expressed in the Securities Act and will be
governed by the final adjudication of such issue.
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act,
the information omitted from the form of this prospectus filed as part of
this Registration Statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
Registration Statement as of the time it was declared effective.
(2) For the purposes of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
The undersigned Registrant hereby undertakes to provide to the Underwriters
at the closing, as specified in the Underwriting Agreement, certificates in
such denomination and registered in such names as required by the Underwriters
to permit prompt delivery to each purchaser.
II-4
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF MOUNTAIN VIEW, STATE OF
CALIFORNIA, ON MARCH 6, 1997.
Rambus Inc.
By: /s/ Gary G. Harmon
----------------------------------
GARY G. HARMON
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears
below hereby constitutes and appoints Geoffrey R. Tate and Gary G. Harmon, and
each of them, his or her true and lawful agent, proxy and attorney-in-fact,
with full power of substitution and resubstitution, for him or her and in his
or her name, place and stead, in any and all capacities, to (i) act on, sign
and file with the Securities and Exchange Commission any and all amendments
(including post-effective amendments) to this registration statement together
with all schedules and exhibits thereto and any subsequent registration
statement filed pursuant to Rule 462(b) under the Securities Act of 1933, as
amended, together with all schedules and exhibits thereto, (ii) act on, sign
and file such certificates, instruments, agreements and other documents as may
be necessary or appropriate in connection therewith, (iii) act on and file any
supplement to any prospectus included in this registration statement or any
such amendment or any subsequent registration statement filed pursuant to Rule
462(b) under the Securities Act of 1933, as amended, and (iv) take any and all
actions which may be necessary or appropriate to be done, as fully for all
intents and purposes as he or she might or could do in person, hereby
approving, ratifying and confirming all that such agent, proxy and attorney-
in-fact or any of his substitutes may lawfully do or cause to be done by
virtue thereof.
IN ACCORDANCE WITH THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES STATED:
SIGNATURE TITLE DATE
/s/ Geoffrey R. Tate President, Chief March 6, 1997
- ------------------------------------- Executive Officer
GEOFFREY R. TATE and Director
(principal
executive officer)
/s/ Gary G. Harmon Vice President, March 6, 1997
- ------------------------------------- Finance and Chief
GARY G. HARMON Financial Officer
(principal
financial and
accounting officer)
/s/ William Davidow Chairman of the March 6, 1997
- ------------------------------------- Board
WILLIAM DAVIDOW
II-5
<PAGE>
SIGNATURE TITLE DATE
/s/ Bruce Dunlevie Director March 6, 1997
- -------------------------------------
BRUCE DUNLEVIE
/s/ Michael Farmwald Director March 6, 1997
- -------------------------------------
MICHAEL FARMWALD
/s/ Charles M. Geschke Director March 6, 1997
- -------------------------------------
CHARLES M. GESCHKE
/s/ Mark Horowitz Director March 6, 1997
- -------------------------------------
MARK HOROWITZ
II-6
<PAGE>
RAMBUS INC. AND SUBSIDIARY
SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
(IN THOUSANDS)
VALUATION ALLOWANCE FOR DOUBTFUL ACCOUNTS
<TABLE>
<CAPTION>
ADDITIONS
BALANCE CHARGED BALANCE
AT TO COSTS CHARGED AT END
BEGINNING AND TO OTHER OF
FOR THE YEAR ENDED: OF PERIOD EXPENSES ACCOUNTS DEDUCTIONS PERIOD
- ------------------- --------- --------- -------- ---------- -------
<S> <C> <C> <C> <C> <C>
------- ------ ---- ---- -------
September 30, 1994............ -- -- -- -- --
======= ====== ==== ==== =======
September 30, 1995............ -- -- -- -- --
======= ====== ==== ==== =======
September 30, 1996............ -- -- -- -- --
======= ====== ==== ==== =======
<CAPTION>
THREE MONTHS ENDED:
- -------------------
<S> <C> <C> <C> <C> <C>
December 31, 1996
(unaudited).................. -- -- -- -- --
======= ====== ==== ==== =======
VALUATION ALLOWANCE FOR DEFERRED TAX ASSET
<CAPTION>
ADDITIONS
BALANCE CHARGED BALANCE
AT TO COSTS CHARGED AT END
BEGINNING AND TO OTHER OF
FOR THE YEAR ENDED: OF PERIOD EXPENSES ACCOUNTS DEDUCTIONS PERIOD
- ------------------- --------- --------- -------- ---------- -------
<S> <C> <C> <C> <C> <C>
------- ------ ---- ---- -------
September 30, 1994............ $ 7,476 $3,326 -- -- $10,802
======= ====== ==== ==== =======
September 30, 1995............ $10,802 $3,624 -- -- $14,426
======= ====== ==== ==== =======
September 30, 1996............ $14,426 $1,645 -- -- $16,071
======= ====== ==== ==== =======
<CAPTION>
THREE MONTHS ENDED:
- -------------------
<S> <C> <C> <C> <C> <C>
December 31, 1996
(unaudited).................. $16,071 -- -- -- $16,071
======= ====== ==== ==== =======
</TABLE>
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION OF DOCUMENT PAGE
------- ----------------------- ------------
<C> <S> <C>
1.1 Form of Underwriting Agreement (draft dated March 5,
1997).
3.1* Form of Amended and Restated Certificate of
Incorporation of Registrant filed March , 1997.
3.2 Certificate of Designation of Rights, Preferences and
Privileges of Series E Participating Preferred Stock
of Registrant.
3.3** Form of Amended and Restated Certificate of
Incorporation of Registrant to be filed upon the
closing of the Offering made under the Registration
Statement.
3.4 Amended and Restated Bylaws of Registrant dated
February 28, 1997.
4.1** Form of Registrant's Common Stock Certificate.
4.2 Amended and Restated Information and Registration
Rights Agreement, dated as of January 7, 1997, between
Registrant and the parties indicated therein.
4.3 Form of Preferred Shares Rights Agreement dated ,
1997.
4.4 Common Stock Purchase Warrant dated January 7, 1997.
5.1** Opinion of Wilson Sonsini Goodrich & Rosati,
Professional Corporation.
10.1 Form of Indemnification Agreement entered into by
Registrant with each of its directors and executive
officers.
10.2** Semiconductor Technology License Agreement, dated as of
July 4, 1991, between Registrant and NEC Corporation,
including supplements and amendments thereto.
10.3** Semiconductor Technology License Agreement, dated as of
December 9, 1994, between Registrant and Goldstar
Electron Co., Ltd, including supplements and
amendments thereto.
10.4** Semiconductor Technology License Agreement, dated as of
November 15, 1996, between Registrant and Intel
Corporation.
10.5 1990 Stock Plan, as amended, and related forms of
agreements.
10.6 1997 Stock Plan and related forms of agreements.
10.7 1997 Employee Stock Purchase Plan and related forms of
agreements.
10.8** Facilities Lease
10.9** Form of Promissory Note between the Registrant and
certain executive officers.
11.1 Statement of computation of Net Loss Per Share and As
Adjusted Net Loss Per Share.
21.1 Subsidiaries of the Registrant.
23.1 Consent of Coopers & Lybrand L.L.P., Independent
Auditors.
23.2** Consent of Wilson Sonsini Goodrich & Rosati,
Professional Corporation (included in Exhibit 5.1).
24.1 Power of Attorney (See page II-5).
27.1 Financial Data Schedule.
</TABLE>
- --------
* Final version filed with Delaware Secretary of State to be supplied by
amendment.
** To be supplied by amendment.
<PAGE>
EXHIBIT 1.1
DRAFT DATED MARCH 5, 1997
_______________ Shares
RAMBUS INC.
Common Stock, $.001 Par Value
UNDERWRITING AGREEMENT
__________, 1997
<PAGE>
__________, 1997
Morgan Stanley & Co. Incorporated
Hambrecht & Quist LLC
Robertson, Stephens & Company LLC
c/o Morgan Stanley & Co. Incorporated
1585 Broadway
New York, New York 10036
Dear Sirs and Mesdames:
Rambus Inc., a Delaware corporation (the "Company"), proposes to issue and
sell to the several Underwriters named in Schedule I hereto (the
"Underwriters"), an aggregate of ______ shares of the Common Stock, $.001 par
value, of the Company (the "Firm Shares").
The Company also proposes to issue and sell to the several
Underwriters not more than an additional ________ shares of its Common Stock,
$.001 par value (the "Additional Shares"), if and to the extent that you, as
Managers of the offering, shall have determined to exercise, on behalf of the
Underwriters, the right to purchase such shares of common stock granted to the
Underwriters in Section 3 hereof. The Firm Shares and the Additional Shares are
hereinafter collectively referred to as the "Shares." The shares of Common
Stock, $.001 par value, of the Company to be outstanding after giving effect to
the sales contemplated hereby are hereinafter referred to as the "Common Stock."
The Company has filed with the Securities and Exchange Commission (the
"Commission") a registration statement, including a prospectus, relating to the
Shares. The registration statement as amended at the time it becomes effective,
including the information (if any) deemed to be part of the registration
statement at the time of effectiveness pursuant to Rule 430A under the
Securities Act of 1933, as amended (the "Securities Act"), is hereinafter
referred to as the "Registration Statement"; the prospectus in the form first
used to confirm sales of Shares is hereinafter referred to as the "Prospectus."
If the Company has filed an abbreviated registration statement to register
additional shares of Common Stock pursuant to Rule 462(b) under the Securities
Act (the "Rule 462 Registration Statement"), then any reference herein to the
term "Registration Statement" shall be deemed to include such Rule 462
Registration Statement.
l. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. THE COMPANY REPRESENTS
AND WARRANTS TO AND AGREES WITH EACH OF THE UNDERWRITERS THAT:
(a) The Registration Statement has become effective; no stop order
suspending the effectiveness of the Registration Statement is in effect, and no
proceedings for such purpose are pending before or threatened by the Commission.
(b) (i) The Registration Statement, when it became effective, did not
contain and, as amended or supplemented, if applicable, will not contain any
untrue statement of a material fact or
<PAGE>
omit to state a material fact required to be stated therein or necessary to make
the statements therein not misleading, (ii) the Registration Statement and the
Prospectus comply and, as amended or supplemented, if applicable, will comply in
all material respects with the Securities Act and the applicable rules and
regulations of the Commission thereunder and (iii) the Prospectus does not
contain and, as amended or supplemented, if applicable, will not contain any
untrue statement of a material fact or omit to state a material fact necessary
to make the statements therein, in the light of the circumstances under which
they were made, not misleading, except that the representations and warranties
set forth in this paragraph l(b) do not apply to statements or omissions in the
Registration Statement or the Prospectus based upon information relating to any
Underwriter furnished to the Company in writing by such Underwriter through you
expressly for use therein.
(c) The Company has been duly incorporated, is validly existing as a
corporation in good standing under the laws of the jurisdiction of its
incorporation, has the corporate power and authority to own its property and to
conduct its business as described in the Prospectus and is duly qualified to
transact business and is in good standing in each jurisdiction in which the
conduct of its business or its ownership or leasing of property requires such
qualification, except to the extent that the failure to be so qualified or be in
good standing would not have a material adverse effect on the Company and its
subsidiaries, taken as a whole. The execution and delivery of the Agreement and
Plan of Merger, dated as of ___________, 1997 (herein called the Merger
Agreement) between Rambus Inc., a California corporation (herein called the
California Corporation), and the Company, which will effect the reincorporation
of the California Corporation under the laws of the State of Delaware on
____________, 1997, was duly authorized by all necessary corporate action on the
part of each of the California Corporation and the Company. Each of the
California Corporation and the Company has all corporate power and authority to
execute and deliver the Merger Agreement, to file the Merger Agreement with the
Secretary of State of California and the Secretary of State of Delaware and to
consummate the reincorporation contemplated by the Merger Agreement, and the
Merger Agreement at the time of execution and filing constitute a valid and
binding obligation of each of the California Corporation and the Company,
enforceable in accordance with its terms.
(d) Each subsidiary of the Company has been duly incorporated, is
validly existing as a corporation in good standing under the laws of the
jurisdiction of its incorporation, has the corporate power and authority to own
its property and to conduct its business as described in the Prospectus and is
duly qualified to transact business and is in good standing in each jurisdiction
in which the conduct of its business or its ownership or leasing of property
requires such qualification, except to the extent that the failure to be so
qualified or be in good standing would not have a material adverse effect on the
Company and its subsidiaries, taken as a whole; all of the issued shares of
capital stock of each subsidiary of the Company have been duly and validly
authorized and issued, are fully paid and non-assessable and are owned directly
by the Company, free and clear of all liens, encumbrances, equities or claims.
(e) This Agreement has been duly authorized, executed and delivered by
the Company.
(f) The authorized capital stock of the Company conforms as to legal
matters to the description thereof contained in the Prospectus.
(g) The shares of Common Stock outstanding prior to the issuance of
the Shares to be sold by the Company have been duly authorized and are validly
issued, fully paid and non-assessable.
2
<PAGE>
(h) The Shares to be sold by the Company have been duly authorized
and, when issued and delivered in accordance with the terms of this Agreement,
will be validly issued, fully paid and non-assessable, and the issuance of such
Shares will not be subject to any preemptive or similar rights.
(i) The execution and delivery by the Company of, and the performance
by the Company of its obligations under, this Agreement will not contravene any
provision of applicable law or the certificate of incorporation or by-laws of
the Company or any agreement or other instrument binding upon the Company or any
of its subsidiaries that is material to the Company and its subsidiaries, taken
as whole, or any judgment, order or decree of any governmental body, agency or
court having jurisdiction over the Company or any subsidiary, and no consent,
approval, authorization or order of, or qualification with, any governmental
body or agency is required for the performance by the Company of its obligations
under this Agreement, except such as may be required by the securities or Blue
Sky laws of the various states in connection with the offer and sale of the
Shares.
(j) There has not occurred any material adverse change, or any
development involving a prospective material adverse change, in the condition,
financial or otherwise, or in the earnings, business or operations of the
Company and its subsidiaries, taken as a whole, from that set forth in the
Prospectus (exclusive of any amendments or supplements thereto subsequent to the
date of this Agreement).
(k) There are no legal or governmental proceedings pending or
threatened to which the Company or any of its subsidiaries is a party or to
which any of the properties of the Company or any of its subsidiaries is subject
that are required to be described in the Registration Statement or the
Prospectus and are not so described or any statutes, regulations, contracts or
other documents that are required to be described in the Registration Statement
or the Prospectus or to be filed as exhibits to the Registration Statement that
are not described or filed as required.
(l) Each preliminary prospectus filed as part of the registration
statement as originally filed or as part of any amendment thereto, or filed
pursuant to Rule 424 under the Securities Act, complied when so filed in all
material respects with the Securities Act and the applicable rules and
regulations of the Commission thereunder.
(m) The Company is not and, after giving effect to the offering and
sale of the Shares and the application of the proceeds thereof as described in
the Prospectus, will not be an "investment company" as such term is defined in
the Investment Company Act of 1940, as amended.
(n) The Company and its subsidiaries (i) are in compliance with any
and all applicable foreign, federal, state and local laws and regulations
relating to the protection of human health and safety, the environment or
hazardous or toxic substances or wastes, pollutants or contaminants
("Environmental Laws"), (ii) have received all permits, licenses or other
approvals required of them under applicable Environmental Laws to conduct their
respective businesses and (iii) are in compliance with all terms and conditions
of any such permit, license or approval, except where such noncompliance with
Environmental Laws, failure to receive required permits, licenses or other
approvals or failure to comply with the terms and conditions of such permits,
licenses or approvals would not, singly or in the aggregate, have a material
adverse effect on the Company and its subsidiaries, taken as a whole.
3
<PAGE>
(o) There are no costs or liabilities associated with Environmental
Laws (including, without limitation, any capital or operating expenditures
required for clean-up, closure of properties or compliance with Environmental
Laws or any permit, license or approval, any related constraints on operating
activities and any potential liabilities to third parties) which would, singly
or in the aggregate, have a material adverse effect on the Company and its
subsidiaries, taken as a whole.
(p) There are no contracts, agreements or understandings between the
Company and any person granting such person the right to require the Company to
file a registration statement under the Securities Act with respect to any
securities of the Company or to require the Company to include such securities
with the Shares registered pursuant to the Registration Statement.
(q) The Company has complied with all provisions of Section 517.075,
Florida Statutes relating to doing business with the Government of Cuba or with
any person or affiliate located in Cuba.
(r) Subsequent to the respective dates as of which information is
given in the Registration Statement and the Prospectus, (i) the Company and its
subsidiaries have not incurred any material liability or obligation, direct or
contingent, nor entered into any material transaction not in the ordinary course
of business; (ii) the Company has not purchased any of its outstanding capital
stock, nor declared, paid or otherwise made any dividend or distribution of any
kind on its capital stock other than ordinary and customary dividends; and (iii)
there has not been any material change in the capital stock, short-term debt or
long-term debt of the Company and its consolidated subsidiaries, except in each
case as described in or contemplated by the Prospectus.
(s) The Company and its subsidiaries have good and marketable title in
fee simple to all real property and good and marketable title to all personal
property owned by them which is material to the business of the Company and its
subsidiaries, in each case free and clear of all liens, encumbrances and defects
except such as are described in the Prospectus or such as do not materially
affect the value of such property and do not interfere with the use made and
proposed to be made of such property by the Company and its subsidiaries; and
any real property and buildings held under lease by the Company and its
subsidiaries are held by them under valid, subsisting and enforceable leases
with such exceptions as are not material and do not interfere with the use made
and proposed to be made of such property and buildings by the Company and its
subsidiaries, in each case except as described in or contemplated by the
Prospectus.
(t) The Company and its subsidiaries own or possess, or can acquire on
reasonable terms, all material patents, patent rights, licenses, inventions,
copyrights, know-how (including trade secrets and other unpatented and/or
unpatentable proprietary or confidential information, systems or procedures),
trademarks, service marks and trade names currently employed by them in
connection with the business now operated by them; the Company is not infringing
or otherwise violating any patent, copyright, trade secret, trademark, service
mark, trade name, technology, know-how or other proprietary information or
material of others; and neither the Company nor any of its subsidiaries has
received any notice of infringement of or conflict with asserted rights of
others with respect to any of the foregoing which, singly or in the aggregate,
if the subject of an unfavorable decision, ruling or finding, would result in
any material adverse change in the condition, financial or otherwise, or in the
earnings, business or operations of the Company and its subsidiaries, taken as a
whole.
(u) No material labor dispute with the employees of the Company or any
of its subsidiaries exists, except as described in or contemplated by the
Prospectus, or, to the knowledge of
4
<PAGE>
the Company, is imminent; and the Company is not aware of any existing,
threatened or imminent labor disturbance by the employees of any of its
principal suppliers, manufacturers or contractors that could result in any
material adverse change in the condition, financial or otherwise, or in the
earnings, business or operations of the Company and its subsidiaries, taken as a
whole.
(v) The Company and each of its subsidiaries are insured by insurers
of recognized financial responsibility against such losses and risks and in such
amounts as are prudent and customary in the businesses in which they are
engaged; neither the Company nor any such subsidiary has been refused any
insurance coverage sought or applied for; and neither the Company nor any such
subsidiary has any reason to believe that it will not be able to renew its
existing insurance coverage as and when such coverage expires or to obtain
similar coverage from similar insurers as may be necessary to continue its
business at a cost that would not materially and adversely affect the condition,
financial or otherwise, or the earnings, business or operations of the Company
and its subsidiaries, taken as a whole, except as described in or contemplated
by the Prospectus.
(w) The Company and its subsidiaries possess all certificates,
authorizations and permits issued by the appropriate federal, state or foreign
regulatory authorities necessary to conduct their respective businesses, and
neither the Company nor any such subsidiary has received any notice of
proceedings relating to the revocation or modification of any such certificate,
authorization or permit which, singly or in the aggregate, if the subject of an
unfavorable decision, ruling or finding, would result in a material adverse
change in the condition, financial or otherwise, or in the earnings, business or
operations of the Company and its subsidiaries, taken as a whole, except as
described in or contemplated by the Prospectus.
(x) Neither the Company nor any of its subsidiaries is in violation of
any federal or state law or regulation relating to occupational safety and
health or to the storage, handling or transportation of hazardous or toxic
materials and the Company and its subsidiaries have received all permits,
licenses or other approvals required of them under applicable federal and state
occupational safety and health and environmental laws and regulations to conduct
their respective businesses, and the Company and each such subsidiary is in
compliance with all terms and conditions of any such permit, license or
approval, except any such violation of law or regulation, failure to receive
required permits, licenses or other approvals or failure to comply with the
terms and conditions of such permits, licenses or approvals which would not,
singly or in the aggregate, result in a material adverse change in the
condition, financial or otherwise, or in the earnings, business or operations of
the Company and its subsidiaries, taken as a whole, except as described in or
contemplated by the Prospectus.
(y) The Company and each of its subsidiaries maintain a system or
internal accounting controls sufficient to provide reasonable assurance that (i)
transactions are executed in accordance with management's general or specific
authorizations; (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with generally accepted
accounting principles and to maintain asset accountability; (iii) access to
assets is permitted only in accordance with management's general or specific
authorization; and (iv) the recorded accountability for assets is compared with
the existing assets at reasonable intervals and appropriate action is taken with
respect to any differences.
(z) No default exists, and no event has occurred which, with notice or
lapse of time or both, would constitute a default in the due performance and
observance of any term, covenant or condition of any indenture, mortgage, deed
of trust, lease or other agreement or instrument to
5
<PAGE>
which the Company or any of its subsidiaries is a party or by which the Company
or any of its subsidiaries or any of their respective properties is bound or may
be affected in any material adverse respect with regard to the property,
business or operations of the Company and its subsidiaries.
(aa) The Company has timely filed all necessary federal, state and
foreign income and franchise tax returns and has paid all taxes shown thereon as
due, and there is no tax deficiency that has been or, to the Company's
knowledge, might be asserted against the Company that could have a material
adverse effect on the condition (financial or otherwise), earnings, operations,
business or business prospects of the Company; and all tax liabilities are
adequately provided for on the books of the Company
(ab) The financial statements, including the notes thereto, and
supporting schedules included in the Registration Statement and the Prospectus
present fairly the financial position of the Company as of the dates indicated
and the results of its operations for the periods specified; except as otherwise
stated in the Registration Statement, said financial statements have been
prepared in conformity with generally accepted accounting principles applied on
a consistent basis; and the supporting schedules included in the Registration
Statement present fairly the information required to be stated therein. Such
financial statements have been prepared in accordance with generally accepted
accounting principles consistently applied throughout the periods involved, are
correct and complete, and are in accordance with the books and records of the
Company in all material respects. No other financial statements are required by
Form S-1 or otherwise to be included in the Registration Statement or
Prospectus.
(ac) The Company has not distributed and will not distribute prior to
the Closing Date any offering material in connection with the offering and sale
of the Shares other than the Preliminary Prospectus, the Prospectus, the
Registration Statement and the other materials permitted by the Securities Act.
(ad) The Company has (A) notified each holder of a currently
outstanding option issued under the Company's 1990 Stock Plan (herein called the
1990 Plan) and each person who has acquired shares of Common Stock pursuant to
the exercise of any option granted under the 1990 Plan that, pursuant to the
terms of the 1990 Plan, none of such options or shares, or other securities of
the Company, may be sold or otherwise transferred for a period of 240 days
following the effective date of the Registration Statement; (B) along with the
certain parties to that certain Amended and Restated Information and
Registration Rights Agreement between the Company and certain investors, dated
February 24, 1995 (herein called the Investors Rights Agreement), amended the
Investors Rights Agreement, such that all parties to the Investors Rights
Agreement are bound by "lock-up" provisions in substantially the same form as
set forth in Exhibit A hereto; and (C) imposed a stop-transfer instruction with
the Company's transfer agent in order to enforce the foregoing "lock-up"
provisions. Each of the foregoing "lock-up" provisions shall be in full force
and effect on the Closing Date.
2. AGREEMENTS TO SELL AND PURCHASE. The Company hereby agrees to sell to
the several Underwriters, and each Underwriter, upon the basis of the
representations and warranties herein contained, but subject to the conditions
hereinafter stated, agrees, severally and not jointly, to purchase from the
Company at $_____ a share (the "Purchase Price") the number of Firm Shares
(subject to such adjustments to eliminate fractional shares as you may
determine) that bears the same proportion to the number of Firm Shares to be
sold by the Company as the number of Firm Shares set forth in Schedule I hereto
opposite the name of such Underwriter bears to the total number of Firm Shares.
6
<PAGE>
On the basis or the representations and warranties contained in this
Agreement, and subject to its terms and conditions, the Company agrees to sell
to the Underwriters the Additional Shares, and the Underwriters shall have a
one-time right to purchase, severally and not jointly, up to ________________
Additional Shares at the Purchase Price. If you, on behalf of the Underwriters,
elect to exercise such option, you shall so notify the Company in writing not
later than 30 days after the date of this Agreement, which notice shall specify
the number of Additional Shares to be purchased by the Underwriters and the date
on which such shares are to be purchased. Such date may be the same as the
Closing Date (as defined below) but not earlier than the Closing Date nor later
than ten business days after the date of such notice. Additional Shares may be
purchased as provided in Section 4 hereof solely for the purpose of covering
over-allotments made in connection with the offering of the Firm Shares. If any
Additional Shares are to be purchased, each Underwriter agrees, severally and
not jointly, to purchase the number of Additional Shares (subject to such
adjustments to eliminate fractional shares as you may determine) that bears the
same proportion to the total number of Additional Shares to be purchased as the
number of Firm Shares set forth in Schedule I hereto opposite the name of such
Underwriter bears to the total number of Firm Shares.
The Company hereby agrees that, without the prior written consent of Morgan
Stanley & Co. Incorporated on behalf of the Underwriters, it will not, during
the period ending 180 days after the date of the Prospectus, (i) offer, pledge,
sell, contract to sell, sell any option or contract to purchase, purchase any
option or contract to sell, grant any option, right or warrant to purchase or
otherwise transfer or dispose of, directly or indirectly, any shares of Common
Stock or any securities convertible into or exercisable or exchangeable for
Common Stock or (ii) enter into any swap or other arrangement that transfers to
another, in whole or in part, any of the economic consequences of ownership of
the Common Stock, whether any such transaction described in clause (i) or (ii)
above is to be settled by delivery of Common Stock or such other securities, in
cash or otherwise. The foregoing sentence shall not apply to (A) the Shares to
be sold hereunder or (B) the issuance by the Company of shares of Common Stock
upon the exercise of an option or warrant or the conversion of a security
outstanding on the date hereof of which the Underwriters have been advised in
writing.
3. TERMS OF PUBLIC OFFERING. The Company is advised by you that the
Underwriters propose to make a public offering of their respective portions of
the Shares as soon after the Registration Statement and this Agreement have
become effective as in your judgment is advisable. The Company is further
advised by you that the Shares are to be offered to the public initially at
$_______ a share (the "Public Offering Price") and to certain dealers selected
by you at a price that represents a concession not in excess of $_____ a share
under the Public Offering Price, and that any Underwriter may allow, and such
dealers may reallow, a concession, not in excess of $_____ a share, to any
Underwriter or to certain other dealers.
4. PAYMENT AND DELIVERY. Payment for the Firm Shares to be sold by the
Company shall be made to the Company in Federal or other funds immediately
available in New York City against delivery of such Firm Shares for the
respective accounts of the several Underwriters at 10:00 A.M., New York City
time, on __________, 1997, or at such other time on the same or such other date,
not later than __________, 1997, as shall be designated in writing by you. The
time and date of such payment are hereinafter referred to as the "Closing Date."
Payment for any Additional Shares shall be made to the Company in Federal
or other funds immediately available in New York City against delivery of such
Additional Shares for the respective accounts of the several Underwriters at
10:00 A.M., New York City time, on the date specified in the notice described in
Section 3 or at such other time on the same or on such other late, in any event
not
7
<PAGE>
later than __________,1997 as shall be designated in writing by you. The time
and date of such payment are hereinafter referred to as the "Option Closing
Date."
Certificates for the Firm Shares and Additional Shares shall be in
definitive form and registered in such names and in such denominations as you
shall request in writing not later than one full business day prior to the
Closing Date or the Option Closing Date, as the case may be. The certificates
evidencing the Firm Shares and Additional Shares shall be delivered to you on
the Closing Date or the Option Closing Date, as the case may be, for the
respective accounts of the several Underwriters, with any transfer taxes payable
in connection with the transfer of the shares to the Underwriters duly paid,
against payment of the Purchase Price therefor.
5. CONDITIONS TO THE UNDERWRITERS' OBLIGATIONS. The obligations of the
Company to sell the Shares to the Underwriters and the several obligations of
the Underwriters to purchase and pay for the Shares on the Closing Date are
subject to the condition that the Registration Statement shall have become
effective not later than __________ (New York City time) on the date hereof.
The several obligations of the Underwriters are subject to the
following further conditions:
(a) Subsequent to the execution and delivery of this Agreement and
prior to the Closing Date:
(i) there shall not have occurred any downgrading, nor shall any
notice have been given of any intended or potential downgrading or of
any review for a possible change that does not indicate the direction
of the possible change, in the rating accorded any of the Company's
securities by any "nationally recognized statistical rating
organization," as such term is defined for purposes of Rule 436(g)(2)
under the Securities Act; and
(ii) there shall not have occurred any change, or any development
involving a prospective change, in the condition, financial or
otherwise, or in the earnings, business or operations of the Company
and its subsidiaries, taken as a whole, from that set forth in the
Prospectus (exclusive of any amendments or supplements thereto
subsequent to the date of this Agreement) that, in your judgment, is
material and adverse and that makes it, in your judgment,
impracticable to market the Shares on the terms and in the manner
contemplated in the Prospectus.
(b) The Underwriters shall have received on the Closing Date a
certificate, dated the Closing Date and signed by an executive officer of the
Company, to the effect set forth in clause (a)(i) above and to the effect that
the representations and warranties of the Company contained in this Agreement
are true and correct as of the Closing Date and that the Company has complied
with all of the agreements and satisfied all of the conditions on its part to be
performed or satisfied hereunder on or before the Closing Date.
The officer signing and delivering such certificate may rely upon the
best of his or her knowledge as to proceedings threatened.
(c) The Underwriters shall have received on the Closing Date an
opinion of Wilson Sonsini Goodrich & Rosati, outside counsel for the Company,
dated the Closing Date, to the effect that:
8
<PAGE>
(i) the Company has been duly incorporated, is validly existing
as a corporation in good standing under the laws of the jurisdiction
of its incorporation, has the corporate power and authority to own its
property and to conduct its business as described in the Prospectus
and is duly qualified to transact business and is in good standing in
each jurisdiction in which the conduct of its business or its
ownership or leasing of property requires such qualification, except
to the extent that the failure to be so qualified or be in good
standing would not have a material adverse effect on the Company and
its subsidiaries, taken as a whole;
(ii) each subsidiary of the Company has been duly incorporated,
is validly existing as a corporation in good standing under the laws
of the jurisdiction of its incorporation, has the corporate power and
authority to own its property and to conduct its business as described
in the Prospectus and is duly qualified to transact business and is in
good standing in each jurisdiction in which the conduct of its
business or its ownership or leasing of property requires such
qualification, except to the extent that the failure to be so
qualified or be in good standing would not have a material adverse
effect on the Company and its subsidiaries, taken as a whole;
(iii) the authorized capital stock of the Company conforms as to
legal matters to the description thereof contained in the Prospectus;
(iv) the shares of Common Stock outstanding prior to the issuance
of the Shares to be sold by the Company have been duly authorized and
are validly issued, fully paid and non-assessable;
(v) all of the issued shares of capital stock of each subsidiary
of the Company have been duly and validly authorized and issued, are
fully paid and non-assessable and are owned directly by the Company,
free and clear of all liens, encumbrances, equities or claims;
(vi) the Shares to be sold by the Company have been duly
authorized and, when issued and delivered in accordance with the terms
of this Agreement, will be validly issued, fully paid and non-
assessable, and the issuance of such Shares will not be subject to any
preemptive or similar rights;
(vii) this Agreement has been duly authorized, executed and
delivered by the Company;
(viii) the execution and delivery by the Company of, and the
performance by the Company of its obligations under, this Agreement
will not contravene any provision of applicable law or the certificate
of incorporation or by-laws of the Company or, to the best of such
counsel's knowledge, any agreement or other instrument binding upon
the Company or any of its subsidiaries that is material to the Company
and its subsidiaries, taken as a whole, or, to the best of such
counsel's knowledge, any judgment, order or decree of any governmental
body, agency or court having jurisdiction over the Company or any
subsidiary, and no consent, approval, authorization or order of, or
qualification with, any governmental body or agency is required for
the performance by the Company of its obligations under this
Agreement,
9
<PAGE>
except such as may be required by the securities or Blue Sky laws of
the various states in connection with the offer and sale of the
Shares;
(ix) the statements (A) in the Prospectus under the captions
"_____," "_____," "Description of Capital Stock" and "Underwriters"
and (B) in the Registration Statement in Items 14 and 15, in each case
insofar as such statements constitute summaries of the legal matters,
documents or proceedings referred to therein, fairly present the
information called for with respect to such legal matters, documents
and proceedings and fairly summarize the matters referred to therein;
(x) after due inquiry, such counsel does not know of any legal or
governmental proceedings pending or threatened to which the Company or
any of its subsidiaries is a party or to which any of the properties
of the Company or any of its subsidiaries is subject that are required
to be described in the Registration Statement or the Prospectus and
are not so described or of any statutes, regulations, contracts or
other documents that are required to be described in the Registration
Statement or the Prospectus or to be filed as exhibits to the
Registration Statement that are not described or filed as required;
(xi) the Company is not and, after giving effect to the offering
and sale of the Shares and the application of the proceeds therefrom
as described in the Prospectus, will not be an "investment company" as
such term is defined in the Investment Company Act of 1940, as
amended; and
(xii) such counsel (A) is of the opinion that the Registration
Statement and Prospectus (except for financial statements and
schedules and other financial and statistical data included therein as
to which such counsel need not express any opinion) comply as to form
in all material respects with the Securities Act and the applicable
rules and regulations of the Commission thereunder, (B) has no reason
to believe that (except for financial statements and schedules and
other financial and statistical data as to which such counsel need not
express any belief) the Registration Statement and the prospectus
included therein at the time the Registration Statement became
effective contained any untrue statement of a material fact or omitted
to state a material fact required to be stated therein or necessary to
make the statements therein not misleading and (C) has no reason to
believe that (except for financial statements and schedules and other
financial and statistical data as to which such counsel need not
express any belief) the Prospectus contains any untrue statement of a
material fact or omits 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.
(d) The Underwriters shall have received on the Closing Date an
opinion of Fenwick & West LLP, counsel for the Underwriters, dated the Closing
Date, covering the matters referred to in subparagraphs (vi), (vii), (ix) (but
only as to the statements in the Prospectus under "Description of Capital Stock"
and "Underwriters") and (xii) of paragraph (c) above.
With respect to subparagraph (xii) of paragraph (c) above, Wilson
Sonsini Goodrich & Rosati and Fenwick & West LLP may state that their opinion
and belief are based upon their participation in the preparation of the
Registration Statement and Prospectus and any amendments or
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<PAGE>
supplements thereto and review and discussion of the contents thereof, but are
without independent check or verification, except as specified.
The opinion of Wilson Sonsini Goodrich & Rosati described in paragraph
(c) above shall be rendered to the Underwriters at the request of the Company,
as the case may be, and shall so state therein.
(e) The Underwriters shall have received on the Closing Date an
opinion of Blakely, Sokoloff, Taylor & Zafman, patent counsel for the Company,
dated the Closing Date, to the effect that:
(i) The statements in the Registration Statement and Prospectus
set forth in "___________" and "___________" are accurate and complete
summaries of the matters set forth therein;
(ii) Neither the Registration Statement nor the Prospectus,
including but not limited to "___________" and "___________," (A)
contains any untrue statement of a material fact with respect to
patents, patent rights, trade secrets, trademarks, service marks or
other proprietary information or materials owned or used by the
Company, or the manner of its use thereof, or any allegation on the
part of any person that the Company is infringing any patents, patent
rights, trade secrets, trademarks, service marks or other proprietary
information or materials of any such person or (B) omits to state any
material fact relating to patents, patent rights, trade secrets,
trademarks, service marks or other proprietary information or
materials owned or used by the Company, or the manner of its use
thereof, or any allegation on the part of any person that the Company
is infringing on any patents, patent rights, trade secrets,
trademarks, service marks or other proprietary information or
materials of any such person, that is necessary to make the statements
therein not misleading;
(iii) Except as stated in the Registration Statement and
Prospectus, there are no legal or governmental proceedings pending
(other than routine administrative proceedings of the U.S. Patent and
Trademark Office concerning pending patent and trademark or service
mark applications of the Company) relating to patents, patent rights,
trade secrets, trademarks, service marks or other proprietary
information or materials of the Company, and no such proceedings are
threatened or contemplated by governmental authorities or others;
(iv) We do not know of any contracts or other documents, relating
to governmental regulation affecting the Company or the Company's
patents, trademarks, service marks or other proprietary information or
materials, of a character required to be filed as an exhibit to the
Registration Statement or required to be described in the Registration
Statement or the Prospectus that are not filed or described as
required;
(v) To the best of our knowledge, the Company is not infringing
or otherwise violating any patents, trade secrets, trademarks, service
marks or other proprietary information or materials, of others, and to
the best of our knowledge, there are no infringements by others of any
of the Company's patents, trademarks, service marks or other
proprietary information or materials which in our judgment could
affect materially the use thereof by the Company; and
11
<PAGE>
(vi) To the best of our knowledge, the Company owns or possesses
sufficient licenses or other rights to use all patents, trade secrets,
trademarks, service marks or other proprietary information or
materials necessary to conduct the business now being or proposed to
be conducted by the Company as described in the Prospectus.
(f) The Underwriters shall have received, on each of the date hereof
and the Closing Date, a letter dated the date hereof or the Closing Date, as the
case may be, in form and substance satisfactory to the Underwriters, from
Coopers & Lybrand L.L.P., independent public accountants, containing statements
and information of the type ordinarily included in accountants' "comfort
letters" to underwriters with respect to the financial statements and certain
financial information contained in the Registration Statement and the
Prospectus; provided that the letter delivered on the Closing Date shall use a
"cut-off date" not earlier than the date hereof.
(g) The "lock-up" agreements, each substantially in the form of
Exhibit A hereto, between you and shareholders, option holders, officers and
directors of the Company relating to sales and certain other dispositions of
shares of Common Stock or certain other securities, delivered to you on or
before the date hereof, shall be in full force and effect on the Closing Date.
The several obligations of the Underwriters to purchase Additional
Shares hereunder are subject to the delivery to you on the Option Closing Date
of such documents as you may reasonably request with respect to the good
standing of the Company, the due authorization and issuance of the Additional
Shares and other matters related to the issuance of the Additional Shares.
6. COVENANTS OF THE COMPANY. In further consideration of the agreements
of the Underwriters herein contained, the Company covenants with each
Underwriter as follows:
(a) To furnish to you, without charge, four signed copies of the
Registration Statement (including exhibits thereto) and for delivery to each
other Underwriter a conformed copy of the Registration Statement (without
exhibits thereto) and to furnish to you in New York City, without charge, prior
to 10:00 A.M. New York City time on the business day next succeeding the date of
this Agreement and during the period mentioned in paragraph (c) below, as many
copies of the Prospectus and any supplements and amendments thereto or to the
Registration Statement as you may reasonably request.
(b) Before amending or supplementing the Registration Statement or the
Prospectus, to furnish to you a copy of each such proposed amendment or
supplement and not to file any such proposed amendment or supplement to which
you reasonably object, and to file with the Commission within the applicable
period specified in Rule 424(b) under the Securities Act any prospectus required
to be filed pursuant to such Rule.
(c) If, during such period after the first date of the public offering
of the Shares as in the opinion of counsel for the Underwriters the Prospectus
is required by law to be delivered in connection with sales by an Underwriter or
dealer, any event shall occur or condition exist as a result of which it is
necessary to amend or supplement the Prospectus in order to make the statements
therein, in the light of the circumstances when the Prospectus is delivered to a
purchaser, not misleading, or if, in the opinion of counsel for the
Underwriters, it is necessary to amend or supplement the Prospectus to comply
with applicable law, forthwith to prepare, file with the Commission and furnish,
at its own expense, to the Underwriters and to the dealers (whose names
12
<PAGE>
and addresses you will furnish to the Company) to which Shares may have been
sold by you on behalf of the Underwriters and to any other dealers upon
request, either amendments or supplements to the Prospectus so that the
statements in the Prospectus as so amended or supplemented will not, in the
light of the circumstances when the Prospectus is delivered to a purchaser, be
misleading or so that the Prospectus, as amended or supplemented, will comply
with law.
(d) To endeavor to qualify the Shares for offer and sale under the
securities or Blue Sky laws of such jurisdictions as you shall reasonably
request.
(e) To make generally available to the Company's security holders and
to you as soon as practicable an earning statement covering the twelve-month
period ending June 30, 1998 that satisfies the provisions of Section 11(a) of
the Securities Act and the rules and regulations of the Commission thereunder.
7. EXPENSES. Whether or not the transactions contemplated in this
Agreement are consummated or this Agreement is terminated, the Company agrees
to pay or cause to be paid all expenses incident to the performance of their
obligations under this Agreement, including: (i) the fees, disbursements and
expenses of the Company's counsel and the Company's accountants in connection
with the registration and delivery of the Shares under the Securities Act and
all other fees or expenses in connection with the preparation and filing of the
Registration Statement, any preliminary prospectus, the Prospectus and
amendments and supplements to any of the foregoing, including all printing
costs associated therewith, and the mailing and delivering of copies thereof to
the Underwriters and dealers, in the quantities herein above specified, (ii)
all costs and expenses related to the transfer and delivery of the Shares to
the Underwriters, including any transfer or other taxes payable thereon, (iii)
the cost of printing or producing any Blue Sky or Legal Investment memorandum
in connection with the offer and sale of the Shares under state securities laws
and all expenses in connection with the qualification of the Shares for offer
and sale under state securities laws as provided in Section 6(d) hereof,
including filing fees and the reasonable fees and disbursements of counsel for
the Underwriters in connection with such qualification and in connection with
the Blue Sky or Legal Investment memorandum, (iv) all filing fees and
disbursements of counsel to the Underwriters incurred in connection with the
review and qualification of the offering of the Shares by the National
Association of Securities Dealers, Inc., (v) all fees and expenses in
connection with the preparation and filing of the registration statement on
Form 8-A relating to the Common Stock and all costs and expenses incident to
listing the Shares on the Nasdaq National Market, (vi) the cost of printing
certificates representing the Shares, (vii) the costs and charges of any
transfer agent, registrar or depositary, (viii) the costs and expenses of the
Company relating to investor presentations on any "road show" undertaken in
connection with the marketing of the offering of the Shares, including, without
limitation, expenses associated with the production of road show slides and
graphics, fees and expenses of any consultants engaged in connection with the
road show presentations with the prior approval of the Company, travel and
lodging expenses of the representatives and officers of the Company and any
such consultants, and the cost of any aircraft chartered in connection with the
road show, and (ix) all other costs and expenses incident to the performance of
the obligations of the Company hereunder for which provision is not otherwise
made in this Section. It is understood, however, that except as provided in
this Section, Section 8 entitled "Indemnity and Contribution", and the last
paragraph of Section 10 below, the Underwriters will pay all of their costs and
expenses, including fees and disbursements of their counsel, stock transfer
taxes payable on resale of any of the Shares by them and any advertising
expenses connected with any offers they may make.
13
<PAGE>
8. INDEMNITY AND CONTRIBUTION. (a) The Company, agrees to indemnify and
hold harmless each Underwriter and each person, if any, who controls any
Underwriter within the meaning of either Section 15 of the Securities Act or
Section 20 of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), from and against any and all losses, claims, damages and liabilities
(including, without limitation, any legal or other expenses reasonably incurred
in connection with defending or investigating any such action or claim) caused
by any untrue statement or alleged untrue statement of a material fact
contained in the Registration Statement or any amendment thereof, any
preliminary prospectus or the Prospectus (as amended or supplemented if the
Company shall have furnished any amendments or supplements thereto), or caused
by any omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not
misleading, except insofar as such losses, claims, damages or liabilities are
caused by any such untrue statement or omission or alleged untrue statement or
omission based upon information relating to any Underwriter furnished to the
Company in writing by such Underwriter through you expressly for use therein.
(b) Each Underwriter agrees, severally and not jointly, to indemnify
and hold harmless the Company, the directors of the Company, the officers of
the Company who sign the Registration Statement and each person, if any, who
controls the Company within the meaning of either Section 15 of the Securities
Act or Section 20 of the Exchange Act from and against any and all losses,
claims, damages and liabilities (including, without limitation, any legal or
other expenses reasonably incurred in connection with defending or
investigating any such action or claim) caused by any untrue statement or
alleged untrue statement of a material fact contained in the Registration
Statement or any amendment thereof, any preliminary prospectus or the
Prospectus (as amended or supplemented if the Company shall have furnished any
amendments or supplements thereto), or caused by any omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, but only with
reference to information relating to such Underwriter furnished to the Company
in writing by such Underwriter through you expressly for use in the
Registration Statement, any preliminary prospectus, the Prospectus or any
amendments or supplements thereto.
(c) In case any proceeding (including any governmental investigation)
shall be instituted involving any person in respect of which indemnity may be
sought pursuant to paragraph (a) or (b) of this Section 8, such person (the
"indemnified party") shall promptly notify the person against whom such
indemnity may be sought (the "indemnifying party") in writing and the
indemnifying party, upon request of the indemnified party, shall retain counsel
reasonably satisfactory to the indemnified party to represent the indemnified
party and any others the indemnifying party may designate in such proceeding
and shall pay the fees and disbursements of such counsel related to such
proceeding. In any such proceeding, any indemnified party shall have the right
to retain its own counsel, but the fees and expenses of such counsel shall be
at the expense of such indemnified party unless (i) the indemnifying party and
the indemnified party shall have mutually agreed to the retention of such
counsel or (ii) the named parties to any such proceeding (including any
impleaded parties) include both the indemnifying party and the indemnified
party and representation of both parties by the same counsel would be
inappropriate due to actual or potential differing interests between them. It
is understood that the indemnifying party shall not, in respect of the legal
expenses of any indemnified party in connection with any proceeding or related
proceedings in the same jurisdiction, be liable for (i) the fees and expenses
of more than one separate firm (in addition to any local counsel) for all
Underwriters and all persons, if any, who control any Underwriter within the
meaning of either Section 15 of the Securities Act or Section 20 of the
Exchange Act and (ii) the fees and expenses of more than one separate firm (in
addition to any local counsel) for the Company, its directors, its
14
<PAGE>
officers who sign the Registration Statement and each person, if any, who
controls the Company within the meaning of either such Section, and that all
such fees and expenses shall be reimbursed as they are incurred. In the case of
any such separate firm for the Underwriters and such control persons of any
Underwriters, such firm shall be designated in writing by Morgan Stanley & Co.
Incorporated. In the case of any such separate firm for the Company, and such
directors, officers and control persons of the Company, such firm shall be
designated in writing by the Company. The indemnifying party shall not be
liable for any settlement of any proceeding effected without its written
consent, but if settled with such consent or if there be a final judgment for
the plaintiff, the indemnifying party agrees to indemnify the indemnified party
from and against any loss or liability by reason of such settlement or
judgment. Notwithstanding the foregoing sentence, if at any time an indemnified
party shall have requested an indemnifying party to reimburse the indemnified
party for fees and expenses of counsel as contemplated by the second and third
sentences of this paragraph, the indemnifying party agrees that it shall be
liable for any settlement of any proceeding effected without its written
consent if (i) such settlement is entered into more than 30 days after receipt
by such indemnifying party of the aforesaid request and (ii) such indemnifying
party shall not have reimbursed the indemnified party in accordance with such
request prior to the date of such settlement. No indemnifying party shall,
without the prior written consent of the indemnified party, effect any
settlement of any pending or threatened proceeding in respect of which any
indemnified party is or could have been a party and indemnity could have been
sought hereunder by such indemnified party, unless such settlement includes an
unconditional release of such indemnified party from all liability on claims
that are the subject matter of such proceeding.
(d) To the extent the indemnification provided for in paragraph (a)
or (b) of this Section 8 is unavailable to an indemnified party or insufficient
in respect of any losses, claims, damages or liabilities referred to therein,
then each indemnifying party under such paragraph, in lieu of indemnifying such
indemnified party thereunder, shall contribute to the amount paid or payable by
such indemnified party as a result of such losses, claims, damages or
liabilities (i) in such proportion as is appropriate to reflect the relative
benefits received by the indemnifying party or parties on the one hand and the
indemnified party or parties on the other hand from the offering of the Shares
or (ii) if the allocation provided by clause (i) above is not permitted by
applicable law, in such proportion as is appropriate to reflect not only the
relative benefits referred to in clause (i) above but also the relative fault
of the indemnifying party or parties on the one hand and of the indemnified
party or parties on the other hand in connection with the statements or
omissions that resulted in such losses, claims, damages or liabilities, as well
as any other relevant equitable considerations. The relative benefits received
by the Company on the one hand and the Underwriters on the other hand in
connection with the offering of the Shares shall be deemed to be in the same
respective proportions as the net proceeds from the offering of the Shares
(before deducting expenses) received by the Company and the total underwriting
discounts and commissions received by the Underwriters, in each case as set
forth in the table on the cover of the Prospectus, bear to the aggregate Public
Offering Price of the Shares. The relative fault of the Company on the one
hand and the Underwriters on the other hand shall be determined by reference
to, among other things, whether the untrue or alleged untrue statement of a
material fact or the omission or alleged omission to state a material fact
relates to information supplied by the Company or by the Underwriters and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission. The Underwriters' respective
obligations to contribute pursuant to this Section 8 are several in proportion
to the respective number of Shares they have purchased hereunder, and not
joint.
(e) The Company and the Underwriters agree that it would not be just
or equitable if contribution pursuant to this Section 8 were determined by pro
rata allocation (even if the
15
<PAGE>
Underwriters were treated as one entity for such purpose) or by any other
method of allocation that does not take account of the equitable considerations
referred to in paragraph (e) of this Section 8. The amount paid or payable by
an indemnified party as a result of the losses, claims, damages and liabilities
referred to in the immediately preceding paragraph shall be deemed to include,
subject to the limitations set forth above, any legal or other expenses
reasonably incurred by such indemnified party in connection with investigating
or defending any such action or claim. Notwithstanding the provisions of this
Section 8, no Underwriter shall be required to contribute any amount in excess
of the amount by which the total price at which the Shares underwritten by it
and distributed to the public were offered to the public exceeds the amount of
any damages that such Underwriter has otherwise been required to pay by reason
of such untrue or alleged untrue statement or omission or alleged omission. No
person guilty of fraudulent misrepresentation (within the meaning of section
11(f) of the Securities Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation. The remedies provided
for in this Section 8 are not exclusive and shall not limit any rights or
remedies which may otherwise be available to any indemnified party at law or in
equity.
(f) The indemnity and contribution provisions contained in this
Section 8 and the representations, warranties and other statements of the
Company contained in this Agreement shall remain operative and in full force
and effect regardless of (i) any termination of this Agreement, (ii) any
investigation made by or on behalf of any Underwriter or any person controlling
any Underwriter, or the Company, its officers or directors or any person
controlling the Company and (iii) acceptance of and payment for any of the
Shares.
9. TERMINATION. This Agreement shall be subject to termination by
notice given by you to the Company, if (a) after the execution and delivery of
this Agreement and prior to the Closing Date (i) trading generally shall have
been suspended or materially limited on or by, as the case may be, any of the
New York Stock Exchange, the American Stock Exchange, the National Association
of Securities Dealers, Inc., the Chicago Board of Options Exchange, the Chicago
Mercantile Exchange or the Chicago Board of Trade, (ii) trading of any
securities of the Company shall have been suspended on any exchange or in any
over-the-counter market, (iii) a general moratorium on commercial banking
activities in New York shall have been declared by either Federal or New York
State authorities or (iv) there shall have occurred any outbreak or escalation
of hostilities or any change in financial markets or any calamity or crisis
that, in your judgment, is material and adverse and (b) in the case of any of
the events specified in clauses (a)(i) through (iv), such event, singly or
together with any other such event, makes it, in your judgment, impracticable
to market the Shares on the terms and in the manner contemplated in the
Prospectus.
10. EFFECTIVENESS; DEFAULTING UNDERWRITERS. This Agreement shall
become effective upon the execution and delivery hereof by the parties hereto.
If, on the Closing Date or the Option Closing Date, as the case may
be, any one or more of the Underwriters shall fail or refuse to purchase Shares
that it has or they have agreed to purchase hereunder on such date, and the
aggregate number of Shares which such defaulting Underwriter or Underwriters
agreed but failed or refused to purchase is not more than one-tenth of the
aggregate number of the Shares to be purchased on such date, the other
Underwriters shall be obligated severally in the proportions that the number of
Firm Shares set forth opposite their respective names in Schedule I bears to
the aggregate number of Firm Shares set forth opposite the names of all such
non-defaulting Underwriters, or in such other proportions as you may specify,
to purchase the Shares which such defaulting Underwriter or Underwriters agreed
but failed or refused
16
<PAGE>
to purchase on such date; provided that in no event shall the number of Shares
that any Underwriter has agreed to purchase pursuant to this Agreement by
increased pursuant to this Section 10 by an amount in excess of one-ninth of
such number of Shares without the written consent of such Underwriter. If, on
the Closing Date, any Underwriter or Underwriters shall fail or refuse to
purchase Firm Shares and the aggregate number of Firm Shares with respect to
which such default occurs is more than one-tenth of the aggregate number of
Firm Shares to be purchased, and arrangements satisfactory to you and the
Company for the purchase of such Firm Shares are not made within 36 hours after
such default, this Agreement shall terminate without liability on the part of
any non-defaulting Underwriter or the Company. In any such case either you or
the Company shall have the right to postpone the Closing Date, but in no event
for longer than seven days, in order that the required changes, if any, in the
Registration Statement and in the Prospectus or in any other documents or
arrangements may be effected. If, on the Option Closing Date, any Underwriter
or Underwriters shall fail or refuse to purchase Additional Shares and the
aggregate number of Additional Shares with respect to which such default occurs
is more than one-tenth of the aggregate number of Additional Shares to be
purchased, the non-defaulting Underwriters shall have the option to (i)
terminate their obligation hereunder to purchase Additional Shares or (ii)
purchase not less than the number of Additional Shares that such non-defaulting
Underwriters would have been obligated to purchase in the absence of such
default. Any action taken under this paragraph shall not relieve any defaulting
Underwriter from liability in respect of any default of such Underwriter under
this Agreement.
If this Agreement shall be terminated by the Underwriters, or any of
them, because of any failure or refusal on the part of the Company to comply
with the terms or to fulfill any of the conditions of this Agreement, or if for
any reason the Company shall be unable to perform its obligations under this
Agreement, the Company will reimburse the Underwriters or such Underwriters as
have so terminated this Agreement with respect to themselves, severally, for
all out-of-pocket expenses (including the fees and disbursements of their
counsel) reasonably incurred by such Underwriters in connection with this
Agreement or the offering contemplated hereunder.
11. COUNTERPARTS. This Agreement may be signed in two or more
counterparts, each of which shall be an original, with the same effect as if
the signatures thereto and hereto were upon the same instrument.
12. APPLICABLE LAW. This Agreement shall be governed by and
construed in accordance with the internal laws of the State of New York.
13. HEADINGS. The headings of the sections of this Agreement have
been inserted for convenience of reference only and shall not be deemed a part
of this Agreement.
Very truly yours,
Rambus Inc.
By
----------------------------------
Name:
Title:
17
<PAGE>
Accepted as of the date hereof
Morgan Stanley & Co. Incorporated
Hambrecht & Quist LLC
Robertson, Stephens & Company LLC
Acting severally on behalf of themselves
and the several underwriters named
herein.
By: Morgan Stanley & Co. Incorporated
By:
----------------------------------
Name:
Title:
<PAGE>
SCHEDULE I
Number of
Firm Shares
Underwriter To Be Purchased
----------- ---------------
Morgan Stanley & Co. Incorporated
Hambrecht & Quist LLC
Robertson, Stephens & Company LLC
--------------
Total
==============
<PAGE>
Exhibit A
RAMBUS INC.
LOCK-UP AGREEMENT
February 28, 1997
Morgan Stanley & Co. Incorporated
Hambrecht & Quist LLC
Robertson, Stephens & Company
c/o Morgan Stanley & Co. Incorporated
1585 Broadway
New York, NY 10036
Ladies and Gentlemen:
The undersigned understands that Morgan Stanley & Co. Incorporated ("Morgan
Stanley"), as Representative of the several Underwriters, proposes to enter
into an Underwriting Agreement (the "Underwriting Agreement") with Rambus Inc.,
a Delaware corporation (the "Company") providing for the initial public
offering (the "Public Offering") by the several Underwriters, including Morgan
Stanley (the "Underwriters"), of Common Stock, $.001 par value per share, of
the Company (the "Common Stock").
To induce the Underwriters that may participate in the Public Offering to
continue their efforts in connection with the Public Offering, the undersigned
hereby agrees that, without the prior written consent of Morgan Stanley on
behalf of the Underwriters, it will not, during the period commencing on the
date hereof and ending 180 days after the date of the final prospectus relating
to the Public Offering (the "Prospectus"), (1) offer, pledge, sell, contract to
sell, sell any option or contract to purchase, purchase any option or contract
to sell, grant any option, right or warrant to purchase, or otherwise transfer
or dispose of, directly or indirectly, any shares of Common Stock or any
securities convertible into or exercisable or exchangeable for Common Stock
(collectively, the "Shares") (whether such Shares are now owned by the
undersigned or are hereafter acquired), or (2) enter into any swap or other
arrangement that transfers to another, in whole or in part, any of the economic
consequences of ownership of the Shares, whether any such transaction described
in clause (1) or (2) above is to be settled by delivery of Common Stock or such
other securities, in cash or otherwise. The foregoing sentence shall not apply
to the sale of any Shares to the Underwriters pursuant to the Underwriting
Agreement. In addition, the undersigned agrees that, without the prior written
consent of Morgan Stanley on behalf of the Underwriters, it will not, during
the period commencing on the date hereof and ending 180 days after the date of
the Prospectus, make any demand for, or exercise any right with respect to, the
registration of any Shares.
Notwithstanding the foregoing, if the undersigned is an individual, he or she
may transfer any or all of the Shares either during his or her lifetime or on
death by gift, will or intestacy to his or her immediate family or to a trust
the beneficiaries of which are exclusively the undersigned and/or a
<PAGE>
Morgan Stanley & Co. Incorporated
February 28, 1997
Page 2
member or members of his or her immediate family; provided, however, that in
any such case, it shall be a condition to the transfer that the transferee
execute an agreement stating that the transferee is receiving and holding the
Shares subject to the provisions of this Agreement, and there shall be no
further transfer of such Shares except in accordance with this Agreement. For
purposes of this paragraph, "immediate family" shall mean spouse, lineal
descendant, father, mother, brother or sister of the transferor.
In addition, notwithstanding the foregoing, if the undersigned is a
partnership, the partnership may transfer any Shares to a partner of such
partnership or a retired partner of such partnership who retires after the date
hereof, or to the estate of any such partner or retired partner, and any
partner who is an individual may transfer any such Shares by gift, will or
intestate succession to his or her spouse or lineal descendants or ancestors;
if the undersigned is a trust, the trust may transfer any Shares to any
beneficiary of such trust or to the estate of any such beneficiary, and any
beneficiary who is an individual may transfer any such Shares by gift, will or
intestate succession to his or her spouse or lineal descendants or ancestors;
and if the undersigned is a corporation, the corporation may transfer any
Shares to any shareholder of such corporation, and any shareholder who is an
individual may transfer any such Shares by gift, will or intestate succession
to his or her spouse or lineal descendant or ancestors; provided, however, that
in any such case, it shall be a condition to the transfer that the transferee
execute an agreement stating that the transferee is receiving and holding the
Shares subject to the provisions of this Agreement, and there shall be no
further transfer of such Shares except in accordance with this Agreement.
Whether or not the Public Offering actually occurs depends on a number of
factors, including market conditions. Any Public Offering will only be made
pursuant to an Underwriting Agreement, the terms of which are subject to
agreement between the Company and the Underwriters. This Agreement shall
terminate and be of no further effect if the Registration Statement for the
Public Offering is not declared effective by the Securities and Exchange
Commission by December 31, 1997. The undersigned agrees and consents to the
entry of stop transfer instructions with the Company's transfer agent against
the transfer of securities of the Company held by the undersigned except in
compliance with the terms and conditions of this Agreement.
Very truly yours,
______________________________
(Name)
______________________________
(Address)
<PAGE>
EXHIBIT 3.1
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
RAMBUS INC.
Rambus Inc., a corporation organized and existing under the laws of the
State of Delaware, hereby certifies as follows:
A. The name of the Corporation is Rambus Inc. The Corporation was
originally incorporated under the same name and the original Certificate of
Incorporation of the Corporation was filed with the Delaware Secretary of State
on February 3, 1997.
B. Pursuant to Sections 242 and 245 of the General Corporation Law of the
State of Delaware, this Restated Certificate of Incorporation restates and
amends the provisions of the Certificate of Incorporation of this Corporation.
C. The text of the Certificate of Incorporation is hereby amended and
restated in its entirety to read as follows:
I. The name of the corporation (the "Corporation") is:
Rambus Inc.
II. The address of the Corporation's registered office in the State of
Delaware is 1209 Orange Street, Wilmington, Delaware 19801, County of New
Castle. The name of its registered agent at such address is The Corporation
Trust Company.
III. The nature of the business or purposes to be conducted or promoted by
the Corporation is to engage in any lawful act or activity for which
corporations may be organized under the General Corporation Law of Delaware.
IV. This Corporation is authorized to issue two classes of stock to be
designated, respectively, Common Stock and Preferred Stock. The total number of
shares of Common Stock this Corporation is authorized to issue is 60,000,000,
$0.001 par value, and the total number of shares of Preferred Stock this
Corporation is authorized to issue is 16,336,096, $0.001 par value. Of the
Preferred Stock, 5,400,000 shares shall be designated Series A Preferred Stock
("Series A Preferred"), 2,803,743 shares shall be designated Series B Preferred
Stock ("Series B Preferred"), 1,250,000 shares shall be designated Series C
Preferred Stock ("Series C Preferred"), 1,882,353 shares shall be designated
Series D Preferred Stock ("Series D Preferred"), and 5,000,000 shares shall be
undesignated.
The Preferred Stock may be issued from time to time in one or more series
pursuant to a resolution or resolutions providing for such issue duly adopted by
the Board of Directors (authority to do so being hereby expressly vested in the
Board). The Board of Directors is further authorized to determine or alter the
rights, preferences, privileges and restrictions granted to or imposed upon any
<PAGE>
wholly unissued series of Preferred Stock and to fix the number of shares of any
series of Preferred Stock and the designation of any such series of Preferred
Stock. The Board of Directors, within the limits and restrictions stated in any
resolution or resolutions of the Board of Directors originally fixing the number
of shares constituting any series, may increase or decrease (but not below the
number of shares in any such series then outstanding) the number of shares of
any series subsequent to the issue of shares of that series.
The Corporation shall from time to time in accordance with the laws of the
State of Delaware increase the authorized amount of its Common Stock if at any
time the number of shares of Common Stock remaining unissued and available for
issuance shall not be sufficient to permit conversion of the Preferred Stock.
The relative rights, preferences, privileges and restrictions granted to or
imposed on the respective classes of the shares of capital stock or the holders
thereof are as follows:
A. Dividend Rights
The holders of the Preferred Stock shall be entitled to receive, out
of any funds legally available therefor, dividends on each outstanding share of
Preferred Stock, payable in preference and priority to any payment of any
dividend on any shares of Common Stock, of the Corporation, when and as declared
by the Board of Directors. Such dividends on the Preferred Stock shall not
exceed an annual rate of $.032 per share for the Series A Preferred Stock,
$.1712 per share for the Series B Preferred Stock, $.24 for the Series C
Preferred Stock, and $.34 per share for the Series D Preferred Stock, unless a
dividend is paid at a higher rate (determined on an as-if-converted basis) on
any other outstanding shares of the Corporation, in which event the dividends on
the Preferred Stock shall be paid at such greater rate (determined on an as-if-
converted basis). The right to such dividends on the Preferred Stock shall not
be cumulative, and no right shall accrue to holders of Preferred Stock by reason
of the fact that dividends on such shares are not declared or paid in any prior
year. Dividends, if paid, or if declared and set apart for payment, must be
paid on, or declared and set apart for payment on all outstanding Preferred
Stock contemporaneously. No shares of Common Stock shall receive any dividend
at a rate which is greater than the rate at which dividends are simultaneously
paid in respect of the Preferred Stock (based on the number of shares of Common
Stock into which the Preferred Stock is convertible on the date of dividend).
Dividends shall be paid by forwarding a check, postage pre-paid, to the
address of each holder (or, in the case of joint holders, to the address of any
such holder) of Preferred Stock as shown on the books of the Corporation, or to
such other address as such holder specifies for such purpose by written notice
to the Corporation. The forwarding of such check shall satisfy all obligations
of the Corporation with respect to such dividends, unless such check is not paid
upon timely presentation.
B. Liquidation Rights
In the event of any liquidation, dissolution or winding up of the
Corporation, whether voluntary or not, the holders of Preferred Stock shall be
entitled to receive, before any amount shall be
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paid to holders of Common Stock, an amount per share equal to $.40 for the
Series A Preferred Stock, $2.14 for the Series B Preferred Stock, $3.00 for the
Series C Preferred Stock, and $4.25 for the Series D Preferred Stock (as
adjusted for stock splits, combinations or similar events and hereafter referred
to as "Original Issue Price"), plus all declared and unpaid dividends, if any.
If, upon the occurrence of a liquidation, dissolution or winding up, the assets
and surplus funds distributed among the holders of Preferred Stock shall be
insufficient to permit the payment to such holders of the full preferential
amount, then the entire assets and surplus funds of the Corporation legally
available for distribution shall be distributed ratably among the holders of
Preferred Stock based upon the total preferential amount each holder would be
entitled to receive if sufficient funds were available to pay the full
preferential amounts. If, upon the occurrence of a liquidation, dissolution or
winding up, after the payment to the holders of Preferred Stock of the
preferential amount, assets or surplus funds remain in the Corporation, the
holders of Common Stock and Preferred Stock shall be entitled to receive ratably
all such remaining assets and surplus funds in the same manner as if all shares
of the Preferred Stock had been converted into Common Stock.
For purposes of this Section B, a liquidation, dissolution or winding up of
the Corporation shall be deemed to be occasioned by, and to include, the
Corporation's sale of all or substantially all of its assets or the acquisition
of this Corporation by another entity by means of merger or consolidation
resulting in the exchange of the outstanding shares of this Corporation for
securities or consideration issued, or caused to be issued, by the acquiring
corporation or its subsidiary, unless the shareholders of the Corporation hold
at least 50% of the voting power of the surviving corporation in such a
transaction. No later than 20 days before any event that, pursuant to Section
F(5), permits a holder of Preferred Stock to have each share of Preferred Stock
held by such holder treated for all purposes as if it had been converted into
Common Stock (for purposes of this Section B, a "Merger or Sale of the
Corporation"), the Corporation shall deliver a notice to each holder of
Preferred Stock setting forth the principal terms of such Merger or Sale of the
Corporation. Such notice shall be deemed delivered upon personal delivery or
five days after deposit in the United States mail, by registered or certified
mail, addressed to a party at its address as shown on the stock records of the
Corporation. Such notice shall include a description of the amounts that would
be paid to holders of Preferred Stock under this Section B and of the
consideration that such holders would receive if they exercised their rights
under Section F(5) to have shares of Preferred Stock treated as if they had been
converted into Common Stock. No later than ten days after delivery of the
notice, each holder of Preferred Stock may deliver an election to the Corpora
tion notifying the Corporation that the holder desires that such holder's shares
of Preferred Stock be treated, pursuant to Section F, upon the closing of the
Merger or Sale of the Corporation as if they had been converted into shares of
Common Stock and, if no such notice is delivered, such holder shall receive such
amounts as are provided for under this Section B.
Each holder of an outstanding share of Preferred Stock shall be deemed to
have consented, for purposes of Section 502, 503 and 506 of the California
Corporation Code, to distributions made by the Corporation in connection with
the repurchase at cost (or such other price as may be agreed to by the
Corporation's Board of Directors) of shares of Common Stock issued to or held by
officers, directors or employees of, or consultants to, the Corporation or its
subsidiaries upon termination of their employment or services pursuant to
agreements (whether now existing or hereafter entered into) providing for the
right of said repurchase between the Corporation and such persons.
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C. Nonredeemable
The shares of Common Stock and the shares of Preferred Stock are
nonredeemable.
D. Voting Rights
1. Vote Other than for Directors. The holders of Preferred Stock and
the holders of Common Stock shall be entitled to notice of any shareholders'
meeting and, except as otherwise required by law and Section 7 hereof, to vote
upon any matter submitted to the shareholders for a vote, other than the
election of directors, as follows: (i) the holders of Preferred Stock shall
have one vote for each full share of Common Stock into which their respective
shares of Preferred Stock are convertible on the record date for the vote and
(ii) the holders of Common Stock shall have one vote per share of Common Stock.
2. Voting for Directors. If, at any time, less than 4,000,000 shares
of Preferred Stock remain outstanding, then all directors shall be elected by
the holders of the Preferred Stock and by holders of the Common Stock, voting
together as a class in the manner provided in Section D(1). If, at any time,
4,000,000 or more shares of Preferred Stock are outstanding, then the holders of
shares of Preferred Stock voting as a class shall be entitled to elect two
directors, the holders of shares of Common Stock voting as a class shall be
entitled to elect two directors, and the remaining director or directors shall
be elected by the affirmative vote of the holders of the Preferred Stock and the
Common Stock, voting together as a class in the manner provided in Section D(1).
In the case of any vacancy in the office of a director elected by a specified
group of shareholders, a successor shall be elected to hold office for the
unexpired term of such director by the affirmative vote of a majority of the
shares of such specified group given at a special meeting of such shareholders
duly called or by an action by written consent for that purpose. Subject to
Section 303 of the California Corporations Code, any director who shall have
been elected by a specified group of shareholders may be removed during the
aforesaid term of office, either for or without cause, by, and only by, the
affirmative vote of the holders of a majority of the shares of such specified
group, given at a special meeting of such shareholders duly called or by an
action by written consent for that purpose, and any such vacancy thereby created
may be filled by the vote of the holders of a majority of the shares of such
specified group represented at such meeting or in such consent.
E. Certain Taxes
The Corporation shall pay any and all issuance and other taxes
(excluding any federal or state income taxes) that may be payable in respect of
any issuance or delivery of shares of Common Stock on conversion of Preferred
Stock. The Corporation shall not, however, be required to pay any tax that may
be payable in respect of any transfer involved in the issuance and delivery of
shares of Common Stock in a name other than that in which the shares of
Preferred Stock to which such issuance relates were registered, and no such
issuance or delivery shall be made unless and until the person requesting such
issuance has paid to the Corporation the amount of any such tax, or it is
established to the satisfaction of the Corporation that such tax has been paid.
F. Conversion to Common Stock
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The Preferred Stock shall be convertible into Common Stock of the
Corporation as follows:
1. Definitions. For purposes of this Section F the following
definitions shall apply:
(a) "Issuance Date" with respect to any series of Preferred Stock
shall mean the first date on which the Corporation issues any shares of any such
series of Preferred Stock.
(b) "Conversion Price" shall mean the price, determined pursuant to
this Section F, at which shares of Common Stock shall be deliverable upon
conversion of Preferred Stock.
(c) "Current Conversion Price" shall mean the Conversion Price
immediately before the occurrence of any event, which, pursuant to Section F(3),
causes an adjustment to the Conversion Price.
(d) "Convertible Securities" shall mean any indebtedness or shares of
stock convertible into or exchangeable for Common Stock, including Preferred
Stock.
(e) "Options" shall mean any rights, warrants or options to subscribe
for or purchase Common Stock or Convertible Securities.
(f) "Common Stock Outstanding" shall mean the aggregate of all Common
Stock outstanding and all Common Stock issuable upon exercise of all outstanding
Options and conversion of all outstanding Convertible Securities.
(g) "Distribution" shall have the meaning of the term "distribution to
its shareholders" set forth in Section 166 of the California Corporations Code
as in effect on the date of filing of these Amended and Restated Articles of
Incorporation.
(h) "Common Stock Equivalents" shall mean Convertible Securities and
rights entitling the holder thereof to receive directly, or indirectly,
additional shares of Common Stock without the payment of any consideration by
such holder for such additional shares of Common Stock or Common Stock
Equivalents.
2. Right to Convert; Initial Conversion Price. Each holder of the
Preferred Stock may, at any time, convert any or all of such Preferred Stock
into fully-paid and non-assessable shares of Common Stock at the Conversion
Price. Each share of Preferred Stock shall be convertible into the number of
shares of Common Stock that results from dividing the Conversion Price in effect
for such Preferred Stock at the time of conversion into $.40 for each share of
Series A Preferred Stock being converted, $2.14 for each share of Series B
Preferred Stock being converted, $3.00 for each share of Series C Preferred
Stock being converted, and $4.25 for each share of Series D Preferred Stock
being converted; the Conversion Price of the Preferred Stock shall initially be
$.40 per share of Common Stock for the Series A Preferred Stock, $2.14 per share
of Common Stock for the Series B Preferred Stock, $3.00 per share of Common
Stock for the Series C Preferred Stock, and $4.25 per share of Common
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<PAGE>
Stock for the Series D Preferred Stock. Each initial Conversion Price shall be
subject to adjustment from time to time in certain instances as hereinafter
provided. No adjustments with respect to conversion shall be made on account of
any dividends that may be declared but unpaid on the Preferred Stock surrendered
for conversion, but no dividends shall thereafter be paid on the Common Stock
unless such unpaid dividends have first been paid to the holders entitled to
payment at the time of conversion of the Preferred Stock.
Before any holder of Preferred Stock shall be entitled to convert the same
into Common Stock, he shall surrender the certificate or certificates therefor,
duly endorsed, to the office of the Corporation or any transfer agent for such
Preferred Stock and shall given written notice to the Corporation at such office
that he elects to convert the same. The Corporation shall, as soon as
practicable thereafter, issue and deliver at such office to such holder of
Preferred Stock, or to his nominee or nominees, certificates for the number of
full shares of Common Stock to which he shall be entitled, together with cash in
lieu of any fraction of a share as hereinafter provided, and, if less than all
of the shares of Preferred Stock represented by such certificate are converted,
a certificate representing the shares of Preferred Stock not converted. Such
conversion shall be deemed to have been made as of the date of such surrender of
the certificate for the Preferred Stock to be converted, and the person or
persons entitled to receive the Common Stock issuable upon such conversion shall
be treated for all purposes as the record holder or holders of such Common Stock
on such date. If the conversion is in connection with an offer of securities
registered pursuant to the Securities Act of 1933, as amended, the conversion
may, at the option of any holder tendering Preferred Stock for conversion, be
conditioned upon the closing of the sale of securities pursuant to such
offering, in which event the person(s) entitled to receive the Common Stock
issuable upon such conversion of the Preferred Stock shall not be deemed to have
converted such Preferred Stock until immediately prior to the closing of such
sale of securities.
3. Adjustments to Conversion Price. Subject to Section F(3)(h), the
Conversion Price in effect from time to time for each series of Preferred Stock
shall be subject to adjustment in certain cases as follows:
(a) Issuance of Securities. In case the Corporation shall at any time
after the Issuance Date of any series of Preferred Stock issue or sell any
Common Stock for a consideration per share less than the Current Conversion
Price for such series of Preferred Stock, then, and thereafter successively upon
each such issuance or sale, the Current Conversion Price of such series of
Preferred Stock shall simultaneously with such issuance or sale be adjusted to a
Conversion Price (calculated to the nearest cent) determined by dividing
(i) an amount equal to (i) the total number of shares of Common
Stock Outstanding when the Current Conversion Price for Preferred Stock became
effective multiplied by the Current Conversion Price for Preferred Stock, plus
(ii) the aggregate of the amount of all consideration, if any, received by the
Corporation for the issuance or sale of Common Stock since the Current
Conversion Price for Preferred Stock became effective, by
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(ii) the total number of shares of Common Stock Outstanding
immediately after such issuance or sale;
provided, however, that the Conversion Price shall at no time exceed $.40 for
the Series A Preferred Stock or $2.14 for the Series B Preferred Stock or $3.00
for the Series C Preferred Stock or $4.25 for the Series D Preferred Stock (as
adjusted for stock splits, combinations and similar events).
For the purposes of this subsection F(3)(a), the following provisions
shall also be applicable:
(iii) Cash Consideration. In case of the issuance or sale of
additional Common Stock for cash, the consideration received by the Corporation
therefor shall be deemed to be the amount of cash received by the Corporation
for such shares (or, if such shares are offered by the Corporation for
subscription, the subscription price, or, if such shares are sold to
underwriters or dealers for public offering without a subscription offering, the
initial public offering price), without deducting therefrom any compensation or
discount paid or allowed to underwriters or dealers or others performing similar
services or for any expenses incurred in connection therewith.
(iv) Non-Cash Consideration. In case of the issuance (otherwise
than upon conversion or exchange of Convertible Securities) or sale of
additional Common Stock, Options or Convertible Securities for a consideration
other than cash or a consideration a part of which shall be other than cash, the
fair value of such consideration as determined by the Board of Directors of the
Corporation in the good faith exercise of its business judgment, irrespective of
the accounting treatment thereof, shall be deemed to be the value, for purposes
of this Section F, of the consideration other than cash received by the
Corporation for such securities.
(v) Options and Convertible Securities. In case the Corporation
shall in any manner issue or grant any Options or any Convertible Securities,
the total maximum number of shares of Common Stock issuable upon the exercise of
such Options or upon conversion or exchange of the total maximum amount of such
Convertible Securities at the time such Convertible Securities first become
convertible or exchangeable shall (as of the date of issue or grant of such
Options or, in the case of the issue or sale of Convertible Securities other
than where the same are issuable upon the exercise of Options, as of the date of
such issue or sale) be deemed to be issued and to be outstanding for the purpose
of this Section F(3)(a) and to have been issued for the sum of the amount (if
any) paid for such Options or Convertible Securities and the amount (if any)
payable upon the exercise of such Options or upon conversion or exchange of such
Convertible Securities at the time such Convertible Securities first become
convertible or exchangeable; provided that, subject to the provisions of Section
F(3)(b), no
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<PAGE>
further adjustment of the Conversion Price shall be made upon
the actual issuance of any such Common Stock or Convertible
Securities or upon the conversion or exchange of any such
Convertible Securities.
(b) Change in Option Price or Conversion Rate. In the event that
the purchase price provided for in any Option referred to in subsection
F(3)(a)(iii), or the rate at which any Convertible Securities referred to in
subsection F(3)(a)(iii) are convertible into or exchangeable for shares of
Common Stock shall change at any time (other than under or by reason of
provisions designed to protect against dilution), the Current Conversion Price
in effect at the time of such event shall forthwith be readjusted to the
Conversion Price that would have been in effect at such time had such Options or
Convertible Securities still outstanding provided for such changed purchase
price, additional consideration or conversion rate, as the case may be, at the
time initially granted, issued or sold. In the event that the purchase price
provided for in any such Option referred to in subsection F(3)(a)(iii), or the
additional consideration (if any) payable upon the conversion or exchange of any
Convertible Securities referred to in subsection F(3)(a)(iii), or the rate at
which any Convertible Securities referred to in subsection F(3)(a)(iii) are
convertible into or exchangeable for shares of Common Stock, shall be reduced at
any time under or by reason of provisions with respect thereto designed to
protect against dilution, then in case of the delivery of shares of Common Stock
upon the exercise of any such Option or upon conversion or exchange of any such
Convertible Security, the Current Conversion Price then in effect hereunder
shall, upon issuance of such shares of Common Stock, be adjusted to such amount
as would have obtained had such Option or Convertible Security never been issued
and had adjustments been made only upon the issuance of the shares of Common
Stock delivered as aforesaid and for the consideration actually received for
such Option or Convertible Security and the Common Stock.
(c) Termination of Option or Conversion Rights. In the event of
the termination or expiration of any right to purchase Common Stock under any
Option or of any right to convert or exchange Convertible Securities, the
Current Conversion Price shall, upon such termination, be changed to the
Conversion Price that would have been in effect at the time of such expiration
or termination had such Option or Convertible Security, to the extent
outstanding immediately prior to such expiration or termination, never been
issued, and the shares of Common Stock issuable thereunder shall no longer be
deemed to be Common Stock Outstanding.
(d) Stock Splits, Dividends, Distributions and Combinations. In
the event the Corporation should at any time or from time to time after the
Issuance Date fix a record date for the effectuation of a split or subdivision
of the outstanding shares of Common Stock or the determination of holders of
Common Stock entitled to receive a dividend or other Distribution payable in
additional shares of Common Stock or Common Stock Equivalents, then, following
such record date (or the date of such dividend, Distribution, split or
subdivision if no record date is fixed), the Conversion Price of Preferred Stock
shall be appropriately decreased so that the number of shares of Common Stock
issuable on conversion of each share of Preferred Stock shall be increased in
proportion to such increase in the number of outstanding shares of Common Stock
(including for this purpose, Common Stock Equivalents) determined in accordance
with Section F(3)(f) If the number of shares of Common Stock outstanding at any
time after the Issuance Date is decreased by a combination of the outstanding
shares of Common Stock, then, following the record date of such combination, the
Conversion Price for Preferred Stock
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<PAGE>
shall be appropriately increased so that the number of shares of Common Stock
issuable on conversion of each share of Preferred Stock shall be decreased in
proportion to such decrease in the number of outstanding shares of Common Stock.
(e) Other Dividends. In the event this Corporation shall declare
a Distribution payable in securities of other persons, evidences of indebtedness
issued by this Corporation or other persons, assets (excluding cash dividends)
or options or rights not referred to in subsection F(3)(a)(iii), then, in each
such case for the purpose of this Section F(3)(e), the holders of Preferred
Stock shall be entitled to a proportionate share of any such Distribution as
though they were the holders of the number of shares of Common Stock of the
Corporation into which their shares of Preferred Stock are convertible as of the
record date fixed for the determination of the holders of Common Stock of the
Corporation entitled to receive such Distribution.
(f) Recapitalizations. If at any time or from time to time there
shall be a recapitalization of the Common Stock (other than a subdivision,
combination or merger or a sale of assets transaction provided for elsewhere in
the Section F) provision shall be made so that the holders of Preferred Stock
shall thereafter be entitled to receive upon conversion of shares of Preferred
Stock the number of shares of stock or other securities or property of the
Corporation or otherwise, to which a holder of Common Stock deliverable upon
conversion would have been entitled on such recapitalization. In any such case,
appropriate adjustment shall be made in the application of the provisions of
this Section F with respect to the rights of the holders of Preferred Stock
after the recapitalization to the end that the provisions of this Section F
(including adjustment of the Conversion Price then in effect and the number of
shares purchasable upon conversion of shares of Preferred Stock) shall be
applicable after that event as nearly equivalent as may be practicable.
(g) Successive Changes. The above provisions of this Section F
shall similarly apply to successive issuances, sales, dividends or other
Distributions, subdivisions and combinations on or of the Common Stock after the
Issuance Date.
(h) Other Events Altering Conversion Price. Upon the occurrence
of any event not specifically denominated in this Section F as reducing the
Conversion Price that, in the reasonable exercise of the business judgment of
the Board of Directors of the Corporation requires, on equitable principles, the
reduction of the Conversion Price, the Conversion Price will be equitably
reduced.
(i) No Impairment. The Corporation will not, by amendment of
these Amended and Restated Articles of Incorporation or through any
reorganization, recapitalization, transfer of assets, consolidation, merger,
dissolution, issue or sale of securities or any other voluntary action, avoid or
seek to avoid the observance or performance of any of the terms to be observed
or performed hereunder by the Corporation, but will at all times in good faith
assist in the carrying out of all the provisions of this Section F and in the
taking of all such action as may be necessary or appropriate in order to protect
the conversion rights of the holders of Preferred Stock against impairment.
(j) Miscellaneous Conversion Price Matters. The Corporation
shall at all times reserve and keep available out of its authorized but unissued
Common Stock the full number of shares
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of Common Stock deliverable upon conversion of all the then outstanding
Preferred Stock and shall, at its own expense, take all such action and obtain
all such permits and orders as may be necessary to enable the Corporation
lawfully to issue such Common Stock upon the conversion of such Preferred Stock.
(k) Excluded Events. Notwithstanding anything in this Section F
to the contrary, the Conversion Price shall not be adjusted by virtue of (i) the
conversion of shares of Preferred Stock into shares of Common Stock, (ii) the
repurchase of shares from the Corporation's employees, consultants, advisors,
officers or directors at such person's cost (or at such other price as may be
agreed to by the Corporation's Board of Directors), (iii) the issuance of, prior
to the Series C Preferred Stock Issuance Date, 20,000 shares to Stanford
University and 10,000 shares to the University of Illinois without
consideration, (iv) the issuance of 1,125,000 shares of Common Stock (or options
therefor) in connection with the merger of Rambus Partners, Inc. with and into
Rambus Inc. prior to the Series C Preferred Stock Issuance Date, (v) the
issuance and sale of, or the grant of options to purchase, an aggregate, net of
returns to the option plan, of not more than 5,000,000 shares of Common Stock to
employees, consultants, advisors, officers or directors of the Corporation and
its subsidiaries (including shares issued or sold pursuant to the exercise of
any stock option or purchase pursuant to a grant under the Corporation's stock
option plan or stock purchase plan, even though granted by the Corporation prior
to the date of the filing of these Amended and Restated Articles of
Incorporation) at a price which is less than the Conversion Price at the time of
such issuance or sale (all as determined in accordance with this Section F) as
may be approved by the Board of Directors, none of such shares shall be included
in any manner in the computation from time to time of the Conversion Price under
subsection F(3)(a) or in Common Stock outstanding for purposes of such
computation.
(l) No Fractional Shares. No fractional shares shall be issued
upon conversion of shares of Preferred Stock and cash shall be paid in lieu of
any fractional shares. Whether or not cash is due in lieu of fractional shares
upon such conversion shall be determined on the basis of the total number of
shares of Preferred Stock the holder is at the time converting into Common Stock
and the number of shares of Common Stock issuable upon such aggregate
conversion.
(m) Certificate as to Adjustments. Upon the occurrence of each
adjustment or readjustment of the Conversion Price of Preferred Stock pursuant
to this Section F, the Corporation, at its expense upon request by any holder of
Preferred Stock, shall compute such adjustment or readjustment in accordance
with the terms hereof and prepare and furnish to each holder of Preferred Stock
a certificate setting forth such adjustment or readjustment and showing in
detail the facts upon which such adjustment or readjustment is based. The
Corporation shall, upon the written request at any time of any holder of
Preferred Stock, furnish or cause to be furnished to such holder a like
certificate setting forth (A) such adjustment and readjustment, (B) the Current
Conversion Price at the time in effect, and (C) the number of shares of Common
Stock and the amount, if any, of other property which at the time would be
received upon the conversion of a share of Preferred Stock.
4. Automatic Conversion. Immediately prior to the closing of an
underwritten public offering pursuant to an effective registration statement
under the Securities Act of 1933, as amended, covering the offer and sale of
Common Stock for the account of the Corporation (or selling shareholders, if
any) at a per share public offering price of not less than the Original Issue
Price of the Series D
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Preferred Stock (equitably adjusted for any stock split, combination or similar
event) and an aggregate public offering price greater than $7,500,000, each
share of Preferred Stock shall automatically be converted into shares of Common
Stock at the Conversion Price for Preferred Stock then in effect. On and after
said conversion date, notwithstanding that any certificates for the shares of
Preferred Stock shall not have been surrendered for conversion, the shares of
Preferred Stock evidenced thereby shall be deemed to be no longer outstanding,
and all rights with respect thereto shall forthwith cease and terminate, except
only the rights of the holder (i) to receive the shares of Common Stock to which
he shall be entitled upon conversion thereof, (ii) to receive the amount of cash
payable in respect of any fractional share of Common Stock to which he shall be
entitled, and (iii) to receive payment of dividends declared but unpaid on
Preferred Stock prior to such conversion date. In the event that any holder of
Preferred Stock presents such holder's certificate therefor for surrender to the
Corporation or its transfer agent upon such conversion, a certificate for the
number of shares of Common Stock into which the shares of Preferred Stock
surrendered were convertible on such conversion date promptly will be issued and
delivered to such holder.
5. Merger; Sale of Corporation. In the event, after the Issuance
Date, of any proposed consolidation of the Corporation with, or merger of the
Corporation with or into another corporation (other than a consolidation or
merger in which the Corporation is the continuing corporation and which does not
result in any reclassification of, or change in, the outstanding shares of
Common Stock), or in case of any proposed sale or transfer to another
corporation of all or substantially all of the assets of the Corporation, any
holder of Preferred Stock may, by delivery of election pursuant to Section B
above, elect to have each share of Preferred Stock held by such holder treated
for all purposes as if it had been converted into Common Stock on the earlier of
(i) the record date, if any, for voting by holders of Common Stock on such event
and (ii) the date of such event.
G. Covenants. In addition to any other rights provided by law, so long
as any shares of Preferred Stock shall be outstanding, the Corporation shall
not, without first obtaining the affirmative vote or written consent of the
holders of not less than a majority of the outstanding shares of Preferred Stock
voting separately as a class:
1. amend or repeal any provision of, or add any provision to, the
Corporation's articles of incorporation or by-laws if such action would alter or
change the preferences, rights, privileges or powers of, or the restrictions
provided for the benefit of, the Preferred Stock, or increase or decrease the
number of shares of Preferred Stock authorized hereby;
2. authorize or issue shares of any class or series of stock not
authorized herein having any preference or priority as to dividends or assets
superior to or on a parity with any such preference or priority of Preferred
Stock; authorize or issue shares of stock of any class or series of any bonds,
debentures, notes or other obligations convertible into or exchangeable for, or
having option rights to purchase, any shares of stock of this Corporation having
any preference or priority as to dividends or assets superior to or on a parity
with any such preference or priority of Preferred Stock (other than the issuance
of Shares Subject to Call under the Series B Preferred Stock Purchase
Agreement);
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<PAGE>
3. reclassify any class or series or any Common Stock into shares
having any preference or priority as to dividends or assets superior to or on a
parity with any such preference or priority of Preferred Stock;
4. apply any of its assets to the redemption, retirement, purchase or
acquisition, directly or indirectly, through subsidiaries (as defined in Section
425 of the Internal Revenue Code of 1986 (the "Code") or otherwise, of any
shares of any class or series of Common Stock, except from employees,
consultants, advisors, officers and directors of, and persons performing
services for, this Corporation or its subsidiaries on terms approved by the
Board of Directors upon termination of employment or association;
5. do any act or thing which would result in taxation of the holders
of shares of the Preferred Stock under Section 305 of the Code (or any
comparable provision of the Code as hereafter from time to time amended); or
6. (i) sell, convey or otherwise dispose of all or substantially all
of its property or business, or (ii) merge into or consolidate with any other
corporation (other than a wholly owned subsidiary corporation) or effect any
other transaction or series of related transactions disposing or more than 50%
of the voting power of the Corporation.
H. Status of Converted or Redeemed Stock. In the event any shares of
Preferred shall be redeemed or converted, the shares so converted or redeemed
shall be canceled and shall not have the status of authorized but unissued
shares of Preferred and shall not be issuable by the corporation and the
Certificate of Incorporation of this corporation shall be amended to effect the
corresponding reduction in the corporation's capital stock.
V. The name and mailing address of the incorporator are as follows:
J. Michael Arrington
c/o Wilson Sonsini Goodrich & Rosati
650 Page Mill Road
Palo Alto, CA 94304-1050
VI. The Corporation is to have perpetual existence.
VII. Elections of directors need not be by written ballot unless a
stockholder demands election by written ballot at the meeting and before voting
begins or unless the Bylaws of the Corporation shall so provide.
VIII. The number of directors which constitute the whole Board of
Directors of the Corporation shall be designated in the Bylaws of the
Corporation. The directors shall be divided into two classes with the term of
office of the first class (Class I) to expire at the annual meeting of
stockholders in 1998; the term of office of the second class (Class II) to
expire at the annual meeting of stockholders held in 1999;
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<PAGE>
and thereafter for each such term to expire at each second succeeding annual
meeting of stockholders after such election.
IX. In furtherance and not in limitation of the powers conferred by
statute, the Board of Directors is expressly authorized to make, alter, amend or
repeal the Bylaws of the Corporation.
X. (a) To the fullest extent permitted by the Delaware General
Corporation Law as the same exists or as may hereafter be amended, a director of
the Corporation shall not be personally liable to the Corporation or its
stockholders for monetary damages for breach fiduciary duty as a director.
(b) The Corporation shall indemnify to the fullest extent permitted by
law any person made or threatened to be made a party to an action or proceeding,
whether criminal, civil, administrative or investigative, by reason of the fact
that he, his testator or intestate is or was a director, officer or employee of
the Corporation or any predecessor of the Corporation or serves or served at any
other enterprise as a director, officer or employee at the request of the
Corporation or any predecessor to the Corporation.
(c) Neither any amendment nor repeal of this Article X, nor the
adoption of any provision of this Corporation's Certificate of Incorporation
inconsistent with this Article X, shall eliminate or reduce the effect of this
Article X, in respect of any matter occurring, or any action or proceeding
accruing or arising or that, but for this Article X, would accrue or arise,
prior to such amendment, repeal or adoption of an inconsistent provision.
XI. Following the effectiveness of the registration of any class of
securities of the Corporation pursuant to the requirements of the Securities
Exchange Act of 1934, as amended, no action shall be taken by the stockholders
of the Corporation except at an annual or special meeting of the stockholders
called in accordance with the Bylaws and no action shall be taken by the
stockholders by written consent. The affirmative vote of sixty-six and two-
thirds percent (66 2/3%) of the then issued and outstanding voting securities of
the Corporation, voting together as a single class, shall be required for the
amendment, repeal or modification of the provisions of Article VIII or Article
XI of this Restated Certificate of Incorporation or Sections 2.3 (Special
Meeting), 2.11 (Stockholder Action by Written Consent without a Meeting) or 2.15
(Advance Notice of Stockholder Nominees and Stockholder Business) of the
Corporation's Bylaws.
XII. Meetings of stockholders may be held within or without the State of
Delaware, as the Bylaws of the Corporation may provide. The books of the
Corporation may be kept (subject to any provision contained in the statutes)
outside of the State of Delaware at such place or places as may be designated
from time to time by the Board of Directors or in the Bylaws of the Corporation.
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<PAGE>
IN WITNESS WHEREOF, the Corporation has caused this certificate to be
signed by Gary Harmon, its Secretary, this 10th day of March 1997.
_____________________________________
Gary Harmon, Secretary
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<PAGE>
EXHIBIT 3.2
CERTIFICATE OF DESIGNATIONS OF RIGHTS, PREFERENCES
AND PRIVILEGES OF
SERIES E PARTICIPATING PREFERRED STOCK
OF RAMBUS INC.
The undersigned, Geoff Tate and Gary Harmon do hereby certify:
1. That they are the duly elected and acting President and Secretary,
respectively, of Rambus Inc., a Delaware corporation (the "CORPORATION").
2. That pursuant to the authority conferred upon the Board of Directors by
the Certificate of Incorporation of the said Corporation, the said Board of
Directors on February 28, 1997 adopted the following resolution creating a
series of 40,000 shares of Preferred Stock designated as Series E Participating
Preferred Stock:
"RESOLVED, that pursuant to the authority vested in the Board of Directors
of the corporation by the Restated Certificate of Incorporation, the Board of
Directors does hereby provide for the issue of a series of Preferred Stock of
the Corporation and does hereby fix and herein state and express the
designations, powers, preferences and relative and other special rights and the
qualifications, limitations and restrictions of such series of Preferred Stock
as follows:
Section 1. Designation and Amount. The shares of such series shall be
designated as "SERIES E PARTICIPATING PREFERRED STOCK." The Series E
Participating Preferred Stock shall have a par value of $0.001 per share, and
the number of shares constituting such series shall be 40,000.
Section 2. Proportional Adjustment. In the event the Corporation shall at
any time after the issuance of any share or shares of Series E Participating
Stock (i) declare any dividend on Common Stock of the Corporation ("COMMON
STOCK") payable in shares of Common Stock, (ii) subdivide the outstanding Common
Stock or (iii) combine the outstanding Common Stock into a smaller number of
shares, then in each such case the Corporation shall simultaneously effect a
proportional adjustment to the number of outstanding shares of Series E
Participating Preferred Stock.
Section 3. Dividends and Distributions.
(a) Subject to the prior and superior right of the holders of any shares of
any series of Preferred Stock ranking prior and superior to the shares of
Series E Participating Preferred Stock with respect to dividends, the holders of
shares of Series E Participating Preferred Stock shall be entitled to receive
when, as and if declared by the Board of Directors out of funds legally
available for the purpose,
<PAGE>
quarterly dividends payable in cash on the last day of January, April, July and
October in each year (each such date being referred to herein as a "QUARTERLY
DIVIDEND PAYMENT DATE"), commencing on the first Quarterly Dividend Payment Date
after the first issuance of a share or fraction of a share of Series E
Participating Preferred Stock, in an amount per share (rounded to the nearest
cent) equal to 1,000 times the aggregate per share amount of all cash dividends,
and 1,000 times the aggregate per share amount (payable in kind) of all non-cash
dividends or other distributions other than a dividend payable in shares of
Common Stock or a subdivision of the outstanding shares of Common Stock (by
reclassification or otherwise), declared on the Common Stock since the
immediately preceding Quarterly Dividend Payment Date, or, with respect to the
first Quarterly Dividend Payment Date, since the first issuance of any share or
fraction of a share of Series E Participating Preferred Stock.
(b) The Corporation shall declare a dividend or distribution on the Series
E Participating Preferred Stock as provided in paragraph (a) above immediately
after it declares a dividend or distribution on the Common Stock (other than a
dividend payable in shares of Common Stock).
(c) Dividends shall begin to accrue on outstanding shares of Series E
Participating Preferred Stock from the Quarterly Dividend Payment Date next
preceding the date of issue of such shares of Series E Participating Preferred
Stock, unless the date of issue of such shares is prior to the record date for
the first Quarterly Dividend Payment Date, in which case dividends on such
shares shall begin to accrue from the date of issue of such shares, or unless
the date of issue is a Quarterly Dividend Payment Date or is a date after the
record date for the determination of holders of shares of Series E Participating
Preferred Stock entitled to receive a quarterly dividend and before such
Quarterly Dividend Payment Date, in either of which events such dividends shall
begin to accrue from such Quarterly Dividend Payment Date. Accrued but unpaid
dividends shall not bear interest. Dividends paid on the shares of Series E
Participating Preferred Stock in an amount less than the total amount of such
dividends at the time accrued and payable on such shares shall be allocated pro
rata on a share-by-share basis among all such shares at the time outstanding.
The Board of Directors may fix a record date for the determination of holders of
shares of Series E Participating Preferred Stock entitled to receive payment of
a dividend or distribution declared thereon, which record date shall be no more
than 30 days prior to the date fixed for the payment thereof.
Section 4. Voting Rights. The holders of shares of Series E Participating
Preferred Stock shall have the following voting rights:
(a) Each share of Series E Participating Preferred Stock shall entitle the
holder thereof to 1,000 votes on all matters submitted to a vote of the
stockholders of the Corporation.
(b) Except as otherwise provided herein or by law, the holders of shares of
Series E Participating Preferred Stock and the holders of shares of Common Stock
shall vote together as one class on all matters submitted to a vote of
stockholders of the Corporation.
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<PAGE>
(c) Except as required by law, holders of Series E Participating
Preferred Stock shall have no special voting rights and their consent shall not
be required (except to the extent they are entitled to vote with holders of
Common Stock as set forth herein) for taking any corporate action.
Section 5. Certain Restrictions
(a) The Corporation shall not declare any dividend on, make any
distribution on, or redeem or purchase or otherwise acquire for consideration
any shares of Common Stock after the first issuance of a share or fraction of a
share of Series E Participating Preferred Stock unless concurrently therewith it
shall declare a dividend on the Series E Participating Preferred Stock as
required by Section 3 hereof.
(b) Whenever quarterly dividends or other dividends or
distributions payable on the Series E Participating Preferred Stock as provided
in Section 3 are in arrears, thereafter and until all accrued and unpaid
dividends and distributions, whether or not declared, on shares of Series E
Participating Preferred Stock outstanding shall have been paid in full, the
Corporation shall not
(i) declare or pay dividends on, make any other
distributions on, or redeem or purchase or otherwise acquire for consideration
any shares of stock ranking junior (either as to dividends or upon liquidation,
dissolution or winding up) to the Series E Participating Preferred Stock;
(ii) declare or pay dividends on, make any other
distributions on any shares of stock ranking on a parity (either as to dividends
or upon liquidation, dissolution or winding up) with Series E Participating
Preferred Stock, except dividends paid ratably on the Series E Participating
Preferred Stock and all such parity stock on which dividends are payable or in
arrears in proportion to the total amounts to which the holders of all such
shares are then entitled;
(iii) redeem or purchase or otherwise acquire for
consideration shares of any stock ranking on a parity (either as to dividends or
upon liquidation, dissolution or winding up) with the Series E Participating
Preferred Stock, provided that the Corporation may at any time redeem, purchase
or otherwise acquire shares of any such parity stock in exchange for shares of
any stock of the Corporation ranking junior (either as to dividends or upon
dissolution, liquidation or winding up) to the Series E Participating Preferred
Stock;
(iv) purchase or otherwise acquire for consideration any
shares of Series E Participating Preferred Stock, or any shares of stock ranking
on a parity with the Series E Participating Preferred Stock, except in
accordance with a purchase offer made in writing or by publication (as
determined by the Board of Directors) to all holders of such shares upon such
terms as the Board of Directors, after consideration of the respective annual
dividend rates and other relative rights and preferences of the respective
series and classes, shall determine in good faith will result in fair and
equitable treatment among the respective series or classes.
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<PAGE>
(c) The Corporation shall not permit any subsidiary of the Corporation
to purchase or otherwise acquire for consideration any shares of stock of the
Corporation unless the Corporation could, under paragraph (a) of this Section 5,
purchase or otherwise acquire such shares at such time and in such manner.
Section 6. Reacquired Shares. Any shares of Series E Participating Preferred
Stock purchased or otherwise acquired by the Corporation in any manner
whatsoever shall be retired and canceled promptly after the acquisition
thereof. All such shares shall upon their cancellation become authorized but
unissued shares of Preferred Stock and may be reissued as part of a new series
of Preferred Stock to be created by resolution or resolutions of the Board of
Directors, subject to the conditions and restrictions on issuance set forth
herein and, in the Restated Certificate of Incorporation, as then amended.
Section 7. Liquidation, Dissolution or Winding Up. Upon any liquidation,
dissolution or winding up of the Corporation, the holders of shares of Series E
Participating Preferred Stock shall be entitled to receive an aggregate amount
per share equal to 1000 times the aggregate amount to be distributed per share
to holders of shares of Common Stock plus an amount equal to any accrued and
unpaid dividends on such shares of Series E Participating Preferred Stock.
Section 8. Consolidation, Merger, etc. In case the Corporation shall enter into
any consolidation, merger, combination or other transactions in which the shares
of Common Stock are exchanged for or changed into other stock or securities,
cash and/or any other property, then in any such case the shares of Series E
Participating Preferred Stock shall at the same time be similarly exchanged or
changed in an amount per share equal to 1,000 times the aggregate amount of
stock, securities, cash and/or any other property (payable in kind), as the case
may be, into which or for which each share of Common Stock is changed or
exchanged.
Section 9. No Redemption. The shares of Series E Participating Preferred Stock
shall not be redeemable.
Section 10. Ranking. The Series E Participating Preferred Stock shall rank
junior to all other series of the Corporation's Preferred Stock as to the
payment of dividends and the distribution of assets, unless the terms of any
such series shall provide otherwise.
Section 11. Amendment. The Restated Certificate of Incorporation of the
Corporation shall not be further amended in any manner which would materially
alter or change the powers, preference or special rights of the Series E
Participating Preferred Stock so as to affect them adversely without the
affirmative vote of the holders of a majority of the outstanding shares of
Series E Participating Preferred Stock, voting separately as a class.
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<PAGE>
Section 12. Fractional Shares. Series E Participating Preferred Stock may be
issued in fractions of a share which shall entitle the holder, in proportion to
such holder's fractional shares, to exercise voting rights, receive dividends,
participate in distributions and to have the benefit of all other rights of
holders of Series E Participating Preferred Stock.
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<PAGE>
RESOLVED FURTHER, that the President or any Vice President and the
Secretary or any Assistant Secretary of this corporation be, and they hereby
are, authorized and directed to prepare and file a Certificate of Designation of
Rights, Preferences and Privileges in accordance with the foregoing resolution
and the provisions of Delaware law and to take such actions as they may deem
necessary or appropriate to carry out the intent of the foregoing resolution."
We further declare under penalty of perjury that the matters set forth in
the foregoing Certificate of Designation are true and correct of our own
knowledge.
Executed at Mountain View, California, on March 21, 1997.
/s/ GEOFF TATE
________________________
Geoff Tate, President
/s/ GARY HARMON
________________________
Gary Harmon, Secretary
<PAGE>
EXHIBIT 3.4
AMENDED AND RESTATED
BYLAWS
OF
RAMBUS INC.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
ARTICLE I - CORPORATE OFFICES.................................................... 1
1.1 REGISTERED OFFICE....................................................... 1
1.2 OTHER OFFICES........................................................... 1
ARTICLE II - MEETINGS OF STOCKHOLDERS............................................ 1
2.1 PLACE OF MEETINGS....................................................... 1
2.2 ANNUAL MEETING.......................................................... 1
2.3 SPECIAL MEETING......................................................... 2
2.4 NOTICE OF STOCKHOLDERS' MEETINGS........................................ 2
2.5 MANNER OF GIVING NOTICE; AFFIDAVIT OF NOTICE............................ 2
2.6 QUORUM.................................................................. 2
2.7 ADJOURNED MEETING; NOTICE............................................... 3
2.8 CONDUCT OF BUSINESS..................................................... 3
2.9 VOTING.................................................................. 3
2.10 WAIVER OF NOTICE........................................................ 4
2.11 STOCKHOLDER ACTION BY WRITTEN CONSENT WITHOUT A MEETING................. 4
2.12 RECORD DATE FOR STOCKHOLDER NOTICE; VOTING; GIVING CONSENTS............. 4
2.13 PROXIES................................................................. 5
2.14 LIST OF STOCKHOLDERS ENTITLED TO VOTE................................... 5
2.15 ADVANCE NOTICE OF STOCKHOLDER NOMINEES AND STOCKHOLDER BUSINESS......... 6
ARTICLE III - DIRECTORS.......................................................... 7
3.1 POWERS.................................................................. 7
3.2 NUMBER OF DIRECTORS..................................................... 7
3.3 ELECTION, QUALIFICATION AND TERM OF OFFICE OF DIRECTORS................. 7
3.4 RESIGNATION AND VACANCIES............................................... 7
3.5 PLACE OF MEETINGS; MEETINGS BY TELEPHONE................................ 8
3.7 REGULAR MEETINGS........................................................ 9
3.8 SPECIAL MEETINGS; NOTICE................................................ 9
3.9 QUORUM.................................................................. 9
3.11 WAIVER OF NOTICE........................................................ 10
3.12 BOARD ACTION BY WRITTEN CONSENT WITHOUT A MEETING....................... 10
3.13 FEES AND COMPENSATION OF DIRECTORS...................................... 10
3.14 APPROVAL OF LOANS TO OFFICERS........................................... 10
</TABLE>
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<PAGE>
TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
3.15 REMOVAL OF DIRECTORS.................................................... 11
ARTICLE IV - COMMITTEES.......................................................... 11
4.1 COMMITTEES OF DIRECTORS................................................. 11
4.2 COMMITTEE MINUTES....................................................... 12
4.3 MEETINGS AND ACTION OF COMMITTEES....................................... 12
ARTICLE V - OFFICERS............................................................. 12
5.1 OFFICERS................................................................ 12
5.2 APPOINTMENT OF OFFICERS................................................. 13
5.3 SUBORDINATE OFFICERS.................................................... 13
5.4 REMOVAL AND RESIGNATION OF OFFICERS..................................... 13
5.5 VACANCIES IN OFFICES.................................................... 13
5.6 CHAIRMAN OF THE BOARD................................................... 13
5.7 CHIEF EXECUTIVE OFFICER................................................. 14
5.8 PRESIDENT............................................................... 14
5.9 VICE PRESIDENTS......................................................... 14
5.10 SECRETARY............................................................... 14
5.11 CHIEF FINANCIAL OFFICER................................................. 15
5.12 ASSISTANT SECRETARY..................................................... 15
5.13 ASSISTANT TREASURER..................................................... 15
5.14 REPRESENTATION OF SHARES OF OTHER CORPORATIONS.......................... 16
5.15 AUTHORITY AND DUTIES OF OFFICERS........................................ 16
ARTICLE VI - INDEMNITY........................................................... 16
6.1 THIRD PARTY ACTIONS..................................................... 16
6.2 ACTIONS BY OR IN THE RIGHT OF THE CORPORATION........................... 17
6.3 SUCCESSFUL DEFENSE...................................................... 17
6.4 DETERMINATION OF CONDUCT................................................ 17
6.5 PAYMENT OF EXPENSES IN ADVANCE.......................................... 18
6.6 INDEMNITY NOT EXCLUSIVE................................................. 18
6.7 INSURANCE INDEMNIFICATION............................................... 18
6.8 THE CORPORATION......................................................... 18
6.9 EMPLOYEE BENEFIT PLANS.................................................. 19
6.10 CONTINUATION OF INDEMNIFICATION AND ADVANCEMENT OF
EXPENSES................................................................ 19
</TABLE>
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<PAGE>
TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
ARTICLE VII - RECORDS AND REPORTS................................................ 19
7.1 MAINTENANCE AND INSPECTION OF RECORDS................................... 19
7.2 INSPECTION BY DIRECTORS................................................. 20
7.3 ANNUAL STATEMENT TO STOCKHOLDERS........................................ 20
ARTICLE VIII - GENERAL MATTERS................................................... 20
8.1 CHECKS.................................................................. 20
8.2 EXECUTION OF CORPORATE CONTRACTS AND INSTRUMENTS........................ 20
8.3 STOCK CERTIFICATES; PARTLY PAID SHARES.................................. 21
8.4 SPECIAL DESIGNATION ON CERTIFICATES..................................... 21
8.5 LOST CERTIFICATES....................................................... 22
8.6 CONSTRUCTION; DEFINITIONS............................................... 22
8.7 DIVIDENDS............................................................... 22
8.8 FISCAL YEAR............................................................. 22
8.9 SEAL.................................................................... 22
8.10 TRANSFER OF STOCK....................................................... 23
8.11 STOCK TRANSFER AGREEMENTS............................................... 23
8.12 REGISTERED STOCKHOLDERS................................................. 23
ARTICLE IX - AMENDMENTS.......................................................... 23
</TABLE>
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<PAGE>
AMENDED & RESTATED
BYLAWS
OF
RAMBUS INC.
ARTICLE I
CORPORATE OFFICES
1.1 REGISTERED OFFICE
The registered office of the corporation shall be in the City of
Wilmington, County of New Castle, State of Delaware. The name of the registered
agent of the corporation at such location is The Corporation Trust Company.
1.2 OTHER OFFICES
The board of directors may at any time establish other offices at any place
or places where the corporation is qualified to do business.
ARTICLE II
MEETINGS OF STOCKHOLDERS
2.1 PLACE OF MEETINGS
Meetings of stockholders shall be held at any place, within or outside the
State of Delaware, designated by the board of directors. In the absence of any
such designation, stockholders' meetings shall be held at the registered office
of the corporation.
2.2 ANNUAL MEETING
The annual meeting of stockholders shall be held each year on a date and at
a time designated by the board of directors. At the meeting, directors shall be
elected and any other proper business may be transacted.
<PAGE>
2.3 SPECIAL MEETING
A special meeting of the stockholders may be called at any time by a
majority of the Board of Directors of the Corporation. No other person or
persons are permitted to call a special meeting. No business may be conducted at
a special meeting other than the business specified by the Board of Directors as
specified in its notice of calling of the meeting delivered to the Corporation
as provided below by Section 2.4 and 2.5.
2.4 NOTICE OF STOCKHOLDERS' MEETINGS
All notices of meetings with stockholders shall be in writing and shall be
sent or otherwise given in accordance with Section 2.5 of these bylaws not less
than ten (10) nor more than sixty (60) days before the date of the meeting to
each stockholder entitled to vote at such meeting. The notice shall specify the
place, date, and hour of the meeting, and, in the case of a special meeting, the
purpose or purposes for which the meeting is called.
2.5 MANNER OF GIVING NOTICE; AFFIDAVIT OF NOTICE
Written notice of any meeting of stockholders, if mailed, is given when
deposited in the United States mail, postage prepaid, directed to the
stockholder at such stockholder's address as it appears on the records of the
corporation. An affidavit of the Secretary or an Assistant Secretary or of the
transfer agent of the corporation that the notice has been given shall, in the
absence of fraud, be prima facie evidence of the facts stated therein.
2.6 QUORUM
The holders of a majority of the stock issued and outstanding and entitled
to vote thereat, present in person or represented by proxy, shall constitute a
quorum at all meetings of the stockholders for the transaction of business
except as otherwise provided by statute or by the certificate of incorporation.
If, however, such quorum is not present or represented at any meeting of the
stockholders, then either (i) the Chairman of the meeting or (ii) the
stockholders entitled to vote thereat, present in person or represented by
proxy, shall have power to adjourn the meeting from time to time, without notice
other than announcement at the meeting, until a quorum is present or
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<PAGE>
represented. At such adjourned meeting at which a quorum is present or
represented, any business may be transacted that might have been transacted at
the meeting as originally noticed.
2.7 ADJOURNED MEETING; NOTICE
When a meeting is adjourned to another time or place, unless these bylaws
otherwise require, notice need not be given of the adjourned meeting if the time
and place thereof are announced at the meeting at which the adjournment is
taken. At the adjourned meeting the corporation may transact any business that
might have been transacted at the original meeting. If the adjournment is for
more than thirty (30) days, or if after the adjournment a new record date is
fixed for the adjourned meeting, a notice of the adjourned meeting shall be
given to each stockholder of record entitled to vote at the meeting.
2.8 CONDUCT OF BUSINESS
The chairman of any meeting of stockholders shall determine the order of
business and the procedure at the meeting, including such regulation of the
manner of voting and the conduct of business.
2.9 VOTING
The stockholders entitled to vote at any meeting of stockholders shall be
determined in accordance with the provisions of Section 2.12 of these bylaws,
subject to the provisions of Sections 217 and 218 of the General Corporation
Law of Delaware (relating to voting rights of fiduciaries, pledgors and joint
owners of stock and to voting trusts and other voting agreements).
Except as may be otherwise provided in the certificate of incorporation or
as may be otherwise required by applicable law, each stockholder shall be
entitled to one vote for each share of capital stock held by such stockholder.
Except as may be otherwise provided in the certificate of incorporation or
these bylaws, or as may be otherwise required by applicable law:
(i) in all matters other than the election of directors, the affirmative
vote of the majority of shares present in person or represented by proxy at the
meeting and entitled to vote on the subject matter shall be the act of the
stockholders;
(ii) directors shall be elected by a plurality of the votes of the shares
present in person or represented by proxy at the meeting and entitled to vote on
the election of directors; and
(iii) where a separate vote by a class or classes or series is required,
the affirmative vote of the majority of shares of such class or classes or
series present in person or represented by proxy at the meeting shall be the act
of such class or classes or series.
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2.10 WAIVER OF NOTICE
Whenever notice is required to be given under any provision of the General
Corporation Law of Delaware or of the certificate of incorporation or these
bylaws, a written waiver thereof, signed by the person entitled to notice,
whether before or after the time stated therein, shall be deemed equivalent to
notice. Attendance of a person at a meeting shall constitute a waiver of notice
of such meeting, except when the person attends a meeting for the express
purpose of objecting, at the beginning of the meeting, to the transaction of any
business because the meeting is not lawfully called or convened. Neither the
business to be transacted at, nor the purpose of, any regular or special meeting
of the stockholders need be specified in any written waiver of notice unless so
required by the certificate of incorporation or these bylaws.
2.11 STOCKHOLDER ACTION BY WRITTEN CONSENT WITHOUT A MEETING
Unless otherwise provided in the certificate of incorporation, any action
required by this chapter to be taken at any annual or special meeting of
stockholders of a corporation, or any action that may be taken at any annual or
special meeting of such stockholders, may be taken without a meeting, without
prior notice, and without a vote if a consent in writing, setting forth the
action so taken, is signed by the holders of outstanding stock having not less
than the minimum number of votes that would be necessary to authorize or take
such action at a meeting at which all shares entitled to vote thereon were
present and voted.
Prompt notice of the taking of the corporate action without a meeting by
less than unanimous written consent shall be given to those stockholders who
have not consented in writing. If the action which is consented to is such as
would have required the filing of a certificate under any section of the General
Corporation Law of Delaware if such action had been voted on by stockholders at
a meeting thereof, then the certificate filed under such section shall state, in
lieu of any statement required by such section concerning any vote of
stockholders, that written notice and written consent have been given as
provided in Section 228 of the General Corporation Law of Delaware.
Effective upon the closing of a firm commitment underwritten initial
public offering of any of the corporation's securities pursuant to a
registration statement on Form S-1 filed under the Securities Act of 1933, as
amended, the stockholders of the corporation may not take action by written
consent without a meeting but must take any such actions at a duly called annual
or special meeting.
2.12 RECORD DATE FOR STOCKHOLDER NOTICE; VOTING; GIVING CONSENTS
In order that the corporation may determine the stockholders entitled to
notice of or to vote at any meeting of stockholders or any adjournment thereof,
or entitled to express consent to corporate action in writing without a meeting,
or entitled to receive payment of any dividend or other distribution or
allotment of any rights, or entitled to exercise any rights in respect of any
change, conversion or exchange of stock or for the purpose of any other lawful
action, the board of directors may fix, in advance, a record date, which shall
not be more than sixty (60) nor less than ten (10) days before the date of such
meeting, nor more than sixty (60) days prior to any other action.
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If the board of directors does not so fix a record date:
(i) The record date for determining stockholders entitled to notice of or
to vote at a meeting of stockholders shall be at the close of business on the
day next preceding the day on which notice is given, or, if notice is waived, at
the close of business on the day next preceding the day on which the meeting is
held.
(ii) The record date for determining stockholders entitled to express
consent to corporate action in writing without a meeting, when no prior action
by the board of directors is necessary, shall be the day on which the first
written consent is expressed.
(iii) The record date for determining stockholders for any other purpose
shall be at the close of business on the day on which the board of directors
adopts the resolution relating thereto.
A determination of stockholders of record entitled to notice of or to vote at
a meeting of stockholders shall apply to any adjournment of the meeting;
provided, however, that the board of directors may fix a new record date for the
adjourned meeting.
2.13 PROXIES
Each stockholder entitled to vote at a meeting of stockholders or to express
consent or dissent to corporate action in writing without a meeting may
authorize another person or persons to act for the stockholder by a written
proxy, signed by the stockholder and filed with the secretary of the
corporation, but no such proxy shall be voted or acted upon after three (3)
years from its date, unless the proxy provides for a longer period. A proxy
shall be deemed signed if the stockholder's name is placed on the proxy (whether
by manual signature, typewriting, telegraphic transmission or otherwise) by the
stockholder or the stockholder's attorney-in-fact. The revocability of a proxy
that states on its face that it is irrevocable shall be governed by the
provisions of Section 212(e) of the General Corporation Law of Delaware.
2.14 LIST OF STOCKHOLDERS ENTITLED TO VOTE
The officer who has charge of the stock ledger of a corporation shall prepare
and make, at least ten (10) days before every meeting of stockholders, a
complete list of the stockholders entitled to vote at the meeting, arranged in
alphabetical order, and showing the address of each stockholder and the number
of shares registered in the name of each stockholder. Such list shall be open
to the examination of any stockholder, for any purpose germane to the meeting,
during ordinary business hours, for a period of at least ten (10) days prior to
the meeting, either at a place within the city where the meeting is to be held,
which place shall be specified in the notice of the meeting, or, if not so
specified, at the place where the meeting is to be held. The list shall also be
produced and kept at the time and place of the meeting during the whole time
thereof, and may be inspected by any stockholder who is present. Such list shall
presumptively determine the identity of the stockholders entitled to vote at the
meeting and the number of shares held by each of them.
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2.15 ADVANCE NOTICE OF STOCKHOLDER NOMINEES AND STOCKHOLDER BUSINESS
To be properly brought before an annual meeting or special meeting,
nominations for the election of director or other business must be (a) specified
in the notice of meeting (or any supplement thereto) given by or at the
direction of the board of directors, (b) otherwise properly brought before the
meeting by or at the direction of the board of directors, or (c) otherwise
properly brought before the meeting by a stockholder. For such nominations or
other business to be considered properly brought before the meeting by a
stockholder, such stockholder must have given timely notice and in proper form
of his intent to bring such business before such meeting. To be timely, such
stockholder's notice must be delivered to or mailed and received by the
secretary of the corporation not less than 90 days prior to the meeting;
provided, however, that in the event that less than 100 days notice or prior
public disclosure of the date of the meeting is given or made to stockholders,
notice by the stockholder to be timely must be so received not later than the
close of business on the tenth day following the day on which such notice of the
date of the meeting was mailed or such public disclosure was made. To be in
proper form, a stockholder's notice to the secretary shall set forth:
(i) the name and address of the stockholder who intends to make the
nominations, propose the business, and, as the case may be, the name and address
of the person or persons to be nominated or the nature of the business to be
proposed;
(ii) a representation that the stockholder is a holder of record of stock of
the corporation entitled to vote at such meeting and, if applicable, intends to
appear in person or by proxy at the meeting to nominate the person or persons
specified in the notice or introduce the business specified in the notice;
(iii) if applicable, a description of all arrangements or understandings
between the stockholder and each nominee and any other person or persons (naming
such person or persons) pursuant to which the nomination or nominations are to
be made by the stockholder;
(iv) such other information regarding each nominee or each matter of business
to be proposed by such stockholder as would be required to be included in a
proxy statement filed pursuant to the proxy rules of the Securities and Exchange
Commission had the nominee been nominated, or intended to be nominated, or the
matter been proposed, or intended to be proposed by the board of directors; and
(v) if applicable, the consent of each nominee to serve as director of the
corporation if so elected.
The chairman of the meeting may refuse to acknowledge the nomination of any
person or the proposal of any business not made in compliance with the foregoing
procedure.
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ARTICLE III
DIRECTORS
3.1 POWERS
Subject to the provisions of the General Corporation Law of Delaware and any
limitations in the certificate of incorporation or these bylaws relating to
action required to be approved by the stockholders or by the outstanding shares,
the business and affairs of the corporation shall be managed and all corporate
powers shall be exercised by or under the direction of the board of directors.
3.2 NUMBER OF DIRECTORS
The number of directors of the corporation shall be not less than three (3)
nor more than seven (7). The exact number of directors shall be six (6) until
changed, within the limits specified above, by a bylaw amending this Section
3.2, duly adopted by the board of directors or by the stockholders. The
indefinite number of directors may be changed, or a definite number may be fixed
without provision for an indefinite number, by a duly adopted amendment to the
Certificate of Incorporation or by an amendment to this bylaw duly adopted by
the board of directors or by the stockholders.
No reduction of the authorized number of directors shall have the effect of
removing any director before that director's term of office expires.
3.3 ELECTION, QUALIFICATION AND TERM OF OFFICE OF DIRECTORS
Except as provided in Section 3.4 of these bylaws, directors shall be elected
at each annual meeting of stockholders to hold office until the next annual
meeting. Directors need not be stockholders unless so required by the
certificate of incorporation or these bylaws, wherein other qualifications for
directors may be prescribed. Each director, including a director elected to
fill a vacancy, shall hold office until his or her successor is elected and
qualified or until the director's earlier resignation or removal.
Elections of directors need not be by written ballot.
3.4 RESIGNATION AND VACANCIES
Any director may resign at any time upon written notice to the attention of
the Secretary of the corporation. When one or more directors so resigns and the
resignation is effective at a future date, a majority of the directors then in
office, including those who have so resigned, shall have power
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to fill such vacancy or vacancies, the vote thereon to take effect when such
resignation or resignations shall become effective, and each director so chosen
shall hold office as provided in this section in the filling of other vacancies.
Unless otherwise provided in the certificate of incorporation or these
bylaws:
(i) Vacancies and newly created directorships resulting from any increase
in the authorized number of directors elected by all of the stockholders having
the right to vote as a single class may be filled by a majority of the directors
then in office, although less than a quorum, or by a sole remaining director.
(ii) Whenever the holders of any class or classes of stock or series
thereof are entitled to elect one or more directors by the provisions of the
certificate of incorporation, vacancies and newly created directorships of such
class or classes or series may be filled by a majority of the directors elected
by such class or classes or series thereof then in office, or by a sole
remaining director so elected.
If at any time, by reason of death or resignation or other cause, the
corporation should have no directors in office, then any officer or any
stockholder or an executor, administrator, trustee or guardian of a stockholder,
or other fiduciary entrusted with like responsibility for the person or estate
of a stockholder, may call a special meeting of stockholders in accordance with
the provisions of the certificate of incorporation or these bylaws, or may apply
to the Court of Chancery for a decree summarily ordering an election as provided
in Section 211 of the General Corporation Law of Delaware.
If, at the time of filling any vacancy or any newly created directorship, the
directors then in office constitute less than a majority of the whole board (as
constituted immediately prior to any such increase), then the Court of Chancery
may, upon application of any stockholder or stockholders holding at least ten
(10) percent of the total number of the shares at the time outstanding having
the right to vote for such directors, summarily order an election to be held to
fill any such vacancies or newly created directorships, or to replace the
directors chosen by the directors then in office as aforesaid, which election
shall be governed by the provisions of Section 211 of the General Corporation
Law of Delaware as far as applicable.
3.5 PLACE OF MEETINGS; MEETINGS BY TELEPHONE
The board of directors of the corporation may hold meetings, both regular and
special, either within or outside the State of Delaware.
Unless otherwise restricted by the certificate of incorporation or these
bylaws, members of the board of directors, or any committee designated by the
board of directors, may participate in a meeting of the board of directors, or
any committee, by means of conference telephone or similar
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communications equipment by means of which all persons participating in the
meeting can hear each other, and such participation in a meeting shall
constitute presence in person at the meeting.
3.6 FIRST MEETINGS
The first meeting of each newly elected board of directors shall be held at
such time and place as shall be fixed by the vote of the stockholders at the
annual meeting and no notice of such meeting shall be necessary to the newly
elected directors in order legally to constitute the meeting, provided a quorum
shall be present. In the event of the failure of the stockholders to fix the
time or place of such first meeting of the newly elected board of directors, or
in the event such meeting is not held at the time and place so fixed by the
stockholders, the meeting may be held at such time and place as shall be
specified in a notice given as hereinafter provided for special meetings of the
board of directors, or as shall be specified in a written waiver signed by all
of the directors.
3.7 REGULAR MEETINGS
Regular meetings of the board of directors may be held without notice at such
time and at such place as shall from time to time be determined by the board.
3.8 SPECIAL MEETINGS; NOTICE
Special meetings of the board of directors for any purpose or purposes may be
called at any time by the chairman of the board, the president, any vice
president, the secretary or a majority of the directors.
Notice of the time and place of special meetings shall be delivered
personally or by telephone to each director or sent by first-class mail or
telegram, charges prepaid, addressed to each director at that director's address
as it is shown on the records of the corporation. If the notice is mailed, it
shall be deposited in the United States mail at least four (4) days before the
time of the holding of the meeting. If the notice is delivered personally or by
telephone or by telegram, it shall be delivered personally or by telephone or to
the telegraph company at least forty-eight (48) hours before the time of the
holding of the meeting. Any oral notice given personally or by telephone may be
communicated either to the director or to a person at the office of the director
who the person giving the notice has reason to believe will promptly communicate
it to the director. The notice need not specify the purpose or the place of the
meeting, if the meeting is to be held at the principal executive office of the
corporation.
3.9 QUORUM
At all meetings of the board of directors, a majority of the authorized
number of directors shall constitute a quorum for the transaction of business
and the act of a majority of the directors present at any meeting at which there
is a quorum shall be the act of the board of directors, except as may be
otherwise specifically provided by statute or by the certificate of
incorporation. If a quorum is
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not present at any meeting of the board of directors, then the directors present
thereat may adjourn the meeting from time to time, without notice other than
announcement at the meeting, until a quorum is present.
A meeting at which a quorum is initially present may continue to transact
business notwithstanding the withdrawal of directors, if any action taken is
approved by at least a majority of the required quorum for that meeting.
3.10 ADJOURNED MEETING; NOTICE
If a quorum is not present at any meeting of the board of directors, then the
directors present thereat may adjourn the meeting from time to time, without
notice other than announcement at the meeting, until a quorum is present.
3.11 WAIVER OF NOTICE
Whenever notice is required to be given under any provision of the General
Corporation Law of Delaware or of the certificate of incorporation or these
bylaws, a written waiver thereof, signed by the person entitled to notice,
whether before or after the time stated therein, shall be deemed equivalent to
notice. Attendance of a person at a meeting shall constitute a waiver of notice
of such meeting, except when the person attends a meeting for the express
purpose of objecting, at the beginning of the meeting, to the transaction of any
business because the meeting is not lawfully called or convened. Neither the
business to be transacted at, nor the purpose of, any regular or special meeting
of the directors, or members of a committee of directors, need be specified in
any written waiver of notice unless so required by the certificate of
incorporation or these bylaws.
3.12 BOARD ACTION BY WRITTEN CONSENT WITHOUT A MEETING
Unless otherwise restricted by the certificate of incorporation or these
bylaws, any action required or permitted to be taken at any meeting of the board
of directors, or of any committee thereof, may be taken without a meeting if all
members of the board or committee, as the case may be, consent thereto in
writing and the writing or writings are filed with the minutes of proceedings of
the board or committee.
3.13 FEES AND COMPENSATION OF DIRECTORS
Unless otherwise restricted by the certificate of incorporation or these
bylaws, the board of directors shall have the authority to fix the compensation
of directors.
3.14 APPROVAL OF LOANS TO OFFICERS
The corporation may lend money to, or guarantee any obligation of, or
otherwise assist any officer or other employee of the corporation or of its
subsidiary, including any officer or employee
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who is a director of the corporation or its subsidiary, whenever, in the
judgment of the directors, such loan, guaranty or assistance may reasonably be
expected to benefit the corporation. The loan, guaranty or other assistance may
be with or without interest and may be unsecured, or secured in such manner as
the board of directors shall approve, including, without limitation, a pledge of
shares of stock of the corporation. Nothing in this section contained shall be
deemed to deny, limit or restrict the powers of guaranty or warranty of the
corporation at common law or under any statute.
3.15 REMOVAL OF DIRECTORS
Unless otherwise restricted by statute, by the certificate of incorporation
or by these bylaws, any director or the entire board of directors may be
removed, with or without cause, by the holders of a majority of the shares then
entitled to vote at an election of directors.
No reduction of the authorized number of directors shall have the effect of
removing any director prior to the expiration of such director's term of office.
ARTICLE IV
COMMITTEES
4.1 COMMITTEES OF DIRECTORS
The board of directors may, by resolution passed by a majority of the whole
board, designate one or more committees, with each committee to consist of one
or more of the directors of the corporation. The board may designate one or
more directors as alternate members of any committee, who may replace any absent
or disqualified member at any meeting of the committee. In the absence or
disqualification of a member of a committee, the member or members thereof
present at any meeting and not disqualified from voting, whether or not such
member or members constitute a quorum, may unanimously appoint another member of
the board of directors to act at the meeting in the place of any such absent or
disqualified member. Any such committee, to the extent provided in the
resolution of the board of directors or in the bylaws of the corporation, shall
have and may exercise all the powers and authority of the board of directors in
the management of the business and affairs of the corporation, and may authorize
the seal of the corporation to be affixed to all papers that may require it; but
no such committee shall have the power or authority to (i) amend the certificate
of incorporation (except that a committee may, to the extent authorized in the
resolution or resolutions providing for the issuance of shares of stock adopted
by the board of directors as provided in Section 151(a) of the General
Corporation Law of Delaware, fix the designations and any of the preferences or
rights of such shares relating to dividends, redemption, dissolution, any
distribution of assets of the corporation or the conversion into, or the
exchange of such shares for, shares of any other class or classes or any other
series of the same or any other class or classes of stock of the
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corporation or fix the number of shares of any series of stock or authorize the
increase or decrease of the shares of any series) [VOTING RIGHTS?], (ii) adopt
an agreement of merger or consolidation under Sections 251 or 252 of the General
Corporation Law of Delaware, (iii) recommend to the stockholders the sale, lease
or exchange of all or substantially all of the corporation's property and
assets, (iv) recommend to the stockholders a dissolution of the corporation or a
revocation of a dissolution, or (v) amend the bylaws of the corporation; and,
unless the board resolution establishing the committee, the bylaws or the
certificate of incorporation expressly so provide, no such committee shall have
the power or authority to declare a dividend, to authorize the issuance of
stock, or to adopt a certificate of ownership and merger pursuant to Section 253
of the General Corporation Law of Delaware.
4.2 COMMITTEE MINUTES
Each committee shall keep regular minutes of its meetings and report the same
to the board of directors when required.
4.3 MEETINGS AND ACTION OF COMMITTEES
Meetings and actions of committees shall be governed by, and held and taken
in accordance with, the provisions of Article III of these bylaws, Section 3.5
(place of meetings and meetings by telephone), Section 3.7 (regular meetings),
Section 3.8 (special meetings and notice), Section 3.9 (quorum), Section 3.11
(waiver of notice), and Section 3.12 (action without a meeting), with such
changes in the context of those bylaws as are necessary to substitute the
committee and its members for the board of directors and its members; provided,
however, that the time of regular meetings of committees may be determined
either by resolution of the board of directors or by resolution of the
committee, that special meetings of committees may also be called by resolution
of the board of directors and that notice of special meetings of committees
shall also be given to all alternate members, who shall have the right to attend
all meetings of the committee. The board of directors may adopt rules for the
government of any committee not inconsistent with the provisions of these
bylaws.
ARTICLE V
OFFICERS
5.1 OFFICERS
The officers of the corporation shall be a chairman of the board or a
president or both, a secretary and a chief financial officer/treasurer. The
corporation may also have, at the discretion of the board of directors, a chief
executive officer, one or more vice presidents, one or more assistant vice
presidents, one or more assistant secretaries, one or more assistant treasurers,
and any such other
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officers as may be appointed in accordance with the provisions of Section 5.3 of
these bylaws. Any number of offices may be held by the same person.
5.2 APPOINTMENT OF OFFICERS
The officers of the corporation, except such officers as may be appointed in
accordance with the provisions of Sections 5.3 or 5.5 of these bylaws, shall be
appointed by the board of directors, subject to the rights, if any, of an
officer under any contract of employment.
5.3 SUBORDINATE OFFICERS
The board of directors may appoint, or empower the president to appoint, such
other officers and agents as the business of the corporation may require, each
of whom shall hold office for such period, have such authority, and perform such
duties as are provided in these bylaws or as the board of directors may from
time to time determine.
5.4 REMOVAL AND RESIGNATION OF OFFICERS
Subject to the rights, if any, of an officer under any contract of
employment, any officer may be removed, either with or without cause, by an
affirmative vote of the majority of the board of directors at any regular or
special meeting of the board or, except in the case of an officer chosen by the
board of directors, by any officer upon whom such power of removal may be
conferred by the board of directors.
Any officer may resign at any time by giving written notice to the
corporation. Any resignation shall take effect at the date of the receipt of
that notice or at any later time specified in that notice; and, unless otherwise
specified in that notice, the acceptance of the resignation shall not be
necessary to make it effective. Any resignation is without prejudice to the
rights, if any, of the corporation under any contract to which the officer is a
party.
5.5 VACANCIES IN OFFICES
Any vacancy occurring in any office of the corporation shall be filled by the
board of directors.
5.6 CHAIRMAN OF THE BOARD
The chairman of the board, if such an officer be elected, shall, if present,
preside at meetings of the board of directors and exercise and perform such
other powers and duties as may from time to time be assigned to him or her by
the board of directors or as may be prescribed by these bylaws. If there is no
chief executive officer and no president, then the chairman of the board shall
also be the chief executive officer of the corporation and shall have the powers
and duties prescribed in Section 5.7 of these bylaws.
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5.7 CHIEF EXECUTIVE OFFICER
Subject to the supervisory powers, if any, as may be given by the board of
directors to the chairman of the board, if there be such an officer, the chief
executive officer shall, subject to the control of the board of directors, have
general supervision, direction, and control of the business and the officers of
the corporation. In the absence or nonexistence of a chairman of the board, the
chief executive officer shall preside at meetings of the board of directors.
The chief executive officer shall have such other powers and duties as may be
prescribed by the board of directors or these bylaws.
5.8 PRESIDENT
The president shall preside at all meetings of the stockholders and, in the
absence or nonexistence of a chairman of the board and a chief executive
officer, at all meetings of the board of directors. The president shall have
the general powers and duties of management usually vested in the office of
president of a corporation and shall have such other powers and duties as may be
prescribed by the board of directors or these bylaws. If there is no chief
executive officer, then the president shall also be the chief executive officer
of the corporation and shall have the powers and duties prescribed in Section
5.7 of these bylaws.
5.9 VICE PRESIDENTS
In the absence or disability of the president, the vice presidents, if any,
in order of their rank as fixed by the board of directors or, if not ranked, a
vice president designated by the board of directors, shall perform all the
duties of the president and when so acting shall have all the powers of, and be
subject to all the restrictions upon, the president. The vice presidents shall
have such other powers and perform such other duties as from time to time may be
prescribed for them respectively by the board of directors, these bylaws, the
president or the chairman of the board.
5.10 SECRETARY
The secretary shall keep or cause to be kept, at the principal executive
office of the corporation or such other place as the board of directors may
direct, a book of minutes of all meetings and actions of directors, committees
of directors, and stockholders. The minutes shall show the time and place of
each meeting, whether regular or special (and, if special, how authorized and
the notice given), the names of those present at directors' meetings or
committee meetings, the number of shares present or represented at stockholders'
meetings, and the proceedings thereof.
The secretary shall keep, or cause to be kept, at the principal executive
office of the corporation or at the office of the corporation's transfer agent
or registrar, as determined by resolu tion of the board of directors, a share
register, or a duplicate share register, showing the names of all stockholders
and their addresses, the number and classes of shares held by each, the number
and date of certificates evidencing such shares, and the number and date of
cancellation of every certificate surrendered for cancellation.
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The secretary shall give, or cause to be given, notice of all meetings of the
stockholders and of the board of directors required to be given by law or by
these bylaws. The secretary shall keep the seal of the corporation, if one be
adopted, in safe custody and shall have such other powers and perform such other
duties as may be prescribed by the board of directors or by these bylaws.
5.11 CHIEF FINANCIAL OFFICER
The chief financial officer shall keep and maintain, or cause to be kept and
maintained, adequate and correct books and records of accounts of the properties
and business transactions of the corporation, including accounts of its assets,
liabilities, receipts, disbursements, gains, losses, capital retained earnings,
and shares. The books of account shall at all reasonable times be open to
inspection by any director.
The chief financial officer shall deposit all moneys and other valuables in
the name and to the credit of the corporation with such depositories as may be
designated by the board of directors. The chief financial officer shall disburse
the funds of the corporation as may be ordered by the board of directors, shall
render to the president and directors, whenever they request it, an account of
all his or her transactions as chief financial officer and of the financial
condition of the corporation, and shall have other powers and perform such other
duties as may be prescribed by the board of directors or these bylaws.
The chief financial officer shall be the treasurer of the corporation.
5.12 ASSISTANT SECRETARY
The assistant secretary, or, if there is more than one, the assistant
secretaries in the order determined by the stockholders or board of directors
(or if there be no such determination, then in the order of their election)
shall, in the absence of the secretary or in the event of his or her inability
or refusal to act, perform the duties and exercise the powers of the secretary
and shall perform such other duties and have such other powers as may be
prescribed by the board of directors or these bylaws.
5.13 ASSISTANT TREASURER
The assistant treasurer, or, if there is more than one, the assistant
treasurers, in the order determined by the stockholders or board of directors
(or if there be no such determination, then in the order of their election),
shall, in the absence of the chief financial officer or in the event of his or
her inability or refusal to act, perform the duties and exercise the powers of
the chief financial officer and shall perform such other duties and have such
other powers as may be prescribed by the board of directors or these bylaws.
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5.14 REPRESENTATION OF SHARES OF OTHER CORPORATIONS
The chairman of the board, the president, any vice president, the chief
financial officer, the secretary or assistant secretary of this corporation, or
any other person authorized by the board of directors or the president or a vice
president, is authorized to vote, represent, and exercise on behalf of this
corporation all rights incident to any and all shares of any other corporation
or corporations standing in the name of this corporation. The authority granted
herein may be exercised either by such person directly or by any other person
authorized to do so by proxy or power of attorney duly executed by such person
having the authority.
5.15 AUTHORITY AND DUTIES OF OFFICERS
In addition to the foregoing authority and duties, all officers of the
corporation shall respectively have such authority and perform such duties in
the management of the business of the corporation as may be designated from time
to time by the board of directors or the stockholders.
ARTICLE VI
INDEMNITY
6.1 THIRD PARTY ACTIONS
The corporation shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending, or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of the corporation) by reason of the
fact that he is or was a director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture trust or other enterprise, against expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement (if such settlement is approved
in advance by the corporation, which approval shall not be unreasonably
withheld) actually and reasonably incurred by him in connection with such
action, suit or proceeding if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. The termination of any
action, suit or proceeding by judgment, order, settlement, conviction, or upon a
plea of nolo contendere or its equivalent, shall not, of itself, create a
presumption that the person did not act in good faith and in a manner which such
person reasonably believed to be in or not opposed to the best interest of the
corporation, and, with respect to any criminal action or proceeding, had
reasonable cause to believe that his conduct was unlawful.
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6.2 ACTIONS BY OR IN THE RIGHT OF THE CORPORATION
The corporation shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action or
suit by or in the right of the corporation to procure a judgment in its favor by
reason of the fact that such person is or was a director, officer, employee or
agent of corporation, or is or was serving at the request of the corporation as
a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise against expenses (including attorneys'
fees) and amounts paid in settlement (if such settlement is approved in advance
by the corporation, which approval shall not be unreasonably withheld) actually
and reasonably incurred by such person in connection with the defense or
settlement of such action or suit if the person acted in good faith and in
manner the person reasonably believed to be in or not opposed to the best
interests of the corporation, except that no indemnification shall be made in
respect of any claim, issue or matter as to which such person shall have been
adjudged to be liable to the corporation unless and only to the extent that the
Delaware Court of Chancery or the court in which such action or suit was brought
shall determine upon application that, despite the adjudication of liability but
in view of all the circumstances of the case, such person is fairly and
reasonably entitled to indemnity for such expenses which the Delaware Court of
Chancery or such other court shall deem proper. Notwithstanding any other
provision of this Article VI, no person shall be indemnified hereunder for any
expenses or amounts paid in settlement with respect to any action to recover
short-swing profits under Section 16(b) of the Securities Exchange Act of 1934,
as amended.
6.3 SUCCESSFUL DEFENSE
To the extent that a director, officer, employee or agent of the corporation
has been successful on the merits or otherwise in defense of any action, suit or
proceeding referred to in Sections 6.1 and 6.2, or in defense of any claim,
issue or matter therein, such person shall be indemnified against expenses
(including attorneys' fees) actually and reasonably incurred by the person in
connection therewith.
6.4 DETERMINATION OF CONDUCT
Any indemnification under Sections 6.1 and 6.2 (unless ordered by a court)
shall be made by the corporation only as authorized in the specific case upon a
determination that the indemnification of the director, officer, employee or
agent is proper in the circumstances because the person has met the applicable
standard of conduct set forth in Sections 6.1 and 6.2. Such determination shall
be made (1) by a majority vote of the directors who are not parties to such
action, suit or proceeding, even though less than a quorum, or (2) if there are
no such directors, or if such directors so direct, by independent legal counsel
in a written opinion, or (3) by the stockholders. Notwithstanding the
foregoing, a director, officer, employee or agent of the Corporation shall be
entitled to contest any determination that the director, officer, employee or
agent has not met the applicable standard of conduct set forth in Sections 6.1
and 6.2 by petitioning a court of competent jurisdiction.
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6.5 PAYMENT OF EXPENSES IN ADVANCE
Expenses incurred in defending a civil or criminal action, suit or
proceeding, by an individual who may be entitled to indemnification pursuant to
Section 6.1 or 6.2, shall be paid by the corporation in advance of the final
disposition of such action, suit or proceeding upon receipt of an undertaking by
or on behalf of the director, officer, employee or agent to repay such amount if
it shall ultimately be determined that the individual is not entitled to be
indemnified by the corporation as authorized in this Article VI.
6.6 INDEMNITY NOT EXCLUSIVE
The indemnification and advancement of expenses provided by or granted
pursuant to the other sections of this Article VI shall not be deemed exclusive
of any other rights to which those seeking indemnification or advancement of
expenses may be entitled under any by-law, agreement, vote of stockholders or
disinterested directors or otherwise, both as to action in their official
capacity and as to action in another capacity while holding such office.
6.7 INSURANCE INDEMNIFICATION
The corporation shall have the power to purchase and maintain insurance on
behalf of any person who is or was a director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against any liability asserted against the
person and incurred by the person in any such capacity or arising out of the
person's status as such, whether or not the corporation would have the power to
indemnify such person against such liability under the provisions of this
Article VI.
6.8 THE CORPORATION
For purposes of this Article VI, references to "the corporation" shall
include, in addition to the resulting corporation, any constituent corporation
(including any constituent of a constituent) absorbed in a consolidation or
merger which, if its separate existence had continued, would have had power and
authority to indemnify its directors, officers, and employees or agents, so that
any person who is or was a director, officer, employee or agent of such
constituent corporation, or is or was serving at the request of such constituent
corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, shall stand in the same
position under and subject to the provisions of this Article VI (including,
without limitation the provisions of Section 6.4) with respect to the resulting
or surviving corporation as the person would have with respect to such
constituent corporation if its separate existence had continued.
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<PAGE>
6.9 EMPLOYEE BENEFIT PLANS
For purposes of this Article VI, references to "other enterprises" shall
include employee benefit plans; references to "fines" shall include any excise
taxes assessed on a person with respect to an employee benefit plan; and
references to "serving at the request of the corporation" shall include any
service as a director, officer, employee or agent of the corporation which
imposes duties on, or involves services by, such director, officer, employee, or
agent with respect to an employee benefit plan, its participants, or
beneficiaries; and a person who acted in good faith and in a manner he
reasonably believed to be in the interest of the participants and beneficiaries
of an employee benefit plan shall be deemed to have acted in a manner "not
opposed to the best interests of the corporation" as referred to in this Article
VI.
6.10 CONTINUATION OF INDEMNIFICATION AND ADVANCEMENT OF EXPENSES
The indemnification and advancement of expenses provided by, or granted
pursuant to, this Article VI shall, unless otherwise provided when authorized or
ratified, continue as to a person who has ceased to be a director, officer,
employee or agent and shall inure to the benefit of the heirs, executors and
administrators of such person.
ARTICLE VII
RECORDS AND REPORTS
7.1 MAINTENANCE AND INSPECTION OF RECORDS
The corporation shall, either at its principal executive officer or at such
place or places as designated by the board of directors, keep a record of its
stockholders listing their names and addresses and the number and class of
shares held by each stockholder, a copy of these bylaws as amended to date,
accounting books, and other records.
Any stockholder of record, in person or by attorney or other agent, shall,
upon written demand under oath stating the purpose thereof, have the right
during the usual hours for business to inspect for any proper purpose the
corporation's stock ledger, a list of its stockholders, and its other books and
records and to make copies or extracts therefrom. A proper purpose shall mean a
purpose reasonably related to such person's interest as a stockholder. In every
instance where an attorney or other agent is the person who seeks the right to
inspection, the demand under oath shall be accompanied by a power of attorney or
such other writing that authorizes the attorney or other agent so to act on
behalf of the stockholder. The demand under oath shall be directed to the
corporation at its registered office in Delaware or at its principal place of
business.
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<PAGE>
7.2 INSPECTION BY DIRECTORS
Any director shall have the right to examine the corporation's stock ledger,
a list of its stockholders, and its other books and records for a purpose
reasonably related to his or her position as a director. The Court of Chancery
is hereby vested with the exclusive jurisdiction to determine whether a director
is entitled to the inspection sought. The Court may summarily order the
corporation to permit the director to inspect any and all books and records,the
stock ledger, and the stock list and to make copies or extracts therefrom. The
Court may, in its discretion, prescribe any limitations or conditions with
reference to the inspection, or award such other and further relief as the Court
may deem just and proper.
7.3 ANNUAL STATEMENT TO STOCKHOLDERS
The board of directors shall present at each annual meeting, and at any
special meeting of the stockholders when called for by vote of the stockholders,
a full and clear statement of the business and condition of the corporation.
ARTICLE VIII
GENERAL MATTERS
8.1 CHECKS
From time to time, the board of directors shall determine by resolution which
person or persons may sign or endorse all checks, drafts, other orders for
payment of money, notes or other evidences of indebtedness that are issued in
the name of or payable to the corporation, and only the persons so authorized
shall sign or endorse those instruments.
8.2 EXECUTION OF CORPORATE CONTRACTS AND INSTRUMENTS
The board of directors, except as otherwise provided in these bylaws, may
authorize any officer or officers, or agent or agents, to enter into any
contract or execute any instrument in the name of and on behalf of the
corporation; such authority may be general or confined to specific instances.
Unless so authorized or ratified by the board of directors or within the agency
power of an officer, no officer, agent or employee shall have any power or
authority to bind the corporation by any contract or engagement or to pledge its
credit or to render it liable for any purpose or for any amount.
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8.3 STOCK CERTIFICATES; PARTLY PAID SHARES
The shares of the corporation shall be represented by certificates, provided
that the board of directors of the corporation may provide by resolution or
resolutions that some or all of any or all classes or series of its stock shall
be uncertificated shares. Any such resolution shall not apply to shares
represented by a certificate until such certificate is surrendered to the
corporation. Notwithstanding the adoption of such a resolution by the board of
directors, every holder of stock represented by certificates and upon request
every holder of uncertificated shares shall be entitled to have a certificate
signed by, or in the name of the corporation by the chairman or vice-chairman of
the board of directors, or the president or vice-president, and by the chief
financial officer or an assistant treasurer, or the secretary or an assistant
secretary of such corporation representing the number of shares registered in
certificate form. Any or all of the signatures on the certificate may be a
facsimile. In case any officer, transfer agent or registrar who has signed or
whose facsimile signature has been placed upon a certificate has ceased to be
such officer, transfer agent or registrar before such certificate is issued, it
may be issued by the corporation with the same effect as if the person were such
officer, transfer agent or registrar at the date of issue.
The corporation may issue the whole or any part of its shares as partly paid
and subject to call for the remainder of the consideration to be paid therefor.
Upon the face or back of each stock certificate issued to represent any such
partly paid shares, upon the books and records of the corporation in the case of
uncertificated partly paid shares, the total amount of the consideration to be
paid therefor and the amount paid thereon shall be stated. Upon the declaration
of any dividend on fully paid shares, the corporation shall declare a dividend
upon partly paid shares of the same class, but only upon the basis of the
percentage of the consideration actually paid thereon.
8.4 SPECIAL DESIGNATION ON CERTIFICATES
If the corporation is authorized to issue more than one class of stock or
more than one series of any class, then the powers, the designations, the
preferences, and the relative, participating, optional or other special rights
of each class of stock or series thereof and the qualifications, limitations or
restrictions of such preferences and/or rights shall be set forth in full or
summarized on the face or back of the certificate that the corporation shall
issue to represent such class or series of stock; provided, however, that,
except as otherwise provided in Section 202 of the General Corporation Law of
Delaware, in lieu of the foregoing requirements there may be set forth on the
face or back of the certificate that the corporation shall issue to represent
such class or series of stock a statement that the corporation will furnish
without charge to each stockholder who so requests the powers, the designations,
the preferences, and the relative, participating, optional or other special
rights of each class of stock or series thereof and the qualifications,
limitations or restrictions of such preferences and/or rights.
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8.5 LOST CERTIFICATES
Except as provided in this Section 8.5, no new certificates for shares shall
be issued to replace a previously issued certificate unless the latter is
surrendered to the corporation and cancelled at the same time. The corporation
may issue a new certificate of stock or uncertificated shares in the place of
any certificate theretofore issued by it, alleged to have been lost, stolen or
destroyed, and the corporation may require the owner of the lost, stolen or
destroyed certificate, or the owner's legal representative, to give the
corporation a bond sufficient to indemnify it against any claim that may be made
against it on account of the alleged loss, theft or destruction of any such
certificate or the issuance of such new certificate or uncertificated shares.
8.6 CONSTRUCTION; DEFINITIONS
Unless the context requires otherwise, the general provisions, rules of
construction, and definitions in the Delaware General Corporation Law shall
govern the construction of these bylaws. Without limiting the generality of this
provision, the singular number includes the plural, the plural number includes
the singular, and the term "person" includes both a corporation and a natural
person.
8.7 DIVIDENDS
The directors of the corporation, subject to any restrictions contained in
(i) the General Corporation Law of Delaware or (ii) the certificate of
incorporation, may declare and pay dividends upon the shares of its capital
stock. Dividends may be paid in cash, in property, or in shares of the
corporation's capital stock.
The directors of the corporation may set apart out of any of the funds of the
corporation available for dividends a reserve or reserves for any proper purpose
and may abolish any such reserve. Such purposes shall include but not be limited
to equalizing dividends, repairing or maintaining any property of the
corporation, and meeting contingencies.
8.8 FISCAL YEAR
The fiscal year of the corporation shall be fixed by resolution of the board
of directors and may be changed by the board of directors.
8.9 SEAL
The corporation may adopt a corporate seal, which shall be adopted and which
may be altered by the board of directors, and may use the same by causing it or
a facsimile thereof to be impressed or affixed or in any other manner
reproduced.
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8.10 TRANSFER OF STOCK
Upon surrender to the corporation or the transfer agent of the corporation of
a certificate for shares duly endorsed or accompanied by proper evidence of
succession, assignation or authority to transfer, it shall be the duty of the
corporation to issue a new certificate to the person entitled thereto, cancel
the old certificate, and record the transaction in its books.
8.11 STOCK TRANSFER AGREEMENTS
The corporation shall have power to enter into and perform any agreement with
any number of stockholders of any one or more classes of stock of the
corporation to restrict the transfer of shares of stock of the corporation of
any one or more classes owned by such stockholders in any manner not prohibited
by the General Corporation Law of Delaware.
8.12 REGISTERED STOCKHOLDERS
The corporation shall be entitled to recognize the exclusive right of a
person registered on its books as the owner of shares to receive dividends and
to vote as such owner, shall be entitled to hold liable for calls and
assessments the person registered on its books as the owner of shares, and shall
not be bound to recognize any equitable or other claim to or interest in such
share or shares on the part of another person, whether or not it shall have
express or other notice thereof, except as otherwise provided by the laws of
Delaware.
ARTICLE IX
AMENDMENTS
The bylaws of the corporation may be adopted, amended or repealed by
the stockholders entitled to vote; provided, however, that the corporation may,
in its certificate of incorporation, confer the power to adopt, amend or repeal
bylaws upon the directors. The fact that such power has been so conferred upon
the directors shall not divest the stockholders of the power, nor limit their
power to adopt, amend or repeal bylaws.
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<PAGE>
EXHIBIT 4.2
RAMBUS INC.
AMENDED AND RESTATED
INFORMATION AND REGISTRATION RIGHTS AGREEMENT
<PAGE>
TABLE OF CONTENTS
PAGE
----
1. Certain Definitions.................................................. 1
2. Financial Statements and Reports to Shareholders..................... 2
3. Additional Information............................................... 3
4. Inspection........................................................... 3
5. Termination of Covenants; Delivery of Public Information............. 3
6. Investor Representation at Board Meetings............................ 4
7. Right of First Refusal............................................... 6
7.1 Right of First Refusal.......................................... 6
7.2 Pro Rata Share.................................................. 6
7.3 New Securities.................................................. 6
7.4 Procedure....................................................... 6
8. Demand Registration.................................................. 7
8.1 Request for Registration on Form Other Than Form S-3............ 7
8.2 Right of Deferral of Registration............................... 7
8.3 Request for Registration on Form S-3............................ 7
8.4 Registration of Other Securities in Demand Registration......... 8
8.5 Underwriting in Demand Registration............................. 8
8.6 Blue Sky in Demand Registration................................. 9
9. Piggyback Registration............................................... 9
9.1 Notice of Piggyback Registration and Inclusion of
Registrable Securities......................................... 9
9.2 Underwriting in Piggyback Registration.......................... 9
9.3 Blue Sky in Piggyback Registration.............................. 11
10. Expenses of Registration............................................. 11
11. Registration Procedures.............................................. 11
12. Information Furnished by Holder...................................... 11
13. Indemnification...................................................... 12
13.1 Company's Indemnification of Holders........................... 12
13.2 Holder's Indemnification of Company............................ 12
13.3 Indemnification Procedure...................................... 13
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TABLE OF CONTENTS
(CONTINUED)
14. Limitations on Registration Rights Granted to Other Securities....... 13
15. Transfer of Rights................................................... 13
16. Market Stand-off..................................................... 14
17. Conversion of Preferred Stock........................................ 14
18. Miscellaneous........................................................ 14
18.1 Termination of Prior Agreements, Rights and Obligations........ 14
18.2 Entire Agreement; Successors and Assigns....................... 14
18.3 Governing Law.................................................. 15
18.4 Counterparts................................................... 15
18.5 Headings....................................................... 15
18.6 Notices........................................................ 15
18.7 Amendment of Agreement......................................... 15
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AMENDED AND RESTATED
INFORMATION AND REGISTRATION RIGHTS AGREEMENT
This AMENDED AND RESTATED INFORMATION AND REGISTRATION RIGHTS AGREEMENT
(the "Agreement") is made as of January 7, 1997, by and among Rambus Inc., a
California corporation (the "Company"), and the persons listed on the attached
Schedule A (collectively, the "Investors").
R E C I T A L S
A. The Company and the Investors have entered into agreements for sale by
the Company and purchase by the Investors the Company's securities.
B. The Company and certain existing investors in the Company are parties
to a Prior Registration Rights Agreement (as defined below), pursuant to which
the Company granted such investors certain information rights and registration
rights with respect to the Company's securities.
C. In connection with the issuance of a warrant for the purchase of
1,000,000 shares of Common Stock (the "Warrant") to Intel Corporation, the
Company and the Investors desire to amend and restate the rights of the
Investors with respect to information about the Company and registration of the
Common Stock issued upon conversion or exercise of the securities according to
the terms of this Agreement.
THE PARTIES AGREE AS FOLLOWS:
1. Certain Definitions.
As used in this Agreement, the following terms shall have the following
respective meanings:
(a) "Commission" shall mean the Securities and Exchange Commission or
any other federal agency at the time administering the Securities Act.
(b) "Convertible Securities" shall mean the Series A Preferred Stock,
Series B Preferred Stock, Series C Preferred Stock and Series D Preferred Stock
of the Company, the Warrant, and the Common Stock of the Company issued or
issuable upon conversion thereof.
(c) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, or any similar federal statute, and the rules and regulations of the
Commission thereunder, all as the same shall be in effect at the time.
(d) "Form S-3" shall mean Form S-3 issued by the Commission or any
substantially similar form then in effect.
(e) "Holder" shall mean any holder of outstanding Registrable
Securities which have not been sold to the public, but only if such holder is an
Investor or an assignee or transferee of Registration rights as permitted by
Section 15.
(f) "Initiating Holders" shall mean Holders who in the aggregate hold
at least fifty percent (50%) of the Registrable Securities (or any Holders in
the case of Section 8.3).
<PAGE>
(g) "Material Adverse Event" shall mean an occurrence having a
consequence that either (a) is materially adverse as to the business,
properties, prospects or financial condition of the Company or (b) is reasonably
foreseeable, has a reasonable likelihood of occurring, and if it were to occur
might materially adversely affect the business, properties, prospects or
financial condition of the Company.
(h) "Prior Registration Rights Agreement" shall mean the Amended and
Restated Information and Registration Rights Agreement dated as of February 24,
1995, by and among Rambus Inc. and the investors listed on Schedule A thereto.
(i) The terms "Register", "Registered" and "Registration" refer to a
registration effected by preparing and filing a registration statement in
compliance with the Securities Act ("Registration Statement"), and the
declaration or ordering of the effectiveness of such Registration Statement.
(j) "Registrable Securities" shall mean all Common Stock not
previously sold to the public issued or issuable upon conversion or exercise of
any of the Company's Convertible Securities purchased by or issued to the
Investors, including Common Stock issued in respect of the Conversion Stock
pursuant to stock splits, stock dividends and similar distributions, and any
securities of the Company granted registration rights pursuant to Section 14 of
this Agreement.
(k) "Registration Expenses" shall mean all expenses incurred by the
Company in complying with Sections 8 or 9 of this Agreement, including, without
limitation, all federal and state registration, qualification and filing fees,
printing expenses, fees and disbursements of counsel for the Company and one
special counsel for Holders (if different from the Company), blue sky fees and
expenses, and the expense of any special audits incident to or required by any
such registration.
(l) "Securities Act" shall mean the Securities Act of 1933, as
amended, or any similar federal statute, and the rules and regulations of the
Commission thereunder, all as the same shall be in effect at the time.
(m) "Selling Expenses" shall mean all underwriting discounts and
selling commissions applicable to the sale of Registrable Securities pursuant to
this Agreement.
(n) "Warrant Stock" shall mean the Common Stock of the Company issued
or issuable upon the exercise of the Warrant (or any similar warrant issued
pursuant to the transfer or exchange thereof), including Common Stock issued in
respect thereof pursuant to stock splits, stock dividends and similar
distributions.
2. Financial Statements and Reports to Shareholders.
The Company shall deliver the Investors as soon as practicable after
the end of each fiscal year of the Company, and in any event within 90 days
thereafter, an audited consolidated balance sheet of the Company as of the end
of such year and audited consolidated statements of income, shareholders' equity
and changes in financial position for such year, which year-end financial
reports shall be in reasonable detail and shall be accompanied by the opinion of
independent public accountants of recognized standing selected by the Company.
In addition, the Company shall deliver to the Investors: (a) as soon as
practicable after the end of each fiscal quarter of the Company, and in any
event within 45 days thereafter, unaudited financial statements
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of the Company on a quarterly basis prepared in accordance with generally
accepted accounting principles and fairly reflecting the fiscal affairs of the
Company to the date thereof, and (b) contemporaneously with delivery to holders
of Common Stock, a copy of each report of the Company delivered to holders of
Common Stock .
3. Additional Information.
As long as an Investor (together with any affiliate) or its transferee
holds not less than 15% of the Warrant Stock originally issuable (or a Warrant
representing such amount of Warrant Stock), or 5% of the Series A Preferred
Stock of the Company originally issued, or 15% of the Series B Preferred Stock
of the Company originally issued, or 15% of the Series C Preferred Stock of the
Company originally issued, or 15% of the Series D Preferred Stock of the Company
originally issued (or an equivalent number of shares consisting of Registrable
Securities issued upon conversion or exercise of such Preferred Stock of the
Company or a combination of such Preferred Stock and Registrable Securities
issued upon conversion thereof), as adjusted for recapitalizations, stock
splits, stock dividends and the like, the Company will deliver to such Investor:
(a) As soon as practicable after the end of each month, and in any
event within 30 days thereafter, consolidated balance sheets of the Company and
its subsidiaries, if any, as of the end of such month, and consolidated
statements of income and cash flow for such month and for the current fiscal
year to date.
(b) As soon as practicable following submission to and approval by the
Board of Directors of the Company, but in no event later than 90 days after the
end of each fiscal year, each operating budget and plan (the "Plan") respecting
the next fiscal year and a summary of each such Plan containing a monthly
financial budget together with any update of the Plan as such update is
prepared.
4. Inspection.
The Company shall permit each Investor, at such Investor's expense, to
visit and inspect the Company's properties, to examine its books of account and
records and to discuss the Company's affairs, finances and accounts with its
officers, all at such reasonable times as may be requested by each such
Investor; provided, however, that the Company shall not be obligated pursuant to
this Section 4 to provide any information which it reasonably considers to be a
trade secret or confidential information. Subject to Section 5, the rights of
an Investor under this Section 4 may not be assigned as part of such Investor's
sale of any of the Registrable Securities or Convertible Securities except with
the consent of the Company, which consent shall not be unreasonably withheld.
Notwithstanding the foregoing, Stone Street Fund 1994, L.P., Stone Street Fund
1995, L.P., Bridge Street Fund 1994, L.P., and Bridge Street Fund 1995, L.P.
shall be entitled to the rights provided under this Section 4 upon the
assignment of any of the Registrable Securities to them, respectively, by GS
Capital Partners, L.P.
5. Termination of Covenants; Delivery of Public Information.
(a) The covenants of the Company set forth in Sections 2, 3, 4, 6(a),
6(b), 6(c), and 7 shall be terminated and be of no further force or effect upon
the earlier of (a) the date when a Registration Statement filed by the Company
under the Securities Act, in connection with the first public offering of its
securities (other than either a public offering limited solely to employees of
the Company or an offering pursuant to Rule 145 under the Securities Act)
becomes effective and (b) the date the Company (i) registers any securities
under the Exchange Act or (ii) first becomes subject to the periodic reporting
requirements of Section 13 or
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<PAGE>
Section 15(d) of the Exchange Act, and such covenants shall terminate as to any
Investor as of the date such Investor no longer holds any shares of the capital
stock of the Company.
(b) The covenants of the Company set forth in Sections 8 and 9 shall
be terminated and shall be of no further force or effect upon March 30, 2005.
(c) Until the third anniversary of the event described in Section
5(a), the Company shall deliver to any Investor or its transferee who holds not
less than 15% of the Warrant Stock originally issuable (or a Warrant
representing such amount of Warrant Stock), a copy of the Company's reports
(without exhibits) on Forms 10-K, 10-Q, 8-K and its Annual Reports to
Shareholders promptly after such documents are filed with the Commission.
6. Investor Representation at Board Meetings.
(a) Each Investor or transferee holding at least 10% of the Series A
Preferred Stock of the Company originally issued (or an equivalent number of
shares consisting of Registrable Securities issued upon conversion or exercise
of such Series A Preferred Stock of the Company or a combination of such Series
A Preferred Stock and Registrable Securities issued upon conversion thereof), as
adjusted for recapitalizations, stock splits, stock dividends and the like,
shall have the right to receive notices (except with respect to previously
unscheduled telephonic meetings) and minutes of each meeting of the Board as if
such Investor were a director, and to designate one of its constituent partners
to attend all Board meetings, and to speak at or otherwise participate in such
meetings to the extent permitted by the Board; provided, however, that such
person may disclose or use any information made known to him by virtue of such
notice, minutes or attendance only to the extent consistent with the fiduciary
obligations of a director of the Company, whether or not such person actually is
a director. Such Investors' rights to notice, attendance and minutes shall be
assignable only with the prior written consent of the Company, which consent
shall not be unreasonably withheld.
(b) The Investors holding Series B Preferred Stock of the Company or
Registrable Securities issued upon conversion thereof shall have the right,
jointly, to have either John Powell or Roger McNamee attend regular meetings of
the Company's Board of Directors, provided that before any such attendance Mr.
Powell or Mr. McNamee, as applicable, shall have executed a confidentiality and
non-disclosure agreement in a form reasonably acceptable to the Company.
(c) GS Capital Partners, L.P. shall have the right to have either
Joseph H. Gleberman or Terence M. O'Toole attend and observe meetings of the
Board, provided that only one of such designees shall be allowed to attend any
particular Board meeting. Such representatives shall receive notices and minutes
of each meeting, and materials distributed to members of the Board in their
capacities as such. Such representatives shall not be Board members (unless
elected to the Board in accordance with the Company's Articles of Incorporation
and Bylaws), nor shall such representatives have the power to vote as Board
members or the right to receive compensation, if any, paid to Board members in
their capacities as such. Before any attendance at Board meetings is allowed,
the Company may require such representatives to execute a confidentiality and
non-disclosure agreement in a form mutually acceptable to the Company and such
representatives. Such representatives may only disclose or use information made
known to them by virtue of the notice, minutes, or materials provided or
attendance allowed hereunder to the extent consistent with the fiduciary duties
of a director of the Company, whether or not such representative actually is a
director. Notwithstanding the foregoing, if the Board makes a good faith
determination that it would be inappropriate
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to allow such representatives to attend all or a portion of a Board meeting or
to provide such representatives with minutes or materials, for reasons relating
to attorney-client privilege, securities law compliance, transactions or
potential transactions between the Company and GS Capital Partners, L.P. or
Goldman, Sachs & Co. or any affiliate thereof, or if, in the reasonable good
faith judgment of the Board of Directors such attendance would be harmful to the
Company, then the Company shall so indicate in the notice of such meeting to GS
Capital Partners, L.P., setting forth the basis of its decision to exclude GS
Capital Partners, L.P., and shall not be obligated to allow such attendance or
to provide such minutes or materials. The rights of GS Capital Partners, L.P.
under this Section 6(c) shall be nonassignable. In the event that a GS Capital
Partners, L.P. representative designated under this Section 6(c) shall
permanently cease to be available to attend and observe meetings of the Board,
GS Capital Partners, L.P. shall have the right to designate a replacement
reasonably acceptable to the Company.
(d) (i) Intel Corporation shall have the option, subject to the
conditions described below, to designate an individual to attend and observe
meetings of the Board. Unless elected to the Board pursuant to Section 6(d)(ii)
below or otherwise in accordance with the Company's Articles of Incorporation
and Bylaws, such designee shall not be a Board member, nor shall such designee
have the power to vote as a Board member or the right to receive compensation,
if any, paid to Board members in their capacities as such. The right to
designate a Board observer pursuant to this Section 6(d)(i) shall terminate upon
termination of the Semiconductor Technology License Agreement between Intel
Corporation and Rambus Inc.
(ii) If the Warrant has by its terms become exercisable, then if
and for so long as Intel Corporation holds at least 500,000 shares of the
Company's outstanding Common Stock (as adjusted for stock splits, stock
dividends, stock combinations and the like), Intel Corporation shall have the
option, subject to the conditions described below, to nominate a representative
to the Board. Should Intel exercise this option in writing, the Company shall
include such nominee among management's slate of nominees to the shareholders at
the first annual meeting of shareholders taking place more than 90 days
following satisfaction of the conditions set forth in this Section 6(d) and
shall solicit shareholder votes in favor of the election of such nominee to the
same extent that it solicits shareholder notes in favor of management's other
nominees. The right to nominate a Board representative pursuant to this Section
6(d)(ii) shall not be effective prior to the effective time of the Company's
initial public offering of shares of Common Stock under a Registration Statement
(other than either a public offering limited solely to employees of the Company
or an offering pursuant to Rule 145 under the Securities Act.)
(iii) Any designee under Section 6(d)(i) or nominee under Section
6(d)(ii) must be acceptable to the Board. The right to maintain such designee or
nominee shall exist during a calendar quarter only if more than twenty percent
(20%) of the main memory chip sets shipped by Intel Corporation during each of
the two immediately preceding calendar quarters implemented the Rambus-1
Interface Specification or the Rambus-2 Interface Specification. Any such
nominee shall resign from the Board on the first day of any calendar quarter
with respect to which such condition is not satisfied. If such condition shall
fail to be satisfied, and then later become satisfied, Intel may re-appoint a
designee or nominee in accordance with the provisions of this Section 6(d).
(iv) The Intel Corporation designee or nominee shall receive
notices and minutes of each meeting, and materials distributed to members of the
Board in their capacities as such. Before any attendance at Board meetings is
allowed, the Company may require such designee or nominee to execute a
confidentiality and non-disclosure agreement in a form mutually acceptable to
the Company and such
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designee or nominee. Such designee or nominee may only disclose or use
information made known to such person by virtue of the notice, minutes, or
materials provided or attendance allowed hereunder to the extent consistent with
the fiduciary duties of a director of the Company, whether or not such person
actually is a director. Notwithstanding the foregoing, if the Board makes a good
faith determination that it would be inappropriate to allow such designee or
nominee to attend all or a portion of a Board meeting or to provide such
designee or nominee with minutes or materials, for reasons relating to attorney-
client privilege, securities law compliance, transactions or potential
transactions between the Company and Intel Corporation or any affiliate or
competitor thereof, or if, in the reasonable good faith judgment of the Board of
Directors such attendance would be harmful to the Company, then the Company
shall so indicate in the notice of such meeting to such designee or nominee,
setting forth the basis of its decision to exclude such person, and shall not be
obligated to allow such attendance or to provide such minutes or materials. The
rights of Intel Corporation under this Section 6(d) shall be nonassignable.
Subject to the conditions in this Section 6(d), Intel Corporation shall have the
right to designate from time to time a replacement designee or nominee.
7. Right of First Refusal.
7.1 Right of First Refusal.
The Company hereby grants to each holder of at least 5% of the
outstanding shares (which may be computed on an aggregate basis with affiliates
of the holder) of any series of Preferred Stock, and to Intel Corporation, (a
"Qualified Purchaser") a right of first refusal (the "Right of First Refusal")
to purchase its Pro Rata Share of New Securities that the Company may from time
to time issue.
7.2 Pro Rata Share.
For purposes of this Right of First Refusal, a Qualified
Purchaser's "Pro Rata Share" shall mean the ratio that (i) the number of shares
of Common Stock issuable upon conversion of the Preferred Stock then held by
such Qualified Purchaser (or in the case of Intel Corporation, the number of
shares of outstanding Common Stock issued to Intel Corporation upon exercise of
the Common Stock Purchase Warrant No. 1 dated November 15, 1996 (the "Warrant"))
bears to (ii) the sum of the number of shares of Common Stock then outstanding
and the number of shares of Common Stock issuable upon conversion of all shares
of Preferred Stock then outstanding. The Company may be required to allow the
purchase of such Pro Rata Share upon a later exercise of the Warrant, and shall
reserve such number of New Securities as may be necessary to satisfy its
obligations under the Warrant.
7.3 New Securities.
Except as set forth below, "New Securities" shall mean any shares
of capital stock of the company, and options, warrants and other rights to
acquire capital stock of the Company issued after the date of this Agreement.
Notwithstanding the foregoing, "New Securities" shall not include (i) the
1,882,353 shares of Series D Preferred Stock, (ii) Common Stock issuable upon
conversion or exercise of securities outstanding as of the date of this
Agreement, (iii) securities offered in a public offering registered under the
Securities Act, (iv) securities issued pursuant to the acquisition of another
corporation or other business entity by the Company by merger, purchase of all
or substantially all of the assets or other reorganization whereby the Company
or its shareholders own more than 50% of the voting power of the surviving
entity in such
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transaction, (v) shares of Common Stock or related options to purchase an
aggregate, net of returns to the option plan, or not more than 6,000,000 shares
of Common Stock issued or granted to employees, consultants, advisors, officers
or directors of the Company and its subsidiaries (including shares issued or
sold pursuant to the exercise of any stock option or purchase pursuant to a
grant under the Company's stock option plan or stock purchase plan, even though
granted prior to the date of this Agreement), (vi) securities issued pursuant to
any rights, including without limitation convertible securities, to receive
securities, provided that the right of first refusal created hereby applied with
respect to the initial sale or grant by the Company of such rights (and the
procedure set forth in Section 7.4 below was complied with by the Company, or
waived by all of the holders of Preferred Stock that did not exercise their
Right of First Refusal, with respect thereto), (vii) shares of Common Stock or
Preferred Stock issued in connection with any stock split, stock dividend, or
recapitalization by the Company, and (viii) securities issued pursuant to any
transactions involving technology licensing or a strategic relationship or
corporate partnering arrangement approved by the Company's Board of Directors.
Notwithstanding the foregoing or anything to the contrary in Section 5(a),
solely for the purpose of determining the rights of Intel Corporation under this
Section 7, Intel shall have a Right of First Refusal to purchase its Pro Rata
Share of securities offered for the account of the Company pursuant to the
initial public offering of the Company under a registration statement filed
under the Securities Act, where the aggregate offering price to the public of
securities so offered for the account of the Company equals or exceeds $50
million.
7.4 Procedure.
In the event that the Company proposes to undertake an issuance
of New Securities, it shall give each Qualified Purchaser written notice of its
intention, describing the amount and type of New Securities and the price and
general terms upon which the Company proposes to issue such New Securities. Each
Qualified Purchaser shall have ten (10) days from the date of receipt of such
notice to agree to purchase up to its Pro Rata Share of such New Securities for
the price and upon the terms specified in the notice by giving written notice to
the Company and stating therein the quantity of New Securities to be purchased.
The Company may then, within ninety (90) days of the date of its notice to
Qualified Purchasers, complete the proposed offering of New Securities on terms
substantially as described in its notice to Qualified Purchasers, and each
Qualified Purchaser shall purchase in such offering that number of New
Securities that it indicated its intention to purchase in its written notice to
the Company. The Company must repeat the notice procedure described above with
respect to any proposed offering of New Securities that is not completed within
such ninety (90) day period or that is proposed to be completed on terms that
are not substantially as described in the notice to Qualified Purchasers.
8. Demand Registration.
8.1 Request for Registration on Form Other Than Form S-3.
Subject to the terms of this Agreement, in the event that the
Company shall receive from the Initiating Holders at any time after the earlier
of (a) March 30, 1996 and (b) the Company's initial public offering of shares of
Common Stock under a Registration Statement, a written request that the Company
effect any Registration with respect to all or a part of the Registrable
Securities on a Form other than Form S-3 for an offering of at least 20% of the
then outstanding Registrable Securities (or any lesser percent if the reasonably
anticipated aggregate offering price to the public would exceed $7,500,000), the
Company shall (i) promptly give written notice of the proposed Registration to
all other Holders and shall (ii) as soon as
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practicable, use its best efforts to effect Registration of the Registrable
Securities specified in such request, together with any Registrable Securities
of any Holder joining in such request as are specified in a written request
given within 20 days after written notice from the Company. The Company shall
not be obligated to take any action to effect any such registration pursuant to
this Section 8.1 (i) within six months of the effective date of a Registration
initiated by the Company or (ii) after the Company has effected two such
Registrations pursuant to this Section 8.1 and such Registrations have been
declared effective.
8.2 Right of Deferral of Registration.
If the Company shall furnish to all such Holders who joined in a
request pursuant to Section 8.1 or 8.3 a certificate signed by the President of
the Company stating that, in the good faith judgment of the Board of Directors
of the Company, it would be seriously detrimental to the Company for any
Registration to be effected as requested under Section 8.1 or 8.3, as
applicable, the Company shall have the right, exercisable one time only with
respect to such request, to defer the filing of a Registration Statement with
respect to such offering for a period of not more than 90 days from delivery of
the request of the Initiating Holders.
8.3 Request for Registration on Form S-3.
Subject to the terms of this Agreement, in the event that the
Company receives from any Holders of the then outstanding Registrable Securities
a written request that the Company effect any Registration on Form S-3 (or any
successor form to Form S-3 regardless of its designation) at a time when the
Company is eligible to register securities on Form S-3 (or any successor form to
Form S-3 regardless of its designation) for an offering of Registrable
Securities, the Company will promptly give written notice of the proposed
Registration to all the Holders and will as soon as practicable use its best
efforts to effect Registration of the Registrable Securities specified in such
request, together with all or such portion of the Registrable Securities of any
Holder joining in such request as are specified in a written request delivered
to the Company within 30 days after written notice from the Company of the
proposed Registration. There shall be no limit to the number of occasions on
which the Company shall be obligated to effect Registration under this Section
8.3. The Company shall not be obligated to take any action to affect
Registration under this Section 8.3 (i) within six months following any other
registered public offering, including any prior registered offering on Form S-3,
or (ii) if the number of shares which Holders have requested be included in such
Registration would result in an anticipated aggregate offering price of less
than $5,000,000.
8.4 Registration of Other Securities in Demand Registration.
Any Registration Statement filed pursuant to the request of the
Initiating Holders under this Section 8 may, subject to the provisions of
Section 8.5, include securities of the Company other than Registrable
Securities.
8.5 Underwriting in Demand Registration.
8.5.1 Notice of Underwriting.
If the Initiating Holders intend to distribute the
Registrable Securities covered by their request by means of an underwriting,
they shall so advise the Company as a part of their request made
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pursuant to this Section 8, and the Company shall include such information in
the written notice referred to in Section 8.1 or 8.3. The right of any Holder to
Registration pursuant to Section 8 shall be conditioned upon such Holder's
agreement to participate in such underwriting and the inclusion of such Holder's
Registrable Securities in the underwriting.
8.5.2 Inclusion of Other Holders in Demand Registration.
If the Company or holders of securities other than
Registrable Securities request inclusion in such Registration, the Initiating
Holders, to the extent they deem advisable and consistent with the goals of such
Registration, shall, on behalf of all Holders, offer to any or all of the
Company and such holders of securities other than Registrable Securities that
such securities other than Registrable Securities be included in the
underwriting and may condition such offer on the acceptance by such persons of
the terms of this Section 8. In the event, however, that the number of shares so
included exceeds the number of shares of Registrable Securities included by all
Holders, such Registration shall be treated as governed by Section 9 hereof
rather than Section 8, and it shall not count as a Registration for purposes of
Section 8.1 hereof.
8.5.3 Selection of Underwriter in Demand Registration.
The Company shall (together with all Holders proposing to
distribute their securities through such underwriting) enter into an
underwriting agreement with the representative ("Underwriter's Representative")
of the underwriter or underwriters selected for such underwriting by the Holders
of a majority of the Registrable Securities being registered (provided that only
those Holders responding positively within the period required by Section 8.1 or
Section 8.3, as applicable, shall be included in such calculation) and agreed to
by the Company.
8.5.4 Marketing Limitation in Demand Registration.
In the event the Underwriter's Representative advises the
Initiating Holders in writing that market factors (including, without
limitation, the aggregate number of shares of Common Stock requested to be
Registered, the general condition of the market, and the status of the persons
proposing to sell securities pursuant to the Registration) require a limitation
of the number of shares to be underwritten, then (i) first the Common Stock
(other than Registrable Securities) held by officers or directors of the
Company, (ii) next the securities other than Registrable Securities, and (iii)
last the securities requested to be registered by the Company, shall be excluded
from such Registration to the extent required by such limitation. If a
limitation of the number of shares is still required, the Initiating Holders
shall so advise all Holders and the number of shares of Registrable Securities
that may be included in the Registration and underwriting shall be allocated
among all Holders in proportion, as nearly as practicable, to the respective
amounts of Registrable Securities entitled to inclusion in such Registration
held by such Holders at the time of filing the Registration Statement. No
Registrable Securities or other securities excluded from the underwriting by
reason of this Section 8.5.4 shall be included in such Registration Statement.
8.5.5 Right of Withdrawal in Demand Registration.
If any Holder of Registrable Securities, or a holder of
other securities entitled (upon request) to be included in such Registration,
disapproves of the terms of the underwriting, such person may elect to withdraw
therefrom by written notice to the Company, the underwriter and the Initiating
Holders
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delivered at least seven days prior to the effective date of the Registration
Statement. The securities so withdrawn shall also be withdrawn from the
Registration Statement.
8.6 Blue Sky in Demand Registration.
In the event of any Registration pursuant to Section 8, the
Company will exercise its best efforts to Register and qualify the securities
covered by the Registration Statement under such other securities or Blue Sky
laws of such jurisdictions as shall be reasonably appropriate for the
distribution of such securities; provided, however, that (i) the Company shall
not be required to qualify to do business or to file a general consent to
service of process in any such states or jurisdictions, and (ii) notwithstanding
anything in this Agreement to the contrary, in the event any jurisdiction in
which the securities shall be qualified imposes a non-waivable requirement that
expenses incurred in connection with the qualification of the securities be
borne by selling shareholders, such expenses shall be payable pro rata by
selling shareholders.
9. Piggyback Registration.
9.1 Notice of Piggyback Registration and Inclusion of Registrable
Securities.
Subject to the terms of this Agreement, in the event the Company
decides to Register any of its Common Stock for its own account on a form that
would be suitable for a registration involving solely Registrable Securities,
the Company will: (i) promptly give each Holder written notice thereof (which
shall include a list of the jurisdictions in which the Company intends to
attempt to qualify such securities under the applicable Blue Sky or other state
securities laws) and (ii) include in such Registration (and any related
qualification under Blue Sky laws or other compliance), and in any underwriting
involved therein, all the Registrable Securities specified in a written request
delivered to the Company by any Holder within 15 days after delivery of such
written notice from the Company.
9.2 Underwriting in Piggyback Registration.
9.2.1 Notice of Underwriting in Piggyback Registration.
If the Registration of which the Company gives notice is
for a Registered public offering involving an underwriting, the Company shall so
advise the Holders as a part of the written notice given pursuant to Section
9.1. In such event the right of any Holder to Registration shall be conditioned
upon such underwriting and the inclusion of such Holder's Registrable Securities
in such underwriting to the extent provided in this Section 9. All Holders
proposing to distribute their securities through such underwriting shall
(together with the Company and the other holders distributing their securities
through such underwriting) enter into an underwriting agreement with the
Underwriter's Representative for such offering. The Holders shall have no right
to participate in the selection of the underwriters for an offering pursuant to
this Section 9.
9.2.2 Marketing Limitation in Piggyback Registration.
In the event the Underwriter's Representative advises the
Holders seeking registration of Registrable Securities pursuant to Section 9 in
writing that market factors (including, without limitation, the aggregate number
of shares of Common Stock requested to be Registered, the general condition of
the market, and the status of the persons proposing to sell securities pursuant
to the Registration) require a
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limitation of the number of shares to be underwritten, the Underwriter's
Representative (subject to the allocation priority set forth in Section 9.2.3)
may:
(a) in the case of the Company's initial Registered public
offering, exclude some or all Registrable Securities from such registration and
underwriting;
(b) in the case of the first Registered public offering
subsequent to the initial public offering, limit the number of shares of
Registrable Securities to be included in such Registration and underwriting to
not less than twenty percent (20%) of the securities included in such
Registration (based on aggregate market values); and
(c) in the case of any subsequent registered public
offering, limit the number of shares of Registrable Securities to be included in
such Registration and underwriting to not less than twenty-five percent (25%) of
the securities included in such Registration (based on aggregate market values).
9.2.3 Allocation of Shares in Piggyback Registration.
In the event that the Underwriter's Representative limits
the number of shares to be included in a Registration pursuant to Section 9.2.2,
the number of shares to be included in such Registration shall be allocated
(subject to Section 9.2.2) in the following manner: The shares (other than
Registrable Securities) held by officers or directors of the Company shall be
excluded from such Registration and underwriting to the extent required by such
limitation. Next, the shares (other than Registrable Securities) held by other
holders of the Company's securities shall be excluded from such Registration and
underwriting to the extent required by such limitation. If a limitation of the
number of shares is still required after such exclusion, the number of shares
that may be included in the Registration and underwriting shall be allocated
among all Holders thereof requesting and legally entitled to include shares in
such Registration, in proportion, as nearly as practicable, to the respective
amounts of Registrable Securities which such Holders would otherwise be entitled
to include in such Registration. No Registrable Securities or other securities
excluded from the underwriting by reason of this Section 9.2.3 shall be included
in the Registration Statement.
9.2.4 Withdrawal in Piggyback Registration.
If any Holder disapproves of the terms of any such
underwriting, he may elect to withdraw therefrom by written notice to the
Company and the underwriter delivered at least seven days prior to the effective
date of the Registration Statement. Any Registrable Securities or other
securities excluded or withdrawn from such underwriting shall be withdrawn from
such Registration.
9.3 Blue Sky in Piggyback Registration.
In the event of any Registration of Registrable Securities
pursuant to Section 9, the Company will exercise its best efforts to Register
and qualify the securities covered by the Registration Statement under such
other securities or Blue Sky laws of such jurisdictions as shall be reasonably
appropriate for the distribution of such securities; provided, however, that (i)
the Company shall not be required to qualify to do business or to file a general
consent to service of process in any such states or jurisdictions, and (ii)
notwithstanding anything in this Agreement to the contrary, in the event any
jurisdiction in which the securities shall be qualified imposes a non-waivable
requirement that expenses incurred in connection with the
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qualification of the securities be borne by selling shareholders, such expenses
shall be payable pro rata by selling shareholders.
10. Expenses of Registration.
All Registration Expenses incurred in connection with two
Registrations pursuant to Section 8 and all Registrations pursuant to Section 9,
shall be borne by the Company. All Registration Expenses incurred in connection
with any other registration, qualification or compliance shall be apportioned
among the Holders and other holders of the securities so registered on the basis
of the number of shares so registered. Notwithstanding the above, the Company
shall not be required to pay for any expenses of any registration proceeding
begun pursuant to Section 8 if the registration request is subsequently
withdrawn at the request of the Holders of a majority of the Registrable
Securities to be registered (which Holders shall bear such expenses), unless the
Holders of a majority of the Registrable Securities agree to forfeit their right
to one demand registration pursuant to Section 8; provided further, however,
that if at the time of such withdrawal, the Holders have learned of a Material
Adverse Event with respect to the condition, business or prospects of the
Company not known to the Holders at the time of their request, then the Holders
shall not be required to pay any of such expenses and shall retain their rights
pursuant to Section 8. All Selling Expenses shall be borne by the holders of the
securities registered pro rata on the basis of the number of shares registered.
11. Registration Procedures.
The Company will keep each Holder whose Registrable Securities are
included in any registration pursuant to this Agreement advised as to the
initiation and completion of such Registration. At its expense the Company will:
(a) use its best efforts to keep such Registration effective for a period of 120
days or until the Holder or Holders have completed the distribution described in
the Registration Statement relating thereto, whichever first occurs; and (b)
furnish such number of prospectuses (including preliminary prospectuses) and
other documents as a Holder from time to time may reasonably request.
12. Information Furnished by Holder.
It shall be a condition precedent of the Company's obligations under
this Agreement that each Holder of Registrable Securities included in any
Registration furnish to the Company such information regarding such Holder and
the distribution proposed by such Holder or Holders as the Company may
reasonably request.
13. Indemnification.
13.1 Company's Indemnification of Holders.
To the extent permitted by law, the Company will indemnify each
Holder, each of its officers, directors and constituent partners, legal counsel
for the Holders, and each person controlling such Holder, with respect to which
Registration, qualification or compliance of Registrable Securities has been
effected pursuant to this Agreement, and each underwriter, if any, and each
person who controls any underwriter against all claims, losses, damages or
liabilities (or actions in respect thereof) to the extent such claims, losses,
damages or liabilities arise out of or are based upon any untrue statement (or
alleged untrue statement) of a material fact contained in any prospectus or
other document (including any related Registration
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Statement) incident to any such Registration, qualification or compliance, or
are based on any omission (or alleged omission) to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, or any violation by the Company of any rule or regulation
promulgated under the Securities Act applicable to the Company and relating to
action or inaction required of the Company in connection with any such
Registration, qualification or compliance; and the Company will reimburse each
such Holder, each such underwriter and each person who controls any such Holder
or underwriter, for any legal and any other expenses reasonably incurred in
connection with investigating or defending any such claim, loss, damage,
liability or action; provided, however, that the indemnity contained in this
Section 13.1 shall not apply to amounts paid in settlement of any such claim,
loss, damage, liability or action if settlement is effected without the consent
of the Company (which consent shall not unreasonably be withheld); and provided,
further, that the Company will not be liable in any such case to the extent that
any such claim, loss, damage, liability or expense arises out of or is based
upon any untrue statement or omission based upon written information furnished
to the Company by such Holder, underwriter, or controlling person and stated to
be for use in connection with the offering of securities of the Company.
13.2 Holder's Indemnification of Company.
To the extent permitted by law, each Holder will, if Registrable
Securities held by such Holder are included in the securities as to which such
Registration, qualification or compliance is being effected pursuant to this
Agreement, indemnify the Company, each of its directors and officers, each legal
counsel and independent accountant of the Company, each underwriter, if any, of
the Company's securities covered by such a Registration Statement, each person
who controls the Company or such underwriter within the meaning of the
Securities Act, and each other such Holder, each of its officers, directors and
constituent partners and each person controlling such other Holder, against all
claims, losses, damages and liabilities (or actions in respect thereof) arising
out of or based upon any untrue statement (or alleged untrue statement) of a
material fact contained in any such Registration Statement, prospectus, offering
circular or other document, or any omission (or alleged omission) to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, or any violation by such Holder of any rule
or regulation promulgated under the Securities Act applicable to such Holder and
relating to action or inaction required of such Holder in connection with any
such Registration, qualification or compliance; and will reimburse the Company,
such Holders, such directors, officers, partners, persons, law and accounting
firms, underwriters or control persons for any legal and any other expenses
reasonably incurred in connection with investigating or defending any such
claim, loss, damage, liability or action, in each case to the extent, but only
to the extent, that such untrue statement (or alleged untrue statement) or
omission (or alleged omission) is made in such Registration Statement,
prospectus, offering circular or other document in reliance upon and in
conformity with written information furnished to the Company by such Holder and
stated to be specifically for use in connection with the offering of securities
of the Company. Notwithstanding the foregoing, a Holder's liability under this
Section 13.2 shall not exceed such Holder's proceeds from the offering of
securities made in connection with such Registration, and the indemnity
contained in this Section 13.2 shall not apply to amounts paid in settlement of
any claim, loss, damage, liability or action if settlement is effected without
the consent of such Holder (which consent shall not unreasonably be withheld).
13.3 Indemnification Procedure.
Promptly after receipt by an indemnified party under this
Section 13 of notice of the commencement of any action, such indemnified party
will, if a claim in respect thereof is to be made against
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an indemnifying party under this Section 13, notify the indemnifying party in
writing of the commencement thereof and generally summarize such action. The
indemnifying party shall have the right to participate in and to assume the
defense of such claim; provided, however, that the indemnifying party shall be
entitled to select counsel for the defense of such claim with the approval of
any parties entitled to indemnification, which approval shall not be
unreasonably withheld; provided further, however, that if either party
reasonably determines that there may be a conflict between the position of the
Company and the Investors in conducting the defense of such action, suit or
proceeding by reason of recognized claims for indemnity under this Section 13,
then counsel for such party shall be entitled to conduct the defense to the
extent reasonably determined by such counsel to be necessary to protect the
interest of such party. The failure to notify an indemnifying party promptly of
the commencement of any such action, if prejudicial to the ability of the
indemnifying party to defend such action, shall relieve such indemnifying party,
to the extent so prejudiced, of any liability to the indemnified party under
this Section 13, but the omission so to notify the indemnifying party will not
relieve such party of any liability that such party may have to any indemnified
party otherwise than under this Section 13. The indemnity provided for in this
Section 13 shall apply to the Holders in their capacities as such, and shall be
independent of any other agreement, including without limitation an underwriting
agreement, entered into after the date hereof between the Company and any Holder
in its capacity as a Holder or otherwise.
14. Limitations on Registration Rights Granted to Other Securities.
From and after the date of this Agreement, the Company shall not
enter into any agreement with any holder or prospective holder of any securities
of the Company providing for the granting to such holder of any information or
Registration rights, except that, with the consent of the Holders of 66-2/3% of
the aggregate of the Convertible Securities and Registrable Securities then
outstanding, additional holders may be added as parties to this Agreement with
regard to any or all securities of the Company held by them. Any such additional
parties shall execute a counterpart of this Agreement, and upon execution by
such additional parties and by the Company, shall be considered an Investor for
all purposes of this Agreement. The additional parties and the additional
Registrable Securities shall be identified in an amendment to Schedule A hereto.
15. Transfer of Rights.
The rights to information under Sections 2, 3, 4 and 5, and the right
to cause the Company to Register securities granted by the Company to the
Investors under this Agreement may be assigned by any Holder to a transferee or
assignee of any Convertible Securities or Registrable Securities not sold to the
public acquiring at least 235,000 shares of such Holder's Registrable Securities
(equitably adjusted for any stock splits, subdivisions, stock dividends,
changes, combinations or the like); provided, however, that (i) the Company must
receive written notice prior to the time of said transfer, stating the name and
address of said transferee or assignee and identifying the securities with
respect to which such information and Registration rights are being assigned,
and (ii) the transferee or assignee of such rights must not be a person deemed
by the Board of Directors of the Company, in its best judgment, to be a
competitor or potential competitor of the Company. Notwithstanding the
limitation set forth in the foregoing sentence respecting the minimum number of
shares which must be transferred, (a) any Holder which is a partnership may
transfer such Holder's Registration rights to such Holder's constituent partners
without restriction as to the number or percentage of shares acquired by any
such constituent partner and (b) GS Capital Partners, L.P. may transfer its
Registration rights to hereunder to Stone Street Fund 1994, L.P., Stone Street
Fund 1995, L.P., Bridge Street Fund 1994, L.P., and Bridge Street Fund 1995,
L.P. (the "GS Transferees") without restriction as to the number or
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percentage of shares acquired by any such transferee. Any transferee or assignee
to which rights are transferred under this Agreement shall be subject to the
restrictions and obligations imposed upon Holders by this Agreement.
16. Market Stand-off.
Each Holder hereby agrees that, if so requested by the Company and
the Underwriter's Representative (if any), such Holder shall not sell or
otherwise transfer any Registrable Securities or other securities of the Company
during the 120 day period (the "Market Standoff Period") following the effective
date of a Registration Statement of the Company filed under the Securities Act;
provided, however, that if in connection with the offering of the securities so
Registered, the Holders of a majority of the Registrable Securities agree not to
sell or otherwise transfer any shares held by them for a period greater than 120
days, then the Market Standoff Period shall be increased to such greater period
agreed to by such Holders; and provided, further, that such restriction shall
only apply to the first two Registration Statements of the Company to become
effective which include securities to be sold on behalf of the Company to the
public in an underwritten offering.
17. Conversion of Preferred Stock.
The Registration rights of the Holders of the Shares set forth in
this Agreement are conditioned upon the conversion of the Shares with respect to
which registration is sought into Common Stock prior to the effective date of
the Registration Statement; provided however, that in the event the closing of
the public offering to which such Registration Statement relates does not occur
within six (6) business days following the effective date, such conversion shall
be deemed not to have occurred.
18. Miscellaneous.
18.1 Termination of Prior Agreements, Rights and Obligations.
Upon execution of this Agreement by the Company, the Investors
and the Holders of at least sixty six and two-thirds percent (66-2/3%) of the
then-outstanding Registrable Securities, as defined in the Prior Registration
Agreement, pursuant to Section 18.7 thereof, the Prior Registration Agreement
and all rights and obligations contained therein shall be amended and superseded
in their entirety by this Agreement and the rights and obligations contained
herein.
18.2 Entire Agreement; Successors and Assigns.
This Agreement constitutes the entire contract between the
Company and the Investors relative to the subject matter hereof. Any previous
agreement between the Company and the Investors concerning Registration rights
is superseded by this Agreement. Subject to the exceptions specifically set
forth in this Agreement the terms and conditions of this Agreement shall inure
to the benefit of and be binding upon the respective executors, administrators,
heirs, successors and assigns of the parties.
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18.3 Governing Law.
This Agreement shall be governed by and construed in accordance
with the laws of the State of California applicable to contracts entered into
and wholly to be performed within the State of California by California
residents.
18.4 Counterparts.
This Agreement may be executed in two or more counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
18.5 Headings.
The headings of the Sections of this Agreement are for
convenience and shall not by themselves determine the interpretation of this
Agreement.
18.6 Notices.
Any notice required or permitted hereunder shall be given in
writing and shall be conclusively deemed effectively given upon personal
delivery, or five days after deposit in the United States mail, by registered or
certified mail, postage prepaid, addressed (i) if to the Company, as set forth
below the Company's name on the signature page of this Agreement, and (ii) if to
an Investor, at such Investor's address as set forth on Schedule A, or at such
other address as the Company or such Investor may designate by ten (10) days'
advance written notice to the Investors or the Company, respectively.
18.7 Amendment of Agreement.
Any provision of this Agreement may be amended only by a
written instrument signed by the Company and by persons holding at least sixty
six and two-thirds percent (66-2/3%) of the Registrable Securities as defined in
Section 1 of this Agreement; provided that any amendment to Section 6 shall
require the consent of the Investor or transferee whose rights thereunder are
being amended; and provided, further, that any amendment adversely affecting an
Investor or transferee in a different manner than all Investors or transferees
generally shall require the consent of the Investor or transferee so affected.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
The Company: RAMBUS, INC.
By: _______________________________
Title:_____________________________
The Investors: MOHR, DAVIDOW VENTURES II
By:________________________________
Title:_____________________________
KLEINER PERKINS CAUFIELD & BYERS V
By:________________________________
Title:_____________________________
MERRILL, PICKARD, ANDERSON & EYRE V
By:________________________________
Title:_____________________________
INTEGRAL CAPITAL PARTNERS
By:________________________________
Title:_____________________________
DOMINION INCOME MANAGEMENT
By:________________________________
Title:_____________________________
GS CAPITAL PARTNERS, L.P.
By:________________________________
Title:_____________________________
MICHAEL DELL
By:________________________________
INTEL CORPORATION
By:________________________________
Title:_____________________________
<PAGE>
EXHIBIT 4.3
RAMBUS INC.
AND
[RIGHTS AGENT]
RIGHTS AGENT
PREFERRED SHARES RIGHTS AGREEMENT
DATED AS OF MARCH 21, 1997
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
------
<S> <C> <C>
Section 1. Certain Definitions 1
Section 2. Appointment of Rights Agent 7
Section 3. Issuance of Rights Certificates 7
Section 4. Form of Rights Certificates 9
Section 5. Countersignature and Registration 10
Section 6. Transfer, Split Up, Combination and Exchange
of Rights Certificates; Mutilated, Destroyed,
Lost or Stolen Rights Certificates 10
Section 7. Exercise of Rights; Exercise Price; Expiration
Date of Rights 11
Section 8. Cancellation and Destruction of Rights Certificates 13
Section 9. Reservation and Availability of Preferred Shares 13
Section 10. Record Date 14
Section 11. Adjustment of Exercise Price, Number of Shares or
Number of Rights 15
Section 12. Certificate of Adjusted Exercise Price or Number
of Shares 21
Section 13. Consolidation, Merger or Sale or Transfer of Assets
or Earning Power 21
Section 14. Fractional Rights and Fractional Shares 25
Section 15. Rights of Action 26
Section 16. Agreement of Rights Holders 26
Section 17. Rights Certificate Holder Not Deemed a Stockholder 27
Section 18. Concerning the Rights Agent 27
Section 19. Merger or Consolidation or Change of Name of
Rights Agent 28
Section 20. Duties of Rights Agent 28
</TABLE>
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TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<CAPTION>
PAGE
------
<S> <C> <C>
Section 21. Change of Rights Agent 30
Section 22. Issuance of New Rights Certificates 31
Section 23. Redemption 31
Section 24. Exchange 32
Section 25. Notice of Certain Events 34
Section 26. Notices 34
Section 27. Supplements and Amendments 35
Section 28. Successors 35
Section 29. Determinations and Actions by the Board of
Directors, etc. 35
Section 30. Benefits of this Agreement 36
Section 31. Severability 36
Section 32. Governing Law 36
Section 33. Counterparts 36
Section 34. Descriptive Headings 36
EXHIBITS
Exhibit A Form of Certificate of Designation
Exhibit B Form of Rights Certificate
Exhibit C Summary of Rights
</TABLE>
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<PAGE>
RIGHTS AGREEMENT
Agreement, dated as of March 21, 1997, between Rambus Inc., a Delaware
corporation, and [RIGHTS AGENT].
On February 28, 1997 (the "RIGHTS DIVIDEND DECLARATION DATE"), the Board of
Directors of the Company authorized and declared a dividend of one Preferred
Share Purchase Right (a "RIGHT") for each Common Share (as hereinafter defined)
of the Company outstanding as of the Close of Business (as hereinafter defined)
on April 1, 1997 (the "RECORD DATE"), each Right representing the right to
purchase one one-thousandth of a share of Series A Participating Preferred Stock
(as such number may be adjusted pursuant to the provisions of this Agreement),
having the rights, preferences and privileges set forth in the form of
Certificate of Designations of Rights, Preferences and Privileges of Series A
Participating Preferred Stock attached hereto as Exhibit A, upon the terms and
subject to the conditions herein set forth, and further authorized and directed
the issuance of one Right (as such number may be adjusted pursuant to the
provisions of this Agreement) with respect to each Common Share that shall
become outstanding between the Record Date and the earlier of the Distribution
Date and the Expiration Date (as such terms are hereinafter defined), and in
certain circumstances after the Distribution Date.
NOW, THEREFORE, in consideration of the promises and the mutual agreements
herein set forth, the parties hereby agree as follows:
Section 1. Certain Definitions. For purposes of this Agreement, the
following terms have the meanings indicated:
(a) "ACQUIRING PERSON" shall mean any Person who or which, together
with all Affiliates and Associates of such Person, shall be the Beneficial Owner
of 15% or more of the Common Shares then outstanding, but shall not include the
Company, any Subsidiary of the Company or any employee benefit plan of the
Company or of any Subsidiary of the Company, or any entity holding Common Shares
for or pursuant to the terms of any such plan. Notwithstanding the foregoing,
no Person shall be deemed to be an Acquiring Person as the result of an
acquisition of Common Shares by the Company which, by reducing the number of
shares outstanding, increases the proportionate number of shares beneficially
owned by such Person to 15% or more of the Common Shares of the Company then
outstanding; provided, however, that if a Person shall become the Beneficial
Owner of 15% or more of the Common Shares of the Company then outstanding by
reason of share purchases by the Company and shall, after such share purchases
by the Company, become the Beneficial Owner of any additional Common Shares of
the Company (other than pursuant to a dividend or distribution paid or made by
the Company on the outstanding Common Shares in Common Shares or pursuant to a
split or subdivision of the outstanding Common Shares), then such Person shall
be deemed to be an Acquiring Person unless upon becoming the Beneficial Owner of
such additional Common Shares of the Company such Person does not beneficially
own 15% or more of the Common Shares of the Company then outstanding.
<PAGE>
Notwithstanding the foregoing, (i) if a majority of the Continuing Directors
then in office determines in good faith that a Person who would otherwise be an
"Acquiring Person," as defined pursuant to the foregoing provisions of this
paragraph (a), has become such inadvertently (including, without limitation,
because (A) such Person was unaware that it beneficially owned a percentage of
the Common Shares that would otherwise cause such Person to be an "Acquiring
Person," as defined pursuant to the foregoing provisions of this paragraph (a),
or (B) such Person was aware of the extent of the Common Shares it beneficially
owned but had no actual knowledge of the consequences of such beneficial
ownership under this Agreement) and without any intention of changing or
influencing control of the Company, and if such Person divested or divests as
promptly as practicable a sufficient number of Common Shares so that such Person
would no longer be an "Acquiring Person," as defined pursuant to the foregoing
provisions of this paragraph (a), then such Person shall not be deemed to be or
to have become an "Acquiring Person" for any purposes of this Agreement; and
(ii) if, as of the date hereof, any Person is the Beneficial Owner of 15% or
more of the Common Shares outstanding, such Person shall not be or become an
"Acquiring Person," as defined pursuant to the foregoing provisions of this
paragraph (a), unless and until such time as such Person shall become the
Beneficial Owner of additional Common Shares (other than pursuant to a dividend
or distribution paid or made by the Company on the outstanding Common Shares in
Common Shares or pursuant to a split or subdivision of the outstanding Common
Shares), unless, upon becoming the Beneficial Owner of such additional Common
Shares, such Person is not then the Beneficial Owner of 15% or more of the
Common Shares then outstanding.
(b) "ADJUSTMENT FRACTION" shall have the meaning set forth in Section
11(a)(i) hereof.
(c) "AFFILIATE" and "ASSOCIATE" shall have the respective meanings
ascribed to such terms in Rule 12b-2 of the General Rules and Regulations under
the Exchange Act, as in effect on the date of this Agreement.
(d) A Person shall be deemed the "BENEFICIAL OWNER" of and shall be
deemed to "BENEFICIALLY OWN" any securities:
(i) which such Person or any of such Person's Affiliates or
Associates beneficially owns, directly or indirectly, for purposes of Section
13(d) of the Exchange Act and Rule 13d-3 thereunder (or any comparable or
successor law or regulation);
(ii) which such Person or any of such Person's Affiliates or
Associates has (A) the right to acquire (whether such right is exercisable
immediately or only after the passage of time) pursuant to any agreement,
arrangement or understanding (other than customary agreements with and between
underwriters and selling group members with respect to a bona fide public
offering of securities), or upon the exercise of conversion rights, exchange
rights, rights (other than the Rights), warrants or options, or otherwise;
provided, however, that a Person shall not be deemed pursuant to this Section
1(d)(ii)(A) to be the Beneficial Owner of, or to beneficially own, (1)
securities tendered pursuant to a tender or exchange offer made by or on behalf
of such Person or any of such Person's Affiliates or Associates until such
tendered securities are accepted for purchase or exchange, or (2) securities
which a Person or any of such Person's Affiliates or Associates may be deemed to
have the right to acquire pursuant to any merger or other acquisition agreement
between the Company and such Person (or one
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<PAGE>
or more of its Affiliates or Associates) if such agreement has been approved by
the Board of Directors of the Company prior to there being an Acquiring Person;
or (B) the right to vote pursuant to any agreement, arrangement or
understanding; provided, however, that a Person shall not be deemed the
Beneficial Owner of, or to beneficially own, any security under this Section
1(d)(ii)(B) if the agreement, arrangement or understanding to vote such security
(1) arises solely from a revocable proxy or consent given to such Person in
response to a public proxy or consent solicitation made pursuant to, and in
accordance with, the applicable rules and regulations of the Exchange Act and
(2) is not also then reportable on Schedule 13D under the Exchange Act (or any
comparable or successor report); or
(iii) which are beneficially owned, directly or indirectly, by any other
Person (or any Affiliate or Associate thereof) with which such Person or any of
such Person's Affiliates or Associates has any agreement, arrangement or
understanding, whether or not in writing (other than customary agreements with
and between underwriters and selling group members with respect to a bona fide
public offering of securities) for the purpose of acquiring, holding, voting
(except to the extent contemplated by the proviso to Section 1(d)(ii)(B)) or
disposing of any securities of the Company; provided, however, that in no case
shall an officer or director of the Company be deemed (x) the Beneficial Owner
of any securities beneficially owned by another officer or director of the
Company solely by reason of actions undertaken by such persons in their capacity
as officers or directors of the Company or (y) the Beneficial Owner of
securities held of record by the trustee of any employee benefit plan of the
Company or any Subsidiary of the Company for the benefit of any employee of the
Company or any Subsidiary of the Company, other than the officer or director, by
reason of any influence that such officer or director may have over the voting
of the securities held in the plan.
(e) "BUSINESS DAY" shall mean any day other than a Saturday, Sunday or a
day on which banking institutions in New York are authorized or obligated by law
or executive order to close.
(f) "CLOSE OF BUSINESS" on any given date shall mean 5:00 P.M., New York
time, on such date; provided, however, that if such date is not a Business Day
it shall mean 5:00 P.M., New York time, on the next succeeding Business Day.
(g) "COMMON SHARES" when used with reference to the Company shall mean the
shares of Common Stock of the Company, $0.001 par value. Common Shares when
used with reference to any Person other than the Company shall mean the capital
stock (or equity interest) with the greatest voting power of such other Person
or, if such other Person is a Subsidiary of another Person, the Person or
Persons which ultimately control such first-mentioned Person.
(h) "COMMON STOCK EQUIVALENTS" shall have the meaning set forth in Section
11(a)(iii) hereof.
(i) "COMPANY" shall mean Rambus Inc., a Delaware corporation, subject to
the terms of Section 13(a)(iii)(C) hereof.
(j) "CONTINUING DIRECTOR" shall mean (i) any member of the Board of
Directors of the Company who, while a member of the Board, is not an Acquiring
Person, or an Affiliate or Associate
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<PAGE>
of an Acquiring Person, or a representative of an Acquiring Person or of any
such Affiliate or Associate, and who was a member of the Board prior to there
being an Acquiring Person, and (ii) any Person who subsequently becomes a member
of the Board and who, while a member of the Board, is not an Acquiring Person,
or an Affiliate or Associate of an Acquiring Person, or a representative of an
Acquiring Person or of any such Affiliate or Associate, if such Person's
nomination for election or election to the Board is recommended or approved by a
majority of the Continuing Directors.
(k) "CURRENT PER SHARE MARKET PRICE" of any security (a "Security" for
purposes of this definition), for all computations other than those made
pursuant to Section 11(a)(iii) hereof, shall mean the average of the daily
closing prices per share of such Security for the thirty (30) consecutive
Trading Days immediately prior to such date, and for purposes of computations
made pursuant to Section 11(a)(iii) hereof, the Current Per Share Market Price
of any Security on any date shall be deemed to be the average of the daily
closing prices per share of such Security for the ten (10) consecutive Trading
Days immediately prior to such date; provided, however, that in the event that
the Current Per Share Market Price of the Security is determined during a period
following the announcement by the issuer of such Security of (i) a dividend or
distribution on such Security payable in shares of such Security or securities
convertible into such shares or (ii) any subdivision, combination or
reclassification of such Security, and prior to the expiration of the applicable
thirty (30) Trading Day or ten (10) Trading Day period, after the ex-dividend
date for such dividend or distribution, or the record date for such subdivision,
combination or reclassification, then, and in each such case, the Current Per
Share Market Price shall be appropriately adjusted to reflect the current market
price per share equivalent of such Security. The closing price for each day
shall be the last sale price, regular way, or, in case no such sale takes place
on such day, the average of the closing bid and asked prices, regular way, in
either case as reported in the principal consolidated transaction reporting
system with respect to securities listed or admitted to trading on the New York
Stock Exchange or, if the Security is not listed or admitted to trading on the
New York Stock Exchange, as reported in the principal consolidated transaction
reporting system with respect to securities listed on the principal national
securities exchange on which the Security is listed or admitted to trading or,
if the Security is not listed or admitted to trading on any national securities
exchange, the last sale price or, if such last sale price is not reported, the
average of the high bid and low asked prices in the over-the-counter market, as
reported by Nasdaq or such other system then in use, or, if on any such date the
Security is not quoted by any such organization, the average of the closing bid
and asked prices as furnished by a professional market maker making a market in
the Security selected by the Board of Directors of the Company. If on any such
date no market maker is making a market in the Security, the fair value of such
shares on such date as determined in good faith by the Board of Directors of the
Company shall be used. If the Preferred Shares are not publicly traded, the
Current Per Share Market Price of the Preferred Shares shall be conclusively
deemed to be the Current Per Share Market Price of the Common Shares as
determined pursuant to this Section 1(k), as appropriately adjusted to reflect
any stock split, stock dividend or similar transaction occurring after the date
hereof, multiplied by 1000. If the Security is not publicly held or so listed or
traded, Current Per Share Market Price shall mean the fair value per share as
determined in good faith by the Board of Directors of the Company, whose
determination shall be described in a statement filed with the Rights Agent and
shall be conclusive for all purposes.
(l) "CURRENT VALUE" shall have the meaning set forth in Section 11(a)(iii)
hereof.
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(m) "DISTRIBUTION DATE" shall mean the earlier of (i) the Close of
Business on the tenth day (or such later date as may be determined by action of
a majority of Continuing Directors then in office) after the Shares Acquisition
Date (or, if the tenth day after the Shares Acquisition Date occurs before the
Record Date, the Close of Business on the Record Date) or (ii) the Close of
Business on the tenth Business Day (or such later date as may be determined by
action of a majority of Continuing Directors then in office) after the date that
a tender or exchange offer by any Person (other than the Company, any Subsidiary
of the Company, any employee benefit plan of the Company or of any Subsidiary of
the Company, or any Person or entity organized, appointed or established by the
Company for or pursuant to the terms of any such plan) is first published or
sent or given within the meaning of Rule 14d-2(a) of the General Rules and
Regulations under the Exchange Act, if, assuming the successful consummation
thereof, such Person would be an Acquiring Person.
(n) "EQUIVALENT SHARES" shall mean Preferred Shares and any other class or
series of capital stock of the Company which is entitled to the same rights,
privileges and preferences as the Preferred Shares.
(o) "EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as
amended.
(p) "EXCHANGE RATIO" shall have the meaning set forth in Section 24(a)
hereof.
(q) "EXERCISE PRICE" shall have the meaning set forth in Section 4(a)
hereof.
(r) "EXPIRATION DATE" shall mean the earliest to occur of: (i) the Close
of Business on the Final Expiration Date, (ii) the Redemption Date, (iii)
consummation of any transaction con templated by Section 13(f) hereof, or (iv)
the time at which the Board of Directors orders the exchange of the Rights as
provided in Section 24 hereof.
(s) "FINAL EXPIRATION DATE" shall mean March 21, 2007.
(t) "NASDAQ" shall mean the National Association of Securities Dealers,
Inc. Automated Quotations System.
(u) "PERMITTED OFFER" shall mean a tender offer for all outstanding Common
Shares made in the manner prescribed by Section 14(d) of the Exchange Act and
the rules and regulations promulgated thereunder; provided, however, that such
tender offer occurs at a time when Continuing Directors are in office and a
majority of the Continuing Directors then in office has determined that the
offer is both fair and otherwise in the best interests of the Company and its
stockholders (taking into account all factors that such Continuing Directors
deem relevant).
(v) "PERSON" shall mean any individual, firm, corporation or other entity,
and shall include any successor (by merger or otherwise) of such entity.
(w) "POST-EVENT TRANSFEREE" shall have the meaning set forth in Section
7(e) hereof.
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(x) "PREFERRED SHARES" shall mean shares of Series A Participating
Preferred Stock, $0.001 par value, of the Company.
(y) "PRE-EVENT TRANSFEREE" shall have the meaning set forth in Section
7(e) hereof.
(z) "PRINCIPAL PARTY" shall have the meaning set forth in Section 13(b)
hereof.
(aa) "RECORD DATE" shall have the meaning set forth in the recitals at the
beginning of this Agreement.
(bb) "REDEMPTION DATE"shall have the meaning set forth in Section 23(a)
hereof.
(cc) "REDEMPTION PRICE" shall have the meaning set forth in Section 23(a)
hereof.
(dd) "RIGHTS AGENT" shall mean [INSERT NAME OF AGENT] or its successor or
replacement as provided in Sections 19 and 21 hereof.
(ee) "RIGHTS CERTIFICATE" shall mean a certificate substantially in the
form attached hereto as Exhibit B.
(ff) "RIGHTS DIVIDEND DECLARATION DATE" shall have the meaning set forth
in the recitals at the beginning of this Agreement.
(gg) "SECTION 11(a)(ii) TRIGGER DATE" shall have the meaning set forth in
Section 11(a)(iii) hereof.
(hh) "SECTION 13 EVENT" shall mean any event described in clause (i), (ii)
or (iii) of Section 13(a) hereof.
(ii) "SECURITIES ACT" shall mean the Securities Act of 1933, as amended.
(jj) "SHARES ACQUISITION DATE" shall mean the first date of public
announcement (which, for purposes of this definition, shall include, without
limitation, a report filed pursuant to Section 13(d) under the Exchange Act) by
the Company or an Acquiring Person that an Acquiring Person has become such;
provided that, if such Person is determined not to have become an Acquiring
Person pursuant to Section 1(a) hereof, then no Shares Acquisition Date shall be
deemed to have occurred.
(kk) "SPREAD" shall have the meaning set forth in Section 11(a)(iii)
hereof.
(ll) "SUBSIDIARY" of any Person shall mean any corporation or other entity
of which an amount of voting securities sufficient to elect a majority of the
directors or Persons having similar authority of such corporation or other
entity is beneficially owned, directly or indirectly, by such Person, or any
corporation or other entity otherwise controlled by such Person.
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(mm) "SUBSTITUTION PERIOD" shall have the meaning set forth in Section
11(a)(iii) hereof.
(nn) "SUMMARY OF RIGHTS" shall mean a summary of this Agreement
substantially in the form attached hereto as Exhibit C.
(oo) "TOTAL EXERCISE PRICE" shall have the meaning set forth in Section
4(a) hereof.
(pp) "TRADING DAY" shall mean a day on which the principal national
securities exchange on which a referenced security is listed or admitted to
trading is open for the transaction of business or, if a referenced security is
not listed or admitted to trading on any national securities exchange, a
Business Day.
(qq) A "TRIGGERING EVENT" shall be deemed to have occurred upon any
Person, becoming an Acquiring Person.
Section 2. Appointment of Rights Agent. The Company hereby appoints
the Rights Agent to act as agent for the Company and the holders of the Rights
(who, in accordance with Section 3 hereof, shall prior to the Distribution Date
also be the holders of the Common Shares) in accordance with the terms and
conditions hereof, and the Rights Agent hereby accepts such appointment. The
Company may from time to time appoint such co-Rights Agents as it may deem
necessary or desirable.
Section 3. Issuance of Rights Certificates.
(a) Until the Distribution Date, (i) the Rights will be evidenced
(subject to the provisions of Sections 3(b) and 3(c) hereof) by the certificates
for Common Shares registered in the names of the holders thereof (which
certificates shall also be deemed to be Rights Certificates) and not by separate
Rights Certificates and (ii) the right to receive Rights Certificates will be
transferable only in connection with the transfer of Common Shares. Until the
earlier of the Distribution Date or the Expiration Date, the surrender for
transfer of certificates for Common Shares shall also constitute the surrender
for transfer of the Rights associated with the Common Shares represented
thereby. As soon as practicable after the Distribution Date, the Company will
prepare and execute, the Rights Agent will countersign, and the Company will
send or cause to be sent (and the Rights Agent will, if requested, send) by
first-class, postage-prepaid mail, to each record holder of Common Shares as of
the Close of Business on the Distribution Date, at the address of such holder
shown on the records of the Company, a Rights Certificate evidencing one Right
for each Common Share so held, subject to adjustment as provided herein. In the
event that an adjustment in the number of Rights per Common Share has been made
pursuant to Section 11 hereof, then at the time of distribution of the Rights
Certificates, the Company shall make the necessary and appropriate rounding
adjustments (in accordance with Section 14(a) hereof) so that Rights
Certificates representing only whole numbers of Rights are distributed and cash
is paid in lieu of any fractional Rights. As of the Distribution Date, the
Rights will be evidenced solely by such Rights Certificates and may be
transferred by the transfer of the Rights Certificates as permitted hereby,
separately and apart from any transfer of Common Shares, and the holders of such
Rights Certificates as listed in the records of the Company or any transfer
agent or registrar for the Rights shall be the record holders thereof.
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(b) On the Record Date or as soon as practicable thereafter, the Company
will send a copy of the Summary of Rights by first-class, postage-prepaid mail,
to each record holder of Common Shares as of the Close of Business on the Record
Date, at the address of such holder shown on the records of the Company's
transfer agent and registrar. With respect to certificates for Common Shares
outstanding as of the Record Date, until the Distribution Date, the Rights will
be evidenced by such certificates registered in the names of the holders thereof
together with the Summary of Rights. Until the Distribution Date (or, if
earlier, the Expiration Date), the surrender for transfer of any certificate for
Common Shares outstanding on the Record Date, with or without a copy of the
Summary of Rights, shall also constitute the transfer of the Rights associated
with the Common Shares represented thereby.
(c) Unless the Board of Directors by resolution adopted at or before the
time of the issuance of any Common Shares specifies to the contrary, Rights
shall be issued in respect of all Common Shares that are issued after the Record
Date but prior to the earlier of the Distribution Date or the Expiration Date
or, in certain circumstances provided in Section 22 hereof, after the
Distribution Date. Certificates representing such Common Shares shall also be
deemed to be certificates for Rights, and shall bear the following legend:
THIS CERTIFICATE ALSO EVIDENCES AND ENTITLES THE HOLDER HEREOF TO CERTAIN
RIGHTS AS SET FORTH IN A RIGHTS AGREEMENT BETWEEN RAMBUS INC. AND [RIGHTS
AGENT], AS THE RIGHTS AGENT, DATED AS OF MARCH 21, 1997, (THE "RIGHTS
AGREEMENT"), THE TERMS OF WHICH ARE HEREBY INCORPORATED HEREIN BY REFERENCE
AND A COPY OF WHICH IS ON FILE AT THE PRINCIPAL EXECUTIVE OFFICES OF RAMBUS
INC.. UNDER CERTAIN CIRCUMSTANCES, AS SET FORTH IN THE RIGHTS AGREEMENT,
SUCH RIGHTS WILL BE EVIDENCED BY SEPARATE CERTIFICATES AND WILL NO LONGER
BE EVIDENCED BY THIS CERTIFICATE. RAMBUS INC. WILL MAIL TO THE HOLDER OF
THIS CERTIFI CATE A COPY OF THE RIGHTS AGREEMENT WITHOUT CHARGE AFTER
RECEIPT OF A WRITTEN REQUEST THEREFOR. UNDER CERTAIN CIRCUM STANCES SET
FORTH IN THE RIGHTS AGREEMENT, RIGHTS ISSUED TO, OR HELD BY, ANY PERSON WHO
IS, WAS OR BECOMES AN ACQUIRING PERSON OR ANY AFFILIATE OR ASSOCIATE
THEREOF (AS SUCH TERMS ARE DEFINED IN THE RIGHTS AGREEMENT), WHETHER
CURRENTLY HELD BY OR ON BEHALF OF SUCH PERSON OR BY ANY SUBSEQUENT HOLDER,
MAY BECOME NULL AND VOID.
With respect to such certificates containing the foregoing legend, until the
earlier of (i) the Distribution Date or (ii) the Expiration Date, the Rights
associated with the Common Shares represented by such certificates shall be
evidenced by such certificates alone, and the surrender for transfer of any such
certificate shall also constitute the transfer of the Rights associated with the
Common Shares represented thereby.
(d) In the event that the Company purchases or acquires any Common Shares
after the Record Date but prior to the Distribution Date, any Rights associated
with such Common Shares shall
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be deemed canceled and retired so that the Company shall not be entitled to
exercise any Rights associated with the Common Shares which are no longer
outstanding.
Section 4. Form of Rights Certificates.
(a) The Rights Certificates (and the forms of election to purchase
Common Shares and of assignment to be printed on the reverse thereof) shall be
substantially in the form of Exhibit B hereto and may have such marks of
identification or designation and such legends, summaries or endorsements
printed thereon as the Company may deem appropriate and as are not inconsistent
with the provisions of this Agreement, or as may be required to comply with any
applicable law or with any rule or regulation made pursuant thereto or with any
rule or regulation of any stock exchange or a national market system, on which
the Rights may from time to time be listed or included, or to conform to usage.
Subject to the provisions of Section 11 and Section 22 hereof, the Rights
Certificates, whenever distri buted, shall be dated as of the Record Date (or in
the case of Rights issued with respect to Common Shares issued by the Company
after the Record Date, as of the date of issuance of such Common Shares) and on
their face shall entitle the holders thereof to purchase such number of one-
thousandths of a Preferred Share as shall be set forth therein at the price set
forth therein (such exercise price per one one-thousandth of a Preferred Share
being hereinafter referred to as the "EXERCISE PRICE" and the aggregate Exercise
Price of all Preferred Shares issuable upon exercise of one Right being
hereinafter referred to as the "TOTAL EXERCISE PRICE"), but the number and type
of securities purchasable upon the exercise of each Right and the Exercise Price
shall be subject to adjustment as provided herein.
(b) Any Rights Certificate issued pursuant to Section 3(a)or Section
22 hereof that represents Rights beneficially owned by: (i) an Acquiring Person
or any Associate or Affiliate of an Acquiring Person, (ii) a transferee of an
Acquiring Person (or of any such Associate or Affiliate) who becomes a
transferee after the Acquiring Person becomes such or (iii) a transferee of an
Acquiring Person (or of any such Associate or Affiliate) who becomes a
transferee prior to or concurrently with the Acquiring Person becoming such and
receives such Rights pursuant to either (A) a transfer (whether or not for
consideration) from the Acquiring Person to holders of equity interests in such
Acquiring Person or to any Person with whom such Acquiring Person has any
continuing agreement, arrangement or understanding regarding the transferred
Rights or (B) a transfer which a majority of the Continuing Directors then in
office has determined is part of a plan, arrangement or understanding which has
as a primary purpose or effect avoidance of Section 7(e) hereof, and any Rights
Certificate issued pursuant to Section 6 or Section 11 hereof upon transfer,
exchange, replacement or adjustment of any other Rights Certificate referred to
in this sentence, shall contain (to the extent feasible) the following legend:
THE RIGHTS REPRESENTED BY THIS RIGHTS CERTIFICATE ARE OR WERE BENEFICIALLY
OWNED BY A PERSON WHO WAS OR BECAME AN ACQUIRING PERSON OR AN AFFILIATE OR
ASSOCIATE OF AN ACQUIRING PERSON (AS SUCH TERMS ARE DEFINED IN THE RIGHTS
AGREEMENT). ACCORDINGLY, THIS RIGHTS CERTIFICATE AND THE RIGHTS REPRE
SENTED HEREBY MAY BECOME NULL AND VOID IN THE CIRCUMSTANCES SPECIFIED IN
SECTION 7(e) OF THE RIGHTS AGREEMENT.
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Section 5. Countersignature and Registration.
(a) The Rights Certificates shall be executed on behalf of the
Company by its Chairman of the Board, its Chief Executive Officer, its Chief
Financial Officer, its President or any Vice President, either manually or by
facsimile signature, and by the Secretary or an Assistant Secretary of the
Company, either manually or by facsimile signature, and shall have affixed
thereto the Company's seal (if any) or a facsimile thereof. The Rights
Certificates shall be manually countersigned by the Rights Agent and shall not
be valid for any purpose unless countersigned. In case any officer of the
Company who shall have signed any of the Rights Certificates shall cease to be
such officer of the Company before countersignature by the Rights Agent and
issuance and delivery by the Company, such Rights Certificates, nevertheless,
may be countersigned by the Rights Agent and issued and delivered by the Company
with the same force and effect as though the person who signed such Rights
Certificates on behalf of the Company had not ceased to be such officer of the
Company; and any Rights Certificate may be signed on behalf of the Company by
any person who, at the actual date of the execution of such Rights Certifi cate,
shall be a proper officer of the Company to sign such Rights Certificate,
although at the date of the execution of this Rights Agreement any such person
was not such an officer.
(b) Following the Distribution Date, the Rights Agent will keep or
cause to be kept, at its office designated for such purposes, books for
registration and transfer of the Rights Certificates issued hereunder. Such
books shall show the names and addresses of the respective holders of the Rights
Certificates, the number of Rights evidenced on its face by each of the Rights
Certificates and the date of each of the Rights Certificates.
Section 6. Transfer, Split Up, Combination and Exchange of Rights
Certificates; Mutilated, Destroyed, Lost or Stolen Rights Certificates.
(a) Subject to the provisions of Sections 7(e), 14 and 24 hereof, at
any time after the Close of Business on the Distribution Date, and at or prior
to the Close of Business on the Expiration Date, any Rights Certificate or
Rights Certificates may be transferred, split up, combined or exchanged for
another Rights Certificate or Rights Certificates, entitling the registered
holder to purchase a like number of one-thousandths of a Preferred Share (or,
following a Triggering Event, other securities, cash or other assets, as the
case may be) as the Rights Certificate or Rights Certificates surrendered then
entitled such holder to purchase. Any registered holder desiring to transfer,
split up, combine or exchange any Rights Certificate or Rights Certificates
shall make such request in writing delivered to the Rights Agent, and shall
surrender the Rights Certificate or Rights Certificates to be transferred, split
up, combined or exchanged at the office of the Rights Agent designated for such
purpose. Neither the Rights Agent nor the Company shall be obligated to take any
action whatsoever with respect to the transfer of any such surrendered Rights
Certificate until the registered holder shall have completed and signed the
certificate contained in the form of assignment on the reverse side of such
Rights Certificate and shall have provided such additional evidence of the
identity of the Beneficial Owner (or former Beneficial Owner) or Affiliates or
Associates thereof as the Company shall reasonably request. Thereupon the Rights
Agent shall, subject to Sections 7(e), 14 and 24 hereof, countersign and deliver
to the person entitled thereto a Rights Certificate or Rights Certificates, as
the case may be, as so requested. The
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Company may require payment of a sum sufficient to cover any tax or governmental
charge that may be imposed in connection with any transfer, split up,
combination or exchange of Rights Certificates.
(b) Upon receipt by the Company and the Rights Agent of evidence
reasonably satisfactory to them of the loss, theft, destruction or mutilation of
a Rights Certificate, and, in case of loss, theft or destruction, of indemnity
or security reasonably satisfactory to them, and, at the Company's request,
reimbursement to the Company and the Rights Agent of all reasonable expenses
incidental thereto, and upon surrender to the Rights Agent and cancellation of
the Rights Certificate if mutilated, the Company will make and deliver a new
Rights Certificate of like tenor to the Rights Agent for delivery to the
registered holder in lieu of the Rights Certificate so lost, stolen, destroyed
or mutilated.
Section 7. Exercise of Rights; Exercise Price; Expiration Date of Rights.
(a) Subject to Sections 7(e), 23(b) and 24(b) hereof, the registered
holder of any Rights Certificate may exercise the Rights evidenced thereby
(except as otherwise provided herein) in whole or in part at any time after the
Distribution Date and prior to the Close of Business on the Expiration Date by
surrender of the Rights Certificate, with the form of election to purchase on
the reverse side thereof duly executed, to the Rights Agent at the office of the
Rights Agent designated for such purpose, together with payment of the Exercise
Price for each one-thousandth of a Preferred Share (or, following a Triggering
Event, other securities, cash or other assets as the case may be) as to which
the Rights are exercised.
(b) The Exercise Price for each one-thousandth of a Preferred Share
issuable pursuant to the exercise of a Right shall initially be ONE HUNDRED
TWENTY FIVE DOLLARS ($125.00), shall be subject to adjustment from time to time
as provided in Sections 11 and 13 hereof and shall be payable in lawful money
of the United States of America in accordance with paragraph (c) below.
(c) Upon receipt of a Rights Certificate representing exercisable
Rights, with the form of election to purchase duly executed, accompanied by
payment of the Exercise Price for the number of one-thousandths of a Preferred
Share (or, following a Triggering Event, other securities, cash or other assets
as the case may be) to be purchased and an amount equal to any applicable
transfer tax required to be paid by the holder of such Rights Certificate in
accordance with Section 9(e) hereof, the Rights Agent shall, subject to Section
20(k) hereof, thereupon promptly (i) (A) requisition from any transfer agent of
the Preferred Shares (or make available, if the Rights Agent is the transfer
agent for the Preferred Shares) a certificate or certificates for the number of
one-thousandths of a Preferred Share (or, following a Triggering Event, other
securities, cash or other assets as the case may be) to be purchased and the
Company hereby irrevocably authorizes its transfer agent to comply with all such
requests or (B) if the Company shall have elected to deposit the total number of
one-thousandths of a Preferred Share (or, following a Triggering Event, other
securities, cash or other assets as the case may be) issuable upon exercise of
the Rights hereunder with a depositary agent, requisition from the depositary
agent depositary receipts representing such number of one-thousandths of a
Preferred Share (or, following a Triggering Event, other securities, cash or
other assets as the case may be) as are to be purchased (in which case
certificates for the Preferred Shares (or, following a Triggering Event, other
securities, cash or other assets as the case may be) represented by such
receipts shall be deposited by the transfer agent with the
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depositary agent) and the Company hereby directs the depositary agent to comply
with such request, (ii) when appropriate, requisition from the Company the
amount of cash to be paid in lieu of issuance of fractional shares in accordance
with Section 14 hereof, (iii) after receipt of such certificates or depositary
receipts, cause the same to be delivered to or upon the order of the registered
holder of such Rights Certificate, registered in such name or names as may be
designated by such holder and (iv) when appro priate, after receipt thereof,
deliver such cash to or upon the order of the registered holder of such Rights
Certificate. The payment of the Exercise Price (as such amount may be reduced
(including to zero) pursuant to Section 11(a)(iii) hereof) and an amount equal
to any applicable transfer tax required to be paid by the holder of such Rights
Certificate in accordance with Section 9(e) hereof, may be made in cash or by
certified bank check, cashier's check or bank draft payable to the order of the
Company. In the event that the Company is obligated to issue securities of the
Company other than Preferred Shares, pay cash and/or distribute other property
pursuant to Section 11(a) hereof, the Company will make all arrangements
necessary so that such other securities, cash and/or other property are
available for distribution by the Rights Agent, if and when appropriate.
(d) In case the registered holder of any Rights Certificate shall
exercise less than all the Rights evidenced thereby, a new Rights Certificate
evidencing Rights equivalent to the Rights remain ing unexercised shall be
issued by the Rights Agent to the registered holder of such Rights Certificate
or to his or her duly authorized assigns, subject to the provisions of Section
14 hereof.
(e) Notwithstanding anything in this Agreement to the contrary, from
and after the first occurrence of a Triggering Event, any Rights beneficially
owned by (i) an Acquiring Person or an Associate or Affiliate of an Acquiring
Person, (ii) a transferee of an Acquiring Person (or of any such Associate or
Affiliate) who becomes a transferee after the Acquiring Person becomes such (a
"POST-EVENT TRANSFEREE"), (iii) a transferee of an Acquiring Person (or of any
such Associate or Affiliate) who becomes a transferee prior to or concurrently
with the Acquiring Person becoming such and receives such Rights pursuant to
either (A) a transfer (whether or not for consideration) from the Acquiring
Person to holders of equity interests in such Acquiring Person or to any Person
with whom the Acquiring Person has any continuing agreement, arrangement or
understanding regarding the transferred Rights or (B) a transfer which a
majority of the Continuing Directors then in office has determined is part of a
plan, arrangement or understanding which has as a primary purpose or effect the
avoidance of this Section 7(e) (a "PRE-EVENT TRANSFEREE") or (iv) any subsequent
transferee receiving transferred Rights from a Post-Event Transferee or a Pre-
Event Transferee, either directly or through one or more intermediate
transferees, shall become null and void without any further action and no holder
of such Rights shall have any rights whatsoever with respect to such Rights,
whether under any provision of this Agreement or otherwise. The Company shall
use all reasonable efforts to ensure that the provisions of this Section 7(e)
and Section 4(b) hereof are complied with, but shall have no liability to any
holder of Rights Certificates or to any other Person as a result of its failure
to make any determinations with respect to an Acquiring Person or any of such
Acquiring Person's Affiliates, Associates or transferees hereunder.
(f) Notwithstanding anything in this Agreement to the contrary,
neither the Rights Agent nor the Company shall be obligated to undertake any
action with respect to a registered holder upon the occurrence of any purported
exercise as set forth in this Section 7 unless such registered holder shall, in
addition to having complied with the requirements of Section 7(a), have (i)
completed and signed
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the certificate contained in the form of election to purchase set forth on the
reverse side of the Rights Certificate surrendered for such exercise and (ii)
provided such additional evidence of the identity of the Beneficial Owner (or
former Beneficial Owner) or Affiliates or Associates thereof as the Company
shall reasonably request.
Section 8. Cancellation and Destruction of Rights Certificates. All
Rights Certificates surrendered for the purpose of exercise, transfer, split up,
combination or exchange shall, if surrendered to the Company or to any of its
agents, be delivered to the Rights Agent for cancellation or in canceled form,
or, if surrendered to the Rights Agent, shall be canceled by it, and no Rights
Certificates shall be issued in lieu thereof except as expressly permitted by
any of the provisions of this Agreement. The Company shall deliver to the Rights
Agent for cancellation and retirement, and the Rights Agent shall so cancel and
retire, any Rights Certificate purchased or acquired by the Company otherwise
than upon the exercise thereof. The Rights Agent shall deliver all canceled
Rights Certificates to the Company, or shall, at the written request of the
Company, destroy such canceled Rights Certificates, and in such case shall
deliver a certificate of destruction thereof to the Company.
Section 9. Reservation and Availability of Preferred Shares.
(a) The Company covenants and agrees that it will use its best
efforts to cause to be reserved and kept available out of its authorized and
unissued Preferred Shares not reserved for another purpose (and, following the
occurrence of a Triggering Event, out of its authorized and unissued Common
Shares and/or other securities), the number of Preferred Shares (and, following
the occurrence of the Triggering Event, Common Shares and/or other securities)
that will be sufficient to permit the exercise in full of all outstanding
Rights.
(b) If the Company shall hereafter list any of its Preferred Shares
on a national securities exchange, then so long as the Preferred Shares (and,
following the occurrence of a Triggering Event, Common Shares and/or other
securities) issuable and deliverable upon exercise of the Rights may be listed
on such exchange, the Company shall use its best efforts to cause, from and
after such time as the Rights become exercisable (but only to the extent that it
is reasonably likely that the Rights will be exercised), all shares reserved for
such issuance to be listed on such exchange upon official notice of issuance
upon such exercise.
(c) The Company shall use its best efforts to (i) file, as soon as
practicable following the earliest date after the first occurrence of a
Triggering Event in which the consideration to be delivered by the Company upon
exercise of the Rights is described in Section 11(a)(ii) or Section 11(a)(iii)
hereof, or as soon as is required by law following the Distribution Date, as the
case may be, a registration statement under the Securities Act with respect to
the securities purchasable upon exercise of the Rights on an appropriate form,
(ii) cause such registration statement to become effective as soon as
practicable after such filing and (iii) cause such registration statement to
remain effective (with a prospectus at all times meeting the requirements of the
Securities Act) until the earlier of (A) the date as of which the Rights are no
longer exercisable for such securities and (B) the date of expiration of the
Rights. The Company may temporarily suspend, for a period not to exceed ninety
(90) days after the date set forth in clause (i) of the first sentence of this
Section 9(c), the exercisability of the Rights in order to prepare
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and file such registration statement and permit it to become effective. Upon any
such suspension, the Company shall issue a public announcement stating, and
notify the Rights Agent, that the exercisability of the Rights has been
temporarily suspended, as well as a public announcement and notification to the
Rights Agent at such time as the suspension is no longer in effect. The Company
will also take such action as may be appropriate under, or to ensure compliance
with, the securities or "blue sky" laws of the various states in connection with
the exercisability of the Rights. Notwithstanding any provision of this
Agreement to the contrary, the Rights shall not be exercisable in any
jurisdiction, unless the requisite qualification in such jurisdiction shall have
been obtained, or an exemption therefrom shall be available, and until a
registration statement has been declared effective.
(d) The Company covenants and agrees that it will take all such
action as may be necessary to ensure that all Preferred Shares (or other
securities of the Company) delivered upon exercise of Rights shall, at the time
of delivery of the certificates for such securities (subject to payment of the
Exercise Price), be duly and validly authorized and issued and fully paid and
nonassessable shares.
(e) The Company further covenants and agrees that it will pay when
due and payable any and all federal and state transfer taxes and charges which
may be payable in respect of the original issuance or delivery of the Rights
Certificates or of any Preferred Shares (or other securities of the Company)
upon the exercise of Rights. The Company shall not, however, be required to pay
any transfer tax which may be payable in respect of any transfer or delivery of
Rights Certificates to a person other than, or the issuance or delivery of
certificates or depositary receipts for the Preferred Shares (or other
securities of the Company) in a name other than that of, the registered holder
of the Rights Certificate evidencing Rights surrendered for exercise or to issue
or to deliver any certificates or depositary receipts for Preferred Shares (or
other securities of the Company) upon the exercise of any Rights until any such
tax shall have been paid (any such tax being payable by the holder of such
Rights Certificate at the time of surrender) or until it has been established to
the Company's satisfaction that no such tax is due.
Section 10. Record Date. Each Person in whose name any certificate
for a number of one-thousandths of a Preferred Share (or other securities of the
Company) is issued upon the exercise of Rights shall for all purposes be deemed
to have become the holder of record of Preferred Shares (or other securities of
the Company) represented thereby on, and such certificate shall be dated, the
date upon which the Rights Certificate evidencing such Rights was duly
surrendered and payment of the Total Exercise Price with respect to which the
Rights have been exercised (and any applicable transfer taxes) was made;
provided, however, that if the date of such surrender and payment is a date upon
which the transfer books of the Company are closed, such Person shall be deemed
to have become the record holder of such shares on, and such certificate shall
be dated, the next succeeding Business Day on which the transfer books of the
Company are open. Prior to the exercise of the Rights evidenced thereby, the
holder of a Rights Certificate shall not be entitled to any rights of a holder
of Preferred Shares (or other securities of the Company) for which the Rights
shall be exercisable, including, without limitation, the right to vote, to
receive dividends or other distributions or to exercise any preemptive rights,
and shall not be entitled to receive any notice of any proceedings of the
Company, except as provided herein.
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Section 11. Adjustment of Exercise Price, Number of Shares or
Number of Rights. The Exercise Price, the number and kind of shares or other
property covered by each Right and the number of Rights outstanding are subject
to adjustment from time to time as provided in this Section 11.
(a) (i) Anything in this Agreement to the contrary notwithstanding,
in the event the Company shall at any time after the date of this Agreement (A)
declare a dividend on the Preferred Shares payable in Preferred Shares, (B)
subdivide the outstanding Preferred Shares, (C) combine the outstanding
Preferred Shares (by reverse stock split or otherwise) into a smaller number of
Preferred Shares, or (D) issue any shares of its capital stock in a
reclassification of the Preferred Shares (including any such reclassification in
connection with a consolidation or merger in which the Company is the continuing
or surviving corporation), then, in each such event, except as otherwise
provided in this Section 11 and Section 7(e) hereof: (1) the Exercise Price in
effect at the time of the record date for such dividend or of the effective date
of such subdivision, combination or reclassification shall be adjusted so that
the Exercise Price thereafter shall equal the result obtained by dividing the
Exercise Price in effect immediately prior to such time by a fraction (the
"ADJUSTMENT FRACTION"), the numerator of which shall be the total number of
Preferred Shares (or shares of capital stock issued in such reclassification of
the Preferred Shares) outstanding immediately following such time and the
denominator of which shall be the total number of Preferred Shares outstanding
immediately prior to such time; provided, however, that in no event shall the
consideration to be paid upon the exercise of one Right be less than the
aggregate par value of the shares of capital stock of the Company issuable upon
exercise of such Right; and (2) the number of one-thousandths of a Preferred
Share (or share of such other capital stock) issuable upon the exercise of each
Right shall equal the number of one-thousandths of a Preferred Share (or share
of such other capital stock) as was issuable upon exercise of a Right
immediately prior to the occurrence of the event described in clauses (A)-(D) of
this Section 11(a)(i), multiplied by the Adjustment Fraction; provided, however,
that, no such adjustment shall be made pursuant to this Section 11(a)(i) to the
extent that there shall have simultaneously occurred an event described in
clause (A), (B), (C) or (D) of Section 11(n) with a proportionate adjustment
being made thereunder. Each Common Share that shall become outstanding after an
adjustment has been made pursuant to this Section 11(a)(i) shall have associated
with it the number of Rights, exercisable at the Exercise Price and for the
number of one-thousandths of a Preferred Share (or shares of such other capital
stock) as one Common Share has associated with it immediately following the
adjustment made pursuant to this Section 11(a)(i).
(ii) Subject to Section 24 of this Agreement, in the event a
Triggering Event shall have occurred, then promptly following such Triggering
Event each holder of a Right, except as provided in Section 7(e) hereof, shall
thereafter have the right to receive for each Right, upon exercise thereof in
accordance with the terms of this Agreement and payment of the Exercise Price in
effect immediately prior to the occurrence of the Triggering Event, in lieu of a
number of one-thousandths of a Preferred Share, such number of Common Shares of
the Company as shall equal the result obtained by multiplying the Exercise Price
in effect immediately prior to the occurrence of the Triggering Event by the
number of one-thousandths of a Preferred Share for which a Right was exercisable
(or would have been exercisable if the Distribution Date had occurred)
immediately prior to the first occurrence of a Triggering Event, and dividing
that product by 50% of the Current Per Share Market Price for Common Shares on
the date of occurrence of the Triggering Event; provided, however, that the
Exercise Price and the number of Common Shares of the Company so receivable upon
exercise of a Right shall be subject
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to further adjustment as appropriate in accordance with Section 11(e) hereof to
reflect any events occurring in respect of the Common Shares of the Company
after the occurrence of the Triggering Event. Notwithstanding the foregoing
provisions of this Section 11(a)(ii), the right to buy Common Shares of the
Company pursuant to Section 11(a)(ii) hereof shall not arise as a result of any
Person becoming an Acquiring Person through an acquisition of Common Shares
pursuant to a Permitted Offer.
(iii) In lieu of issuing Common Shares in accordance with Section
11(a)(ii) hereof, the Company may, if a majority of the Continuing Directors
then in office determines that such action is necessary or appropriate and not
contrary to the interest of holders of Rights and, in the event that the number
of Common Shares which are authorized by the Company's Certificate of
Incorporation but not outstanding or reserved for issuance for purposes other
than upon exercise of the Rights are not sufficient to permit the exercise in
full of the Rights, or if any necessary regulatory approval for such issuance
has not been obtained by the Company, the Company shall: (A) determine the
excess of (1) the value of the Common Shares issuable upon the exercise of a
Right (the "CURRENT VALUE") over (2) the Exercise Price (such excess, the
"SPREAD") and (B) with respect to each Right, make adequate provision to
substitute for such Common Shares, upon exercise of the Rights, (1) cash, (2) a
reduction in the Exercise Price, (3) other equity securities of the Company
(including, without limitation, shares or units of shares of any series of
preferred stock which a majority of the Continuing Directors then in office has
deemed to have the same value as Common Shares (such shares or units of shares
of preferred stock are herein called "COMMON STOCK EQUIVALENTS")), except to the
extent that the Company has not obtained any necessary stockholder or regulatory
approval for such issuance, (4) debt securities of the Company, except to the
extent that the Company has not obtained any necessary stockholder or regulatory
approval for such issuance, (5) other assets or (6) any combination of the
foregoing, having an aggregate value equal to the Current Value, where such
aggregate value has been determined by a majority of the Continuing Directors
then in office based upon the advice of a nationally recognized investment
banking firm selected by a majority of the Continuing Directors then in office;
provided, however, if the Company shall not have made adequate provision to
deliver value pursuant to clause (B) above within thirty (30) days following the
later of (x) the first occurrence of a Triggering Event and (y) the date on
which the Company's right of redemption pursuant to Section 23(a) expires (the
later of (x) and (y) being referred to herein as the "SECTION 11(a)(ii) TRIGGER
DATE"), then the Company shall be obligated to deliver, upon the surrender for
exercise of a Right and without requiring payment of the Exercise Price, Common
Shares (to the extent available), except to the extent that the Company has not
obtained any necessary stockholder or regulatory approval for such issuance, and
then, if necessary, cash, which shares and/or cash have an aggregate value equal
to the Spread. If a majority of the Continuing Directors then in office shall
determine in good faith that it is likely that sufficient additional Common
Shares could be authorized for issuance upon exercise in full of the Rights or
that any necessary regulatory approval for such issuance will be obtained, the
thirty (30) day period set forth above may be extended to the extent necessary,
but not more than ninety (90) days after the Section 11(a)(ii)Trigger Date, in
order that the Company may seek stockholder approval for the authorization of
such additional shares or take action to obtain such regulatory approval (such
period, as it may be extended, the "SUBSTITUTION PERIOD"). To the extent that
the Company determines that some action need be taken pursuant to the first
and/or second sentences of this Section 11(a)(iii), the Company (x) shall
provide, subject to Section 7(e) hereof, that such action shall apply uniformly
to all outstanding Rights and (y) may suspend the exercisability of the Rights
until the expiration of the Substitution Period in order to seek any
authorization of additional shares, to take
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any action to obtain any required regulatory approval and/or to decide the
appropriate form of distribution to be made pursuant to such first sentence and
to determine the value thereof. In the event of any such suspension, the
Company shall issue a public announcement stating that the exercisability of the
Rights has been temporarily suspended, as well as a public announcement at such
time as the suspen sion is no longer in effect. For purposes of this Section
11(a)(iii), the value of the Common Shares shall be the Current Per Share Market
Price of the Common Shares on the Section 11(a)(ii) Trigger Date and the value
of any Common Stock Equivalent shall be deemed to have the same value as the
Common Shares on such date.
(b) In case the Company shall, at any time after the date of this
Agreement, fix a record date for the issuance of rights, options or warrants to
all holders of Preferred Shares entitling such holders (for a period expiring
within forty-five (45) calendar days after such record date) to subscribe for or
purchase Preferred Shares or Equivalent Shares or securities convertible into
Preferred Shares or Equivalent Shares at a price per share (or having a
conversion price per share, if a security convertible into Preferred Shares or
Equivalent Shares) less than the then Current Per Share Market Price of the
Preferred Shares or Equivalent Shares on such record date, then, in each such
case, the Exercise Price to be in effect after such record date shall be
determined by multiplying the Exercise Price in effect immediately prior to such
record date by a fraction, the numerator of which shall be the number of
Preferred Shares and Equivalent Shares (if any) outstanding on such record date,
plus the number of Preferred Shares or Equivalent Shares, as the case may be,
which the aggregate offering price of the total number of Preferred Shares or
Equivalent Shares, as the case may be, to be offered or issued (and/or the
aggregate initial conversion price of the convertible securities to be offered
or issued) would purchase at such current market price, and the denominator of
which shall be the number of Preferred Shares and Equivalent Shares (if any)
outstanding on such record date, plus the number of additional Preferred Shares
or Equivalent Shares, as the case may be, to be offered for subscription or
purchase (or into which the convertible securities so to be offered are
initially convertible); provided, however, that in no event shall the
consideration to be paid upon the exercise of one Right be less than the
aggregate par value of the shares of capital stock of the Company issuable upon
exercise of one Right. In case such subscription price may be paid in a
consideration part or all of which shall be in a form other than cash, the value
of such consideration shall be as determined in good faith by a majority of the
Continuing Directors then in office, whose determination shall be described in a
statement filed with the Rights Agent and shall be binding on the Rights Agent
and the holders of the Rights. Preferred Shares and Equivalent Shares owned by
or held for the account of the Company shall not be deemed outstanding for the
purpose of any such computation. Such adjustment shall be made successively
whenever such a record date is fixed, and in the event that such rights, options
or warrants are not so issued, the Exercise Price shall be adjusted to be the
Exercise Price which would then be in effect if such record date had not been
fixed.
(c) In case the Company shall, at any time after the date of this
Agreement, fix a record date for the making of a distribution to all holders of
the Preferred Shares or of any class or series of Equivalent Shares (including
any such distribution made in connection with a consolidation or merger in which
the Company is the continuing or surviving corporation) of evidences of
indebtedness or assets (other than a regular quarterly cash dividend, if any, or
a dividend payable in Preferred Shares) or subscription rights, options or
warrants (excluding those referred to in Section 11(b)), then, in each such
case, the Exercise Price to be in effect after such record date shall be
determined by multiplying the
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Exercise Price in effect immediately prior to such record date by a fraction,
the numerator of which shall be the Current Per Share Market Price of a
Preferred Share or an Equivalent Share on such record date, less the fair market
value per Preferred Share or Equivalent Share (as determined in good faith by
the Board of Directors of the Company, whose determination shall be described in
a statement filed with the Rights Agent) of the portion of the cash, assets or
evidences of indebtedness so to be distributed or of such subscription rights or
warrants applicable to a Preferred Share or Equivalent Share, as the case may
be, and the denominator of which shall be such Current Per Share Market Price of
a Preferred Share or Equivalent Share on such record date; provided, however,
that in no event shall the consideration to be paid upon the exercise of one
Right be less than the aggregate par value of the shares of capital stock of the
Company issuable upon exercise of one Right. Such adjustments shall be made
successively whenever such a record date is fixed, and in the event that such
distribution is not so made, the Exercise Price shall be adjusted to be the
Exercise Price which would have been in effect if such record date had not been
fixed.
(d) Anything herein to the contrary notwithstanding, no adjustment in the
Exercise Price shall be required unless such adjustment would require an
increase or decrease of at least 1% in the Exercise Price; provided, however,
that any adjustments which by reason of this Section 11(d) are not required to
be made shall be carried forward and taken into account in any subsequent
adjustment. All calculations under this Section 11 shall be made to the nearest
cent or to the nearest ten-thousandth of a Common Share or other share or one
hundred-thousandth of a Preferred Share, as the case may be. Notwithstanding the
first sentence of this Section 11(d), any adjustment required by this Section 11
shall be made no later than the earlier of (i) three (3) years from the date of
the transaction which requires such adjustment or (ii) the Expiration Date.
(e) If as a result of an adjustment made pursuant to Section 11(a) or
13(a) hereof, the holder of any Right thereafter exercised shall become
entitled to receive any shares of capital stock other than Preferred Shares,
thereafter the number of such other shares so receivable upon exercise of any
Right and, if required, the Exercise Price thereof, shall be subject to
adjustment from time to time in a manner and on terms as nearly equivalent as
practicable to the provisions with respect to the Preferred Shares contained in
Sections 11(a), 11(b), 11(c), 11(d), 11(g), 11(h), 11(i), 11(j), 11(k) and
11(l), and the provisions of Sections 7, 9, 10, 13 and 14 with respect to the
Preferred Shares shall apply on like terms to any such other shares.
(f) All Rights originally issued by the Company subsequent to any
adjustment made to the Exercise Price hereunder shall evidence the right to
purchase, at the adjusted Exercise Price, the number of one-thousandths of a
Preferred Share purchasable from time to time hereunder upon exercise of the
Rights, all subject to further adjustment as provided herein.
(g) Unless the Company shall have exercised its election as provided in
Section 11(h), upon each adjustment of the Exercise Price as a result of the
calculations made in Section 11(b) and (c), each Right outstanding immediately
prior to the making of such adjustment shall thereafter evidence the right to
purchase, at the adjusted Exercise Price, that number of Preferred Shares
(calculated to the nearest one hundred-thousandth of a share) obtained by (i)
multiplying (x) the number of Preferred Shares covered by a Right immediately
prior to this adjustment, by (y) the Exercise Price in effect immediately
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prior to such adjustment of the Exercise Price, and (ii) dividing the product so
obtained by the Exercise Price in effect immediately after such adjustment of
the Exercise Price.
(h) The Company may elect on or after the date of any adjustment of the
Exercise Price as a result of the calculations made in Section 11(b) or (c) to
adjust the number of Rights, in substi tution for any adjustment in the number
of Preferred Shares purchasable upon the exercise of a Right. Each of the Rights
outstanding after such adjustment of the number of Rights shall be exercisable
for the number of one-thousandths of a Preferred Share for which a Right was
exercisable immediately prior to such adjustment. Each Right held of record
prior to such adjustment of the number of Rights shall become that number of
Rights (calculated to the nearest one hundred-thousandth) obtained by dividing
the Exercise Price in effect immediately prior to adjustment of the Exercise
Price by the Exercise Price in effect immediately after adjustment of the
Exercise Price. The Company shall make a public announcement of its election to
adjust the number of Rights, indicating the record date for the adjustment, and,
if known at the time, the amount of the adjustment to be made. This record date
may be the date on which the Exercise Price is adjusted or any day thereafter,
but, if the Rights Certificates have been issued, shall be at least ten (10)
days later than the date of the public announcement. If Rights Certificates
have been issued, upon each adjustment of the number of Rights pursuant to this
Section 11(h), the Company shall, as promptly as practicable, cause to be
distributed to holders of record of Rights Certificates on such record date
Rights Certificates evidencing, subject to Section 14 hereof, the additional
Rights to which such holders shall be entitled as a result of such adjustment,
or, at the option of the Company, shall cause to be distributed to such holders
of record in substitution and replacement for the Rights Certificates held by
such holders prior to the date of adjustment, and upon surrender thereof, if
required by the Company, new Rights Certificates evidencing all the Rights to
which such holders shall be entitled after such adjustment. Rights Certificates
so to be distributed shall be issued, executed and countersigned in the manner
provided for herein (and may bear, at the option of the Company, the adjusted
Exercise Price) and shall be registered in the names of the holders of record of
Rights Certificates on the record date specified in the public announcement.
(i) Irrespective of any adjustment or change in the Exercise Price or the
number of Preferred Shares issuable upon the exercise of the Rights, the Rights
Certificates theretofore and thereafter issued may continue to express the
Exercise Price per one one-thousandth of a Preferred Share and the number of
one-thousandths of a Preferred Share which were expressed in the initial Rights
Certificates issued hereunder.
(j) Before taking any action that would cause an adjustment reducing the
Exercise Price below the par or stated value, if any, of the number of one-
thousandths of a Preferred Share issuable upon exercise of the Rights, the
Company shall take any corporate action which may, in the opinion of its
counsel, be necessary in order that the Company may validly and legally issue as
fully paid and nonassessable shares such number of one-thousandths of a
Preferred Share at such adjusted Exercise Price.
(k) In any case in which this Section 11 shall require that an adjustment
in the Exercise Price be made effective as of a record date for a specified
event, the Company may elect to defer until the occurrence of such event the
issuing to the holder of any Right exercised after such record date of
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<PAGE>
the number of one-thousandths of a Preferred Share and other capital stock or
securities of the Company, if any, issuable upon such exercise over and above
the number of one-thousandths of a Preferred Share and other capital stock or
securities of the Company, if any, issuable upon such exercise on the basis of
the Exercise Price in effect prior to such adjustment; provided, however, that
the Company shall deliver to such holder a due bill or other appropriate
instrument evidencing such holder's right to receive such additional shares
(fractional or otherwise) upon the occurrence of the event requiring such
adjustment.
(l) Anything in this Section 11 to the contrary notwithstanding, prior to
the Distribution Date, the Company shall be entitled to make such reductions in
the Exercise Price, in addition to those adjustments expressly required by this
Section 11, as and to the extent that it in its sole discretion shall determine
to be advisable in order that any (i) consolidation or subdivision of the
Preferred or Common Shares, (ii) issuance wholly for cash of any Preferred or
Common Shares at less than the current market price, (iii) issuance wholly for
cash of Preferred or Common Shares or securities which by their terms are
convertible into or exchangeable for Preferred or Common Shares, (iv) stock
dividends or (v) issuance of rights, options or warrants referred to in this
Section 11, hereafter made by the Company to holders of its Preferred or Common
Shares shall not be taxable to such stockholders.
(m) The Company covenants and agrees that, after the Distribution Date, it
will not, except as permitted by Sections 23, 24 or 27 hereof, take (or permit
to be taken) any action if at the time such action is taken it is reasonably
foreseeable that such action will diminish substantially or otherwise eliminate
the benefits intended to be afforded by the Rights.
(n) In the event the Company shall at any time after the date of this
Agreement (A) declare a dividend on the Common Shares payable in Common Shares,
(B) subdivide the outstanding Common Shares, (C) combine the outstanding Common
Shares (by reverse stock split or otherwise) into a smaller number of Common
Shares, or (D) issue any shares of its capital stock in a reclassification of
the Common Shares (including any such reclassification in connection with a
consolidation or merger in which the Company is the continuing or surviving
corporation), then, in each such event, except as otherwise provided in this
Section 11(a) and Section 7(e) hereof: (1) each Common Share (or shares of
capital stock issued in such reclassification of the Common Shares) outstanding
immediately following such time shall have associated with it the number of
Rights as were associated with one Common Share immediately prior to the
occurrence of the event described in clauses (A)-(D) above; (2) the Exercise
Price in effect at the time of the record date for such dividend or of the
effective date of such subdivision, combination or reclassification shall be
adjusted so that the Exercise Price thereafter shall equal the result obtained
by multiplying the Exercise Price in effect immediately prior to such time by a
fraction, the numerator of which shall be the total number of Common Shares
outstanding immediately prior to the event described in clauses (A)-(D) above,
and the denominator of which shall be the total number of Common Shares
outstanding immediately after such event; provided, however, that in no event
shall the consideration to be paid upon the exercise of one Right be less than
the aggregate par value of the shares of capital stock of the Company issuable
upon exercise of such Right; and (3) the number of one-thousandths of a
Preferred Share (or shares of such other capital stock) issuable upon the
exercise of each Right outstanding after such event shall equal the number of
one-thousandths of a Preferred Share (or shares of such other capital stock) as
were issuable with respect to one Right immediately prior to such event. Each
Common Share that shall become outstanding after an adjustment has been made
pursuant
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to this Section 11(n) shall have associated with it the number of Rights,
exercisable at the Exercise Price and for the number of one-thousandths of a
Preferred Share (or shares of such other capital stock) as one Common Share has
associated with it immediately following the adjustment made pursuant to this
Section 11(n). If an event occurs which would require an adjustment under both
this Section 11(n) and Section 11(a)(ii) hereof, the adjustment provided for in
this Section 11(n) shall be in addition to, and shall be made prior to, any
adjustment required pursuant to Section 11(a)(ii) hereof.
Section 12. Certificate of Adjusted Exercise Price or Number of Shares.
Whenever an adjustment is made as provided in Sections 11 and 13 hereof, the
Company shall promptly (a) prepare a certificate setting forth such adjustment
and a brief statement of the facts accounting for such adjustment, (b) file with
the Rights Agent and with each transfer agent for the Preferred Shares a copy of
such certificate and (c) mail a brief summary thereof to each holder of a Rights
Certificate in accordance with Section 26 hereof. Notwithstanding the foregoing
sentence, the failure of the Company to make such certification or give such
notice shall not affect the validity of such adjustment or the force or effect
of the requirement for such adjustment. The Rights Agent shall be fully
protected in relying on any such certificate and on any adjustment contained
therein and shall not be deemed to have knowledge of such adjustment unless and
until it shall have received such certificate.
Section 13. Consolidation, Merger or Sale or Transfer of Assets or
Earning Power.
(a) In the event that, following a Triggering Event, directly or
indirectly:
(i) the Company shall consolidate with, or merge with and
into, any other Person (other than a wholly-owned Subsidiary of the Company in a
transaction the principal purpose of which is to change the state of
incorporation of the Company and which complies with Section 11(m) hereof);
(ii) any Person shall consolidate with the Company, or merge
with and into the Company and the Company shall be the continuing or surviving
corporation of such consolidation or merger and, in connection with such merger,
all or part of the Common Shares shall be changed into or exchanged for stock or
other securities of any other person (or the Company); or
(iii) the Company shall sell or otherwise transfer (or one or
more of its Subsidiaries shall sell or otherwise transfer), in one or more
transactions, assets or earning power aggregating 50% or more of the assets or
earning power of the Company and its Subsidiaries (taken as a whole) to any
other Person or Persons (other than the Company or one or more of its wholly
owned Subsidiaries in one or more transactions, each of which individually (and
together) complies with Section 11(m) hereof),
then, concurrent with and in each such case,
(A) each holder of a Right (except as provided in Section
7(e) hereof) shall thereafter have the right to receive, upon the exercise
thereof at a price equal to the Total Exercise Price applicable immediately
prior to the occurrence of the Section 13 Event in accordance with the terms
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of this Agreement, such number of validly authorized and issued, fully paid,
nonassessable and freely tradeable Common Shares of the Principal Party (as
hereinafter defined), free of any liens, encumbrances, rights of first refusal
or other adverse claims, as shall be equal to the result obtained by dividing
such Total Exercise Price by 50% of the Current Per Share Market Price of the
Common Shares of such Principal Party on the date of consummation of such
Section 13 Event, provided, however, that the Exercise Price and the number of
Common Shares of such Principal Party so receivable upon exercise of a Right
shall be subject to further adjustment as appropriate in accordance with Section
11(e) hereof;
(B) such Principal Party shall thereafter be liable for,
and shall assume, by virtue of such Section 13 Event, all the obligations and
duties of the Company pursuant to this Agreement;
(C) the term "Company" shall thereafter be deemed to
refer to such Principal Party, it being specifically intended that the
provisions of Section 11 hereof shall apply only to such Principal Party
following the first occurrence of a Section 13 Event;
(D) such Principal Party shall take such steps
(including, but not limited to, the reservation of a sufficient number of its
Common Shares) in connection with the consummation of any such transaction as
may be necessary to ensure that the provisions hereof shall thereafter be
applicable, as nearly as reasonably may be, in relation to its Common Shares
thereafter deliverable upon the exercise of the Rights; and
(E) upon the subsequent occurrence of any consolidation,
merger, sale or transfer of assets or other extraordinary transaction in respect
of such Principal Party, each holder of a Right shall thereupon be entitled to
receive, upon exercise of a Right and payment of the Total Exercise Price as
provided in this Section 13(a), such cash, shares, rights, warrants and other
property which such holder would have been entitled to receive had such holder,
at the time of such transaction, owned the Common Shares of the Principal Party
receivable upon the exercise of such Right pursuant to this Section 13(a), and
such Principal Party shall take such steps (including, but not limited to,
reservation of shares of stock) as may be necessary to permit the subsequent
exercise of the Rights in accordance with the terms hereof for such cash,
shares, rights, warrants and other property.
(F) For purposes hereof, the "earning power" of the
Company and its Subsidiaries shall be determined in good faith by the Company's
Board of Directors on the basis of the operating earnings of each business
operated by the Company and its Subsidiaries during the three fiscal years
preceding the date of such determination (or, in the case of any business not
operated by the Company or any Subsidiary during three full fiscal years
preceding such date, during the period such business was operated by the Company
or any Subsidiary).
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(b) For purposes of this Agreement, the term "PRINCIPAL PARTY" shall mean:
(i) in the case of any transaction described in clause (i) or (ii) of
Section 13(a) hereof: (A) the Person that is the issuer of the securities into
which the Common Shares are converted in such merger or consolidation, or, if
there is more than one such issuer, the issuer the Common Shares of which have
the greatest aggregate market value of shares outstanding, or (B) if no
securities are so issued, (x) the Person that is the other party to the merger,
if such Person survives said merger, or, if there is more than one such Person,
the Person the Common Shares of which have the greatest aggregate market value
of shares outstanding or (y) if the Person that is the other party to the merger
does not survive the merger, the Person that does survive the merger (including
the Company if it survives) or (z) the Person resulting from the consolidation;
and
(ii) in the case of any transaction described in clause (iii) of
Section 13(a) hereof, the Person that is the party receiving the greatest
portion of the assets or earning power transferred pursuant to such transaction
or transactions, or, if more than one Person that is a party to such transaction
or transactions receives the same portion of the assets or earning power so
transferred and each such portion would, were it not for the other equal
portions, constitute the greatest portion of the assets or earning power so
transferred, or if the Person receiving the greatest portion of the assets or
earning power cannot be determined, whichever of such Persons is the issuer of
Common Shares having the greatest aggregate market value of shares outstanding;
provided, however, that in any such case described in the foregoing clause
(b)(i) or (b)(ii), if the Common Shares of such Person are not at such time or
have not been continuously over the preceding 12-month period registered under
Section 12 of the Exchange Act, then (1) if such Person is a direct or indirect
Subsidiary of another Person the Common Shares of which are and have been so
registered, the term "Principal Party" shall refer to such other Person, or (2)
if such Person is a Subsidiary, directly or indirectly, of more than one Person,
the Common Shares of which are and have been so registered, the term "Principal
Party" shall refer to whichever of such Persons is the issuer of Common Shares
having the greatest aggregate market value of shares outstanding, or (3) if such
Person is owned, directly or indirectly, by a joint venture formed by two or
more Persons that are not owned, directly or indirectly by the same Person, the
rules set forth in clauses (1) and (2) above shall apply to each of the owners
having an interest in the venture as if the Person owned by the joint venture
was a Subsidiary of both or all of such joint venturers, and the Principal Party
in each such case shall bear the obligations set forth in this Section 13 in the
same ratio as its interest in such Person bears to the total of such interests.
(c) The Company shall not consummate any Section 13 Event unless the
Principal Party shall have a sufficient number of authorized Common Shares that
have not been issued or reserved for issuance to permit the exercise in full of
the Rights in accordance with this Section 13 and unless prior thereto the
Company and such issuer shall have executed and delivered to the Rights Agent a
supplemental agreement confirming that such Principal Party shall, upon
consummation of such Section 13 Event, assume this Agreement in accordance with
Sections 13(a) and 13(b) hereof, that all rights of first refusal or preemptive
rights in respect of the issuance of Common Shares of such Principal Party upon
exercise of outstanding Rights have been waived, that there are no rights,
warrants, instruments or securities outstanding or any agreements or
arrangements which, as a result of the
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<PAGE>
consummation of such transaction, would eliminate or substantially diminish the
benefits intended to be afforded by the Rights and that such transaction shall
not result in a default by such Principal Party under this Agreement, and
further providing that, as soon as practicable after the date of such Section 13
Event, such Principal Party will:
(i) prepare and file a registration statement under the Securities Act
with respect to the Rights and the securities purchasable upon exercise of the
Rights on an appropriate form, use its best efforts to cause such registration
statement to become effective as soon as practicable after such filing and use
its best efforts to cause such registration statement to remain effective (with
a prospectus at all times meeting the requirements of the Securities Act) until
the Expiration Date, and similarly comply with applicable state securities laws;
(ii) use its best efforts to list (or continue the listing of) the
Rights and the securities purchasable upon exercise of the Rights on a national
securities exchange or to meet the eligibility requirements for quotation on
Nasdaq and list (or continue the listing of) the Rights and the securities
purchasable upon exercise of the Rights on Nasdaq; and
(iii) deliver to holders of the Rights historical financial statements
for such Principal Party which comply in all respects with the requirements for
registration on Form 10 (or any successor form) under the Exchange Act.
In the event that at any time after the occurrence of a Triggering Event
some or all of the Rights shall not have been exercised at the time of a
transaction described in this Section 13, the Rights which have not theretofore
been exercised shall thereafter be exercisable in the manner described in
Section 13(a) (without taking into account any prior adjustment required by
Section 11(a)(ii)).
(d) In case the "Principal Party" for purposes of Section 13(b) hereof has
provision in any of its authorized securities or in its certificate of
incorporation or by-laws or other instrument governing its corporate affairs,
which provision would have the effect of (i) causing such Principal Party to
issue (other than to holders of Rights pursuant to Section 13 hereof), in
connection with, or as a consequence of, the consummation of a Section 13 Event,
Common Shares or Equivalent Shares of such Principal Party at less than the then
Current Per Share Market Price thereof or securities exercisable for, or
convertible into, Common Shares or Equivalent Shares of such Principal Party at
less than such then Current Per Share Market Price, or (ii) providing for any
special payment, tax or similar provision in connection with the issuance of the
Common Shares of such Principal Party pursuant to the provisions of Section 13
hereof, then, in such event, the Company hereby agrees with each holder of
Rights that it shall not consummate any such transaction unless prior thereto
the Company and such Principal Party shall have executed and delivered to the
Rights Agent a supplemental agreement providing that the provision in question
of such Principal Party shall have been canceled, waived or amended, or that the
authorized securities shall be redeemed, so that the applicable provision will
have no effect in connection with or as a consequence of, the consummation of
the proposed transaction.
(e) The Company covenants and agrees that it shall not, at any time after
the Distribution Date, effect or permit to occur any Section 13 Event, if (i) at
the time or immediately after
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such Section 13 Event there are any rights, warrants or other instruments or
securities outstanding or agreements in effect which would substantially
diminish or otherwise eliminate the benefits intended to be afforded by the
Rights, (ii) prior to, simultaneously with or immediately after such Section 13
Event, the stockholders of the Person who constitutes, or would constitute, the
"Principal Party" for purposes of Section 13(b) hereof shall have received a
distribution of Rights previously owned by such Person or any of its Affiliates
or Associates or (iii) the form or nature of organization of the Principal Party
would preclude or limit the exercisability of the Rights.
(f) Notwithstanding anything in this Agreement to the contrary,
Section 13 shall not be applicable to a transaction described in clauses (i) and
(ii) of Section 13(a) if: (i) such transaction is consummated with a Person or
Persons who acquired Common Shares pursuant to a Permitted Offer (or a wholly-
owned Subsidiary of any such Person or Persons); (ii) the price per share of
Common Shares offered in such transaction is not less than the price per share
of Common Shares paid to all holders of Common Shares whose shares were
purchased pursuant to such Permitted Offer; and (iii) the form of consideration
being offered to the remaining holders of Common Shares pursuant to such
transaction is the same form as the form of consideration paid pursuant to such
Permitted Offer. Upon consummation of any such transaction contemplated by this
Section 13(f), all Rights hereunder shall expire.
(g) The provisions of this Section 13 shall similarly apply to
successive mergers or consolidations or sales or other transfers.
Section 14. Fractional Rights and Fractional Shares.
(a) The Company shall not be required to issue fractions of Rights or
to distribute Rights Certificates which evidence fractional Rights. In lieu of
such fractional Rights, there shall be paid to the registered holders of the
Rights Certificates with regard to which such fractional Rights would otherwise
be issuable, an amount in cash equal to the same fraction of the current market
value of a whole Right. For the purposes of this Section 14(a), the current
market value of a whole Right shall be the closing price of the Rights for the
Trading Day immediately prior to the date on which such fractional Rights would
have been otherwise issuable, as determined pursuant to the second sentence of
Section 1(k) hereof.
(b) The Company shall not be required to issue fractions of Preferred
Shares (other than fractions that are integral multiples of one one-thousandth
of a Preferred Share) upon exercise of the Rights or to distribute certificates
which evidence fractional Preferred Shares (other than fractions that are
integral multiples of one one-thousandth of a Preferred Share). Interests in
fractions of Preferred Shares in integral multiples of one one-thousandth of a
Preferred Share may, at the election of the Company, be evidenced by depositary
receipts, pursuant to an appropriate agreement between the Company and a
depositary selected by it; provided, that such agreement shall provide that the
holders of such depositary receipts shall have all the rights, privileges and
preferences to which they are entitled as beneficial owners of the Preferred
Shares represented by such depositary receipts. In lieu of fractional Preferred
Shares that are not integral multiples of one one-thousandth of a Preferred
Share, the Company shall pay to the registered holders of Rights Certificates at
the time such Rights are exercised as herein provided an amount in cash equal to
the same fraction of the current market value of a Preferred Share.
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For purposes of this Section 14(b), the current market value of a Preferred
Share shall be one thousand times the closing price of a Common Share (as
determined pursuant to the second sentence of Section 1(k) hereof) for the
Trading Day immediately prior to the date of such exercise.
(c) The Company shall not be required to issue fractions of Common
Shares or to distribute certificates which evidence fractional Common Shares
upon the exercise or exchange of Rights. In lieu of such fractional Common
Shares, the Company shall pay to the registered holders of Rights Certificates
at the time such Rights are exercised as herein provided an amount in cash equal
to the same fraction of the current market value of a Common Share. For purposes
of this Section 14(c), the current market value of a Common Share shall be the
closing price of a Common Share (as determined pursuant to the second sentence
of Section 1(k) hereof) for the Trading Day immediately prior to the date of
such exercise.
(d) The holder of a Right by the acceptance of the Right expressly
waives his or her right to receive any fractional Rights or any fractional
shares (other than fractions that are integral multiples of one one-thousandth
of a Preferred Share) upon exercise of a Right.
Section 15. Rights of Action. All rights of action in respect of
this Agreement, excepting the rights of action given to the Rights Agent under
Section 18 hereof, are vested in the respective registered holders of the Rights
Certificates (and, prior to the Distribution Date, the registered holders of the
Common Shares); and any registered holder of any Rights Certificate (or, prior
to the Distribution Date, of the Common Shares), without the consent of the
Rights Agent or of the holder of any other Rights Certificate (or, prior to the
Distribution Date, of the Common Shares), may, in his or her own behalf and for
his or her own benefit, enforce, and may institute and maintain any suit, action
or proceeding against the Company to enforce, or otherwise act in respect of,
his or her right to exercise the Rights evidenced by such Rights Certificate in
the manner provided in such Rights Certificate and in this Agreement. Without
limiting the foregoing or any remedies available to the holders of Rights, it is
specifically acknowledged that the holders of Rights would not have an adequate
remedy at law for any breach of this Agreement and will be entitled to specific
performance of the obligations under, and injunctive relief against actual or
threatened violations of, the obligations of any Person subject to this
Agreement.
Section 16. Agreement of Rights Holders. Every holder of a Right,
by accepting the same, consents and agrees with the Company and the Rights Agent
and with every other holder of a Right that:
(a) prior to the Distribution Date, the Rights will be transferable
only in connection with the transfer of the Common Shares;
(b) after the Distribution Date, the Rights Certificates are
transferable only on the registry books of the Rights Agent if surrendered at
the principal office or offices of the Rights Agent designated for such
purposes, duly endorsed or accompanied by a proper instrument of transfer and
with the appropriate forms and certificates fully executed; and
(c) subject to Sections 6(a)and 7(f) hereof, the Company and the
Rights Agent may deem and treat the person in whose name the Rights Certificate
(or, prior to the Distribution Date, the
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associated Common Shares certificate) is registered as the absolute owner
thereof and of the Rights evidenced thereby (notwithstanding any notations of
ownership or writing on the Rights Certificates or the associated Common Shares
certificate made by anyone other than the Company or the Rights Agent) for all
purposes whatsoever, and neither the Company nor the Rights Agent shall be
affected by any notice to the contrary.
Section 17. Rights Certificate Holder Not Deemed a Stockholder. No
holder, as such, of any Rights Certificate shall be entitled to vote, receive
dividends or be deemed for any purpose to be the holder of the Preferred Shares
or any other securities of the Company which may at any time be issuable on the
exercise of the Rights represented thereby, nor shall anything contained herein
or in any Rights Certificate be construed to confer upon the holder of any
Rights Certificate, as such, any of the rights of a stockholder of the Company
or any right to vote for the election of directors or upon any matter submitted
to stockholders at any meeting thereof, or to give or withhold consent to any
corporate action, or to receive notice of meetings or other actions affecting
stockholders (except as provided in Section 25 hereof), or to receive dividends
or subscription rights, or otherwise, until the Right or Rights evidenced by
such Rights Certificate shall have been exercised in accordance with the
provisions hereof.
Section 18. Concerning the Rights Agent.
(a) The Company agrees to pay to the Rights Agent reasonable
compensation for all services rendered by it hereunder and, from time to time,
on demand of the Rights Agent, its reasonable expenses and counsel fees and
other disbursements incurred in the administration and execution of this
Agreement and the exercise and performance of its duties hereunder. The Company
also agrees to indemnify the Rights Agent for, and to hold it harmless against,
any loss, liability or expense, incurred without negligence, bad faith or
willful misconduct on the part of the Rights Agent, for anything done or omitted
by the Rights Agent in connection with the acceptance and administration of this
Agreement, including the costs and expenses of defending against any claim of
liability in the premises. In no event will the Rights Agent be liable for
special, indirect, incidental or consequential loss or damage of any kind
whatsoever, even if the Rights Agent has been advised of the possibility of such
loss or damage.
(b) The Rights Agent shall be protected and shall incur no liability
for, or in respect of any action taken, suffered or omitted by it in connection
with, its administration of this Agreement in reliance upon any Rights
Certificate or certificate for the Preferred Shares or Common Shares or for
other securities of the Company, instrument of assignment or transfer, power of
attorney, endorsement, affidavit, letter, notice, direction, consent,
certificate, statement or other paper or document reasonably believed by it to
be genuine and to be signed, executed and, where necessary, verified or
acknowledged, by the proper Person or Persons, or otherwise upon the advice of
counsel as set forth in Section 20 hereof.
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Section 19. Merger or Consolidation or Change of Name of Rights Agent.
(a) Any corporation into which the Rights Agent or any successor Rights
Agent may be merged or with which it may be consolidated, or any corporation
resulting from any merger or consolidation to which the Rights Agent or any
successor Rights Agent shall be a party, or any corpora tion succeeding to the
corporate trust business of the Rights Agent or any successor Rights Agent,
shall be the successor to the Rights Agent under this Agreement without the
execution or filing of any paper or any further act on the part of any of the
parties hereto; provided, however, that such corporation would be eligible for
appointment as a successor Rights Agent under the provisions of Section hereof.
In case at the time such successor Rights Agent shall succeed to the agency
created by this Agreement, any of the Rights Certificates shall have been
countersigned but not delivered, any such successor Rights Agent may adopt the
countersignature of the predecessor Rights Agent and deliver such Rights
Certificates so countersigned; and in case at that time any of the Rights
Certificates shall not have been countersigned, any successor Rights Agent may
countersign such Rights Certificates either in the name of the predecessor
Rights Agent or in the name of the successor Rights Agent; and in all such cases
such Rights Certificates shall have the full force provided in the Rights
Certificates and in this Agreement.
(b) In case at any time the name of the Rights Agent shall be changed and
at such time any of the Rights Certificates shall have been countersigned but
not delivered, the Rights Agent may adopt the countersignature under its prior
name and deliver Rights Certificates so countersigned; and in case at that time
any of the Rights Certificates shall not have been countersigned, the Rights
Agent may countersign such Rights Certificates either in its prior name or in
its changed name; and in all such cases such Rights Certificates shall have the
full force provided in the Rights Certificates and in this Agreement.
Section 20. Duties of Rights Agent. The Rights Agent undertakes the
duties and obligations imposed by this Agreement upon the following terms and
conditions, by all of which the Company and the holders of Rights Certificates,
by their acceptance thereof, shall be bound:
(a) The Rights Agent may consult with legal counsel (who may be legal
counsel for the Company), and the written advice or opinion of such counsel
shall be full and complete authorization and protection to the Rights Agent as
to any action taken or omitted by it in good faith and in accordance with such
written advice or opinion.
(b) Whenever in the performance of its duties under this Agreement the
Rights Agent shall deem it necessary or desirable that any fact or matter
(including, without limitation, the identity of any Acquiring Person and the
determination of Current Per Share Market Price) be proved or established by the
Company prior to taking or suffering any action hereunder, such fact or matter
(unless other evidence in respect thereof be herein specifically prescribed) may
be deemed to be conclusively proved and established by a certificate signed by
any one of the Chairman of the Board, the Chief Executive Officer, the
President, any Vice President, the Chief Financial Officer, the Secretary or any
Assistant Secretary of the Company and delivered to the Rights Agent; and such
certificate shall be full authorization to the Rights Agent for any action taken
or suffered in good faith by it under the provisions of this Agreement in
reliance upon such certificate.
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(c) The Rights Agent shall be liable hereunder to the Company and any
other Person only for its own negligence, bad faith or willful misconduct.
(d) The Rights Agent shall not be liable for or by reason of any of the
statements of fact or recitals contained in this Agreement or in the Rights
Certificates (except its countersignature thereof) or be required to verify the
same, but all such statements and recitals are and shall be deemed to have been
made by the Company only.
(e) The Rights Agent shall not be under any responsibility in respect of
the validity of this Agreement or the execution and delivery hereof (except the
due execution hereof by the Rights Agent) or in respect of the validity or
execution of any Rights Certificate (except its countersignature thereof); nor
shall it be responsible for any breach by the Company of any covenant or
condition contained in this Agreement or in any Rights Certificate; nor shall it
be responsible for any change in the exercisability of the Rights or any
adjustment in the terms of the Rights (including the manner, method or amount
thereof) provided for in Sections 3, 11, 13, or 23, or the ascertaining of the
existence of facts that would require any such change or adjustment (except with
respect to the exercise of Rights evidenced by Rights Certificates after receipt
by the Rights Agent of a certificate furnished pursuant to Section 12 describing
such change or adjustment); nor shall it by any act hereunder be deemed to make
any representation or warranty as to the authorization or reservation of any
Preferred Shares to be issued pursuant to this Agreement or any Rights
Certificate or as to whether any Preferred Shares will, when issued, be validly
authorized and issued, fully paid and nonassessable.
(f) The Company agrees that it will perform, execute, acknowledge and
deliver or cause to be performed, executed, acknowledged and delivered all such
further and other acts, instruments and assurances as may reasonably be required
by the Rights Agent for the carrying out or performing by the Rights Agent of
the provisions of this Agreement.
(g) The Rights Agent is hereby authorized and directed to accept
instructions with respect to the performance of its duties hereunder from any
one of the Chairman of the Board, the Chief Executive Officer, the President,
any Vice President, the Chief Financial Officer, the Secretary or any Assistant
Secretary of the Company, and to apply to such officers for advice or
instructions in connection with its duties, and it shall not be liable for any
action taken or suffered by it in good faith in accordance with instructions of
any such officer or for any delay in acting while waiting for those
instructions. Any application by the Rights Agent for written instructions from
the Company may, at the option of the Rights Agent, set forth in writing any
action proposed to be taken or omitted by the Rights Agent under this Rights
Agreement and the date on and/or after which such action shall be taken or such
omission shall be effective. The Rights Agent shall not be liable for any
action taken by, or omission of, the Rights Agent in accordance with a proposal
included in any such application on or after the date specified in such
application (which date shall not be less than five (5) Business Days after the
date any officer of the Company actually receives such application, unless any
such officer shall have consented in writing to an earlier date) unless, prior
to taking any such action (or the effective date in the case of an omission),
the Rights Agent shall have received written instructions in response to such
application specifying the action to be taken or omitted.
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(h) The Rights Agent and any stockholder, director, officer or employee of
the Rights Agent may buy, sell or deal in any of the Rights or other securities
of the Company or become pecuniarily interested in any transaction in which the
Company may be interested, or contract with or lend money to the Company or
otherwise act as fully and freely as though it were not Rights Agent under this
Agreement. Nothing herein shall preclude the Rights Agent from acting in any
other capacity for the Company or for any other legal entity.
(i) The Rights Agent may execute and exercise any of the rights or powers
hereby vested in it or perform any duty hereunder either itself or by or through
its attorneys or agents, and the Rights Agent shall not be answerable or
accountable for any act, default, neglect or misconduct of any such attorneys or
agents or for any loss to the Company resulting from any such act, default,
neglect or misconduct, provided reasonable care was exercised in the selection
and continued employment thereof.
(j) No provision of this Agreement shall require the Rights Agent to
expend or risk its own funds or otherwise incur any financial liability in the
performance of any of its duties hereunder or in the exercise of its rights if
there shall be reasonable grounds for believing that repayment of such funds or
adequate indemnification against such risk or liability is not reasonably
assured to it.
(k) If, with respect to any Rights Certificate surrendered to the Rights
Agent for exercise or transfer, the certificate attached to the form of
assignment or form of election to purchase, as the case may be, has either not
been completed or indicates an affirmative response to clause 1 and/or 2
thereof, the Rights Agent shall not take any further action with respect to such
requested exercise or transfer without first consulting with the Company.
Section 21. Change of Rights Agent. The Rights Agent or any
successor Rights Agent may resign and be discharged from its duties under this
Agreement upon thirty (30) days' notice in writing mailed to the Company and to
each transfer agent of the Preferred Shares and the Common Shares by registered
or certified mail, and to the holders of the Rights Certificates by first-class
mail. The Company may remove the Rights Agent or any successor Rights Agent
upon thirty (30) days' notice in writing, mailed to the Rights Agent or
successor Rights Agent, as the case may be, and to each transfer agent of the
Preferred Shares and the Common Shares by registered or certified mail, and to
the holders of the Rights Certificates by first-class mail. If the Rights Agent
shall resign or be removed or shall otherwise become incapable of acting, the
Company shall appoint a successor to the Rights Agent. If the Company shall
fail to make such appointment within a period of thirty (30) days after giving
notice of such removal or after it has been notified in writing of such
resignation or incapacity by the resigning or incapacitated Rights Agent or by
the holder of a Rights Certificate (who shall, with such notice, submit his or
her Rights Certificate for inspection by the Company), then the registered
holder of any Rights Certificate may apply to any court of competent
jurisdiction for the appointment of a new Rights Agent. Any successor Rights
Agent, whether appointed by the Company or by such a court, shall be a
corporation organized and doing business under the laws of the United States or
of any state of the United States, in good standing, which is authorized under
such laws to exercise corporate trust or stockholder services powers and is
subject to supervision or examination by federal or state authority and which
has at the time of its appointment as Rights Agent a combined capital and
surplus of at least $100 million. After appointment, the successor Rights Agent
shall be vested with the same powers, rights, duties and
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responsibilities as if it had been originally named as Rights Agent without
further act or deed; but the predecessor Rights Agent shall deliver and transfer
to the successor Rights Agent any property at the time held by it hereunder, and
execute and deliver any further assurance, conveyance, act or deed necessary for
the purpose. Not later than the effective date of any such appointment, the
Company shall file notice thereof in writing with the predecessor Rights Agent
and each transfer agent of the Preferred Shares and the Common Shares, and mail
a notice thereof in writing to the registered holders of the Rights
Certificates. Failure to give any notice provided for in this Section 21,
however, or any defect therein, shall not affect the legality or validity of the
resignation or removal of the Rights Agent or the appointment of the successor
Rights Agent, as the case may be.
Section 22. Issuance of New Rights Certificates. Notwithstanding
any of the provisions of this Agreement or of the Rights to the contrary, the
Company may, at its option, issue new Rights Certificates evidencing Rights in
such form as may be approved by its Board of Directors to reflect any adjustment
or change in the Exercise Price and the number or kind or class of shares or
other securities or property purchasable under the Rights Certificates made in
accordance with the provisions of this Agreement. In addition, in connection
with the issuance or sale of Common Shares following the Distribution Date and
prior to the redemption or expiration of the Rights, the Company (a) shall, with
respect to Common Shares so issued or sold pursuant to the exercise of stock
options or under any employee plan or arrangement or upon the exercise,
conversion or exchange of other securities of the Company outstanding at the
date hereof or upon the exercise, conversion or exchange of securities
hereinafter issued by the Company and (b) may, in any other case, if deemed
necessary or appropriate by the Board of Directors of the Company, issue Rights
Certificates representing the appropriate number of Rights in connection with
such issuance or sale; provided, however, that (i) no such Rights Certificate
shall be issued and this sentence shall be null and void ab initio if, and to
the extent that, such issuance or this sentence would create a significant risk
of or result in material adverse tax consequences to the Company or the Person
to whom such Rights Certificate would be issued or would create a significant
risk of or result in such options' or employee plans' or arrangements' failing
to qualify for otherwise available special tax treatment and (ii) no such Rights
Certificate shall be issued if, and to the extent that, appropriate adjustment
shall otherwise have been made in lieu of the issuance thereof.
Section 23. Redemption.
(a) The Company may, at its option and with the approval of the Board of
Directors, at any time prior to the Close of Business on the earlier of (i) the
tenth day following the Shares Acquisition Date (or such later date as may be
determined by action of a majority of Continuing Directors then in office and
publicly announced by the Company) and (ii) the Final Expiration Date, redeem
all but not less than all the then outstanding Rights at a redemption price of
$0.01 per Right, appropriately adjusted to reflect any stock split, stock
dividend or similar transaction occurring after the date hereof (such redemption
price being herein referred to as the "REDEMPTION PRICE") and the Company may,
at its option, pay the Redemption Price either in Common Shares (based on the
Current Per Share Market Price thereof at the time of redemption) or cash. Such
redemption of the Rights by the Company may be made effective at such time, on
such basis and with such conditions as the Board of Directors in its sole
discretion may establish; provided, however, if the Board of Directors of the
Company authorizes redemption of the Rights on or after the time a Person
becomes an Acquiring Person, then there must be
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Continuing Directors then in office and such authorization shall require the
concurrence of a majority of such Continuing Directors. The date on which the
Board of Directors elects to make the redemption effective shall be referred to
as the "REDEMPTION DATE."
(b) Immediately upon the action of the Board of Directors of the Company
ordering the redemption of the Rights, evidence of which shall have been filed
with the Rights Agent, and without any further action and without any notice,
the right to exercise the Rights will terminate and the only right thereafter of
the holders of Rights shall be to receive the Redemption Price. The Company
shall promptly give public notice of any such redemption; provided, however,
that the failure to give or any defect in, any such notice shall not affect the
validity of such redemption. Within ten (10) days after the action of the Board
of Directors ordering the redemption of the Rights, the Company shall give
notice of such redemption to the Rights Agent and the holders of the then
outstanding Rights by mailing such notice to all such holders at their last
addresses as they appear upon the registry books of the Rights Agent or, prior
to the Distribution Date, on the registry books of the transfer agent for the
Common Shares. Any notice which is mailed in the manner herein provided shall
be deemed given, whether or not the holder receives the notice. Each such
notice of redemption will state the method by which the payment of the
Redemption Price will be made. Neither the Company nor any of its Affiliates or
Associates may redeem, acquire or purchase for value any Rights at any time in
any manner other than that specifically set forth in this Section 23 or in
Section 24 hereof, and other than in connection with the purchase of Common
Shares prior to the Distribution Date.
Section 24. Exchange.
(a) Subject to applicable laws, rules and regulations, and subject to
subsection 24(c) below, the Company may, at its option, by majority vote of the
Board of Directors and a majority vote of the Continuing Directors, at any time
after the occurrence of a Triggering Event, exchange all or part of the then
outstanding and exercisable Rights (which shall not include Rights that have
become void pursuant to the provisions of Section 7(e) hereof) for Common Shares
at an exchange ratio of one Common Share per Right, appropriately adjusted to
reflect any stock split, stock dividend or similar transaction occurring after
the date hereof (such exchange ratio being hereinafter referred to as the
"EXCHANGE RATIO"). Notwithstanding the foregoing, the Board of Directors shall
not be empowered to effect such exchange at any time after any Person (other
than the Company, any Subsidiary of the Company, any employee benefit plan of
the Company or any such Subsidiary, or any entity holding Common Shares for or
pursuant to the terms of any such plan), together with all Affiliates and
Associates of such Person, becomes the Beneficial Owner of 50% or more of the
Common Shares then outstanding.
(b) Immediately upon the action of the Board of Directors ordering the
exchange of any Rights pursuant to subsection 24(a) of this Section 24 and
without any further action and without any notice, the right to exercise such
Rights shall terminate and the only right thereafter of a holder of such Rights
shall be to receive that number of Common Shares equal to the number of such
Rights held by such holder multiplied by the Exchange Ratio. The Company shall
give public notice of any such exchange; provided, however, that the failure to
give, or any defect in, such notice shall not affect the validity of such
exchange. The Company shall mail a notice of any such exchange to all of the
holders of such Rights at their last addresses as they appear upon the registry
books of the Rights Agent. Any
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notice which is mailed in the manner herein provided shall be deemed given,
whether or not the holder receives the notice. Each such notice of exchange
will state the method by which the exchange of the Common Shares for Rights will
be effected and, in the event of any partial exchange, the number of Rights
which will be exchanged. Any partial exchange shall be effected pro rata based
on the number of Rights (other than Rights which have become void pursuant to
the provisions of Section 7(e) hereof) held by each holder of Rights.
(c) In the event that there shall not be sufficient Common Shares issued
but not outstanding or authorized but unissued to permit any exchange of Rights
as contemplated in accordance with Section 24(a), the Company shall either take
such action as may be necessary to authorize additional Common Shares for
issuance upon exchange of the Rights or alternatively, at the option of a
majority of the Board of Directors, with respect to each Right (i) pay cash in
an amount equal to the Current Value (as hereinafter defined), in lieu of
issuing Common Shares in exchange therefor, or (ii) issue debt or equity
securities or a combination thereof, having a value equal to the Current Value,
in lieu of issuing Common Shares in exchange for each such Right, where the
value of such securities shall be determined by a nationally recognized
investment banking firm selected by majority vote of the Board of Directors, or
(iii) deliver any combination of cash, property, Common Shares and/or other
securities having a value equal to the Current Value in exchange for each Right.
For purposes of this Section 24(c) only, the Current Value shall mean the
product of the Current Per Share Market Price of Common Shares on the date of
the occurrence of the event described above in subparagraph (a), multiplied by
the number of Common Shares for which the Right otherwise would be exchangeable
if there were sufficient shares available. To the extent that the Company
determines that some action need be taken pursuant to clauses (i), (ii) or (iii)
of this Section 24(c), the Board of Directors may temporarily suspend the
exercisability of the Rights for a period of up to sixty (60) days following the
date on which the event described in Section 24(a) shall have occurred, in order
to seek any authorization of additional Common Shares and/or to decide the
appropriate form of distribution to be made pursuant to the above provision and
to determine the value thereof. In the event of any such suspension, the Company
shall issue a public announcement stating that the exercisability of the Rights
has been temporarily suspended.
(d) The Company shall not be required to issue fractions of Common Shares
or to distribute certificates which evidence fractional Common Shares. In lieu
of such fractional Common Shares, there shall be paid to the registered holders
of the Rights Certificates with regard to which such fractional Common Shares
would otherwise be issuable, an amount in cash equal to the same fraction of the
current market value of a whole Common Share (as determined pursuant to the
second sentence of Section 1(k) hereof).
(e) The Company may, at its option, by majority vote of the Board of
Directors, at any time before any Person has become an Acquiring Person,
exchange all or part of the then outstanding Rights for rights of substantially
equivalent value, as determined reasonably and with good faith by the Board of
Directors, based upon the advice of one or more nationally recognized investment
banking firms.
(f) Immediately upon the action of the Board of Directors ordering the
exchange of any Rights pursuant to subsection 24(e) of this Section 24 and
without any further action and without
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any notice, the right to exercise such Rights shall terminate and the only right
thereafter of a holder of such Rights shall be to receive that number of rights
in exchange therefor as has been determined by the Board of Directors in
accordance with subsection 24(e) above. The Company shall give public notice of
any such exchange; provided, however, that the failure to give, or any defect
in, such notice shall not affect the validity of such exchange. The Company
shall mail a notice of any such exchange to all of the holders of such Rights at
their last addresses as they appear upon the registry books of the transfer
agent for the Common Shares of the Company. Any notice which is mailed in the
manner herein provided shall be deemed given, whether or not the holder receives
the notice. Each such notice of exchange will state the method by which the
exchange of the Rights will be effected.
Section 25. Notice of Certain Events.
(a) In case the Company shall propose to effect or permit to occur any
Triggering Event or Section 13 Event, the Company shall give notice thereof to
each holder of Rights in accordance with Section 26 hereof at least twenty (20)
days prior to occurrence of such Triggering Event or such Section 13 Event.
(b) In case any Triggering Event or Section 13 Event shall occur, then, in
any such case, the Company shall as soon as practicable thereafter give to each
holder of a Rights Certificate, in accordance with Section 26 hereof, a notice
of the occurrence of such event, which shall specify the event and the
consequences of the event to holders of Rights under Sections 11(a)(ii) and 13
hereof.
Section 26. Notices. Notices or demands authorized by this
Agreement to be given or made by the Rights Agent or by the holder of any Rights
Certificate to or on the Company shall be sufficiently given or made if sent by
first-class mail, postage prepaid, addressed (until another address is filed in
writing with the Rights Agent) as follows:
Rambus Inc.
2465 Latham Street
Mountain View, California 94040
Attention: Gary Harmon
with a copy to:
Wilson Sonsini Goodrich & Rosati
Professional Corporation
650 Page Mill Road
Palo Alto, California 94304-1050
Attention: Richard J. Char, Esq.
Subject to the provisions of Section 21 hereof, any notice or demand
authorized by this Agreement to be given or made by the Company or by the holder
of any Rights Certificate to or on the Rights Agent shall be sufficiently given
or made if sent by first-class mail, postage prepaid, addressed (until another
address is filed in writing with the Company) as follows:
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[RIGHTS AGENT]
[Address]
[Address]
Attention: ____________________
Notices or demands authorized by this Agreement to be given or made by the
Company or the Rights Agent to the holder of any Rights Certificate shall be
sufficiently given or made if sent by first-class mail, postage prepaid,
addressed to such holder at the address of such holder as shown on the registry
books of the Company.
Section 27. Supplements and Amendments. Prior to the occurrence of
a Distribution Date, the Company may supplement or amend this Agreement in any
respect without the approval of any holders of Rights and the Rights Agent
shall, if the Company so directs, execute such supplement or amendment. From
and after the occurrence of a Distribution Date, the Company and the Rights
Agent may from time to time supplement or amend this Agreement without the
approval of any holders of Rights in order to (i) cure any ambiguity, (ii)
correct or supplement any provision contained herein which may be defective or
inconsistent with any other provisions herein, (iii) shorten or lengthen any
time period hereunder (which shortening or lengthening shall be effective only
if there are Continuing Directors and shall require the concurrence of a
majority of such Continuing Directors) or (iv) to change or supplement the
provisions hereunder in any manner that the Company may deem necessary or
desirable and that shall not adversely affect the interests of the holders of
Rights (other than an Acquiring Person or an Affiliate or Associate of an
Acquiring Person); provided, this Agreement may not be supplemented or amended
to lengthen, pursuant to clause (iii) of this sentence, (A) a time period
relating to when the Rights may be redeemed at such time as the Rights are not
then redeemable or (B) any other time period unless such lengthening is for the
purpose of protecting, enhancing or clarifying the rights of, and/or the
benefits to, the holders of Rights (other than an Acquiring Person or an
Affiliate or Associate of an Acquiring Person). Upon the delivery of a
certificate from an appropriate officer of the Company that states that the
proposed supplement or amendment is in compliance with the terms of this Section
27, the Rights Agent shall execute such supplement or amendment. Prior to the
Distribution Date, the interests of the holders of Rights shall be deemed
coincident with the interests of the holders of Common Shares.
Section 28. Successors. All the covenants and provisions of this
Agreement by or for the benefit of the Company or the Rights Agent shall bind
and inure to the benefit of their respective successors and assigns hereunder.
Section 29. Determinations and Actions by the Board of Directors,
etc. For all purposes of this Agreement, any calculation of the number of
Common Shares outstanding at any particular time, including for purposes of
determining the particular percentage of such outstanding Common Shares of which
any Person is the Beneficial Owner, shall be made in accordance with the last
sentence of Rule 13d-3(d)(1)(i) of the General Rules and Regulations under the
Exchange Act. The Board of Directors of the Company (or, where specifically
provided for herein, the Continuing Directors) shall have the exclusive power
and authority to administer this Agreement and to exercise all rights and powers
specifically granted to the Board, or the Company (or, where specifically
provided for herein, the Continuing Directors), or as may be necessary or
advisable in the administration of this Agreement,
-35-
<PAGE>
including, without limitation, the right and power to (i) interpret the
provisions of this Agreement and (ii) make all determinations deemed necessary
or advisable for the administration of this Agreement (including a determination
to redeem or not redeem the Rights or to amend the Agreement). All such
actions, calculations, interpretations and determinations (including, for
purposes of clause (y) below, all omissions with respect to the foregoing) which
are done or made by the Board (or, where specifically provided for herein, by
the Continuing Directors) in good faith, shall (x) be final, conclusive and
binding on the Company, the Rights Agent, the holders of the Rights Certificates
and all other parties and (y) not subject the Board or the Continuing Directors
to any liability to the holders of the Rights.
Section 30. Benefits of this Agreement. Nothing in this Agreement
shall be construed to give to any Person other than the Company, the Rights
Agent and the registered holders of the Rights Certificates (and, prior to the
Distribution Date, the Common Shares) any legal or equitable right, remedy or
claim under this Agreement; but this Agreement shall be for the sole and
exclusive benefit of the Company, the Rights Agent and the registered holders of
the Rights Certificates (and, prior to the Distribution Date, the Common
Shares).
Section 31. Severability. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction or
other authority to be invalid, void or unenforceable, the remainder of the
terms, provisions, covenants and restrictions of this Agreement shall remain in
full force and effect and shall in no way be affected, impaired or invalidated;
provided, however, that notwithstanding anything in this Agreement to the
contrary, if any such term, provision, covenant or restriction is held by such
court or authority to be invalid, void or unenforceable and the Board of
Directors of the Company determines in its good faith judgment that severing the
invalid language from this Agreement would adversely affect the purpose or
effect of this Agreement, the right of redemption set forth in Section 23 hereof
shall be reinstated and shall not expire until the Close of Business on the
tenth day following the date of such determination by the Board of Directors.
Section 32. Governing Law. This Agreement and each Right and each
Rights Certificate issued hereunder shall be deemed to be a contract made under
the laws of the State of Delaware and for all purposes shall be governed by and
construed in accordance with the laws of such State applicable to contracts to
be made and performed entirely within such State.
Section 33. Counterparts. This Agreement may be executed in any
number of counterparts and each of such counterparts shall for all purposes be
deemed to be an original, and all such counterparts shall together constitute
but one and the same instrument.
Section 34. Descriptive Headings. Descriptive headings of the
several Sections of this Agreement are inserted for convenience only and shall
not control or affect the meaning or construction of any of the provisions
hereof.
-36-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
"COMPANY" RAMBUS INC.
By:
--------------------------------------
Gary Harmon, Vice President and
Chief Financial Officer
"RIGHTS AGENT" [RIGHTS AGENT]
By:
--------------------------------------
Name:
------------------------------------
Title:
-----------------------------------
-37-
<PAGE>
EXHIBIT A
---------
CERTIFICATE OF DESIGNATIONS OF RIGHTS, PREFERENCES
AND PRIVILEGES OF
SERIES A PARTICIPATING PREFERRED STOCK
OF RAMBUS INC.
The undersigned, Geoffrey Tate and Gary Harmon do hereby certify:
1. That they are the duly elected and acting President and Secretary,
respectively, of Rambus Inc., a Delaware corporation (the "CORPORATION").
2. That pursuant to the authority conferred upon the Board of Directors
by the Certificate of Incorporation of the said Corporation, the said Board of
Directors on February 28, 1997 adopted the following resolution creating a
series of 40,000 shares of Preferred Stock designated as Series A Participating
Preferred Stock:
"RESOLVED, that pursuant to the authority vested in the Board of Directors
of the corporation by the Restated Certificate of Incorporation, the Board of
Directors does hereby provide for the issue of a series of Preferred Stock of
the Corporation and does hereby fix and herein state and express the
designations, powers, preferences and relative and other special rights and the
qualifications, limitations and restrictions of such series of Preferred Stock
as follows:
Section 1. Designation and Amount. The shares of such series shall be
designated as "SERIES A PARTICIPATING PREFERRED STOCK." The Series A
Participating Preferred Stock shall have a par value of $0.001 per share, and
the number of shares constituting such series shall be 40,000.
Section 2. Proportional Adjustment. In the event the Corporation shall
at any time after the issuance of any share or shares of Series A Participating
Preferred Stock (i) declare any dividend on Common Stock of the Corporation
("COMMON STOCK") payable in shares of Common Stock, (ii) subdivide the
outstanding Common Stock or (iii) combine the outstanding Common Stock into a
smaller number of shares, then in each such case the Corporation shall
simultaneously effect a proportional adjustment to the number of outstanding
shares of Series A Participating Preferred Stock.
Section 3. Dividends and Distributions.
(a) Subject to the prior and superior right of the holders of any
shares of any series of Preferred Stock ranking prior and superior to the shares
of Series A Participating Preferred Stock with respect to dividends, the holders
of shares of Series A Participating Preferred Stock shall be entitled to receive
when, as and if declared by the Board of Directors out of funds legally
available for the purpose, quarterly dividends payable in cash on the last day
of January, April, July and October in each year (each such date being referred
to herein as a "QUARTERLY DIVIDEND PAYMENT DATE"), commencing on the first
Quarterly Dividend Payment Date after the first issuance of a share or fraction
of a share of Series A
<PAGE>
Participating Preferred Stock, in an amount per share (rounded to the nearest
cent) equal to 1,000 times the aggregate per share amount of all cash dividends,
and 1,000 times the aggregate per share amount (payable in kind) of all non-cash
dividends or other distributions other than a dividend payable in shares of
Common Stock or a subdivision of the outstanding shares of Common Stock (by
reclassification or otherwise), declared on the Common Stock since the
immediately preceding Quarterly Dividend Payment Date, or, with respect to the
first Quarterly Dividend Payment Date, since the first issuance of any share or
fraction of a share of Series A Participating Preferred Stock.
(b) The Corporation shall declare a dividend or distribution on the
Series A Participating Preferred Stock as provided in paragraph (a) above
immediately after it declares a dividend or distribution on the Common Stock
(other than a dividend payable in shares of Common Stock).
(c) Dividends shall begin to accrue on outstanding shares of Series A
Participating Preferred Stock from the Quarterly Dividend Payment Date next
preceding the date of issue of such shares of Series A Participating Preferred
Stock, unless the date of issue of such shares is prior to the record date for
the first Quarterly Dividend Payment Date, in which case dividends on such
shares shall begin to accrue from the date of issue of such shares, or unless
the date of issue is a Quarterly Dividend Payment Date or is a date after the
record date for the determination of holders of shares of Series A Participating
Preferred Stock entitled to receive a quarterly dividend and before such
Quarterly Dividend Payment Date, in either of which events such dividends shall
begin to accrue from such Quarterly Dividend Payment Date. Accrued but unpaid
dividends shall not bear interest. Dividends paid on the shares of Series A
Participating Preferred Stock in an amount less than the total amount of such
dividends at the time accrued and payable on such shares shall be allocated pro
rata on a share-by-share basis among all such shares at the time outstanding.
The Board of Directors may fix a record date for the determination of holders of
shares of Series A Participating Preferred Stock entitled to receive payment of
a dividend or distribution declared thereon, which record date shall be no more
than 30 days prior to the date fixed for the payment thereof.
Section 4. Voting Rights. The holders of shares of Series A
Participating Preferred Stock shall have the following voting rights:
(a) Each share of Series A Participating Preferred Stock shall entitle
the holder thereof to 1,000 votes on all matters submitted to a vote of the
stockholders of the Corporation.
(b) Except as otherwise provided herein or by law, the holders of
shares of Series A Participating Preferred Stock and the holders of shares of
Common Stock shall vote together as one class on all matters submitted to a vote
of stockholders of the Corporation.
(c) Except as required by law, holders of Series A Participating
Preferred Stock shall have no special voting rights and their consent shall not
be required (except to the extent they are entitled to vote with holders of
Common Stock as set forth herein) for taking any corporate action.
-2-
<PAGE>
Section 5. Certain Restrictions.
(a) The Corporation shall not declare any dividend on, make any
distribution on, or redeem or purchase or otherwise acquire for consideration
any shares of Common Stock after the first issuance of a share or fraction of a
share of Series A Participating Preferred Stock unless concurrently therewith it
shall declare a dividend on the Series A Participating Preferred Stock as
required by Section 3 hereof.
(b) Whenever quarterly dividends or other dividends or distributions
payable on the Series A Participating Preferred Stock as provided in Section 3
are in arrears, thereafter and until all accrued and unpaid dividends and
distributions, whether or not declared, on shares of Series A Participating
Preferred Stock outstanding shall have been paid in full, the Corporation shall
not
(i) declare or pay dividends on, make any other distributions on, or
redeem or purchase or otherwise acquire for consideration any shares of stock
ranking junior (either as to dividends or upon liquidation, dissolution or
winding up) to the Series A Participating Preferred Stock;
(ii) declare or pay dividends on, make any other distributions on any
shares of stock ranking on a parity (either as to dividends or upon liquidation,
dissolution or winding up) with Series A Participating Preferred Stock, except
dividends paid ratably on the Series A Participating Preferred Stock and all
such parity stock on which dividends are payable or in arrears in proportion to
the total amounts to which the holders of all such shares are then entitled;
(iii) redeem or purchase or otherwise acquire for consideration shares
of any stock ranking on a parity (either as to dividends or upon liquidation,
dissolution or winding up) with the Series A Participating Preferred Stock,
provided that the Corporation may at any time redeem, purchase or otherwise
acquire shares of any such parity stock in exchange for shares of any stock of
the Corporation ranking junior (either as to dividends or upon dissolution,
liquidation or winding up) to the Series A Participating Preferred Stock;
(iv) purchase or otherwise acquire for consideration any shares of
Series A Participating Preferred Stock, or any shares of stock ranking on a
parity with the Series A Participating Preferred Stock, except in accordance
with a purchase offer made in writing or by publication (as determined by the
Board of Directors) to all holders of such shares upon such terms as the Board
of Directors, after consideration of the respective annual dividend rates and
other relative rights and preferences of the respective series and classes,
shall determine in good faith will result in fair and equitable treatment among
the respective series or classes.
(c) The Corporation shall not permit any subsidiary of the Corporation to
purchase or otherwise acquire for consideration any shares of stock of the
Corporation unless the Corporation could, under paragraph (a) of this Section 5,
purchase or otherwise acquire such shares at such time and in such manner.
-3-
<PAGE>
Section 6. Reacquired Shares. Any shares of Series A Participating
Preferred Stock purchased or otherwise acquired by the Corporation in any manner
whatsoever shall be retired and canceled promptly after the acquisition thereof.
All such shares shall upon their cancellation become authorized but unissued
shares of Preferred Stock and may be reissued as part of a new series of
Preferred Stock to be created by resolution or resolutions of the Board of
Directors, subject to the conditions and restrictions on issuance set forth
herein and, in the Restated Certificate of Incorporation, as then amended.
Section 7. Liquidation, Dissolution or Winding Up. Upon any
liquidation, dissolution or winding up of the Corporation, the holders of shares
of Series A Participating Preferred Stock shall be entitled to receive an
aggregate amount per share equal to 1000 times the aggregate amount to be
distributed per share to holders of shares of Common Stock plus an amount equal
to any accrued and unpaid dividends on such shares of Series A Participating
Preferred Stock.
Section 8. Consolidation, Merger, etc. In case the Corporation shall
enter into any consolidation, merger, combination or other transaction in which
the shares of Common Stock are exchanged for or changed into other stock or
securities, cash and/or any other property, then in any such case the shares of
Series A Participating Preferred Stock shall at the same time be similarly
exchanged or changed in an amount per share equal to 1,000 times the aggregate
amount of stock, securities, cash and/or any other property (payable in kind),
as the case may be, into which or for which each share of Common Stock is
changed or exchanged.
Section 9. No Redemption. The shares of Series A Participating
Preferred Stock shall not be redeemable.
Section 10. Ranking. The Series A Participating Preferred Stock
shall rank junior to all other series of the Corporation's Preferred Stock as to
the payment of dividends and the distribution of assets, unless the terms of any
such series shall provide otherwise.
Section 11. Amendment. The Restated Certificate of Incorporation of
the Corporation shall not be further amended in any manner which would
materially alter or change the powers, preference or special rights of the
Series A Participating Preferred Stock so as to affect them adversely without
the affirmative vote of the holders of a majority of the outstanding shares of
Series A Participating Preferred Stock, voting separately as a class.
Section 12. Fractional Shares. Series A Participating Preferred
Stock may be issued in fractions of a share which shall entitle the holder, in
proportion to such holder's fractional shares, to exercise voting rights,
receive dividends, participate in distributions and to have the benefit of all
other rights of holders of Series A Participating Preferred Stock.
-4-
<PAGE>
RESOLVED FURTHER, that the President or any Vice President and the
Secretary or any Assistant Secretary of this corporation be, and they hereby
are, authorized and directed to prepare and file a Certificate of Designation of
Rights, Preferences and Privileges in accordance with the foregoing resolution
and the provisions of Delaware law and to take such actions as they may deem
necessary or appropriate to carry out the intent of the foregoing resolution."
We further declare under penalty of perjury that the matters set forth in
the foregoing Certificate of Designation are true and correct of our own
knowledge.
Executed at Mountain View, California, on March 21, 1997.
------------------------------------
Geoffrey Tate, President
------------------------------------
Gary Harmon, Secretary
-5-
<PAGE>
EXHIBIT B
---------
FORM OF RIGHTS CERTIFICATE
Certificate No. R- _________ Rights
NOT EXERCISABLE AFTER THE EARLIER OF (i) MARCH 21, 2007, (ii) THE DATE
TERMINATED BY THE COMPANY OR (iii) THE DATE THE COMPANY EXCHANGES THE
RIGHTS PURSUANT TO THE RIGHTS AGREEMENT. THE RIGHTS ARE SUBJECT TO
REDEMPTION, AT THE OPTION OF THE COMPANY, AT $0.01 PER RIGHT ON THE TERMS
SET FORTH IN THE RIGHTS AGREEMENT. UNDER CERTAIN CIRCUMSTANCES, RIGHTS
BENEFICIALLY OWNED BY AN ACQUIRING PERSON OR AN AFFILIATE OR ASSOCIATE OF
AN ACQUIRING PERSON (AS SUCH TERMS ARE DEFINED IN THE RIGHTS AGREEMENT) AND
ANY SUBSEQUENT HOLDER OF SUCH RIGHTS MAY BECOME NULL AND VOID. [THE RIGHTS
REPRESENTED BY THIS RIGHTS CERTIFICATE ARE OR WERE BENEFICIALLY OWNED BY A
PERSON WHO WAS OR BECAME AN ACQUIRING PERSON OR AN AFFILIATE OR ASSOCIATE
OF AN ACQUIRING PERSON (AS SUCH TERMS ARE DEFINED IN THE RIGHTS AGREEMENT).
ACCORDINGLY, THIS RIGHTS CERTIFICATE AND THE RIGHTS REPRESENTED HEREBY MAY
BECOME NULL AND VOID IN THE CIRCUMSTANCES SPECIFIED IN SECTION 7(E) OF SUCH
RIGHTS AGREEMENT.]/*/
RIGHTS CERTIFICATE
RAMBUS INC.
This certifies that ______________________________, or registered assigns,
is the registered owner of the number of Rights set forth above, each of which
entitles the owner thereof, subject to the terms, provisions and conditions of
the Rights Agreement dated as of March 21,1997, (the "RIGHTS AGREEMENT"),
between Rambus Inc., a Delaware corporation (the "COMPANY"), and [RIGHTS AGENT]
( the "RIGHTS AGENT"), to purchase from the Company at any time after the
Distribution Date (as such term is defined in the Rights Agreement) and prior to
5:00 P.M., New York time, on March 21, 2007 at the office of the Rights Agent
designated for such purpose, or at the office of its successor as Rights Agent,
one one-thousandth (1/1,000) of a fully paid non-assessable share of Series A
Participating Preferred Stock, $0.001 par value, (the "PREFERRED SHARES"), of
the Company, at a Exercise Price of ONE HUNDRED TWENTY FIVE DOLLARS ($125.00)
per one-thousandth of a Preferred Share (the "EXERCISE PRICE"), upon
presentation and surrender of this Rights Certificate with the Form of Election
to Purchase
- -------------
/*/ The portion of the legend in bracket shall be inserted only if applicable
and shall replace the preceding sentence.
<PAGE>
and related Certificate duly executed. The number of Rights evidenced by this
Rights Certificate (and the number of one-thousandths of a Preferred Share which
may be purchased upon exercise hereof) set forth above are the number and
Exercise Price as of March 21, 1997 based on the Preferred Shares as constituted
at such date. As provided in the Rights Agreement, the Exercise Price and the
number and kind of Preferred Shares or other securities which may be purchased
upon the exercise of the Rights evidenced by this Rights Certificate are subject
to modification and adjustment upon the happening of certain events.
This Rights Certificate is subject to all of the terms, provisions and
conditions of the Rights Agreement, which terms, provisions and conditions are
hereby incorporated herein by reference and made a part hereof and to which
Rights Agreement reference is hereby made for a full description of the rights,
limitations of rights, obligations, duties and immunities hereunder of the
Rights Agent, the Company and the holders of the Rights Certificates, which
limitations of rights include the temporary suspension of the exercisability of
such Rights under the specific circumstances set forth in the Rights Agreement.
Copies of the Rights Agreement are on file at the principal executive offices of
the Company and the above-mentioned office of the Rights Agent.
Subject to the provisions of the Rights Agreement, the Rights
evidenced by this Rights Certificate (i) may be redeemed by the Company, at its
option, at a redemption price of $0.01 per Right or (ii) may be exchanged by the
Company in whole or in part for Common Shares, substantially equivalent rights
or other consideration as determined by the Company.
This Rights Certificate, with or without other Rights Certificates,
upon surrender at the office of the Rights Agent designated for such purpose,
may be exchanged for another Rights Certificate or Rights Certificates of like
tenor and date evidencing Rights entitling the holder to purchase a like
aggregate amount of securities as the Rights evidenced by the Rights Certificate
or Rights Certificates surrendered shall have entitled such holder to purchase.
If this Rights Certificate shall be exercised in part, the holder shall be
entitled to receive upon surrender hereof another Rights Certificate or Rights
Certificates for the number of whole Rights not exercised.
No fractional portion of less than one one-thousandth of a Preferred
Share will be issued upon the exercise of any Right or Rights evidenced hereby
but in lieu thereof a cash payment will be made, as provided in the Rights
Agreement.
No holder of this Rights Certificate, as such, shall be entitled to
vote or receive dividends or be deemed for any purpose the holder of the
Preferred Shares or of any other securities of the Company which may at any time
be issuable on the exercise hereof, nor shall anything contained in the Rights
Agreement or herein be construed to confer upon the holder hereof, as such, any
of the rights of a stockholder of the Company or any right to vote for the
election of directors or upon any matter submitted to stockholders at any
meeting thereof, or to give or withhold consent to any corporate action, or to
receive notice of meetings or other actions affecting stockholders (except as
provided in the Rights Agreement), or to receive dividends or subscription
rights, or otherwise, until the Right or Rights evidenced by this Rights
Certificate shall have been exercised as provided in the Rights Agreement.
-2-
<PAGE>
This Rights Certificate shall not be valid or obligatory for any purpose
until it shall have been countersigned by the Rights Agent.
WITNESS the facsimile signature of the proper officers of the Company and
its corporate seal. Dated as of _______________, 19____.
ATTEST: RAMBUS INC.
By:
- ------------------------------------ ---------------------------------
Gary Harmon, Secretary Geoffrey Tate, President
Countersigned:
[RIGHTS AGENT]
as Rights Agent
By:
----------------------------------
Its:
---------------------------------
-3-
<PAGE>
FORM OF REVERSE SIDE OF RIGHTS CERTIFICATE
FORM OF ASSIGNMENT
------------------
(To be executed by the registered holder if such
holder desires to transfer the Rights Certificate)
FOR VALUE RECEIVED ____________________________________ hereby sells,
assigns and transfers unto
_______________________________________________________________________________
(Please print name and address of transferee)
_______________________________________________________________________________
this Rights Certificate, together with all right, title and interest therein,
and does hereby irrevocably constitute and appoint __________________________
Attorney, to transfer the within Rights Certificate on the books of the within-
named Company, with full power of substitution.
Dated: _______________, 19____
____________________________
Signature
Signature Guaranteed:
Signatures must be guaranteed by a member firm of a registered national
securities exchange, a member of the National Association of Securities Dealers,
Inc., or a commercial bank or trust company having an office or correspondent in
the United States.
<PAGE>
CERTIFICATE
-----------
The undersigned hereby certifies by checking the appropriate boxes that:
(1) this Rights Certificate [ ] is [ ] is not being sold, assigned and
transferred by or on behalf of a Person who is or was an Acquiring Person, or an
Affiliate or Associate of any such Person (as such terms are defined in the
Rights Agreement);
(2) after due inquiry and to the best knowledge of the undersigned, it
[ ] did [ ] did not acquire the Rights evidenced by this Rights Certificate from
any Person who is, was or subsequently became an Acquiring Person or an
Affiliate or Associate of any such Person.
Dated: _______________, 19____
_______________________________
Signature
Signature Guaranteed:
Signatures must be guaranteed by a member firm of a registered national
securities exchange, a member of the National Association of Securities Dealers,
Inc., or a commercial bank or trust company having an office or correspondent in
the United States.
<PAGE>
FORM OF REVERSE SIDE OF RIGHTS CERTIFICATE -- CONTINUED
FORM OF ELECTION TO PURCHASE
----------------------------
(To be executed if holder desires to
exercise the Rights Certificate)
To: ___________________________
The undersigned hereby irrevocably elects to exercise
_________________________ Rights represented by this Rights Certificate to
purchase the number of one-thousandths of a Preferred Share issuable upon the
exercise of such Rights and requests that certificates for such number of one-
thousandths of a Preferred Share issued in the name of:
Please insert social security
or other identifying number
_______________________________________________________________________________
(Please print name and address)
_______________________________________________________________________________
If such number of Rights shall not be all the Rights evidenced by this Rights
Certificate, a new Rights Certificate for the balance remaining of such Rights
shall be registered in the name of and delivered to:
Please insert social security
or other identifying number
_______________________________________________________________________________
(Please print name and address)
_______________________________________________________________________________
Dated: ___________________ , 19____
_______________________________________
Signature
Signature Guaranteed:
Signatures must be guaranteed by a member firm of a registered
national securities exchange, a member of the National Association of Securities
Dealers, Inc., or a commercial bank or trust company having an office or
correspondent in the United States.
<PAGE>
CERTIFICATE
-----------
The undersigned hereby certifies by checking the appropriate boxes
that:
(1) the Rights evidenced by this Rights Certificate [ ] are [ ] are
not being exercised by or on behalf of a Person who is or was an Acquiring
Person or an Affiliate or Associate of any such Person (as such terms are
defined in the Rights Agreement);
(2) after due inquiry and to the best knowledge of the undersigned, it
[ ] did [ ] did not acquire the Rights evidenced by this Rights Certificate from
any Person who is, was or subsequently became an Acquiring Person or an
Affiliate or Associate of any such Person.
Dated: _______________, 19____
________________________________
Signature
Signature Guaranteed:
Signatures must be guaranteed by a member firm of a registered national
securities exchange, a member of the National Association of Securities Dealers,
Inc., or a commercial bank or trust company having an office or correspondent in
the United States.
<PAGE>
FORM OF REVERSE SIDE OF RIGHTS CERTIFICATE -- CONTINUED
NOTICE
------
The signature in the foregoing Forms of Assignment and Election must
conform to the name as written upon the face of this Rights Certificate in every
particular, without alteration or enlargement or any change whatsoever.
<PAGE>
EXHIBIT C
---------
STOCKHOLDER RIGHTS PLAN
RAMBUS INC.
Summary of Rights
-----------------
Distribution and
Transfer of Rights;
Rights Certificate:
The Board of Directors has declared a dividend of one Right
for each share of Rambus Inc. Common Stock outstanding. Prior to the
Distribution Date referred to below, the Rights will be evidenced by and trade
with the certificates for the Common Stock. After the Distribution Date, Rambus
Inc. (the "COMPANY") will mail Rights certificates to the Company's stockholders
and the Rights will become transferable apart from the Common Stock.
Distribution Date:
Rights will separate from the Common Stock and become exercisable following (a)
the tenth day (or such later date as may be deter mined by a majority of the
Directors not affiliated with the acquiring person or group (the "CONTINUING
DIRECTORS")) after a person or group acquires beneficial ownership of 15% or
more of the Company's Common Stock or (b) the tenth business day (or such later
date as may be determined by a majority of the Continuing Directors) after a
person or group announces a tender or exchange offer, the consummation of which
would result in ownership by a person or group of 15% or more of the Company's
Common Stock.
Preferred Stock
Purchasable Upon
Exercise of Rights:
After the Distribution Date, each Right will entitle the holder to purchase for
$125.00 (the "EXERCISE PRICE"), a fraction of a share of the Company's Preferred
Stock with economic terms similar to that of one share of the Company's Common
Stock.
Flip-In:
If an acquiror (an "ACQUIRING PERSON") obtains 15% or more of the
Company's Common Stock (other than pursuant to a tender offer deemed adequate
and in the best interests of the Company and its stockholders by the Continuing
Directors (a "PERMITTED OFFER")), then each Right (other than Rights owned by an
Acquiring Person or its affiliates) will entitle the holder thereof to purchase,
for the Exercise Price, a number of shares of the Com pany's Common Stock having
a then current market value of twice the Exercise Price.
Flip-Over:
If, after an Acquiring Person obtains 15% or more of the Company's
Common Stock, (a) the Company merges into another entity, (b) an acquiring
entity merges into the Company or (c) the Company sells more than 50% of the
Company's assets or earning power, then each Right (other than Rights owned by
an Acquiring
<PAGE>
Person or its affiliates) will entitle the holder thereof to purchase, for the
Exercise Price, a number of shares of Common Stock of the person engaging in the
transaction having a then current market value of twice the Exercise Price
(unless the transaction satisfies certain conditions and is consummated with a
person who acquired shares pursuant to a Permitted Offer, in which case the
Rights will expire).
Exchange Provision:
At any time after the date an Acquiring Person obtains 15% or more of the
Company's Common Stock and prior to the acquisition by the Acquiring Person of
50% of the outstanding Common Stock, a majority of the Board of Directors and a
majority of the Continuing Directors of the Company may exchange the Rights
(other than Rights owned by the Acquiring Person or its affiliates), in whole or
in part, for shares of Common Stock of the Company at an exchange ratio of one
share of Common Stock per Right (subject to adjustment).
Redemption of
the Rights:
Rights will be redeemable at the Company's option for $0.01 per Right at any
time on or prior to the tenth day (or such later date as may be determined by a
majority of the Continuing Directors) after public announcement that a Person
has acquired beneficial ownership of 15% or more of the Company's Common Stock
(the "SHARES ACQUISITION DATE").
Expiration of
the Rights:
The Rights expire on the earliest of (a) March 21, 2007, (b) exchange or
redemption of the Rights as described above, or (c) consummation of a merger,
consolidation or asset sale resulting in expiration of the Rights as described
above.
Amendment of
Terms of Rights:
The terms of the Rights and the Rights Agreement may be amended in any respect
without the consent of the Rights holders on or prior to the Distribution Date;
thereafter, the terms of the Rights and the Rights Agreement may be amended
without the consent of the Rights holders in order to cure any ambiguities or to
make changes which do not adversely affect the interests of Rights holders
(other than the Acquiring Person).
Voting Rights:
Rights will not have any voting rights.
Anti-Dilution
Provisions:
Rights will have the benefit of certain customary anti-dilution
provisions.
Taxes:
The Rights distribution should not be taxable for federal income tax
purposes. However, following an event which renders the Rights exercisable or
upon redemption of the Rights, stockholders may recognize taxable income.
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<PAGE>
The foregoing is a summary of certain principal terms of the Stockholder Rights
Plan only and is qualified in its entirety by reference to the detailed terms of
the Rights Agreement dated as of March 21, 2007, between the Company and the
Rights Agent.
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<PAGE>
EXHIBIT 4.4
THIS WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE OR CONVERSION HEREOF HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY
APPLICABLE STATE LAWS, AND NO INTEREST THEREIN MAY BE SOLD, DISTRIBUTED,
ASSIGNED, OFFERED, PLEDGED OR OTHERWISE TRANSFERRED UNLESS (I) THERE IS AN
EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT AND APPLICABLE STATE SECURITIES
LAWS COVERING ANY SUCH TRANSACTION OR SUCH TRANSACTION IS EXEMPT FROM THE
REGISTRATION REQUIREMENTS OF SUCH ACT AND LAWS AND (II) SUCH TRANSFER IS
EFFECTED IN ACCORDANCE WITH THE TERMS SET FORTH IN THIS WARRANT.
NO. [1] RAMBUS INC. JANUARY 7, 1997
COMMON STOCK PURCHASE WARRANT
This certifies that, for good and valuable consideration, Intel
Corporation ("Intel"), or registered assigns, is entitled, upon the terms and
subject to the conditions hereinafter set forth, to acquire from Rambus Inc., a
California corporation (the "Company"), in whole or from time to time in part,
up to one million (1,000,000) fully paid and nonassessable shares of Common
Stock of the Company ("Warrant Stock") at a purchase price per share of ten
dollars ($10.00) (the "Exercise Price"). Such number of shares, type of
security and Exercise Price are subject to adjustment as provided herein, and
all references to "Warrant Stock" and "Exercise Price" herein shall be deemed to
include any such adjustment or series of adjustments.
1. EXERCISE OF WARRANT
(a) Vesting Time. The term "Vesting Time" means the close of business on
the last day of the first two-calendar quarter period in which more than twenty
percent (20%) of the main memory chipsets shipped by Intel in each calendar
quarter in such period implemented the Rambus-1 Interface Specification or the
Rambus-2 Interface Specification.
(b) Expiration Time. The term "Expiration Time" means the close of business
on the eighth (8th) anniversary of the date hereof; provided, however, that if
the Vesting Time shall not have occurred on or prior to December 31, 2000, then
the term "Expiration Time" shall mean the close of business on December 31,
2000.
(c) Exercise Procedure. The purchase rights represented by this Warrant are
exercisable, in whole or in part, at any time and from time to time at or after
the Vesting Time and at or prior to the Expiration Time, by the surrender of
this Warrant and the Notice of Exercise form attached hereto duly executed to
the office of the Company at 2465 Latham Street, Mountain View, CA 94040, Attn:
Corporate Secretary (or such other office or agency of the Company as it may
designate by notice in writing to the registered holder hereof at the address of
such holder appearing on the books of the Company), and upon payment of the
Exercise Price for the shares thereby purchased (by wire transfer or by
certified bank check payable to the order of the Company, by cancellation of
indebtedness of the Company to the holder hereof, if any, at the time of
exercise, or by any combination thereof, in an amount equal to the purchase
price of the shares thereby purchased); whereupon the holder of this Warrant
shall be entitled to receive from the Company a stock certificate in proper form
representing the number of shares of Warrant Stock so purchased, and a new
Warrant in substantially identical form for the purchase of that number of
shares of Warrant Stock equal to the
<PAGE>
difference, if any, between the number of shares of Warrant Stock subject hereto
and the number of shares of Warrant Stock as to which this Warrant is so
exercised.
2. CONVERSION OF WARRANT
The registered holder hereof shall have the right to convert this Warrant,
in whole or in part, at any time and from time to time at or after the Vesting
Time and at or prior to the Expiration Time, by the surrender of this Warrant
and the Notice of Conversion form attached hereto duly executed to the office of
the Company at the address set forth in Section 1(c) hereof (or such other
office or agency of the Company as it may designate by notice in writing to the
registered holder hereof at the address of such holder appearing on the books of
the Company), into shares of Warrant Stock as provided in this Section 2. Upon
exercise of this conversion right, the holder hereof shall be entitled to
receive that number of shares of Warrant Stock of the Company equal to the
quotient obtained by dividing [(A - B)(Y)] by (A), where:
A = the Fair Market Value (as defined below) of one share of Warrant
Stock on the date of conversion of this Warrant;
B = the Exercise Price for one share of Warrant Stock under this
Warrant; and
Y = the number of shares of Warrant Stock as to which this Warrant
is being converted.
If the above calculation results in a negative number, then no shares of
Warrant Stock shall be issued or issuable upon conversion of this Warrant.
"Fair Market Value" of a share of Warrant Stock shall mean:
(a) if the conversion right is being exercised in connection with a
transaction specified in Section 10(b) hereof, the value of the
consideration (determined, in the case of noncash consideration, in
good faith by the Board of Directors of the Company) to be received
pursuant to such transaction by the holder of one share of Warrant
Stock;
(b) if the conversion right is being exercised in connection with the
initial public offering of the Company's Common Stock, the initial
public offering price (before deducting commissions, discounts or
expenses) at which the Common Stock is sold in such offering;
(c) if the conversion right is being exercised more than five (5) business
days after the occurrence of the initial public offering of the
Company's Common Stock:
(i) if the Company's Common Stock is traded on an exchange or is
quoted on the National Association of Securities Dealers, Inc.
Automated Quotation ("NASDAQ") National Market System, the average of
the closing or last sale price reported for the five (5) business days
immediately preceding the date that the Notice of Conversion is
delivered to the Company;
(ii) if the Company's Common Stock is not traded on an exchange
or on the NASDAQ National Market System, but is traded in the
over-the-counter market, the mean of
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<PAGE>
the closing bid and asked prices reported for the five (5) business
days immediately preceding the date that the Notice of Conversion is
delivered to the Company; and
(d) in all other cases, the fair value as determined in good faith by the
Company's Board of Directors.
Upon conversion of this Warrant in accordance with this Section 2, the
registered holder hereof shall be entitled to receive a certificate for the
number of shares of Warrant Stock determined in accordance with the foregoing,
and a new Warrant in substantially identical form for the purchase of that
number of shares of Warrant Stock equal to the difference, if any, between the
number of shares of Warrant Stock subject hereto and the number of shares of
Warrant Stock as to which this Warrant is so converted.
3. ISSUANCE OF SHARES; NO FRACTIONAL SHARES OR SCRIP
Certificates for shares purchased hereunder or issuable upon conversion
hereof shall be delivered within a reasonable time after the date on which this
Warrant shall have been exercised or converted in accordance with the terms
hereof. The Company hereby represents and warrants that all shares of Warrant
Stock which may be issued upon the exercise or conversion of this Warrant will,
upon such exercise or conversion, be duly and validly authorized and issued,
fully paid and nonassessable and free from all taxes, liens and charges in
respect of the issuance thereof (other than liens or charges created by or
imposed upon the holder of the Warrant Stock). The Company agrees that the
shares so issued shall be and shall for all purposes be deemed to have been
issued as of the close of business on the date on which this Warrant shall have
been exercised or converted in accordance with the terms hereof. No fractional
shares or scrip representing fractional shares shall be issued upon the exercise
or conversion of this Warrant. With respect to any fraction of a share called
for upon the exercise or conversion of this Warrant, an amount equal to such
fraction multiplied by the Fair Market Value of a share of Warrant Stock on the
date of exercise or conversion shall be paid in cash or check to the holder of
this Warrant.
4. CHARGES, TAXES AND EXPENSES
Issuance of certificates for shares of Warrant Stock upon the exercise or
conversion of this Warrant shall be made without charge to the holder hereof for
any issue or transfer tax or other incidental expense in respect of the issuance
of such certificate, all of which taxes and expenses shall be paid by the
Company, and such certificates shall be issued in the name of the holder of this
Warrant.
5. NO RIGHTS AS A SHAREHOLDER
This Warrant does not entitle the holder hereof to any voting rights or
other rights as a shareholder of the Company prior to the exercise or conversion
hereof.
6. RESTRICTIONS ON TRANSFER; LOCK-UP
(a) Transfer of Warrant. Prior to the Expiration Time and subject to
compliance with applicable laws, this Warrant and all rights hereunder are
transferable by the holder hereof, in whole or in part, at the office or agency
of the Company referred to in Section 1(c) hereof. Any such transfer shall be
made upon surrender of this Warrant together with the Assignment Form attached
hereto properly executed, endorsed and guaranteed. Notwithstanding the
foregoing, the Company may prohibit the transfer of this Warrant and
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<PAGE>
the rights hereunder to more than a single transferee or to a transferee which
the Company reasonably believes to be an actual or potential competitor of the
Company. The Company shall not be required to effect any transfer of this
Warrant or the rights hereunder unless the transferor and transferee provide the
Company with an opinion of counsel that such transfer is in compliance with
applicable Federal and state securities laws, or provide the Company with
information sufficient for the Company or the Company's counsel to make such
determination. The Company shall not be required to effect any transfer of this
Warrant or the rights hereunder unless the transferee shall have agreed in
writing to be bound by the restrictions set forth in this Warrant.
(b) Transfer of Warrant Stock. Prior to the closing of the initial public
offering of the Company's Common Stock pursuant to a registration statement
declared effective under the Securities Act of 1933, as amended (the "Securities
Act"), the Company may prohibit the transfer of the Warrant Stock to more than a
single transferee or to a transferee which the Company reasonably believes to be
an actual or potential competitor of the Company. The Company shall not be
required to effect any transfer of the Warrant Stock unless the transferor and
transferee provide the Company with an opinion of counsel that such transfer is
in compliance with applicable Federal and state securities laws, or provide the
Company with information sufficient for the Company or the Company's counsel to
make such determination. The Company shall not be required to effect any
transfer of the Warrant Stock unless the transferee shall have agreed in writing
to be bound by the restrictions set forth in this Warrant.
(c) Lock-Up. In connection with any registration of the offering of any
securities of the Company under the Securities Act, if so requested by the
Company or any representative of the underwriters (the "Managing Underwriter"),
the Warrant, the Warrant Stock and any securities of the Company issued with
respect thereto, and any interest therein, may not be sold, transferred or
otherwise disposed of during the period specified by the Company's Board of
Directors at the request of the Managing Underwriter, with such period not to
exceed 180 days following the effective date of a registration statement of the
Company filed under the Securities Act (the "Market Standoff Period"). The
Company may impose stop-transfer instructions with respect to securities subject
to the foregoing restrictions until the end of such Market Standoff Period. The
restrictions set forth in this Section 6(c) shall be of no further force or
effect following the transfer of the securities subject hereto pursuant to a
registration statement filed under the Securities Act or pursuant to a brokers'
transaction or transaction with a market maker pursuant to Rule 144 promulgated
under the Securities Act.
(d) No Public Market. At the date of issuance of this Warrant, no public
market exists for any of the securities of the Company and the Company makes no
assurances that a public market will ever exist for the Company's securities.
(e) Legends. The certificates representing the Warrant Stock and any
securities of the Company issued with respect thereto shall be imprinted with
legends restricting transfer except in compliance with the terms hereof and with
applicable Federal and state securities laws.
7. EXCHANGE AND REGISTRY OF WARRANT
The Company shall maintain at the office or agency referred to in Section
1(c) hereof a registry showing the name and address of the registered holder of
this Warrant. This Warrant may be surrendered for exchange, transfer, exercise
or conversion, in accordance with its terms, at such office or agency of the
Company, and the Company shall be entitled to rely in all respects upon such
registry.
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<PAGE>
8. LOSS, THEFT, DESTRUCTION OR MUTILATION OF WARRANT
On receipt by the Company of evidence reasonably satisfactory to the
Company of the loss, theft, destruction or mutilation of this Warrant, and in
case of any such loss, theft or destruction of this Warrant, on delivery of an
indemnity agreement reasonably satisfactory in form and amount to the Company
or, in the case of any such mutilation, on surrender and cancellation of such
Warrant, the Company will execute and deliver to the holder, in lieu thereof, a
new Warrant in substantially identical form.
9. SATURDAYS, SUNDAYS AND HOLIDAYS
If the last or appointed day for the taking of any action or the expiration
of any right required or granted herein shall be a Saturday or a Sunday or shall
be a legal holiday, then such action may be taken or such right may be exercised
on the next succeeding business day.
10. ADJUSTMENT TO NUMBER AND TYPE OF SECURITIES AND EXERCISE PRICE
The type and number of securities of the Company issuable upon exercise of
this Warrant and the Exercise Price are subject to adjustment as set forth
below:
(a) Adjustment for Stock Splits, Stock Dividends, Recapitalizations,
Automatic Conversion, etc.. The Exercise Price and the number and type of
securities and/or other property issuable upon exercise of this Warrant shall be
appropriately and proportionately adjusted to reflect any stock dividend, stock
split, combination of shares, reclassification, recapitalization, automatic
conversion, redemption or other similar event affecting the number or character
of outstanding shares of Warrant Stock, so that the number and type of
securities and/or other property issuable upon exercise of this Warrant shall be
equal to that which would have been issuable with respect to the number of
shares of Warrant Stock subject hereto at the time of such event, had such
shares of Warrant Stock then been outstanding.
(b) Adjustment for Reorganization, Consolidation, Merger, etc.. In case of
any consolidation or merger of the Company with or into any other corporation,
entity or person, or any other corporate reorganization, in which the Company
shall not be the continuing or surviving entity of such consolidation, merger or
reorganization (any such transaction being hereinafter referred to as a
"Reorganization"), then, in each case, the holder of this Warrant, on exercise
or conversion hereof at any time after the consummation or effective date of
such Reorganization, shall receive, in lieu of the Warrant Stock issuable on
such exercise prior to the date of such Reorganization, the stock and other
securities and property (including cash) to which such holder would have been
entitled upon the date of such Reorganization if such holder had exercised this
Warrant immediately prior thereto.
(c) Adjustment for Right of First Refusal. In case of any event which,
under the terms of the Rambus Inc. Amended and Restated Information and
Registration Rights Agreement dated of even date herewith, as such may be
amended from time to time (the "Rights Agreement"), would have entitled Intel
Corporation to exercise its Right of First Refusal (as defined in Section 7 of
the Rights Agreement) if the Warrant Stock had been held by Intel Corporation on
the date of such event, then the holder of this Warrant, upon exercise or
conversion hereof at any time after the date of such event, may elect to
purchase (in addition to the Warrant Stock) the type and number of securities
which Intel Corporation would have been so entitled to purchase, and upon such
election shall pay to the Company (in addition to the Exercise Price) the
consideration which Intel Corporation would have been required to pay in
connection with the exercise of such
-5-
<PAGE>
a Right of First Refusal. The provisions of this Section 10(c) shall apply to
any partial exercise or conversion of this Warrant on a pro rata basis.
(d) Certificate as to Adjustments. In case of any adjustment in the
Exercise Price or number and type of securities issuable on the exercise of this
Warrant, the Company will promptly give written notice thereof to the holder of
this Warrant in the form of a certificate, certified and confirmed by an officer
of the Company, setting forth such adjustment and showing in reasonable detail
the facts upon which such adjustment is based.
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<PAGE>
11. GOVERNING LAW
This Warrant shall be governed by and construed in accordance with the laws
of the State of California.
IN WITNESS WHEREOF, the Company has caused this Warrant to be executed by
its duly authorized officer.
RAMBUS INC.,
a California corporation
By: __________________________________
Name: ________________________________
Title: _______________________________
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<PAGE>
NOTICE OF EXERCISE
To: Rambus Inc., a California corporation
(1) The undersigned hereby elects to purchase __________ shares of Common
Stock of Rambus Inc., a California corporation, pursuant to the terms of the
attached Warrant, and tenders herewith payment of the purchase price in full.
(2) The undersigned represents that the aforesaid shares are being acquired
for the account of the undersigned for investment and not with a view to, or for
resale in connection with, the distribution thereof and that the undersigned has
no present intention of distributing or reselling such shares, except in
compliance with applicable Federal and state securities laws.
(3) The undersigned accepts such shares subject to the restrictions on
transfer set forth in the attached Warrant.
Holder: ________________________________
_________________________________ By: ________________________________
(Date)
Name: ______________________________
Title: _____________________________
<PAGE>
NOTICE OF CONVERSION
To: Rambus Inc., a California corporation
(1) The undersigned hereby elects to convert that portion of the attached
Warrant representing the right to purchase ________ shares of Common Stock of
Rambus Inc., a California corporation, into such number of shares of Common
Stock as is determined pursuant to Section 2 of such Warrant, which conversion
shall be effected pursuant to the terms of the attached Warrant.
(2) The undersigned represents that the aforesaid shares are being acquired
for the account of the undersigned for investment and not with a view to, or for
resale in connection with, the distribution thereof and that the undersigned has
no present intention of distributing or reselling such shares, except in
compliance with applicable federal and state securities laws.
(3) The undersigned accepts such shares subject to the restrictions on
transfer set forth in the attached Warrant.
Holder: ________________________________
__________________________________ By: ____________________________________
(Date)
Name: __________________________________
Title: _________________________________
<PAGE>
ASSIGNMENT FORM
(To assign the Warrant, execute this form and supply the required information.
Do not use this form to purchase shares.)
FOR VALUE RECEIVED, the attached Warrant and all rights evidenced thereby
are hereby assigned to
_______________________________________________________________________
(Please Print)
whose address is ______________________________________________________
(Please Print)
Dated: ___________________________________________________________
Holder's Signature: ______________________________________________
Holder's Address: ________________________________________________
Guaranteed Signature:
NOTE: The signature to this Assignment Form must correspond with the name as it
appears on the face of the Warrant, without alteration or enlargement or any
change whatever, and must be guaranteed by an eligible guarantor institution
such as a bank, stockbroker, savings and loan association or credit union with
membership in an approved medallion signature guarantee program. Officers of
corporations and those acting in a fiduciary or other representative capacity
should file proper evidence of authority to assign the attached Warrant.
The undersigned transferee agrees to hold the Warrant and any Warrant Stock
issuable upon exercise or conversion of the Warrant subject to the restrictions
on transfer set forth in the Warrant.
Transferee: _____________________________________
By: ______________________________________________
Name: ____________________________________________
Title: ___________________________________________
Date: ____________________________________________
<PAGE>
EXHIBIT 10.1
RAMBUS INC.
INDEMNIFICATION AGREEMENT
This Indemnification Agreement ("AGREEMENT") is effective as of
_______________, 1997, by and between Rambus Inc., a Delaware corporation (the
"COMPANY"), and __________ ("INDEMNITEE").
WHEREAS, the Company desires to attract and retain the services of highly
qualified individuals, such as Indemnitee, to serve the Company and its related
entities;
WHEREAS, in order to induce Indemnitee to continue to provide services to
the Company, the Company wishes to provide for the indemnification of, and the
advancement of expenses to, Indemnitee to the maximum extent permitted by law;
WHEREAS, the Company and Indemnitee recognize the continued difficulty in
obtaining liability insurance for the Company's directors, officers, employees,
agents and fiduciaries, the significant increases in the cost of such insurance
and the general reductions in the coverage of such insurance;
WHEREAS, the Company and Indemnitee further recognize the substantial
increase in corporate litigation in general, subjecting directors, officers,
employees, agents and fiduciaries to expensive litigation risks at the same time
as the availability and coverage of liability insurance has been severely
limited; and
WHEREAS, in view of the considerations set forth above, the Company desires
that Indemnitee shall be indemnified and advanced expenses by the Company as set
forth herein;
NOW, THEREFORE, the Company and Indemnitee hereby agree as set forth below.
1. Certain Definitions.
(a) "CHANGE IN CONTROL" shall mean, and shall be deemed to have occurred
if, on or after the date of this Agreement, (i) any "person" (as such term is
used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as
amended), other than a trustee or other fiduciary holding securities under an
employee benefit plan of the Company acting in such capacity or a corporation
owned directly or indirectly by the stockholders of the Company in substantially
the same proportions as their ownership of stock of the Company, becomes the
"beneficial owner" (as defined in Rule 13d-3 under said Act), directly or
indirectly, of securities of the Company representing more than 50% of the total
voting power represented by the Company's then outstanding Voting Securities (as
defined below), (ii) during any period of two consecutive years, individuals who
at the beginning of such
<PAGE>
period constitute the Board of Directors of the Company and any new director
whose election by the Board of Directors or nomination for election by the
Company's stockholders was approved by a vote of at least two thirds (2/3) of
the directors then still in office who either were directors at the beginning
of the period or whose election or nomination for election was previously so
approved, cease for any reason to constitute a majority thereof, or (iii) the
stockholders of the Company approve a merger or consolidation of the Company
with any other corporation other than a merger or consolidation which would
result in the Voting Securities of the Company outstanding immediately prior
thereto continuing to represent (either by remaining outstanding or by being
converted into Voting Securities of the surviving entity) at least 80% of the
total voting power represented by the Voting Securities of the Company or such
surviving entity outstanding immediately after such merger or consolidation, or
the stockholders of the Company approve a plan of complete liquidation of the
Company or an agreement for the sale or disposition by the Company of (in one
transaction or a series of related transactions) all or substantially all of the
Company's assets.
(b) "CLAIM" shall mean with respect to a Covered Event (as defined below):
any threatened, pending or completed action, suit, proceeding or alternative
dispute resolution mechanism, or any hearing, inquiry or investigation that
Indemnitee in good faith believes might lead to the institution of any such
action, suit, proceeding or alternative dispute resolution mechanism, whether
civil, criminal, administrative, investigative or other.
(c) References to the "COMPANY" shall include, in addition to Rambus Inc.,
any constituent corporation (including any constituent of a constituent)
absorbed in a consolidation or merger to which Rambus Inc. (or any of its wholly
owned subsidiaries) is a party which, if its separate existence had continued,
would have had power and authority to indemnify its directors, officers,
employees, agents or fiduciaries, so that if Indemnitee is or was a director,
officer, employee, agent or fiduciary of such constituent corporation, or is or
was serving at the request of such constituent corporation as a director,
officer, employee, agent or fiduciary of another corporation, partnership, joint
venture, employee benefit plan, trust or other enterprise, Indemnitee shall
stand in the same position under the provisions of this Agreement with respect
to the resulting or surviving corporation as Indemnitee would have with respect
to such constituent corporation if its separate existence had continued.
(d) "COVERED EVENT" shall mean any event or occurrence related to the fact
that Indemnitee is or was a director, officer, employee, agent or fiduciary of
the Company, or any subsidiary of the Company, or is or was serving at the
request of the Company as a director, officer, employee, agent or fiduciary of
another corporation, partnership, joint venture, trust or other enterprise, or
by reason of any action or inaction on the part of Indemnitee while serving in
such capacity.
(e) "EXPENSES" shall mean any and all expenses (including attorneys' fees
and all other costs, expenses and obligations incurred in connection with
investigating, defending, being a witness in or participating in (including on
appeal), or preparing to defend, to be a witness in or to participate in, any
action, suit, proceeding, alternative dispute resolution mechanism, hearing,
inquiry or investigation), judgments, fines, penalties and amounts paid in
settlement (if such settlement is
2
<PAGE>
approved in advance by the Company, which approval shall not be unreasonably
withheld), actually and reasonably incurred, of any Claim and any federal,
state, local or foreign taxes imposed on the Indemnitee as a result of the
actual or deemed receipt of any payments under this Agreement.
(f) "EXPENSE ADVANCE" shall mean a payment to Indemnitee pursuant to
Section 3 of Expenses in advance of the settlement of or final judgement in any
action, suit, proceeding or alternative dispute resolution mechanism, hearing,
inquiry or investigation which constitutes a Claim.
(g) "INDEPENDENT LEGAL COUNSEL" shall mean an attorney or firm of
attorneys, selected in accordance with the provisions of Section 2(d) hereof,
who shall not have otherwise performed services for the Company or Indemnitee
within the last three years (other than with respect to matters concerning the
rights of Indemnitee under this Agreement, or of other indemnitees under similar
indemnity agreements).
(h) References to "OTHER ENTERPRISES" shall include employee benefit plans;
references to "FINES" shall include any excise taxes assessed on Indemnitee with
respect to an employee benefit plan; and references to "SERVING AT THE REQUEST
OF THE COMPANY" shall include any service as a director, officer, employee,
agent or fiduciary of the Company which imposes duties on, or involves services
by, such director, officer, employee, agent or fiduciary with respect to an
employee benefit plan, its participants or its beneficiaries; and if Indemnitee
acted in good faith and in a manner Indemnitee reasonably believed to be in the
interest of the participants and beneficiaries of an employee benefit plan,
Indemnitee shall be deemed to have acted in a manner "NOT OPPOSED TO THE BEST
INTERESTS OF THE COMPANY" as referred to in this Agreement.
(i) "REVIEWING PARTY" shall mean, subject to the provisions of Section
2(d), any person or body appointed by the Board of Directors in accordance with
applicable law to review the Company's obligations hereunder and under
applicable law, which may include a member or members of the Company's Board of
Directors, Independent Legal Counsel or any other person or body not a party to
the particular Claim for which Indemnitee is seeking indemnification.
(j) "SECTION" refers to a section of this Agreement unless otherwise
indicated.
(k) "VOTING SECURITIES" shall mean any securities of the Company that vote
generally in the election of directors.
2. Indemnification.
(a) Indemnification of Expenses. Subject to the provisions of Section 2(b)
below, the Company shall indemnify Indemnitee for Expenses to the fullest extent
permitted by law if Indemnitee was or is or becomes a party to or witness or
other participant in, or is threatened to be made a party to or witness or other
participant in, any Claim (whether by reason of or arising in part out of a
Covered Event), including all interest, assessments and other charges paid or
payable in connection with or in respect of such Expenses.
3
<PAGE>
(b) Review of Indemnification Obligations. Notwithstanding the foregoing,
in the event any Reviewing Party shall have determined (in a written opinion, in
any case in which Independent Legal Counsel is the Reviewing Party) that
Indemnitee is not entitled to be indemnified hereunder under applicable law, (i)
the Company shall have no further obligation under Section 2(a) to make any
payments to Indemnitee not made prior to such determination by such Reviewing
Party, and (ii) the Company shall be entitled to be reimbursed by Indemnitee
(who hereby agrees to reimburse the Company) for all Expenses theretofore paid
in indemnifying Indemnitee; provided, however, that if Indemnitee has commenced
or thereafter commences legal proceedings in a court of competent jurisdiction
to secure a determination that Indemnitee is entitled to be indemnified
hereunder under applicable law, any determination made by any Reviewing Party
that Indemnitee is not entitled to be indemnified hereunder under applicable law
shall not be binding and Indemnitee shall not be required to reimburse the
Company for any Expenses theretofore paid in indemnifying Indemnitee until a
final judicial determination is made with respect thereto (as to which all
rights of appeal therefrom have been exhausted or lapsed). Indemnitee's
obligation to reimburse the Company for any Expenses shall be unsecured and no
interest shall be charged thereon.
(c) Indemnitee Rights on Unfavorable Determination; Binding Effect. If any
Reviewing Party determines that Indemnitee substantively is not entitled to be
indemnified hereunder in whole or in part under applicable law, Indemnitee shall
have the right to commence litigation seeking an initial determination by the
court or challenging any such determination by such Reviewing Party or any
aspect thereof, including the legal or factual bases therefor, and, subject to
the provisions of Section 15, the Company hereby consents to service of process
and to appear in any such proceeding. Absent such litigation, any
determination by any Reviewing Party shall be conclusive and binding on the
Company and Indemnitee.
(d) Selection of Reviewing Party; Change in Control. If there has not been
a Change in Control, any Reviewing Party shall be selected by the Board of
Directors, and if there has been such a Change in Control (other than a Change
in Control which has been approved by a majority of the Company's Board of
Directors who were directors immediately prior to such Change in Control), any
Reviewing Party with respect to all matters thereafter arising concerning the
rights of Indemnitee to indemnification of Expenses under this Agreement or any
other agreement or under the Company's certificate of incorporation or bylaws as
now or hereafter in effect, or under any other applicable law, if desired by
Indemnitee, shall be Independent Legal Counsel selected by Indemnitee and
approved by the Company (which approval shall not be unreasonably withheld).
Such counsel, among other things, shall render its written opinion to the
Company and Indemnitee as to whether and to what extent Indemnitee would be
entitled to be indemnified hereunder under applicable law and the Company agrees
to abide by such opinion. The Company agrees to pay the reasonable fees of the
Independent Legal Counsel referred to above and to indemnify fully such counsel
against any and all expenses (including attorneys' fees), claims, liabilities
and damages arising out of or relating to this Agreement or its engagement
pursuant hereto. Notwithstanding any other provision of this Agreement, the
Company shall not be required to pay Expenses of more than one Independent Legal
Counsel in connection with all matters concerning a single Indemnitee, and such
Independent Legal Counsel shall be the Independent Legal Counsel for any or all
other Indemnitees unless (i) the
4
<PAGE>
Company otherwise determines or (ii) any Indemnitee shall provide a written
statement setting forth in detail a reasonable objection to such Independent
Legal Counsel representing other Indemnitees.
(e) Mandatory Payment of Expenses. Notwithstanding any other provision of
this Agreement other than Section 10 hereof, to the extent that Indemnitee has
been successful on the merits or otherwise, including, without limitation, the
dismissal of an action without prejudice, in defense of any Claim, Indemnitee
shall be indemnified against all Expenses incurred by Indemnitee in connection
therewith.
3. Expense Advances.
(a) Obligation to Make Expense Advances. The Company shall make Expense
Advances to Indemnitee upon receipt of a written undertaking by or on behalf of
the Indemnitee to repay such amounts if it shall ultimately be determined that
the Indemnitee is not entitled to be indemnified therefor by the Company.
(b) Form of Undertaking. Any written undertaking by the Indemnitee to
repay any Expense Advances hereunder shall be unsecured and no interest shall be
charged thereon.
(c) Determination of Reasonable Expense Advances. The parties agree that
for the purposes of any Expense Advance for which Indemnitee has made written
demand to the Company in accordance with this Agreement, all Expenses included
in such Expense Advance that are certified by affidavit of Indemnitee's counsel
as being reasonable shall be presumed conclusively to be reasonable.
4. Procedures for Indemnification and Expense Advances.
(a) Timing of Payments. All payments of Expenses (including without
limitation Expense Advances) by the Company to the Indemnitee pursuant to this
Agreement shall be made to the fullest extent permitted by law as soon as
practicable after written demand by Indemnitee therefor is presented to the
Company, but in no event later than forty-five (45) business days after such
written demand by Indemnitee is presented to the Company, except in the case of
Expense Advances, which shall be made no later than twenty (20) business days
after such written demand by Indemnitee is presented to the Company.
(b) Notice/Cooperation by Indemnitee. Indemnitee shall, as a condition
precedent to Indemnitee's right to be indemnified or Indemnitee's right to
receive Expense Advances under this Agreement, give the Company notice in
writing as soon as practicable of any Claim made against Indemnitee for which
indemnification will or could be sought under this Agreement. Notice to the
Company shall be directed to the Chief Executive Officer of the Company at the
address shown on the signature page of this Agreement (or such other address as
the Company shall designate in writing to Indemnitee). In addition, Indemnitee
shall give the Company such information and cooperation as it may reasonably
require and as shall be within Indemnitee's power.
5
<PAGE>
(c) No Presumptions; Burden of Proof. For purposes of this Agreement, the
termination of any Claim by judgment, order, settlement (whether with or without
court approval) or conviction, or upon a plea of nolo contendere, or its
equivalent, shall not create a presumption that Indemnitee did not meet any
particular standard of conduct or have any particular belief or that a court has
determined that indemnification is not permitted by this Agreement or applicable
law. In addition, neither the failure of any Reviewing Party to have made a
determination as to whether Indemnitee has met any particular standard of
conduct or had any particular belief, nor an actual determination by any
Reviewing Party that Indemnitee has not met such standard of conduct or did not
have such belief, prior to the commencement of legal proceedings by Indemnitee
to secure a judicial determination that Indemnitee should be indemnified under
this Agreement or applicable law, shall be a defense to Indemnitee's claim or
create a presumption that Indemnitee has not met any particular standard of
conduct or did not have any particular belief. In connection with any
determination by any Reviewing Party or otherwise as to whether the Indemnitee
is entitled to be indemnified hereunder, the burden of proof shall be on the
Company to establish that Indemnitee is not so entitled.
(d) Notice to Insurers. If, at the time of the receipt by the Company of a
notice of a Claim pursuant to Section 4(b) hereof, the Company has liability
insurance in effect which may cover such Claim, the Company shall give prompt
notice of the commencement of such Claim to the insurers in accordance with the
procedures set forth in the respective policies. The Company shall thereafter
take all necessary or desirable action to cause such insurers to pay, on behalf
of the Indemnitee, all amounts payable as a result of such Claim in accordance
with the terms of such policies.
(e) Selection of Counsel. In the event the Company shall be obligated
hereunder to provide indemnification for or make any Expense Advances with
respect to the Expenses of any Claim, the Company, if appropriate, shall be
entitled to assume the defense of such Claim with counsel approved by Indemnitee
(which approval shall not be unreasonably withheld) upon the delivery to
Indemnitee of written notice of the Company's election to do so. After delivery
of such notice, approval of such counsel by Indemnitee and the retention of such
counsel by the Company, the Company will not be liable to Indemnitee under this
Agreement for any fees or expenses of separate counsel subsequently employed by
or on behalf of Indemnitee with respect to the same Claim; provided, however,
that (i) Indemnitee shall have the right to employ Indemnitee's separate counsel
in any such Claim at Indemnitee's expense and (ii) if (A) the employment of
separate counsel by Indemnitee has been previously authorized by the Company,
(B) Indemnitee shall have reasonably concluded that there may be a conflict of
interest between the Company and Indemnitee in the conduct of any such defense,
or (C) the Company shall not continue to retain such counsel to defend such
Claim, then the fees and expenses of Indemnitee's separate counsel shall be
Expenses for which Indemnitee may receive indemnification or Expense Advances
hereunder.
5. Additional Indemnification Rights; Nonexclusivity.
(a) Scope. The Company hereby agrees to indemnify the Indemnitee to the
fullest extent permitted by law, notwithstanding that such indemnification is
not specifically authorized by the other provisions of this Agreement, the
Company's certificate of incorporation, the Company's
6
<PAGE>
bylaws or by statute. In the event of any change after the date of this
Agreement in any applicable law, statute or rule which expands the right of a
Delaware corporation to indemnify a member of its board of directors or an
officer, employee, agent or fiduciary, it is the intent of the parties hereto
that Indemnitee shall enjoy by this Agreement the greater benefits afforded by
such change. In the event of any change in any applicable law, statute or rule
which narrows the right of a Delaware corporation to indemnify a member of its
board of directors or an officer, employee, agent or fiduciary, such change, to
the extent not otherwise required by such law, statute or rule to be applied to
this Agreement, shall have no effect on this Agreement or the parties' rights
and obligations hereunder except as set forth in Section 10(a) hereof.
(b) Nonexclusivity. The indemnification and the payment of Expense
Advances provided by this Agreement shall be in addition to any rights to which
Indemnitee may be entitled under the Company's certificate of incorporation, its
bylaws, any other agreement, any vote of stockholders or disinterested
directors, the General Corporation Law of the State of Delaware, or otherwise.
The indemnification and the payment of Expense Advances provided under this
Agreement shall continue as to Indemnitee for any action taken or not taken
while serving in an indemnified capacity even though subsequent thereto
Indemnitee may have ceased to serve in such capacity.
6. No Duplication of Payments. The Company shall not be liable under this
Agreement to make any payment in connection with any Claim made against
Indemnitee to the extent Indemnitee has otherwise actually received payment
(under any insurance policy, provision of the Company's certificate of
incorporation, bylaws or otherwise) of the amounts otherwise payable hereunder.
7. Partial Indemnification. If Indemnitee is entitled under any provision
of this Agreement to indemnification by the Company for some or a portion of
Expenses incurred in connection with any Claim, but not, however, for all of the
total amount thereof, the Company shall nevertheless indemnify Indemnitee for
the portion of such Expenses to which Indemnitee is entitled.
8. Mutual Acknowledgment. Both the Company and Indemnitee acknowledge
that in certain instances, federal law or applicable public policy may prohibit
the Company from indemnifying its directors, officers, employees, agents or
fiduciaries under this Agreement or otherwise. Indemnitee understands and
acknowledges that the Company has undertaken or may be required in the future to
undertake with the Securities and Exchange Commission to submit the question of
indemnification to a court in certain circumstances for a determination of the
Company's right under public policy to indemnify Indemnitee.
9. Liability Insurance. To the extent the Company maintains liability
insurance applicable to directors, officers, employees, agents or fiduciaries,
Indemnitee shall be covered by such policies in such a manner as to provide
Indemnitee the same rights and benefits as are provided to the most favorably
insured of the Company's directors, if Indemnitee is a director; or of the
Company's officers, if Indemnitee is not a director of the Company but is an
officer; or of the Company's key employees, agents or fiduciaries, if Indemnitee
is not an officer or director but is a key employee, agent or fiduciary.
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<PAGE>
10. Exceptions. Notwithstanding any other provision of this Agreement,
the Company shall not be obligated pursuant to the terms of this Agreement:
(a) Excluded Action or Omissions. To indemnify Indemnitee for Expenses
resulting from acts, omissions or transactions for which Indemnitee is
prohibited from receiving indemnification under this Agreement or applicable
law; provided, however, that notwithstanding any limitation set forth in this
Section 10(a) regarding the Company's obligation to provide indemnification,
Indemnitee shall be entitled under Section 3 to receive Expense Advances
hereunder with respect to any such Claim unless and until a court having
jurisdiction over the Claim shall have made a final judicial determination (as
to which all rights of appeal therefrom have been exhausted or lapsed) that
Indemnitee has engaged in acts, omissions or transactions for which Indemnitee
is prohibited from receiving indemnification under this Agreement or applicable
law.
(b) Claims Initiated by Indemnitee. To indemnify or make Expense Advances
to Indemnitee with respect to Claims initiated or brought voluntarily by
Indemnitee and not by way of defense, counterclaim or cross claim, except (i)
with respect to actions or proceedings brought to establish or enforce a right
to indemnification under this Agreement or any other agreement or insurance
policy or under the Company's certificate of incorporation or bylaws now or
hereafter in effect relating to Claims for Covered Events, (ii) in specific
cases if the Board of Directors has approved the initiation or bringing of such
Claim, or (iii) as otherwise required under Section 145 of the Delaware General
Corporation Law (relating to indemnification of officers, directors, employees
and agents; and insurance), regardless of whether Indemnitee ultimately is
determined to be entitled to such indemnification or insurance recovery, as the
case may be.
(c) Lack of Good Faith. To indemnify Indemnitee for any Expenses incurred
by the Indemnitee with respect to any action instituted (i) by Indemnitee to
enforce or interpret this Agreement, if a court having jurisdiction over such
action determines as provided in Section 13 that each of the material assertions
made by the Indemnitee as a basis for such action was not made in good faith or
was frivolous, or (ii) by or in the name of the Company to enforce or interpret
this Agreement, if a court having jurisdiction over such action determines as
provided in Section 13 that each of the material defenses asserted by Indemnitee
in such action was made in bad faith or was frivolous.
(d) Claims Under Section 16(b). To indemnify Indemnitee for expenses and
the payment of profits arising from the purchase and sale by Indemnitee of
securities in violation of Section 16(b) of the Securities Exchange Act of 1934,
as amended, or any similar successor statute; provided, however, that
notwithstanding any limitation set forth in this Section 10(d) regarding the
Company's obligation to provide indemnification, Indemnitee shall be entitled
under Section 3 to receive Expense Advances hereunder with respect to any such
Claim unless and until a court having jurisdiction over the Claim shall have
made a final judicial determination (as to which all rights of appeal therefrom
have been exhausted or lapsed) that Indemnitee has violated said statute.
11. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall constitute an original.
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<PAGE>
12. Binding Effect; Successors and Assigns. This Agreement shall be
binding upon and inure to the benefit of and be enforceable by the parties
hereto and their respective successors, assigns (including any direct or
indirect successor by purchase, merger, consolidation or otherwise to all or
substantially all of the business or assets of the Company), spouses, heirs and
personal and legal representatives. The Company shall require and cause any
successor (whether direct or indirect, and whether by purchase, merger,
consolidation or otherwise) to all, substantially all, or a substantial part, of
the business or assets of the Company, by written agreement in form and
substance satisfactory to Indemnitee, expressly to assume and agree to perform
this Agreement in the same manner and to the same extent that the Company would
be required to perform if no such succession had taken place. This Agreement
shall continue in effect regardless of whether Indemnitee continues to serve as
a director, officer, employee, agent or fiduciary (as applicable) of the Company
or of any other enterprise at the Company's request.
13. Expenses Incurred in Action Relating to Enforcement or Interpretation.
In the event that any action is instituted by Indemnitee under this Agreement or
under any liability insurance policies maintained by the Company to enforce or
interpret any of the terms hereof or thereof, Indemnitee shall be entitled to be
indemnified for all Expenses incurred by Indemnitee with respect to such action
(including without limitation attorneys' fees), regardless of whether Indemnitee
is ultimately successful in such action, unless as a part of such action a
court having jurisdiction over such action makes a final judicial determination
(as to which all rights of appeal therefrom have been exhausted or lapsed) that
each of the material assertions made by Indemnitee as a basis for such action
was not made in good faith or was frivolous; provided, however, that until such
final judicial determination is made, Indemnitee shall be entitled under Section
3 to receive payment of Expense Advances hereunder with respect to such action.
In the event of an action instituted by or in the name of the Company under this
Agreement to enforce or interpret any of the terms of this Agreement, Indemnitee
shall be entitled to be indemnified for all Expenses incurred by Indemnitee in
defense of such action (including without limitation costs and expenses incurred
with respect to Indemnitee's counterclaims and cross-claims made in such
action), unless as a part of such action a court having jurisdiction over such
action makes a final judicial determination (as to which all rights of appeal
therefrom have been exhausted or lapsed) that each of the material defenses
asserted by Indemnitee in such action was made in bad faith or was frivolous;
provided, however, that until such final judicial determination is made,
Indemnitee shall be entitled under Section 3 to receive payment of Expense
Advances hereunder with respect to such action.
14. Notice. All notices, requests, demands and other communications under
this Agreement shall be in writing and shall be deemed duly given (i) if
delivered by hand and signed for by the party addressed, on the date of such
delivery, or (ii) if mailed by domestic certified or registered mail with
postage prepaid, on the third business day after the date postmarked. Addresses
for notice to either party are as shown on the signature page of this Agreement
or as subsequently modified by written notice.
15. Consent to Jurisdiction. The Company and Indemnitee each hereby
irrevocably consent to the jurisdiction of the courts of the State of Delaware
for all purposes in connection with any action or proceeding which arises out of
or relates to this Agreement and agree that any action
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<PAGE>
instituted under this Agreement shall be commenced, prosecuted and continued
only in the Court of Chancery of the State of Delaware in and for New Castle
County, which shall be the exclusive and only proper forum for adjudicating such
a claim.
16. Severability. The provisions of this Agreement shall be severable in
the event that any of the provisions hereof (including any provision within a
single section, paragraph or sentence) are held by a court of competent
jurisdiction to be invalid, void or otherwise unenforceable, and the remaining
provisions shall remain enforceable to the fullest extent permitted by law.
Furthermore, to the fullest extent possible, the provisions of this Agreement
(including without limitation each portion of this Agreement containing any
provision held to be invalid, void or otherwise unenforceable, that is not
itself invalid, void or unenforceable) shall be construed so as to give effect
to the intent manifested by the provision held invalid, illegal or
unenforceable.
17. Choice of Law. This Agreement, and all rights, remedies, liabilities,
powers and duties of the parties to this Agreement, shall be governed by and
construed in accordance with the laws of the State of Delaware without regard to
principles of conflicts of laws.
18. Subrogation. In the event of payment under this Agreement, the
Company shall be subrogated to the extent of such payment to all of the rights
of recovery of Indemnitee, who shall execute all documents required and shall do
all acts that may be necessary to secure such rights and to enable the Company
effectively to bring suit to enforce such rights.
19. Amendment and Termination. No amendment, modification, termination or
cancellation of this Agreement shall be effective unless it is in writing signed
by both the parties hereto. No waiver of any of the provisions of this
Agreement shall be deemed to be or shall constitute a waiver of any other
provisions hereof (whether or not similar), nor shall such waiver constitute a
continuing waiver.
20. Integration and Entire Agreement. This Agreement sets forth the
entire understanding between the parties hereto and supersedes and merges all
previous written and oral negotiations, commitments, understandings and
agreements relating to the subject matter hereof between the parties hereto.
21. No Construction as Employment Agreement. Nothing contained in this
Agreement shall be construed as giving Indemnitee any right to be retained in
the employ of the Company or any of its subsidiaries or affiliated entities.
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IN WITNESS WHEREOF, the parties hereto have executed this Indemnification
Agreement as of the date first above written.
RAMBUS INC.
By:____________________________________________
Name:__________________________________________
Title:_________________________________________
Address: RAMBUS INC.
2465 Latham Street
Mountain View, CA 94040
AGREED TO AND ACCEPTED BY:
INDEMNITEE
__________________________________
(signature)
--------------------
Address:
--------------------------
--------------------------
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EXHIBIT 10.5
RAMBUS INC.
1990 STOCK PLAN
(as amended September 14, 1994)
(as amended July 5, 1995)
(as amended September 14, 1995)
(as amended September 26, 1996)
1. Purposes of the Plan. The purposes of this Stock Plan are to attract
and retain the best available personnel for positions of substantial
responsibility, to provide additional incentive to Employees and Consultants of
the Company and its Subsidiaries and to promote the success of the Company's
business. Options granted under the Plan may be incentive stock options (as
defined under Section 422A of the Code) or non-statutory stock options, as
determined by the Administrator at the time of grant of an option and subject to
the applicable provisions of Section 422A of the Code, as amended, and the
regulations promulgated thereunder. Stock purchase rights may also be granted
under the Plan.
2. Definitions. As used herein, the following definitions shall apply:
(a) "Administrator" means the Board or any of its Committees appointed
pursuant to Section 4 of the Plan.
(b) "Board" means the Board of Directors of the Company.
(c) "Code" means the Internal Revenue Code of 1986, as amended.
(d) "Committee" means the Committee appointed by the Board of Directors in
accordance with paragraph (a) of Section 4 of the Plan.
(e) "Common Stock" means the Common Stock of the Company.
(f) "Company" means Rambus Inc., a California corporation.
(g) "Consultant" means any person, including an advisor, who is engaged by
the Company or any Parent or Subsidiary to render services and is compensated
for such services, and any director of the Company whether compensated for such
services or not provided that if and in the event the Company registers any
class of any equity security pursuant to the Exchange Act, the term Consultant
shall thereafter not include directors who are not compensated for their
services or are paid only a director's fee by the Company.
(h) "Continuous Status as an Employee" means the absence of any
interruption or termination of the employment relationship by the Company or any
Subsidiary. Continuous Status as an Employee shall not be considered
interrupted in the case of: (i) sick leave; (ii) military leave; (iii) any
other leave of absence approved by the Board, provided that such leave is for a
period of not more than ninety (90) days, unless reemployment upon the
expiration of such leave is guaranteed by contract or statute, or unless
provided otherwise pursuant to Company policy adopted from time to
<PAGE>
time; or (iv) in the case of transfers between locations of the Company or
between the Company, its Subsidiaries or its successor.
(i) "Employee" means any person, including officers and directors, employed
by the Company or any Parent or Subsidiary of the Company. The payment of a
director's fee by the Company shall not be sufficient to constitute "employment"
by the Company.
(j) "Exchange Act" means the Securities Exchange Act of 1934, as amended.
(k) "Fair Market Value" means, as of any date, the value of Common Stock
determined as follows:
(i) If the Common Stock is listed on any established stock exchange
or a national market system including without limitation the National Market
System of the National Association of Securities Dealers, Inc. Automated
Quotation ("NASDAQ") System, its Fair Market Value shall be the closing sales
price for such stock (or the closing bid, if no sales were reported, as quoted
on such system or exchange, or the exchange with the greatest volume of trading
in Common Stock, for the last market trading day prior to the time of
determination) as reported in the Wall Street Journal or such other source as
the Administrator deems reliable;
(ii) If the Common Stock is quoted on the NASDAQ System (but not on the
National Market System thereof) or regularly quoted by a recognized securities
dealer but selling prices are not reported, its Fair Market Value shall be the
mean between the high and low asked prices for the Common Stock or;
(iii) In the absence of an established market for the Common Stock, the
Fair Market Value thereof shall be determined in good faith by the
Administrator.
(l) "Incentive Stock Option" means an Option intended to qualify as an
incentive stock option within the meaning of Section 422A of the Code.
(m) "Nonstatutory Stock Option" means an Option not intended to qualify as
an Incentive Stock Option.
(n) "Evergreen Stock Option" means an Option which shall vest 100% as to
the shares subject to such Option one year from the date that all options
granted previous to, and currently held by, the Optionee have vested in full.
(o) "Evergreen II Stock Option" means an Option which shall vest
cumulatively as to 1/12 of the shares subject to such Option for each month
which has expired (i) in the case of Evergreen II Stock Options granted prior to
September 14, 1995, since the date all options granted previous to, and
currently held by, the Optionee have vested in full and (ii) in the case of
Evergreen II Stock Options granted on or after September 14, 1995, since the
date that all new hire Options, rehire
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Options, Evergreen Stock Options and Evergreen II Stock Options granted
previously to, and currently held by, the Optionee have vested in full.
(p) "Option" means a stock option granted pursuant to the Plan.
(q) "Optioned Stock" means the Common Stock subject to an Option.
(r) "Optionee" means an Employee or Consultant who receives an Option.
(s) "Parent" means a "parent corporation", whether now or hereafter
existing, as defined in Section 425(e) of the Code.
(t) "Plan" means this 1990 Stock Plan.
(u) "Restricted Stock" means shares of Common Stock acquired pursuant to a
grant of Stock Purchase Rights under Section 11 below.
(v) "Share" means a share of the Common Stock, as adjusted in accordance
with Section 13 of the Plan.
(w) "Subsidiary" means a "subsidiary corporation", whether now or hereafter
existing, as defined in Section 425(f) of the Code.
3. Stock Subject to the Plan. Subject to the provisions of Section 13 of
the Plan, the maximum aggregate number of shares which may be optioned and sold
under the Plan is 6,875,000 shares of Common Stock. The shares may be
authorized, but unissued, or reacquired Common Stock.
If an Option should expire or become unexercisable for any reason without
having been exercised in full, the unpurchased Shares which were subject thereto
shall, unless the Plan shall have been terminated, become available for future
grant under the Plan.
4. Administration of the Plan.
(a) Procedure.
(i) Administration With Respect to Directors and Officers. With respect
to grants of Options or Stock Purchase Rights to Employees who are also officers
or directors of the Company, the Plan shall be administered by (A) the Board if
the Board may administer the Plan in compliance with Rule 16b-3 promulgated
under the Exchange Act or any successor thereto ("Rule 16b-3") with respect to a
plan intended to qualify thereunder as a discretionary plan, or (B) a Committee
designated by the Board to administer the Plan, which Committee shall be
constituted in such a manner as to permit the Plan to comply with Rule 16b-3
with respect to a plan intended to
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<PAGE>
qualify thereunder as a discretionary plan. Once appointed, such Committee
shall continue to serve in its designated capacity until otherwise directed by
the Board. From time to time the Board may increase the size of the Committee
and appoint additional members thereof, remove members (with or without cause)
and appoint new members in substitution therefor, fill vacancies, however
caused, and remove all members of the Committee and thereafter directly
administer the Plan, all to the extent permitted by Rule 16b-3 with respect to a
plan intended to qualify thereunder as a discretionary plan.
(ii) Multiple Administrative Bodies. If permitted by Rule 16b-3, the
Plan may be administered by different bodies with respect to directors, non-
director officers and Employees who are neither directors nor officers.
(iii) Administration With Respect to Consultants and Other Employees.
With respect to grants of Options or Stock Purchase Rights to Employees or
Consultants who are neither directors nor officers of the Company, the Plan
shall be administered by (A) the Board or (B) a Committee designated by the
Board, which Committee shall be constituted in such a manner as to satisfy the
legal requirements relating to the administration of incentive stock option
plans, if any, of California corporate and securities laws and of the Code (the
"Applicable Laws"). Once appointed, such Committee shall continue to serve in
its designated capacity until otherwise directed by the Board. From time to
time the Board may increase the size of the Committee and appoint additional
members thereof, remove members (with or without cause) and appoint new members
in substitution therefor, fill vacancies, however caused, and remove all members
of the Committee and thereafter directly administer the Plan, all to the extent
permitted by the Applicable Laws.
(b) Powers of the Administrator. Subject to the provisions of the Plan and
in the case of a Committee, the specific duties delegated by the Board to such
Committee, the Administrator shall have the authority, in its discretion:
(i) to determine the Fair Market Value of the Common Stock, in
accordance with Section 2(k) of the Plan;
(ii) to select the officers, Consultants and Employees to whom Options
and Stock Purchase Rights may from time to time be granted hereunder;
(iii) to determine whether and to what extent Options and Stock Purchase
Rights or any combination thereof, are granted hereunder;
(iv) to determine the number of shares of Common Stock to be covered by
each such award granted hereunder;
(v) to approve forms of agreement for use under the Plan;
(vi) to determine the terms and conditions, not inconsistent with the
terms of the Plan, of any award granted hereunder (including, but not limited
to, the share price and any
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<PAGE>
restriction or limitation, or any vesting acceleration or waiver of forfeiture
restrictions regarding any Option or other award and/or the shares of Common
Stock relating thereto, based in each case on such factors as the Administrator
shall determine, in its sole discretion);
(vii) to determine whether and under what circumstances an Option may
be settled in cash under subsection 9(f) instead of Common Stock;
(viii) to determine whether, to what extent and under what circumstances
Common Stock and other amounts payable with respect to an award under this Plan
shall be deferred either automatically or at the election of the participant
(including providing for and determining the amount, if any, of any deemed
earnings on any deferred amount during any deferral period);
(ix) to reduce the exercise price of any Option to the then current
Fair Market Value if the Fair Market Value of the Common Stock covered by such
Option shall have declined since the date the Option was granted; and
(x) to determine the terms and restrictions applicable to Stock
Purchase Rights and the Restricted Stock purchased by exercising such Stock
Purchase Rights.
(c) Effect of Committee's Decision. All decisions, determinations and
interpretations of the Administrator shall be final and binding on all Optionees
and any other holders of any Options.
5. Eligibility.
(a) Nonstatutory Stock Options may be granted to Employees and Consultants.
Incentive Stock Options may be granted only to Employees. Evergreen and
Evergreen II Stock Options may only be granted to Employees and Consultants who
earn more than $60,000 per year. An Employee or Consultant who has been granted
an Option may, if he is otherwise eligible, be granted an additional Option or
Options.
(b) Each Option shall be designated in the written option agreement as
either an Incentive Stock Option or a Nonstatutory Stock Option. However,
notwithstanding such designations, to the extent that the aggregate Fair Market
Value of the Shares with respect to which Options designated as Incentive Stock
Options are exercisable for the first time by any Optionee during any calendar
year (under all plans of the Company or any Parent or Subsidiary) exceeds
$100,000, such excess Options shall be treated as Nonstatutory Stock Options.
(c) For purposes of Section 5(b), Incentive Stock Options shall be taken
into account in the order in which they were granted, and the Fair Market Value
of the Shares shall be determined as of the time the Option with respect to such
Shares is granted.
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(d) The Plan shall not confer upon any Optionee any right with respect to
continuation of employment or consulting relationship with the Company, nor
shall it interfere in any way with his right or the Company's right to terminate
his employment or consulting relationship at any time, with or without cause.
6. Term of Plan. The Plan shall become effective upon the earlier to
occur of its adoption by the Board of Directors or its approval by the
shareholders of the Company as described in Section 19 of the Plan. It shall
continue in effect for a term of ten (10) years unless sooner terminated under
Section 15 of the Plan.
7. Term of Option. The term of each Option shall be the term stated in
the Option Agreement; provided, however, that in the case of an Incentive Stock
Option, the term shall be no more than ten (10) years from the date of grant
thereof or such shorter term as may be provided in the Option Agreement.
However, in the case of an Option granted to an Optionee who, at the time the
Option is granted, owns stock representing more than ten percent (10%) of the
voting power of all classes of stock of the Company or any Parent or Subsidiary,
the term of the Option shall be five (5) years from the date of grant thereof or
such shorter term as may be provided in the Option Agreement.
8. Option Exercise Price and Consideration.
(a) The per share exercise price for the Shares to be issued pursuant to
exercise of an Option shall be such price as is determined by the Board, but
shall be subject to the following:
(i) In the case of an Incentive Stock Option
(A) granted to an Employee who, at the time of the grant of such
Incentive Stock Option, owns stock representing more than ten percent (10%) of
the voting power of all classes of stock of the Company or any Parent or
Subsidiary, the per Share exercise price shall be no less than 110% of the Fair
Market Value per Share on the date of grant.
(B) granted to any Employee, the per Share exercise price shall
be no less than 100% of the Fair Market Value per Share on the date of grant.
(ii) In the case of a Nonstatutory Stock Option
(A) granted to a person who, at the time of the grant of such
Option, owns stock representing more than ten percent (10%) of the voting power
of all classes of stock of the Company or any Parent or Subsidiary, the per
Share exercise price shall be no less than 110% of the Fair Market Value per
Share on the date of the grant.
(B) granted to any person, the per Share exercise price shall be
no less than 85% of the Fair Market Value per Share on the date of grant.
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(b) The consideration to be paid for the Shares to be issued upon exercise
of an Option, including the method of payment, shall be determined by the
Administrator (and, in the case of an Incentive Stock Option, shall be
determined at the time of grant) and may consist entirely of (1) cash, (2)
check, (3) promissory note, (4) other Shares which (x) in the case of Shares
acquired upon exercise of an Option either have been owned by the Optionee for
more than six months on the date of surrender or were not acquired, directly or
indirectly, from the Company, and (y) have a Fair Market Value on the date of
surrender equal to the aggregate exercise price of the Shares as to which said
Option shall be exercised, (5) authorization from the Company to retain from the
total number of Shares as to which the Option is exercised that number of Shares
having a Fair Market Value on the date of exercise equal to the exercise price
for the total number of Shares as to which the Option is exercised, (6) delivery
of a properly executed exercise notice together with irrevocable instructions to
a broker to promptly deliver to the Company the amount of sale or loan proceeds
required to pay the exercise price, (7) by delivering an irrevocable
subscription agreement for the Shares which irrevocably obligates the option
holder to take and pay for the Shares not more than twelve months after the date
of delivery of the subscription agreement, (8) any combination of the foregoing
methods of payment, (9) or such other consideration and method of payment for
the issuance of Shares to the extent permitted under Applicable Laws. In making
its determination as to the type of consideration to accept, the Board shall
consider if acceptance of such consideration may be reasonably expected to
benefit the Company (Section 315(b) of the California Corporations Code).
9. Exercise of Option.
(a) Procedure for Exercise; Rights as a Shareholder. Any Option granted
hereunder shall be exercisable at such times and under such conditions as
determined by the Board, including performance criteria with respect to the
Company and/or the Optionee, and as shall be permissible under the terms of the
Plan.
An Option may not be exercised for a fraction of a Share.
An Option shall be deemed to be exercised when written notice of
such exercise has been given to the Company in accordance with the terms of the
Option by the person entitled to exercise the Option and full payment for the
Shares with respect to which the Option is exercised has been received by the
Company. Full payment may, as authorized by the Board, consist of any
consideration and method of payment allowable under Section 8(b) of the Plan.
Until the issuance (as evidenced by the appropriate entry on the books of the
Company or of a duly authorized transfer agent of the Company) of the stock
certificate evidencing such Shares, no right to vote or receive dividends or any
other rights as a shareholder shall exist with respect to the Optioned Stock,
notwithstanding the exercise of the Option. The Company shall issue (or cause to
be issued) such stock certificate promptly upon exercise of the Option. No
adjustment will be made for a dividend or other right for which the record date
is prior to the date the stock certificate is issued, except as provided in
Section 11 of the Plan.
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Exercise of an Option in any manner shall result in a decrease in the
number of Shares which thereafter may be available, both for purposes of the
Plan and for sale under the Option, by the number of Shares as to which the
Option is exercised.
(b) Termination of Employment. In the event of termination of an Optionee's
consulting relationship or Continuous Status as an Employee with the Company (as
the case may be), such Optionee may, but only within ninety (90) days (or such
other period of time as is determined by the Board, with such determination in
the case of an Incentive Stock Option being made at the time of grant of the
Option and not exceeding ninety (90) days) after the date of such termination
(but in no event later than the expiration date of the term of such Option as
set forth in the Option Agreement), exercise his Option to the extent that
Optionee was entitled to exercise it at the date of such termination. To the
extent that Optionee was not entitled to exercise the Option at the date of such
termination, or if Optionee does not exercise such Option to the extent so
entitled within the time specified herein, the Option shall terminate.
(c) Disability of Optionee. Notwithstanding the provisions of Section 9(b)
above, in the event of termination of an Optionee's Consulting relationship or
Continuous Status as an Employee as a result of his total and permanent
disability (as defined in Section 22(e)(3) of the Code), Optionee may, but only
within twelve (12) months from the date of such termination (but in no event
later than the expiration date of the term of such Option as set forth in the
Option Agreement), exercise the Option to the extent otherwise entitled to
exercise it at the date of such termination. To the extent that Optionee was
not entitled to exercise the Option at the date of termination, or if Optionee
does not exercise such Option to the extent so entitled within the time
specified herein, the Option shall terminate.
(d) Death of Optionee. In the event of the death of an Optionee, the
Option may be exercised, at any time within twelve (12) months following the
date of death (but in no event later than the expiration date of the term of
such Option as set forth in the Option Agreement), by the Optionee's estate or
by a person who acquired the right to exercise the Option by bequest or
inheritance, but only to the extent the Optionee was entitled to exercise the
Option at the date of death. To the extent that Optionee was not entitled to
exercise the Option at the date of termination, or if Optionee does not exercise
such Option to the extent so entitled within the time specified herein, the
Option shall terminate.
(e) Rule 16b-3. Options granted to persons subject to Section 16(b) of the
Exchange Act must comply with Rule 16b-3 and shall contain such additional
conditions or restrictions as may be required thereunder to qualify for the
maximum exemption from Section 16 of the Exchange Act with respect to Plan
transactions.
(f) Buyout Provisions. The Administrator may at any time offer to buy out
for a payment in cash or Shares, an Option previously granted, based on such
terms and conditions as the Administrator shall establish and communicate to the
Optionee at the time that such offer is made.
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10. Non-Transferability of Options. The Option may not be sold, pledged,
assigned, hypothecated, transferred, or disposed of in any manner other than by
will or by the laws of descent or distribution and may be exercised, during the
lifetime of the Optionee, only by the Optionee.
11. Stock Purchase Rights.
(a) Rights to Purchase. Stock Purchase Rights may be issued either
alone, in addition to, or in tandem with other awards granted under the Plan
and/or cash awards made outside of the Plan. After the Administrator determines
that it will offer Stock Purchase Rights under the Plan, it shall advise the
offeree in writing of the terms, conditions and restrictions related to the
offer, including the number of Shares that such person shall be entitled to
purchase, the price to be paid (which price shall not be less than 85% of the
Fair Market Value of the Shares as of the date of the offer), and the time
within which such person must accept such offer, which shall in no event exceed
thirty (30) days from the date upon which the Administrator made the
determination to grant the Stock Purchase Right. The offer shall be accepted by
execution of a Restricted Stock purchase agreement in the form determined by the
Administrator. Shares purchased pursuant to the grant of a Stock Purchase Right
shall be referred to herein as "Restricted Stock."
(b) Repurchase Option. Unless the Administrator determines otherwise,
the Restricted Stock purchase agreement shall grant the Company a repurchase
option exercisable upon the voluntary or involuntary termination of the
purchaser's employment with the Company for any reason (including death or
Disability). The purchase price for Shares repurchased pursuant to the
Restricted Stock purchase agreement shall be the original price paid by the
purchaser and may be paid by cancellation of any indebtedness of the purchaser
to the Company. The repurchase option shall lapse at such rate as the Committee
may determine, but in no event at a rate less than 20% per annum. If the
Repurchase Option is assigned by the Company and the Fair market value of the
shares, as determined by the administrator, exceeds the repurchase price, and
such assignee exercises the Repurchase Option, then the assignee shall pay the
Company the difference between the fair market value of the Shares repurchased
and the aggregate repurchase price.
(c) Other Provisions. The Restricted Stock purchase agreement shall
contain such other terms, provisions and conditions not inconsistent with the
Plan as may be determined by the Administrator in its sole discretion. In
addition, the provisions of Restricted Stock purchase agreements need not be the
same with respect to each purchaser.
(d) Rights as a Shareholder. Once the Stock Purchase Right is exercised,
the purchaser shall have the rights equivalent to those of a shareholder, and
shall be a shareholder when his or her purchase is entered upon the records of
the duly authorized transfer agent of the Company. No adjustment will be made
for a dividend or other right for which the record date is prior to the date the
Stock Purchase Right is exercised, except as provided in Section 13 of the Plan.
12. Stock Withholding to Satisfy Withholding Tax Obligations. At the
discretion of the Administrator, Optionees may satisfy withholding obligations
as provided in this paragraph. When an
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Optionee incurs tax liability in connection with an Option or Stock Purchase
Right, which tax liability is subject to tax withholding under applicable tax
laws, and the Optionee is obligated to pay the Company an amount required to be
withheld under applicable tax laws, the Optionee may satisfy the withholding tax
obligation by electing to have the Company withhold from the Shares to be issued
upon exercise of the Option, or the Shares to be issued in connection with the
Stock Purchase Right, if any, that number of Shares having a Fair Market Value
equal to the amount required to be withheld. The Fair Market Value of the
Shares to be withheld shall be determined on the date that the amount of tax to
be withheld is to be determined (the "Tax Date").
All elections by an Optionee to have Shares withheld for this purpose shall
be made in writing in a form acceptable to the Administrator and shall be
subject to the following restrictions:
(a) the election must be made on or prior to the applicable Tax Date;
(b) once made, the election shall be irrevocable as to the particular
Shares of the Option or Right as to which the election is made;
(c) all elections shall be subject to the consent or disapproval of the
Administrator;
(d) if the Optionee is subject to Rule 16b-3, the election must comply
with the applicable provisions of Rule 16b-3 and shall be subject to such
additional conditions or restrictions as may be required thereunder to qualify
for the maximum exemption from Section 16 of the Exchange Act with respect to
Plan transactions.
In the event the election to have Shares withheld is made by an Optionee
and the Tax Date is deferred under Section 83 of the Code because no election is
filed under Section 83(b) of the Code, the Optionee shall receive the full
number of Shares with respect to which the Option or Stock Purchase Right is
exercised but such Optionee shall be unconditionally obligated to tender back to
the Company the proper number of Shares on the Tax Date.
13. Adjustments Upon Changes in Capitalization or Merger. Subject to any
required action by the shareholders of the Company, the number of shares of
Common Stock covered by each outstanding Option, and the number of shares of
Common Stock which have been authorized for issuance under the Plan but as to
which no Options have yet been granted or which have been returned to the Plan
upon cancellation or expiration of an Option, as well as the price per share of
Common Stock covered by each such outstanding Option, shall be proportionately
adjusted for any increase or decrease in the number of issued shares of Common
Stock resulting from a stock split, reverse stock split, stock dividend,
combination or reclassification of the Common Stock, or any other increase or
decrease in the number of issued shares of Common Stock effected without receipt
of consideration by the Company; provided, however, that conversion of any
convertible securities of the Company shall not be deemed to have been "effected
without receipt of consideration." Such adjustment shall be made by the Board,
whose determination in that respect shall be final, binding and conclusive.
Except as expressly provided herein, no issuance by the Company of shares of
stock of
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any class, or securities convertible into shares of stock of any class, shall
affect, and no adjustment by reason thereof shall be made with respect to, the
number or price of shares of Common Stock subject to an Option.
In the event of the proposed dissolution or liquidation of the Company, the
Board shall notify the Optionee at least fifteen (15) days prior to such
proposed action. To the extent it has not been previously exercised, the Option
will terminate immediately prior to the consummation of such proposed action.
In the event of a merger of the Company with or into another corporation, the
Option shall be assumed or an equivalent option shall be substituted by such
successor corporation or a parent or subsidiary of such successor corporation.
In the event that such successor corporation does not agree to assume such
Option or to substitute an equivalent option, the Board shall notify the
Optionee that the Option shall be exercisable for a period of fifteen (15) days
from the date of such notice to the extent that Optionee was entitled to
exercise it upon the expiration of such period, and, to the extent that Optionee
was not entitled to exercise such Option upon the expiration of such period, or
if the Optionee does not exercise such Option to the extent so entitled within
such period, the Option shall terminate. With respect to any Option granted
prior to the July 17, 1992, in the event that such successor corporation refuses
to assume such Option or to substitute an equivalent option, the Board shall,
in lieu of such assumption or substitution, provide for the Optionee to have the
right to exercise such Option as to all of the Optioned Stock, including Shares
as to which the Option would not otherwise be exercisable. If the Board makes
an Option fully exercisable in lieu of assumption or substitution in the event
of a merger, the Board shall notify the Optionee that such Option shall be fully
exercisable for a period of fifteen (15) days from the date of such notice, and
such Option will terminate upon the expiration of such period.
14. Time of Granting Options. The date of grant of an Option shall, for
all purposes, be the date on which the Administrator makes the determination
granting such Option, or such other date as is determined by the Board. Notice
of the determination shall be given to each Employee or Consultant to whom an
Option is so granted within a reasonable time after the date of such grant.
15. Amendment and Termination of the Plan.
(a) Amendment and Termination. The Board may at any time amend, alter,
suspend or discontinue the Plan, but no amendment, alteration, suspension or
discontinuation shall be made which would impair the rights of any Optionee
under any grant theretofore made, without his or her consent. In addition, to
the extent necessary and desirable to comply with Rule 16b-3 under the Exchange
Act or with Section 422A of the Code (or any other applicable law or regulation,
including the requirements of the NASD or an established stock exchange), the
Company shall obtain shareholder approval of any Plan amendment in such a manner
and to such a degree as required.
(b) Effect of Amendment or Termination. Any such amendment or
termination of the Plan shall not affect Options already granted and such
Options shall remain in full force and effect as if this Plan had not been
amended or terminated, unless mutually agreed otherwise between the
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Optionee and the Board, which agreement must be in writing and signed by the
Optionee and the Company.
16. Conditions Upon Issuance of Shares. Shares shall not be issued
pursuant to the exercise of an Option unless the exercise of such Option and the
issuance and delivery of such Shares pursuant thereto shall comply with all
relevant provisions of law, including, without limitation, the Securities Act of
1933, as amended, the Exchange Act, the rules and regulations promulgated
thereunder, and the requirements of any stock exchange upon which the Shares may
then be listed, and shall be further subject to the approval of counsel for the
Company with respect to such compliance.
As a condition to the exercise of an Option, the Company may require the
person exercising such Option to represent and warrant at the time of any such
exercise that the Shares are being purchased only for investment and without any
present intention to sell or distribute such Shares if, in the opinion of
counsel for the Company, such a representation is required by any of the
aforementioned relevant provisions of law.
17. Reservation of Shares. The Company, during the term of this Plan,
will at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan.
The inability of the Company to obtain authority from any regulatory body
having jurisdiction, which authority is deemed by the Company's counsel to be
necessary to the lawful issuance and sale of any Shares hereunder, shall relieve
the Company of any liability in respect of the failure to issue or sell such
Shares as to which such requisite authority shall not have been obtained.
18. Agreements. Options and Stock Purchase Rights shall be evidenced by
written agreements in such form as the Board shall approve from time to time.
19. Shareholder Approval. Continuance of the Plan shall be subject to
approval by the shareholders of the Company within twelve (12) months before or
after the date the Plan is adopted. Such shareholder approval shall be obtained
in the degree and manner required under applicable state and federal law.
20. Information to Optionees. The Company shall provide to each Optionee,
during the period for which such Optionee has one or more Options outstanding,
copies of all annual reports and other information which are provided to all
shareholders of the Company. The Company shall not be required to provide such
information if the issuance of Options under the Plan is limited to key
employees whose duties in connection with the Company assure their access to
equivalent information.
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EXHIBIT 10.6
RAMBUS INC.
1997 STOCK PLAN
1. Purposes of the Plan. The purposes of this Stock Plan are:
. to attract and retain the best available personnel for positions of
substantial responsibility,
. to provide additional incentive to Employees, Directors and
Consultants, and
. to promote the success of the Company's business.
Options granted under the Plan may be Incentive Stock Options or Nonstatutory
Stock Options, as determined by the Administrator at the time of grant. Stock
Purchase Rights may also be granted under the Plan. The Plan also provides for
automatic grants of Nonstatutory Stock Options to Outside Directors.
2. Definitions. As used herein, the following definitions shall apply:
(a) "Administrator" means the Board or any of its Committees as shall be
administering the Plan, in accordance with Section 4 of the Plan.
(b) "Applicable Laws" means the requirements relating to the
administration of stock option plans under U. S. state corporate laws, U.S.
federal and state securities laws, the Code, any stock exchange or quotation
system on which the Common Stock is listed or quoted and the applicable laws of
any foreign country or jurisdiction where Options or Stock Purchase Rights are,
or will be, granted under the Plan.
(c) "Board" means the Board of Directors of the Company.
(d) "Code" means the Internal Revenue Code of 1986, as amended.
(e) "Committee" means a committee of Directors appointed by the Board in
accordance with Section 4 of the Plan.
(f) "Common Stock" means the common stock of the Company.
(g) "Company" means Rambus Inc., a Delaware corporation.
(h) "Consultant" means any person, including an advisor, engaged by the
Company or a Parent or Subsidiary to render services to such entity.
(i) "Director" means a member of the Board.
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(j) "Disability" means total and permanent disability as defined in
Section 22(e)(3) of the Code.
(k) "Employee" means any person, including Officers and Directors,
employed by the Company or any Parent or Subsidiary of the Company. A Service
Provider shall not cease to be an Employee in the case of (i) any leave of
absence approved by the Company or (ii) transfers between locations of the
Company or between the Company, its Parent, any Subsidiary, or any successor.
For purposes of Incentive Stock Options, no such leave may exceed ninety days,
unless reemployment upon expiration of such leave is guaranteed by statute or
contract. If reemployment upon expiration of a leave of absence approved by the
Company is not so guaranteed, on the 181st day of such leave any Incentive Stock
Option held by the Optionee shall cease to be treated as an Incentive Stock
Option and shall be treated for tax purposes as a Nonstatutory Stock Option.
Neither service as a Director nor payment of a director's fee by the Company
shall be sufficient to constitute "employment" by the Company.
(l) "Exchange Act" means the Securities Exchange Act of 1934, as amended.
(m) "Fair Market Value" means, as of any date, the value of Common Stock
determined as follows:
(i) If the Common Stock is listed on any established stock exchange or
a national market system, including without limitation the Nasdaq National
Market or The Nasdaq SmallCap Market of The Nasdaq Stock Market, its Fair Market
Value shall be the closing sales price for such stock (or the closing bid, if no
sales were reported) as quoted on such exchange or system for the last market
trading day prior to the time of determination, as reported in The Wall Street
Journal or such other source as the Administrator deems reliable;
(ii) If the Common Stock is regularly quoted by a recognized
securities dealer but selling prices are not reported, the Fair Market Value of
a Share of Common Stock shall be the mean between the high bid and low asked
prices for the Common Stock on the last market trading day prior to the day of
determination, as reported in The Wall Street Journal or such other source as
the Administrator deems reliable; or
(iii) In the absence of an established market for the Common Stock,
the Fair Market Value shall be determined in good faith by the Administrator.
(n) "Incentive Stock Option" means an Option intended to qualify as an
incentive stock option within the meaning of Section 422 of the Code and the
regulations promulgated thereunder.
(o) "Inside Director" means a Director who is an Employee. The term
Inside Director shall include the founders, Mike Farmwald and Mark Horowitz.
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(p) "Nonstatutory Stock Option" means an Option not intended to qualify as
an Incentive Stock Option.
(q) "Notice of Grant" means a written or electronic notice evidencing
certain terms and conditions of an individual Option or Stock Purchase Right
grant. The Notice of Grant is part of the Option Agreement.
(r) "Officer" means a person who is an officer of the Company within the
meaning of Section 16 of the Exchange Act and the rules and regulations
promulgated thereunder.
(s) "Option" means a stock option granted pursuant to the Plan.
(t) "Option Agreement" means an agreement between the Company and an
Optionee evidencing the terms and conditions of an individual Option grant. The
Option Agreement is subject to the terms and conditions of the Plan.
(u) "Option Exchange Program" means a program whereby outstanding Options
are surrendered in exchange for Options with a lower exercise price.
(v) "Outside Director" means a Director who is not an Employee; provided,
however, that such term shall not include the founders, Mike Farmwald and Mark
Horowitz.
(w) "Optioned Stock" means the Common Stock subject to an Option or Stock
Purchase Right.
(x) "Optionee" means the holder of an outstanding Option or Stock Purchase
Right granted under the Plan.
(y) "Parent" means a "parent corporation," whether now or hereafter
existing, as defined in Section 424(e) of the Code.
(z) "Plan" means this 1997 Stock Plan.
(aa) "Restricted Stock" means shares of Common Stock acquired pursuant to
a grant of Stock Purchase Rights under Section 11 of the Plan.
(bb) "Restricted Stock Purchase Agreement" means a written agreement
between the Company and the Optionee evidencing the terms and restrictions
applying to stock purchased under a Stock Purchase Right. The Restricted Stock
Purchase Agreement is subject to the terms and conditions of the Plan and the
Notice of Grant.
(cc) "Rule 16b-3" means Rule 16b-3 of the Exchange Act or any successor to
Rule 16b-3, as in effect when discretion is being exercised with respect to the
Plan.
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(dd) "Section 16(b)" means Section 16(b) of the Exchange Act.
(ee) "Service Provider" means an Employee, Director or Consultant.
(ff) "Share" means a share of the Common Stock, as adjusted in accordance
with Section 14 of the Plan.
(gg) "Stock Purchase Right" means the right to purchase Common Stock
pursuant to Section 11 of the Plan, as evidenced by a Notice of Grant.
(hh) "Subsidiary" means a "subsidiary corporation", whether now or
hereafter existing, as defined in Section 424(f) of the Code.
3. Stock Subject to the Plan. Subject to the provisions of Section 14 of the
Plan, the maximum aggregate number of Shares which may be optioned and sold
under the Plan is 1,000,000 Shares, plus an annual increase as of the last day
of each of the Company's immediately preceding fiscal years during the term of
the Plan equal to the lesser of (i) the number of Shares needed to restore the
maximum aggregate number of Shares which may be optioned and sold under the
Plan to 1,000,000 Shares, (ii) four percent (4%) of the outstanding Shares on
such date, or (iii) a lesser amount determined by the Board. The Shares may be
authorized, but unissued, or reacquired Common Stock.
If an Option or Stock Purchase Right expires or becomes unexercisable
without having been exercised in full, or is surrendered pursuant to an Option
Exchange Program, the unpurchased Shares which were subject thereto shall become
available for future grant or sale under the Plan (unless the Plan has
terminated); provided, however, that Shares that have actually been issued under
the Plan, whether upon exercise of an Option or Right, shall not be returned to
the Plan and shall not become available for future distribution under the Plan,
except that if Shares of Restricted Stock are repurchased by the Company at
their original purchase price, such Shares shall become available for future
grant under the Plan.
4. Administration of the Plan.
(a) Procedure.
(i) Multiple Administrative Bodies. The Plan may be administered by
different Committees with respect to different groups of Service Providers.
(ii) Section 162(m). To the extent that the Administrator determines
it to be desirable to qualify Options granted hereunder as "performance-based
compensation" within the meaning of Section 162(m) of the Code, the Plan shall
be administered by a Committee of two or more "outside directors" within the
meaning of Section 162(m) of the Code.
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(iii) Rule 16b-3. To the extent desirable to qualify transactions
hereunder as exempt under Rule 16b-3, the transactions contemplated hereunder
shall be structured to satisfy the requirements for exemption under Rule 16b-3.
(iv) Grants to Outside Directors. All grants of Options to Outside
Directors made pursuant to Section 13 of the Plan shall be automatic and
nondiscretionary.
(v) Other Administration. Other than as provided above, the Plan
shall be administered by (A) the Board or (B) a Committee, which committee shall
be constituted to satisfy Applicable Laws.
(b) Powers of the Administrator. Subject to the provisions of the Plan,
and in the case of a Committee, subject to the specific duties delegated by the
Board to such Committee, the Administrator shall have the authority, in its
discretion:
(i) to determine the Fair Market Value;
(ii) to select the Service Providers to whom Options and Stock
Purchase Rights may be granted hereunder;
(iii) to determine the number of shares of Common Stock to be covered
by each Option and Stock Purchase Right granted hereunder;
(iv) to approve forms of agreement for use under the Plan;
(v) to determine the terms and conditions, not inconsistent with the
terms of the Plan, of any Option or Stock Purchase Right granted hereunder.
Such terms and conditions include, but are not limited to, the exercise price,
the time or times when Options or Stock Purchase Rights may be exercised (which
may be based on performance criteria), any vesting acceleration or waiver of
forfeiture restrictions, and any restriction or limitation regarding any Option
or Stock Purchase Right of the shares of Common Stock relating thereto, based in
each case on such factors as the Administrator, in its sole discretion, shall
determine;
(vi) to reduce the exercise price of any Option or Stock Purchase
Right to the then current Fair Market Value if the Fair Market Value of the
Common Stock covered by such Option or Stock Purchase Right shall have declined
since the date the Option or Stock Purchase Right was granted;
(vii) to institute an Option Exchange Program;
(viii) to construe and interpret the terms of the Plan and awards
granted pursuant to the Plan;
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(ix) to prescribe, amend and rescind rules and regulations relating to
the Plan, including rules and regulations relating to sub-plans established for
the purpose of qualifying for preferred tax treatment under foreign tax laws;
(x) to modify or amend each Option or Stock Purchase Right (subject to
Section 16(c) of the Plan), including the discretionary authority to extend the
post-termination exercisability period of Options longer than is otherwise
provided for in the Plan;
(xi) to allow Optionees to satisfy withholding tax obligations by
electing to have the Company withhold from the Shares to be issued upon exercise
of an Option or Stock Purchase Right that number of Shares having a Fair Market
Value equal to the amount required to be withheld. The Fair Market Value of the
Shares to be withheld shall be determined on the date that the amount of tax to
be withheld is to be determined. All elections by an Optionee to have Shares
withheld for this purpose shall be made in such form and under such conditions
as the Administrator may deem necessary or advisable;
(xii) to authorize any person to execute on behalf of the Company any
instrument required to effect the grant of an Option or Stock Purchase Right
previously granted by the Administrator;
(xiii) to make all other determinations deemed necessary or advisable
for administering the Plan.
(c) Effect of Administrator's Decision. The Administrator's decisions,
determinations and interpretations shall be final and binding on all Optionees
and any other holders of Options or Stock Purchase Rights.
5. Eligibility. Nonstatutory Stock Options and Stock Purchase Rights may be
granted to Service Providers. Incentive Stock Options may be granted only to
Employees.
6. Limitations.
(a) Each Option shall be designated in the Option Agreement as either an
Incentive Stock Option or a Nonstatutory Stock Option. However, notwithstanding
such designation, to the extent that the aggregate Fair Market Value of the
Shares with respect to which Incentive Stock Options are exercisable for the
first time by the Optionee during any calendar year (under all plans of the
Company and any Parent or Subsidiary) exceeds $100,000, such Options shall be
treated as Nonstatutory Stock Options. For purposes of this Section 6(a),
Incentive Stock Options shall be taken into account in the order in which they
were granted. The Fair Market Value of the Shares shall be determined as of the
time the Option with respect to such Shares is granted.
(b) Neither the Plan nor any Option or Stock Purchase Right shall confer
upon an Optionee any right with respect to continuing the Optionee's
relationship as a Service Provider with
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the Company, nor shall they interfere in any way with the Optionee's right or
the Company's right to terminate such relationship at any time, with or without
cause.
(c) The following limitations shall apply to grants of Options:
(i) No Service Provider shall be granted, in any fiscal year of the
Company, Options to purchase more than 250,000 Shares.
(ii) In connection with his or her initial service, a Service Provider
may be granted Options to purchase up to an additional 250,000 Shares which
shall not count against the limit set forth in subsection (i) above.
(iii) The foregoing limitations shall be adjusted proportionately in
connection with any change in the Company's capitalization as described in
Section 14.
(iv) If an Option is canceled in the same fiscal year of the Company
in which it was granted (other than in connection with a transaction described
in Section 14), the canceled Option will be counted against the limits set forth
in subsections (i) and (ii) above. For this purpose, if the exercise price of
an Option is reduced, the transaction will be treated as a cancellation of the
Option and the grant of a new Option.
7. Term of Plan. Subject to Section 20 of the Plan, the Plan shall become
effective upon its adoption by the Board. It shall continue in effect for a
term of ten (10) years unless terminated earlier under Section 16 of the Plan.
8. Term of Option. The term of each Option shall be stated in the Option
Agreement. In the case of an Incentive Stock Option, the term shall be ten (10)
years from the date of grant or such shorter term as may be provided in the
Option Agreement. Moreover, in the case of an Incentive Stock Option granted to
an Optionee who, at the time the Incentive Stock Option is granted, owns stock
representing more than ten percent (10%) of the total combined voting power of
all classes of stock of the Company or any Parent or Subsidiary, the term of the
Incentive Stock Option shall be five (5) years from the date of grant or such
shorter term as may be provided in the Option Agreement.
9. Option Exercise Price and Consideration.
(a) Exercise Price. The per share exercise price for the Shares to be
issued pursuant to exercise of an Option shall be determined by the
Administrator, subject to the following:
(i) In the case of an Incentive Stock Option
(A) granted to an Employee who, at the time the Incentive Stock
Option is granted, owns stock representing more than ten percent (10%) of the
voting power of all classes of
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stock of the Company or any Parent or Subsidiary, the per Share exercise price
shall be no less than 110% of the Fair Market Value per Share on the date of
grant.
(B) granted to any Employee other than an Employee described in
paragraph (A) immediately above, the per Share exercise price shall be no less
than 100% of the Fair Market Value per Share on the date of grant.
(ii) In the case of a Nonstatutory Stock Option, the per Share
exercise price shall be determined by the Administrator. In the case of a
Nonstatutory Stock Option intended to qualify as "performance-based
compensation" within the meaning of Section 162(m) of the Code, the per Share
exercise price shall be no less than 100% of the Fair Market Value per Share on
the date of grant.
(iii) Notwithstanding the foregoing, Options may be granted with a per
Share exercise price of less than 100% of the Fair Market Value per Share on the
date of grant pursuant to a merger or other corporate transaction.
(b) Waiting Period and Exercise Dates. At the time an Option is granted,
the Administrator shall fix the period within which the Option may be exercised
and shall determine any conditions which must be satisfied before the Option may
be exercised.
(c) Form of Consideration. The Administrator shall determine the
acceptable form of consideration for exercising an Option, including the method
of payment. In the case of an Incentive Stock Option, the Administrator shall
determine the acceptable form of consideration at the time of grant. Such
consideration may consist entirely of:
(i) cash;
(ii) check;
(iii) promissory note;
(iv) other Shares which (A) in the case of Shares acquired upon
exercise of an option, have been owned by the Optionee for more than six months
on the date of surrender, and (B) have a Fair Market Value on the date of
surrender equal to the aggregate exercise price of the Shares as to which said
Option shall be exercised;
(v) consideration received by the Company under a cashless exercise
program implemented by the Company in connection with the Plan;
(vi) a reduction in the amount of any Company liability to the
Optionee, including any liability attributable to the Optionee's participation
in any Company-sponsored deferred compensation program or arrangement;
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(vii) any combination of the foregoing methods of payment; or
(viii) such other consideration and method of payment for the issuance
of Shares to the extent permitted by Applicable Laws.
10. Exercise of Option.
(a) Procedure for Exercise; Rights as a Stockholder. Any Option granted
hereunder shall be exercisable according to the terms of the Plan and at such
times and under such conditions as determined by the Administrator and set forth
in the Option Agreement. Unless the Administrator provides otherwise, vesting
of Options granted hereunder shall be tolled during any unpaid leave of absence.
An Option may not be exercised for a fraction of a Share.
An Option shall be deemed exercised when the Company receives: (i)
written or electronic notice of exercise (in accordance with the Option
Agreement) from the person entitled to exercise the Option, and (ii) full
payment for the Shares with respect to which the Option is exercised. Full
payment may consist of any consideration and method of payment authorized by the
Administrator and permitted by the Option Agreement and the Plan. Shares issued
upon exercise of an Option shall be issued in the name of the Optionee or, if
requested by the Optionee, in the name of the Optionee and his or her spouse.
Until the Shares are issued (as evidenced by the appropriate entry on the books
of the Company or of a duly authorized transfer agent of the Company), no right
to vote or receive dividends or any other rights as a stockholder shall exist
with respect to the Optioned Stock, notwithstanding the exercise of the Option.
The Company shall issue (or cause to be issued) such Shares promptly after the
Option is exercised. No adjustment will be made for a dividend or other right
for which the record date is prior to the date the Shares are issued, except as
provided in Section 14 of the Plan.
Exercising an Option in any manner shall decrease the number of Shares
thereafter available, both for purposes of the Plan and for sale under the
Option, by the number of Shares as to which the Option is exercised.
(b) Termination of Relationship as a Service Provider. If an Optionee
ceases to be a Service Provider, other than upon the Optionee's death or
Disability, the Optionee may exercise his or her Option within such period of
time as is specified in the Option Agreement to the extent that the Option is
vested on the date of termination (but in no event later than the expiration of
the term of such Option as set forth in the Option Agreement). In the absence
of a specified time in the Option Agreement, the Option shall remain exercisable
for three (3) months following the Optionee's termination. If, on the date of
termination, the Optionee is not vested as to his or her entire Option, the
Shares covered by the unvested portion of the Option shall revert to the Plan.
If, after termination, the Optionee does not exercise his or her Option within
the time specified by the Administrator, the Option shall terminate, and the
Shares covered by such Option shall revert to the Plan.
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(c) Disability of Optionee. If an Optionee ceases to be a Service
Provider as a result of the Optionee's Disability, the Optionee may exercise his
or her Option within such period of time as is specified in the Option Agreement
to the extent the Option is vested on the date of termination (but in no event
later than the expiration of the term of such Option as set forth in the Option
Agreement). In the absence of a specified time in the Option Agreement, the
Option shall remain exercisable for twelve (12) months following the Optionee's
termination. If, on the date of termination, the Optionee is not vested as to
his or her entire Option, the Shares covered by the unvested portion of the
Option shall revert to the Plan. If, after termination, the Optionee does not
exercise his or her Option within the time specified herein, the Option shall
terminate, and the Shares covered by such Option shall revert to the Plan.
(d) Death of Optionee. If an Optionee dies while a Service Provider, the
Option may be exercised within such period of time as is specified in the Option
Agreement (but in no event later than the expiration of the term of such Option
as set forth in the Notice of Grant), by the Optionee's estate or by a person
who acquires the right to exercise the Option by bequest or inheritance, but
only to the extent that the Option is vested on the date of death. In the
absence of a specified time in the Option Agreement, the Option shall remain
exercisable for twelve (12) months following the Optionee's termination. If, at
the time of death, the Optionee is not vested as to his or her entire Option,
the Shares covered by the unvested portion of the Option shall immediately
revert to the Plan. The Option may be exercised by the executor or
administrator of the Optionee's estate or, if none, by the person(s) entitled to
exercise the Option under the Optionee's will or the laws of descent or
distribution. If the Option is not so exercised within the time specified
herein, the Option shall terminate, and the Shares covered by such Option shall
revert to the Plan.
(e) Buyout Provisions. The Administrator may at any time offer to buy out
for a payment in cash or Shares an Option previously granted based on such terms
and conditions as the Administrator shall establish and communicate to the
Optionee at the time that such offer is made.
11. Stock Purchase Rights.
(a) Rights to Purchase. Stock Purchase Rights may be issued either alone,
in addition to, or in tandem with other awards granted under the Plan and/or
cash awards made outside of the Plan. After the Administrator determines that
it will offer Stock Purchase Rights under the Plan, it shall advise the offeree
in writing or electronically, by means of a Notice of Grant, of the terms,
conditions and restrictions related to the offer, including the number of Shares
that the offeree shall be entitled to purchase, the price to be paid, and the
time within which the offeree must accept such offer. The offer shall be
accepted by execution of a Restricted Stock Purchase Agreement in the form
determined by the Administrator.
(b) Repurchase Option. Unless the Administrator determines otherwise, the
Restricted Stock Purchase Agreement shall grant the Company a repurchase option
exercisable upon the voluntary or involuntary termination of the purchaser's
service with the Company for any reason (including death or Disability). The
purchase price for Shares repurchased pursuant to the Restricted
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Stock Purchase Agreement shall be the original price paid by the purchaser and
may be paid by cancellation of any indebtedness of the purchaser to the Company.
The repurchase option shall lapse at a rate determined by the Administrator.
(c) Other Provisions. The Restricted Stock Purchase Agreement shall
contain such other terms, provisions and conditions not inconsistent with the
Plan as may be determined by the Administrator in its sole discretion.
(d) Rights as a Stockholder. Once the Stock Purchase Right is exercised,
the purchaser shall have the rights equivalent to those of a stockholder, and
shall be a stockholder when his or her purchase is entered upon the records of
the duly authorized transfer agent of the Company. No adjustment will be made
for a dividend or other right for which the record date is prior to the date the
Stock Purchase Right is exercised, except as provided in Section 14 of the Plan.
12. Non-Transferability of Options and Stock Purchase Rights. Unless
determined otherwise by the Administrator, an Option or Stock Purchase Right may
not be sold, pledged, assigned, hypothecated, transferred, or disposed of in any
manner other than by will or by the laws of descent or distribution and may be
exercised, during the lifetime of the Optionee, only by the Optionee. If the
Administrator makes an Option or Stock Purchase Right transferable, such Option
or Stock Purchase Right shall contain such additional terms and conditions as
the Administrator deems appropriate.
13. Automatic Option Grants to Outside Directors.
(a) First Option. Each Outside Director who becomes an Outside Director
after the effective date of this Plan shall be automatically granted a
Nonstatutory Stock Option to purchase 10,000 Shares (the "First Option") on the
date on which such person first becomes an Outside Director, whether through
election by the stockholders of the Company or appointment by the Board to fill
a vacancy; provided, however, that an Inside Director who ceases to be an Inside
Director but who remains a Director shall not receive a First Option.
(b) Subsequent Option. Each Outside Director shall be automatically
granted a Nonstatutory Stock Option to purchase 5,000 Shares (a "Subsequent
Option") on October 1 of each year; provided that he or she is then an Outside
Director and, provided further, that as of such date, he or she shall have
served on the Board for at least the preceding six (6) months.
(c) Terms of Options. The terms of First Options and Subsequent Options
granted hereunder shall be as follows:
(A) the term of each Option shall be ten (10) years.
(B) the exercise price per Share shall be 100% of the Fair Market
Value per Share on the date of grant. In the event that the date of grant is
not a trading day, the exercise price
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per Share shall be the Fair Market Value on the next trading day immediately
following the date of grant.
(C) 12.5% of the Shares subject to the Option shall vest six months
after the date of grant, and 1/48 of the Shares subject to the Option shall vest
each month thereafter so that 100% of the Shares subject to the Option shall be
vested four (4) years from the grant date, subject to the Optionee remaining a
Service Provider as of such vesting dates.
14. Adjustments Upon Changes in Capitalization, Dissolution, Merger or Asset
Sale.
(a) Changes in Capitalization. Subject to any required action by the
stockholders of the Company, the number of shares of Common Stock covered by
each outstanding Option and Stock Purchase Right, and the number of shares of
Common Stock which have been authorized for issuance under the Plan but as to
which no Options or Stock Purchase Rights have yet been granted or which have
been returned to the Plan upon cancellation or expiration of an Option or Stock
Purchase Right, as well as the price per share of Common Stock covered by each
such outstanding Option or Stock Purchase Right, shall be proportionately
adjusted for any increase or decrease in the number of issued shares of Common
Stock resulting from a stock split, reverse stock split, stock dividend,
combination or reclassification of the Common Stock, or any other increase or
decrease in the number of issued shares of Common Stock effected without receipt
of consideration by the Company; provided, however, that conversion of any
convertible securities of the Company shall not be deemed to have been "effected
without receipt of consideration." Such adjustment shall be made by the Board,
whose determination in that respect shall be final, binding and conclusive.
Except as expressly provided herein, no issuance by the Company of shares of
stock of any class, or securities convertible into shares of stock of any class,
shall affect, and no adjustment by reason thereof shall be made with respect to,
the number or price of shares of Common Stock subject to an Option or Stock
Purchase Right.
(b) Dissolution or Liquidation. In the event of the proposed dissolution
or liquidation of the Company, the Administrator shall notify each Optionee as
soon as practicable prior to the effective date of such proposed transaction.
The Administrator in its discretion may provide for an Optionee to have the
right to exercise his or her Option until ten (10) days prior to such
transaction as to all of the Optioned Stock covered thereby, including Shares as
to which the Option would not otherwise be exercisable. In addition, the
Administrator may provide that any Company repurchase option applicable to any
Shares purchased upon exercise of an Option or Stock Purchase Right shall lapse
as to all such Shares, provided the proposed dissolution or liquidation takes
place at the time and in the manner contemplated. To the extent it has not been
previously exercised, an Option or Stock Purchase Right will terminate
immediately prior to the consummation of such proposed action.
(c) Merger or Asset Sale. In the event of a merger of the Company with or
into another corporation, or the sale of substantially all of the assets of the
Company (a "Merger"), each outstanding Option and Stock Purchase Right shall be
assumed or an equivalent option or right
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substituted by the successor corporation or a Parent or Subsidiary of the
successor corporation (the "Successor Corporation").
Following such assumption or substitution in connection with a Merger, if
the Optionee's status as an Employee or employee of the Successor Corporation,
as applicable, is terminated by the Successor Corporation as a result of an
Involuntary Termination (as defined below) other than for Cause (as defined
below) within twelve months following a Merger, the Optionee shall fully vest in
and have the right to exercise Optionee's Option or Stock Purchase Right as to
all of the Optioned Stock, including Shares as to which Optionee would not
otherwise be vested or exercisable. Thereafter, the Option or Stock Purchase
Right shall remain exercisable in accordance with Sections 10(b) through (d)
above.
For purposes of this section, any of the following events shall
constitute an "Involuntary Termination": (i) without the Employee's express
written consent, a significant reduction of the Employee's duties, authority or
responsibilities, relative to the Employee's duties, authority or
responsibilities as in effect immediately prior to the Merger, or the assignment
to Employee of such reduced duties, authority or responsibilities; (ii) without
the Employee's express written consent, a substantial reduction, without good
business reasons, of the facilities and perquisites (including office space and
location) available to the Employee immediately prior to the Merger; (iii) a
reduction by the Successor Corporation in the base salary of the Employee as in
effect immediately prior to the Merger; (iv) a material reduction by the
Successor Corporation in the kind or level of employee benefits, including
bonuses, to which the Employee was entitled immediately prior to the Merger with
the result that the Employee's overall benefits package is significantly
reduced; (v) the relocation of the Employee to a facility or a location more
than fifty (50) miles from the Employee's then present location, without the
Employee's express written consent; (vi) any purported termination of the
Employee by the Corporation which is not effected for Disability or for Cause,
or any purported termination for which the grounds relied upon are not valid;
(vii) or any act or set of facts or circumstances which would, under California
case law or statute constitute a constructive termination of the Employee.
For purposes of this section, "Cause" shall mean (i) any act of personal
dishonesty taken by the Employee in connection with his responsibilities as an
employee and intended to result in substantial personal enrichment of the
Employee, (ii) the conviction of a felony, (iii) a willful act by the Employee
which constitutes gross misconduct and which is injurious to the Successor
Corporation, and (iv) following delivery to the Employee of a written demand for
performance from the Successor Corporation which describes the basis for the
Successor Corporation's belief that the Employee has not substantially performed
his duties, continued violations by the Employee of the Employee's obligations
to the Successor which are demonstrably willful and deliberate on the Employee's
part.
In the event that the Successor Corporation refuses to assume or
substitute for the Option or Stock Purchase Right, the Optionee shall fully vest
in and have the right to exercise the Option or Stock Purchase Right as to all
of the Optioned Stock, including Shares as to which
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Optionee would not otherwise be vested or exercisable. If an Option or Stock
Purchase Right becomes fully vested and exercisable in lieu of assumption or
substitution in the event of a merger or sale of assets, the Administrator shall
notify the Optionee in writing or electronically that the Option or Stock
Purchase Right shall be fully vested and exercisable for a period of fifteen
(15) days from the date of such notice, and the Option or Stock Purchase Right
shall terminate upon the expiration of such period. For the purposes of this
paragraph, the Option or Stock Purchase Right shall be considered assumed if,
following the merger or sale of assets, the option or right confers the right to
purchase or receive, for each Share of Optioned Stock subject to the Option or
Stock Purchase Right immediately prior to the merger or sale of assets, the
consideration (whether stock, cash, or other securities or property) received in
the merger or sale of assets by holders of Common Stock for each Share held on
the effective date of the transaction (and if holders were offered a choice of
consideration, the type of consideration chosen by the holders of a majority of
the outstanding Shares); provided, however, that if such consideration received
in the merger or sale of assets is not solely common stock of the Successor
Corporation or its Parent, the Administrator may, with the consent of the
Successor Corporation, provide for the consideration to be received upon the
exercise of the Option or Stock Purchase Right, for each Share of Optioned Stock
subject to the Option or Stock Purchase Right, to be solely common stock of the
Successor Corporation or its Parent equal in fair market value to the per share
consideration received by holders of Common Stock in the merger or sale of
assets.
15. Date of Grant. The date of grant of an Option or Stock Purchase Right
shall be, for all purposes, the date on which the Administrator makes the
determination granting such Option or Stock Purchase Right, or such other later
date as is determined by the Administrator. Notice of the determination shall
be provided to each Optionee within a reasonable time after the date of such
grant.
16. Amendment and Termination of the Plan.
(a) Amendment and Termination. The Board may at any time amend, alter,
suspend or terminate the Plan.
(b) Stockholder Approval. The Company shall obtain stockholder approval
of any Plan amendment to the extent necessary and desirable to comply with
Applicable Laws.
(c) Effect of Amendment or Termination. No amendment, alteration,
suspension or termination of the Plan shall impair the rights of any Optionee,
unless mutually agreed otherwise between the Optionee and the Administrator,
which agreement must be in writing and signed by the Optionee and the Company.
Termination of the Plan shall not affect the Administrator's ability to exercise
the powers granted to it hereunder with respect to Options granted under the
Plan prior to the date of such termination.
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17. Conditions Upon Issuance of Shares.
(a) Legal Compliance. Shares shall not be issued pursuant to the exercise
of an Option or Stock Purchase Right unless the exercise of such Option or Stock
Purchase Right and the issuance and delivery of such Shares shall comply with
Applicable Laws and shall be further subject to the approval of counsel for the
Company with respect to such compliance.
(b) Investment Representations. As a condition to the exercise of an
Option or Stock Purchase Right, the Company may require the person exercising
such Option or Stock Purchase Right to represent and warrant at the time of any
such exercise that the Shares are being purchased only for investment and
without any present intention to sell or distribute such Shares if, in the
opinion of counsel for the Company, such a representation is required.
18. Inability to Obtain Authority. The inability of the Company to obtain
authority from any regulatory body having jurisdiction, which authority is
deemed by the Company's counsel to be necessary to the lawful issuance and sale
of any Shares hereunder, shall relieve the Company of any liability in respect
of the failure to issue or sell such Shares as to which such requisite authority
shall not have been obtained.
19. Reservation of Shares. The Company, during the term of this Plan, will at
all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan.
20. Stockholder Approval. The Plan shall be subject to approval by the
stockholders of the Company within twelve (12) months after the date the Plan is
adopted. Such stockholder approval shall be obtained in the manner and to the
degree required under Applicable Laws.
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1997 STOCK PLAN
STOCK OPTION AGREEMENT
Unless otherwise defined herein, the terms defined in the Plan shall have the
same defined meanings in this Option Agreement.
I. NOTICE OF STOCK OPTION GRANT
[Optionee's Name and Address]
You have been granted an option to purchase Common Stock of the Company,
subject to the terms and conditions of the Plan and this Option Agreement, as
follows:
Grant Number _________________________
Date of Grant _________________________
Vesting Commencement Date _________________________
Exercise Price per Share $________________________
Total Number of Shares Granted _________________________
Total Exercise Price $________________________
Type of Option: ___ Incentive Stock Option
___ Nonstatutory Stock Option
Term/Expiration Date: _________________________
Vesting Schedule:
This Option may be exercised, in whole or in part, in accordance with the
following schedule:
12.5% of the Shares subject to the Option shall vest six months after the date
of grant, and 1/48 of the Shares subject to the Option shall vest each month
thereafter so that 100% of the Shares subject to the Option shall be vested four
(4) years from the grant date, subject to the Optionee remaining a Service
Provider as of such vesting dates.
<PAGE>
Termination Period:
This Option may be exercised for [THREE MONTHS] after Optionee ceases to be a
Service Provider. Upon the death or Disability of the Optionee, this Option may
be exercised for such longer period as provided in the Plan. In no event shall
this Option be exercised later than the Term/Expiration Date as provided above.
II. AGREEMENT
1. Grant of Option. The Plan Administrator of the Company hereby grants to
the Optionee named in the Notice of Grant attached as Part I of this Agreement
(the "Optionee") an option (the "Option") to purchase the number of Shares, as
set forth in the Notice of Grant, at the exercise price per share set forth in
the Notice of Grant (the "Exercise Price"), subject to the terms and conditions
of the Plan, which is incorporated herein by reference. Subject to Section
16(c) of the Plan, in the event of a conflict between the terms and conditions
of the Plan and the terms and conditions of this Option Agreement, the terms and
conditions of the Plan shall prevail.
If designated in the Notice of Grant as an Incentive Stock Option ("ISO"),
this Option is intended to qualify as an Incentive Stock Option under Section
422 of the Code. However, if this Option is intended to be an Incentive Stock
Option, to the extent that it exceeds the $100,000 rule of Code Section 422(d)
it shall be treated as a Nonstatutory Stock Option ("NSO").
2. Exercise of Option.
(a) Right to Exercise. This Option is exercisable during its term in
accordance with the Vesting Schedule set out in the Notice of Grant and the
applicable provisions of the Plan and this Option Agreement.
(b) Method of Exercise. This Option is exercisable by delivery of an
exercise notice, in the form attached as Exhibit A (the "Exercise Notice"),
which shall state the election to exercise the Option, the number of Shares in
respect of which the Option is being exercised (the "Exercised Shares"), and
such other representations and agreements as may be required by the Company
pursuant to the provisions of the Plan. The Exercise Notice shall be completed
by the Optionee and delivered to [Title] of the Company. The Exercise Notice
shall be accompanied by payment of the aggregate Exercise Price as to all
Exercised Shares. This Option shall be deemed to be exercised upon receipt by
the Company of such fully executed Exercise Notice accompanied by such aggregate
Exercise Price.
No Shares shall be issued pursuant to the exercise of this Option unless
such issuance and exercise complies with Applicable Laws. Assuming such
compliance, for income tax purposes the Exercised Shares shall be considered
transferred to the Optionee on the date the Option is exercised with respect to
such Exercised Shares.
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3. Method of Payment. Payment of the aggregate Exercise Price shall be by
any of the following, or a combination thereof, at the election of the Optionee:
(a) cash;
(b) check;
(c) consideration received by the Company under a cashless exercise
program implemented by the Company in connection with the Plan; or
(d) surrender of other Shares which (i) in the case of Shares acquired
upon exercise of an option, have been owned by the Optionee for more than six
(6) months on the date of surrender, and (ii) have a Fair Market Value on the
date of surrender equal to the aggregate Exercise Price of the Exercised Shares;
or
(e) with the Administrator's consent, delivery of Optionee's promissory
note (the "Note") in the form attached hereto as Exhibit C, in the amount of the
aggregate Exercise Price of the Exercised Shares together with the execution and
delivery by the Optionee of the Security Agreement attached hereto as Exhibit B.
The Note shall bear interest at the "applicable federal rate" prescribed under
the Code and its regulations at time of purchase, and shall be secured by a
pledge of the Shares purchased by the Note pursuant to the Security Agreement.
4. Non-Transferability of Option. This Option may not be transferred in any
manner otherwise than by will or by the laws of descent or distribution and may
be exercised during the lifetime of Optionee only by the Optionee. The terms of
the Plan and this Option Agreement shall be binding upon the executors,
administrators, heirs, successors and assigns of the Optionee.
5. Term of Option. This Option may be exercised only within the term set out
in the Notice of Grant, and may be exercised during such term only in accordance
with the Plan and the terms of this Option Agreement.
6. Tax Consequences. Some of the federal tax consequences relating to this
Option, as of the date of this Option, are set forth below. THIS SUMMARY IS
NECESSARILY INCOMPLETE, AND THE TAX LAWS AND REGULATIONS ARE SUBJECT TO CHANGE.
THE OPTIONEE SHOULD CONSULT A TAX ADVISER BEFORE EXERCISING THIS OPTION OR
DISPOSING OF THE SHARES.
(a) Exercising the Option.
(i) Nonstatutory Stock Option. The Optionee may incur regular federal
income tax liability upon exercise of a NSO. The Optionee will be treated as
having received compensation income (taxable at ordinary income tax rates) equal
to the excess, if any, of the Fair Market Value of the Exercised Shares on the
date of exercise over their aggregate Exercise Price. If the Optionee is
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<PAGE>
an Employee or a former Employee, the Company will be required to withhold from
his or her compensation or collect from Optionee and pay to the applicable
taxing authorities an amount in cash equal to a percentage of this compensation
income at the time of exercise, and may refuse to honor the exercise and refuse
to deliver Shares if such withholding amounts are not delivered at the time of
exercise.
(ii) Incentive Stock Option. If this Option qualifies as an ISO, the
Optionee will have no regular federal income tax liability upon its exercise,
although the excess, if any, of the Fair Market Value of the Exercised Shares on
the date of exercise over their aggregate Exercise Price will be treated as an
adjustment to alternative minimum taxable income for federal tax purposes and
may subject the Optionee to alternative minimum tax in the year of exercise. In
the event that the Optionee ceases to be an Employee but remains a Service
Provider, any Incentive Stock Option of the Optionee that remains unexercised
shall cease to qualify as an Incentive Stock Option and will be treated for tax
purposes as a Nonstatutory Stock Option on the date three (3) months and one (1)
day following such change of status.
(b) Disposition of Shares.
(i) NSO. If the Optionee holds NSO Shares for at least one year, any
gain realized on disposition of the Shares will be treated as long-term capital
gain for federal income tax purposes.
(ii) ISO. If the Optionee holds ISO Shares for at least one year
after exercise and two years after the grant date, any gain realized on
disposition of the Shares will be treated as long-term capital gain for federal
income tax purposes. If the Optionee disposes of ISO Shares within one year
after exercise or two years after the grant date, any gain realized on such
disposition will be treated as compensation income (taxable at ordinary income
rates) to the extent of the excess, if any, of the lesser of (A) the difference
between the Fair Market Value of the Shares acquired on the date of exercise and
the aggregate Exercise Price, or (B) the difference between the sale price of
such Shares and the aggregate Exercise Price. Any additional gain will be taxed
as capital gain, short-term or long-term depending on the period that the ISO
Shares were held.
(c) Notice of Disqualifying Disposition of ISO Shares. If the Optionee
sells or otherwise disposes of any of the Shares acquired pursuant to an ISO on
or before the later of (i) two years after the grant date, or (ii) one year
after the exercise date, the Optionee shall immediately notify the Company in
writing of such disposition. The Optionee agrees that he or she may be subject
to income tax withholding by the Company on the compensation income recognized
from such early disposition of ISO Shares by payment in cash or out of the
current earnings paid to the Optionee.
7. Entire Agreement; Governing Law. The Plan is incorporated herein by
reference. The Plan and this Option Agreement constitute the entire agreement
of the parties with respect to the subject matter hereof and supersede in their
entirety all prior undertakings and agreements of the Company and Optionee with
respect to the subject matter hereof, and may not be modified adversely
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<PAGE>
to the Optionee's interest except by means of a writing signed by the Company
and Optionee. This agreement is governed by the internal substantive laws, but
not the choice of law rules, of California.
8. NO GUARANTEE OF CONTINUED SERVICE. OPTIONEE ACKNOWLEDGES AND AGREES THAT
THE VESTING OF SHARES PURSUANT TO THE VESTING SCHEDULE HEREOF IS EARNED ONLY BY
CONTINUING AS A SERVICE PROVIDER AT THE WILL OF THE COMPANY (AND NOT THROUGH THE
ACT OF BEING HIRED, BEING GRANTED AN OPTION OR PURCHASING SHARES HEREUNDER).
OPTIONEE FURTHER ACKNOWLEDGES AND AGREES THAT THIS AGREEMENT, THE TRANSACTIONS
CONTEMPLATED HEREUNDER AND THE VESTING SCHEDULE SET FORTH HEREIN DO NOT
CONSTITUTE AN EXPRESS OR IMPLIED PROMISE OF CONTINUED ENGAGEMENT AS A SERVICE
PROVIDER FOR THE VESTING PERIOD, FOR ANY PERIOD, OR AT ALL, AND SHALL NOT
INTERFERE WITH OPTIONEE'S RIGHT OR THE COMPANY'S RIGHT TO TERMINATE OPTIONEE'S
RELATIONSHIP AS A SERVICE PROVIDER AT ANY TIME, WITH OR WITHOUT CAUSE.
By your signature and the signature of the Company's representative below, you
and the Company agree that this Option is granted under and governed by the
terms and conditions of the Plan and this Option Agreement. Optionee has
reviewed the Plan and this Option Agreement in their entirety, has had an
opportunity to obtain the advice of counsel prior to executing this Option
Agreement and fully understands all provisions of the Plan and Option Agreement.
Optionee hereby agrees to accept as binding, conclusive and final all decisions
or interpretations of the Administrator upon any questions relating to the Plan
and Option Agreement. Optionee further agrees to notify the Company upon any
change in the residence address indicated below.
OPTIONEE: RAMBUS INC.
_____________________________________ _____________________________________
Signature By
_____________________________________ _____________________________________
Print Name Title
____________________________________
Residence Address
____________________________________
EXHIBIT A
1997 STOCK PLAN
EXERCISE NOTICE
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<PAGE>
Rambus Inc.
2465 Latham Drive
Mountain View, CA 94040
Attention: Secretary
9. Exercise of Option. Effective as of today, ________________, 199__, the
undersigned ("Purchaser") hereby elects to purchase ______________ shares (the
"Shares") of the Common Stock of Rambus Inc. (the "Company") under and pursuant
to the 1997 Stock Plan (the "Plan") and the Stock Option Agreement dated
_____________, 19___ (the "Option Agreement"). The purchase price for the
Shares shall be $_____________, as required by the Option Agreement.
10. Delivery of Payment. Purchaser herewith delivers to the Company the full
purchase price for the Shares.
11. Representations of Purchaser. Purchaser acknowledges that Purchaser has
received, read and understood the Plan and the Option Agreement and agrees to
abide by and be bound by their terms and conditions.
12. Rights as Stockholder. Until the issuance (as evidenced by the
appropriate entry on the books of the Company or of a duly authorized transfer
agent of the Company) of the Shares, no right to vote or receive dividends or
any other rights as a stockholder shall exist with respect to the Optioned
Stock, notwithstanding the exercise of the Option. The Shares so acquired shall
be issued to the Optionee as soon as practicable after exercise of the Option.
No adjustment will be made for a dividend or other right for which the record
date is prior to the date of issuance, except as provided in Section 14 of the
Plan.
13. Tax Consultation. Purchaser understands that Purchaser may suffer adverse
tax consequences as a result of Purchaser's purchase or disposition of the
Shares. Purchaser represents that Purchaser has consulted with any tax
consultants Purchaser deems advisable in connection with the purchase or
disposition of the Shares and that Purchaser is not relying on the Company for
any tax advice.
14. Entire Agreement; Governing Law. The Plan and Option Agreement are
incorporated herein by reference. This Agreement, the Plan and the Option
Agreement constitute the entire agreement of the parties with respect to the
subject matter hereof and supersede in their entirety all prior undertakings and
agreements of the Company and Purchaser with respect to the subject matter
hereof, and may not be modified adversely to the Purchaser's interest except by
means of a writing
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<PAGE>
signed by the Company and Purchaser. This agreement is governed by the internal
substantive laws, but not the choice of law rules, of California.
Submitted by: Accepted by:
PURCHASER: RAMBUS INC.
_________________________________ ______________________________________
Signature By
_________________________________ ______________________________________
Print Name Title
Address: Address:
_________________________________ Rambus Inc.
2465 Latham Drive
_________________________________ Mountain View, CA 94040
_____________________________________
Date Received
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<PAGE>
EXHIBIT B
SECURITY AGREEMENT
This Security Agreement is made as of __________, 19___ between Rambus Inc., a
Delaware corporation ("Pledgee"), and _________________________ ("Pledgor").
Recitals
Pursuant to Pledgor's election to purchase Shares under the Option Agreement
dated ________ (the "Option"), between Pledgor and Pledgee under Pledgee's 1997
Stock Plan, and Pledgor's election under the terms of the Option to pay for such
shares with his promissory note (the "Note"), Pledgor has purchased _________
shares of Pledgee's Common Stock (the "Shares") at a price of $________ per
share, for a total purchase price of $__________. The Note and the obligations
thereunder are as set forth in Exhibit C to the Option.
NOW, THEREFORE, it is agreed as follows:
1. Creation and Description of Security Interest. In consideration of the
transfer of the Shares to Pledgor under the Option Agreement, Pledgor, pursuant
to the California Commercial Code, hereby pledges all of such Shares (herein
sometimes referred to as the "Collateral") represented by certificate number
______, duly endorsed in blank or with executed stock powers, and herewith
delivers said certificate to the Secretary of Pledgee ("Pledgeholder"), who
shall hold said certificate subject to the terms and conditions of this Security
Agreement.
The pledged stock (together with an executed blank stock assignment for use in
transferring all or a portion of the Shares to Pledgee if, as and when required
pursuant to this Security Agreement) shall be held by the Pledgeholder as
security for the repayment of the Note, and any extensions or renewals thereof,
to be executed by Pledgor pursuant to the terms of the Option, and the Pledge
holder shall not encumber or dispose of such Shares except in accordance with
the provisions of this Security Agreement.
2. Pledgor's Representations and Covenants. To induce Pledgee to enter into
this Security Agreement, Pledgor represents and covenants to Pledgee, its
successors and assigns, as follows:
a. Payment of Indebtedness. Pledgor will pay the principal sum of the
Note secured hereby, together with interest thereon, at the time and in the
manner provided in the Note.
b. Encumbrances. The Shares are free of all other encumbrances, defenses
and liens, and Pledgor will not further encumber the Shares without the prior
written consent of Pledgee.
c. Margin Regulations. In the event that Pledgee's Common Stock is now
or later becomes margin-listed by the Federal Reserve Board and Pledgee is
classified as a "lender" within the
<PAGE>
meaning of the regulations under Part 207 of Title 12 of the Code of Federal
Regulations ("Regulation G"), Pledgor agrees to cooperate with Pledgee in making
any amendments to the Note or providing any additional collateral as may be
necessary to comply with such regulations.
3. Voting Rights. During the term of this pledge and so long as all payments
of principal and interest are made as they become due under the terms of the
Note, Pledgor shall have the right to vote all of the Shares pledged hereunder.
4. Stock Adjustments. In the event that during the term of the pledge any
stock dividend, reclassification, readjustment or other changes are declared or
made in the capital structure of Pledgee, all new, substituted and additional
shares or other securities issued by reason of any such change shall be
delivered to and held by the Pledgee under the terms of this Security Agreement
in the same manner as the Shares originally pledged hereunder. In the event of
substitution of such securities, Pledgor, Pledgee and Pledgeholder shall
cooperate and execute such documents as are reasonable so as to provide for the
substitution of such Collateral and, upon such substitution, references to
"Shares" in this Security Agreement shall include the substituted shares of
capital stock of Pledgor as a result thereof.
5. Options and Rights. In the event that, during the term of this pledge,
subscription Options or other rights or options shall be issued in connection
with the pledged Shares, such rights, Options and options shall be the property
of Pledgor and, if exercised by Pledgor, all new stock or other securities so
acquired by Pledgor as it relates to the pledged Shares then held by
Pledgeholder shall be immediately delivered to Pledgeholder, to be held under
the terms of this Security Agreement in the same manner as the Shares pledged.
6. Default. Pledgor shall be deemed to be in default of the Note and of this
Security Agreement in the event:
a. Payment of principal or interest on the Note shall be delinquent for a
period of 10 days or more; or
b. Pledgor fails to perform any of the covenants set forth in the Option
or contained in this Security Agreement for a period of 10 days after written
notice thereof from Pledgee.
In the case of an event of Default, as set forth above, Pledgee shall have the
right to accelerate payment of the Note upon notice to Pledgor, and Pledgee
shall thereafter be entitled to pursue its remedies under the California
Commercial Code.
7. Release of Collateral. Subject to any applicable contrary rules under
Regulation G, there shall be released from this pledge a portion of the pledged
Shares held by Pledgeholder here under upon payments of the principal of the
Note. The number of the pledged Shares which shall be released shall be that
number of full Shares which bears the same proportion to the initial number of
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<PAGE>
Shares pledged hereunder as the payment of principal bears to the initial full
principal amount of the Note.
8. Withdrawal or Substitution of Collateral. Pledgor shall not sell,
withdraw, pledge, substitute or otherwise dispose of all or any part of the
Collateral without the prior written consent of Pledgee.
9. Term. The within pledge of Shares shall continue until the payment of all
indebtedness secured hereby, at which time the remaining pledged stock shall be
promptly delivered to Pledgor, subject to the provisions for prior release of a
portion of the Collateral as provided in paragraph 7 above.
10. Insolvency. Pledgor agrees that if a bankruptcy or insolvency proceeding
is instituted by or against it, or if a receiver is appointed for the property
of Pledgor, or if Pledgor makes an assignment for the benefit of creditors, the
entire amount unpaid on the Note shall become immediately due and payable, and
Pledgee may proceed as provided in the case of default.
11. Pledgeholder Liability. In the absence of willful or gross negligence,
Pledgeholder shall not be liable to any party for any of his acts, or omissions
to act, as Pledgeholder.
12. Invalidity of Particular Provisions. Pledgor and Pledgee agree that the
enforceability or invalidity of any provision or provisions of this Security
Agreement shall not render any other provision or provisions herein contained
unenforceable or invalid.
13. Successors or Assigns. Pledgor and Pledgee agree that all of the terms of
this Security Agreement shall be binding on their respective successors and
assigns, and that the term "Pledgor" and the term "Pledgee" as used herein shall
be deemed to include, for all purposes, the respective designees, successors,
assigns, heirs, executors and administrators.
14. Governing Law. This Security Agreement shall be interpreted and governed
under the internal substantive laws, but not the choice of law rules, of
California.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
day and year first above written.
"PLEDGOR" _________________________________
Signature
_________________________________
Print Name
Address: _________________________________
_________________________________
"PLEDGEE" Rambus Inc.,
a Delaware corporation
_________________________________
Signature
_________________________________
Print Name
_________________________________
Title
"PLEDGEHOLDER" _________________________________
Secretary of
Rambus Inc.
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<PAGE>
EXHIBIT C
NOTE
$_______________ [City, State]
______________, 19___
FOR VALUE RECEIVED, _______________ promises to pay to Rambus Inc., a Delaware
corporation (the "Company"), or order, the principal sum of
_______________________ ($_____________), together with interest on the unpaid
principal hereof from the date hereof at the rate of _______________ percent
(____%) per annum, compounded semiannually.
Principal and interest shall be due and payable on __________, 19___.
Payment of principal and interest shall be made in lawful money of the United
States of America.
The undersigned may at any time prepay all or any portion of the principal or
interest owing hereunder.
This Note is subject to the terms of the Option, dated as of ________________.
This Note is secured in part by a pledge of the Company's Common Stock under the
terms of a Security Agreement of even date herewith and is subject to all the
provisions thereof.
The holder of this Note shall have full recourse against the undersigned, and
shall not be required to proceed against the collateral securing this Note in
the event of default.
In the event the undersigned shall cease to be an employee, director or
consultant of the Company for any reason, this Note shall, at the option of the
Company, be accelerated, and the whole unpaid balance on this Note of principal
and accrued interest shall be immediately due and payable.
Should any action be instituted for the collection of this Note, the
reasonable costs and attorneys' fees therein of the holder shall be paid by the
undersigned.
____________________________________
____________________________________
<PAGE>
1997 STOCK PLAN
NOTICE OF GRANT OF STOCK PURCHASE RIGHT
Unless otherwise defined herein, the terms defined in the Plan shall have the
same defined meanings in this Notice of Grant.
[Grantee's Name and Address]
You have been granted the right to purchase Common Stock of the Company,
subject to the Company's Repurchase Option and your ongoing status as a Service
Provider (as described in the Plan and the attached Restricted Stock Purchase
Agreement), as follows:
Grant Number _________________________
Date of Grant _________________________
Price Per Share $________________________
Total Number of Shares Subject _________________________
to This Stock Purchase Right
Expiration Date: _________________________
YOU MUST EXERCISE THIS STOCK PURCHASE RIGHT BEFORE THE EXPIRATION DATE OR IT
WILL TERMINATE AND YOU WILL HAVE NO FURTHER RIGHT TO PURCHASE THE SHARES. By
your signature and the signature of the Company's representative below, you and
the Company agree that this Stock Purchase Right is granted under and governed
by the terms and conditions of the 1997 Stock Plan and the Restricted Stock
Purchase Agreement, attached hereto as Exhibit A-1, both of which are made a
part of this document. You further agree to execute the attached Restricted
Stock Purchase Agreement as a condition to purchasing any shares under this
Stock Purchase Right.
GRANTEE: RAMBUS INC.
___________________________ ________________________________
Signature By
___________________________ ________________________________
Print Name Title
<PAGE>
EXHIBIT A-1
1997 STOCK PLAN
RESTRICTED STOCK PURCHASE AGREEMENT
Unless otherwise defined herein, the terms defined in the Plan shall have the
same defined meanings in this Restricted Stock Purchase Agreement.
WHEREAS the Purchaser named in the Notice of Grant, (the "Purchaser") is an
Service Provider, and the Purchaser's continued participation is considered by
the Company to be important for the Company's continued growth; and
WHEREAS in order to give the Purchaser an opportunity to acquire an equity
interest in the Company as an incentive for the Purchaser to participate in the
affairs of the Company, the Administrator has granted to the Purchaser a Stock
Purchase Right subject to the terms and conditions of the Plan and the Notice of
Grant, which are incorporated herein by reference, and pursuant to this
Restricted Stock Purchase Agreement (the "Agreement").
NOW THEREFORE, the parties agree as follows:
1. Sale of Stock. The Company hereby agrees to sell to the Purchaser and the
Purchaser hereby agrees to purchase shares of the Company's Common Stock (the
"Shares"), at the per Share purchase price and as otherwise described in the
Notice of Grant.
2. Payment of Purchase Price. The purchase price for the Shares may be paid
by delivery to the Company at the time of execution of this Agreement of cash, a
check, or some combination thereof.
3. Repurchase Option.
(a) In the event the Purchaser ceases to be a Service Provider for any or
no reason (including death or disability) before all of the Shares are released
from the Company's Repurchase Option (see Section 4), the Company shall, upon
the date of such termination (as reasonably fixed and determined by the Company)
have an irrevocable, exclusive option (the "Repurchase Option") for a period of
sixty (60) days from such date to repurchase up to that number of shares which
constitute the Unreleased Shares (as defined in Section 4) at the original
purchase price per share (the "Repurchase Price"). The Repurchase Option shall
be exercised by the Company by delivering written notice to the Purchaser or the
Purchaser's executor (with a copy to the Escrow Holder) AND, at the Company's
option, (i) by delivering to the Purchaser or the Purchaser's executor a check
in the amount of the aggregate Repurchase Price, or (ii) by canceling an amount
of the Purchaser's indebtedness to the Company equal to the aggregate Repurchase
Price, or (iii) by a combination of (i) and (ii) so that the combined payment
and cancellation of indebtedness equals the aggregate Repurchase Price. Upon
delivery of such notice and the payment of the aggregate Repurchase Price, the
Company shall become the legal and beneficial owner of the Shares being
repurchased and all
<PAGE>
rights and interests therein or relating thereto, and the Company shall have the
right to retain and transfer to its own name the number of Shares being
repurchased by the Company.
(b) Whenever the Company shall have the right to repurchase Shares
hereunder, the Company may designate and assign one or more employees, officers,
directors or stockholders of the Company or other persons or organizations to
exercise all or a part of the Company's purchase rights under this Agreement and
purchase all or a part of such Shares. If the Fair Market Value of the Shares
to be repurchased on the date of such designation or assignment (the "Repurchase
FMV") exceeds the aggregate Repurchase Price of such Shares, then each such
designee or assignee shall pay the Company cash equal to the difference between
the Repurchase FMV and the aggregate Repurchase Price of such Shares.
4. Release of Shares From Repurchase Option.
(a) _______________________ percent (______%) of the Shares shall be
released from the Company's Repurchase Option [one year] after the Date of
Grant and __________________ percent (______%) of the Shares [at the end of each
month thereafter], provided that the Purchaser does not cease to be a Service
Provider prior to the date of any such release.
(b) Any of the Shares that have not yet been released from the Repurchase
Option are referred to herein as "Unreleased Shares."
(c) The Shares that have been released from the Repurchase Option shall be
delivered to the Purchaser at the Purchaser's request (see Section 6).
5. Restriction on Transfer. Except for the escrow described in Section 6 or
the transfer of the Shares to the Company or its assignees contemplated by this
Agreement, none of the Shares or any beneficial interest therein shall be
transferred, encumbered or otherwise disposed of in any way until such Shares
are released from the Company's Repurchase Option in accordance with the
provisions of this Agreement, other than by will or the laws of descent and
distribution.
6. Escrow of Shares.
(a) To ensure the availability for delivery of the Purchaser's Unreleased
Shares upon repurchase by the Company pursuant to the Repurchase Option, the
Purchaser shall, upon execution of this Agreement, deliver and deposit with an
escrow holder designated by the Company (the "Escrow Holder") the share
certificates representing the Unreleased Shares, together with the stock
assignment duly endorsed in blank, attached hereto as Exhibit A-2. The
Unreleased Shares and stock assignment shall be held by the Escrow Holder,
pursuant to the Joint Escrow Instructions of the Company and Purchaser attached
hereto as Exhibit A-3, until such time as the Company's Repurchase Option
expires.
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<PAGE>
(b) The Escrow Holder shall not be liable for any act it may do or omit to
do with respect to holding the Unreleased Shares in escrow while acting in good
faith and in the exercise of its judgment.
(c) If the Company or any assignee exercises the Repurchase Option
hereunder, the Escrow Holder, upon receipt of written notice of such exercise
from the proposed transferee, shall take all steps necessary to accomplish such
transfer.
(d) When the Repurchase Option has been exercised or expires unexercised
or a portion of the Shares has been released from the Repurchase Option, upon
request the Escrow Holder shall promptly cause a new certificate to be issued
for the released Shares and shall deliver the certificate to the Company or the
Purchaser, as the case may be.
(e) Subject to the terms hereof, the Purchaser shall have all the rights
of a stockholder with respect to the Shares while they are held in escrow,
including without limitation, the right to vote the Shares and to receive any
cash dividends declared thereon. If, from time to time during the term of the
Repurchase Option, there is (i) any stock dividend, stock split or other change
in the Shares, or (ii) any merger or sale of all or substantially all of the
assets or other acquisition of the Company, any and all new, substituted or
additional securities to which the Purchaser is entitled by reason of the
Purchaser's ownership of the Shares shall be immediately subject to this escrow,
deposited with the Escrow Holder and included thereafter as "Shares" for
purposes of this Agreement and the Repurchase Option.
7. Legends. The share certificate evidencing the Shares, if any, issued
hereunder shall be endorsed with the following legend (in addition to any legend
required under applicable state securities laws):
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN RESTRICTIONS
UPON TRANSFER AND RIGHTS OF REPURCHASE AS SET FORTH IN AN AGREEMENT BETWEEN THE
COMPANY AND THE Stockholder, A COPY OF WHICH IS ON FILE WITH THE SECRETARY OF
THE COMPANY.
8. Adjustment for Stock Split. All references to the number of Shares and
the purchase price of the Shares in this Agreement shall be appropriately
adjusted to reflect any stock split, stock dividend or other change in the
Shares which may be made by the Company after the date of this Agreement.
9. Tax Consequences. The Purchaser has reviewed with the Purchaser's own tax
advisors the federal, state, local and foreign tax consequences of this
investment and the transactions contemplated by this Agreement. The Purchaser
is relying solely on such advisors and not on any statements or representations
of the Company or any of its agents. The Purchaser understands that the
Purchaser (and not the Company) shall be responsible for the Purchaser's own tax
liability that may arise as a result of the transactions contemplated by this
Agreement. The Purchaser understands that
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<PAGE>
Section 83 of the Internal Revenue Code of 1986, as amended (the "Code"), taxes
as ordinary income the difference between the purchase price for the Shares and
the Fair Market Value of the Shares as of the date any restrictions on the
Shares lapse. In this context, "restriction" includes the right of the Company
to buy back the Shares pursuant to the Repurchase Option. The Purchaser
understands that the Purchaser may elect to be taxed at the time the Shares are
purchased rather than when and as the Repurchase Option expires by filing an
election under Section 83(b) of the Code with the IRS within 30 days from the
date of purchase. The form for making this election is attached as Exhibit A-4
hereto.
THE PURCHASER ACKNOWLEDGES THAT IT IS THE PURCHASER'S SOLE RESPONSIBILITY
AND NOT THE COMPANY'S TO FILE TIMELY THE ELECTION UNDER SECTION 83(b), EVEN IF
THE PURCHASER REQUESTS THE COMPANY OR ITS REPRESENTATIVES TO MAKE THIS FILING ON
THE PURCHASER'S BEHALF.
10. General Provisions.
(a) This Agreement shall be governed by the internal substantive laws, but
not the choice of law rules of California. This Agreement, subject to the terms
and conditions of the Plan and the Notice of Grant, represents the entire
agreement between the parties with respect to the purchase of the Shares by the
Purchaser. Subject to Section 16(c) of the Plan, in the event of a conflict
between the terms and conditions of the Plan and the terms and conditions of
this Agreement, the terms and conditions of the Plan shall prevail. Unless
otherwise defined herein, the terms defined in the Plan shall have the same
defined meanings in this Agreement.
(b) Any notice, demand or request required or permitted to be given by
either the Company or the Purchaser pursuant to the terms of this Agreement
shall be in writing and shall be deemed given when delivered personally or
deposited in the U.S. mail, First Class with postage prepaid, and addressed to
the parties at the addresses of the parties set forth at the end of this
Agreement or such other address as a party may request by notifying the other in
writing.
Any notice to the Escrow Holder shall be sent to the Company's address
with a copy to the other party hereto.
(c) The rights of the Company under this Agreement shall be transferable
to any one or more persons or entities, and all covenants and agreements
hereunder shall inure to the benefit of, and be enforceable by the Company's
successors and assigns. The rights and obligations of the Purchaser under this
Agreement may only be assigned with the prior written consent of the Company.
(d) Either party's failure to enforce any provision of this Agreement
shall not in any way be construed as a waiver of any such provision, nor prevent
that party from thereafter enforcing any other provision of this Agreement. The
rights granted both parties hereunder are cumulative and shall not constitute a
waiver of either party's right to assert any other legal remedy available to it.
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<PAGE>
(e) The Purchaser agrees upon request to execute any further documents or
instruments necessary or desirable to carry out the purposes or intent of this
Agreement.
(f) PURCHASER ACKNOWLEDGES AND AGREES THAT THE VESTING OF SHARES PURSUANT
TO SECTION 4 HEREOF IS EARNED ONLY BY CONTINUING SERVICE AS A SERVICE PROVIDER
AT THE WILL OF THE COMPANY (AND NOT THROUGH THE ACT OF BEING HIRED OR PURCHASING
SHARES HEREUNDER). PURCHASER FURTHER ACKNOWLEDGES AND AGREES THAT THIS
AGREEMENT, THE TRANSACTIONS CONTEMPLATED HEREUNDER AND THE VESTING SCHEDULE SET
FORTH HEREIN DO NOT CONSTITUTE AN EXPRESS OR IMPLIED PROMISE OF CONTINUED
ENGAGEMENT AS A SERVICE PROVIDER FOR THE VESTING PERIOD, FOR ANY PERIOD, OR AT
ALL, AND SHALL NOT INTERFERE WITH PURCHASER'S RIGHT OR THE COMPANY'S RIGHT TO
TERMINATE PURCHASER'S RELATIONSHIP AS A SERVICE PROVIDER AT ANY TIME, WITH OR
WITHOUT CAUSE.
By Purchaser's signature below, Purchaser represents that he or she is
familiar with the terms and provisions of the Plan, and hereby accepts this
Agreement subject to all of the terms and provisions thereof. Purchaser has
reviewed the Plan and this Agreement in their entirety, has had an opportunity
to obtain the advice of counsel prior to executing this Agreement and fully
understands all provisions of this Agreement. Purchaser agrees to accept as
binding, conclusive and final all decisions or interpretations of the
Administrator upon any questions arising under the Plan or this Agreement.
Purchaser further agrees to notify the Company upon any change in the residence
indicated in the Notice of Grant.
DATED: _____________________
PURCHASER: RAMBUS INC.
_____________________________ _________________________________
Signature By
_____________________________ _________________________________
Print Name Title
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<PAGE>
EXHIBIT A-2
ASSIGNMENT SEPARATE FROM CERTIFICATE
FOR VALUE RECEIVED I, __________________________, hereby sell, assign and
transfer unto ____________________________________(__________) shares of the
Common Stock of Rambus Inc. standing in my name of the books of said
corporation represented by Certificate No. _____ herewith and do hereby
irrevocably constitute and appoint _________________________________________
______ to transfer the said stock on the books of the within named corporation
with full power of substitution in the premises.
This Stock Assignment may be used only in accordance with the Restricted Stock
Purchase Agreement (the "Agreement") between________________________ and the
undersigned dated ______________, 19__.
Dated: _______________, 19__
Signature:______________________________
INSTRUCTIONS: Please do not fill in any blanks other than the signature line.
The purpose of this assignment is to enable the Company to exercise the
Repurchase Option, as set forth in the Agreement, without requiring additional
signatures on the part of the Purchaser.
<PAGE>
EXHIBIT A-3
JOINT ESCROW INSTRUCTIONS
_____________, 19__
Corporate Secretary
Rambus Inc.
2465 Latham Drive
Mountain View, CA 94040
Dear _________________:
As Escrow Agent for both Rambus Inc., a Delaware corporation (the "Company"),
and the undersigned purchaser of stock of the Company (the "Purchaser"), you are
hereby authorized and directed to hold the documents delivered to you pursuant
to the terms of that certain Restricted Stock Purchase Agreement ("Agreement")
between the Company and the undersigned, in accordance with the following
instructions:
1. In the event the Company and/or any assignee of the Company (referred to
collectively as the "Company") exercises the Company's Repurchase Option set
forth in the Agreement, the Company shall give to Purchaser and you a written
notice specifying the number of shares of stock to be purchased, the purchase
price, and the time for a closing hereunder at the principal office of the
Company. Purchaser and the Company hereby irrevocably authorize and direct you
to close the transaction contemplated by such notice in accordance with the
terms of said notice.
2. At the closing, you are directed (a) to date the stock assignments
necessary for the transfer in question, (b) to fill in the number of shares
being transferred, and (c) to deliver same, together with the certificate
evidencing the shares of stock to be transferred, to the Company or its
assignee, against the simultaneous delivery to you of the purchase price (by
cash, a check, or some combination thereof) for the number of shares of stock
being purchased pursuant to the exercise of the Company's Repurchase Option.
3. Purchaser irrevocably authorizes the Company to deposit with you any
certificates evidencing shares of stock to be held by you hereunder and any
additions and substitutions to said shares as defined in the Agreement.
Purchaser does hereby irrevocably constitute and appoint you as Purchaser's
attorney-in-fact and agent for the term of this escrow to execute with respect
to such securities all documents necessary or appropriate to make such
securities negotiable and to complete any transaction herein contemplated,
including but not limited to the filing with any applicable state blue sky
authority of any required applications for consent to, or notice of transfer of,
the securities. Subject to the provisions of this paragraph 3, Purchaser shall
exercise all rights and privileges of a stockholder of the Company while the
stock is held by you.
<PAGE>
4. Upon written request of the Purchaser, but no more than once per calendar
year, unless the Company's Repurchase Option has been exercised, you shall
deliver to Purchaser a certificate or certificates representing so many shares
of stock as are not then subject to the Company's Repurchase Option. Within 90
days after Purchaser ceases to be a Service Provider, you shall deliver to
Purchaser a certificate or certificates representing the aggregate number of
shares held or issued pursuant to the Agreement and not purchased by the Company
or its assignees pursuant to exercise of the Company's Repurchase Option.
5. If at the time of termination of this escrow you should have in your
possession any documents, securities, or other property belonging to Purchaser,
you shall deliver all of the same to Purchaser and shall be discharged of all
further obligations hereunder.
6. Your duties hereunder may be altered, amended, modified or revoked only by
a writing signed by all of the parties hereto.
7. You shall be obligated only for the performance of such duties as are
specifically set forth herein and may rely and shall be protected in relying or
refraining from acting on any instrument reasonably believed by you to be
genuine and to have been signed or presented by the proper party or parties.
You shall not be personally liable for any act you may do or omit to do
hereunder as Escrow Agent or as attorney-in-fact for Purchaser while acting in
good faith, and any act done or omitted by you pursuant to the advice of your
own attorneys shall be conclusive evidence of such good faith.
8. You are hereby expressly authorized to disregard any and all warnings
given by any of the parties hereto or by any other person or corporation,
excepting only orders or process of courts of law, and are hereby expressly
authorized to comply with and obey orders, judgments or decrees of any court.
In case you obey or comply with any such order, judgment or decree, you shall
not be liable to any of the parties hereto or to any other person, firm or
corporation by reason of such compliance, notwithstanding any such order,
judgment or decree being subsequently reversed, modified, annulled, set aside,
vacated or found to have been entered without jurisdiction.
9. You shall not be liable in any respect on account of the identity,
authorities or rights of the parties executing or delivering or purporting to
execute or deliver the Agreement or any documents or papers deposited or called
for hereunder.
10. You shall not be liable for the outlawing of any rights under the statute
of limitations with respect to these Joint Escrow Instructions or any documents
deposited with you.
11. You shall be entitled to employ such legal counsel and other experts as
you may deem necessary properly to advise you in connection with your
obligations hereunder, may rely upon the advice of such counsel, and may pay
such counsel reasonable compensation therefor.
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<PAGE>
12. Your responsibilities as Escrow Agent hereunder shall terminate if you
shall cease to be an officer or agent of the Company or if you shall resign by
written notice to each party. In the event of any such termination, the Company
shall appoint a successor Escrow Agent.
13. If you reasonably require other or further instruments in connection with
these Joint Escrow Instructions or obligations in respect hereto, the necessary
parties hereto shall join in furnishing such instruments.
14. It is understood and agreed that should any dispute arise with respect to
the delivery and/or ownership or right of possession of the securities held by
you hereunder, you are authorized and directed to retain in your possession
without liability to anyone all or any part of said securities until such
disputes shall have been settled either by mutual written agreement of the
parties concerned or by a final order, decree or judgment of a court of
competent jurisdiction after the time for appeal has expired and no appeal has
been perfected, but you shall be under no duty whatsoever to institute or defend
any such proceedings.
15. Any notice required or permitted hereunder shall be given in writing and
shall be deemed effectively given upon personal delivery or upon deposit in the
United States Post Office, by registered or certified mail with postage and fees
prepaid, addressed to each of the other parties thereunto entitled at the
following addresses or at such other addresses as a party may designate by ten
days' advance written notice to each of the other parties hereto.
COMPANY: Rambus Inc.
2465 Latham Drive
Mountain View, CA 94040
PURCHASER:
_____________________________
_____________________________
_____________________________
ESCROW AGENT: Corporate Secretary
Rambus Inc.
2465 Latham Drive
Mountain View, CA 94040
16. By signing these Joint Escrow Instructions, you become a party hereto only
for the purpose of said Joint Escrow Instructions; you do not become a party to
the Agreement.
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<PAGE>
17. This instrument shall be binding upon and inure to the benefit of the
parties hereto, and their respective successors and permitted assigns.
18. These Joint Escrow Instructions shall be governed by, and construed and
enforced in accordance with, the internal substantive laws, but not the choice
of law rules, of California.
Very truly yours,
RAMBUS INC.
___________________________________
By
___________________________________
Title
PURCHASER:
___________________________________
Signature
___________________________________
Print Name
ESCROW AGENT:
_____________________________________
Corporate Secretary
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<PAGE>
EXHIBIT A-4
ELECTION UNDER SECTION 83(b)
OF THE INTERNAL REVENUE CODE OF 1986
The undersigned taxpayer hereby elects, pursuant to Section 83(b) of the
Internal Revenue Code of 1986, as amended, to include in taxpayer's gross income
for the current taxable year the amount of any compensation taxable to taxpayer
in connection with his or her receipt of the property described below:
1. The name, address, taxpayer identification number and taxable year of the
undersigned are as follows:
NAME: TAXPAYER: SPOUSE:
ADDRESS:
IDENTIFICATION NO.: TAXPAYER: SPOUSE:
TAXABLE YEAR:
2. The property with respect to which the election is made is described as
follows: __________ shares (the "Shares") of the Common Stock of Rambus,
Inc. (the "Company").
3. The date on which the property was transferred is: ______________, 19__.
4. The property is subject to the following restrictions:
The Shares may be repurchased by the Company, or its assignee, upon certain
events. This right lapses with regard to a portion of the Shares based on
the continued performance of services by the taxpayer over time.
5. The fair market value at the time of transfer, determined without regard to
any restriction other than a restriction which by its terms will never
lapse, of such property is:
$_______________.
6. The amount (if any) paid for such property is:
$_______________.
The undersigned has submitted a copy of this statement to the person for whom
the services were performed in connection with the undersigned's receipt of the
above-described property. The transferee of such property is the person
performing the services in connection with the transfer of said property.
The undersigned understands that the foregoing election may not be revoked
except with the consent of the Commissioner.
Dated: ___________________, 19____ ___________________________________
Taxpayer
The undersigned spouse of taxpayer joins in this election.
Dated: ___________________, 19____ ___________________________________
Spouse of Taxpayer
<PAGE>
EXHIBIT 10.7
RAMBUS INC.
1997 EMPLOYEE STOCK PURCHASE PLAN
The following constitute the provisions of the 1997 Employee Stock Purchase
Plan of Rambus Inc.
1. Purpose. The purpose of the Plan is to provide employees of the
Company and its Designated Subsidiaries with an opportunity to purchase Common
Stock of the Company through accumulated payroll deductions. It is the intention
of the Company to have the Plan qualify as an "Employee Stock Purchase Plan"
under Section 423 of the Internal Revenue Code of 1986, as amended. The
provisions of the Plan, accordingly, shall be construed so as to extend and
limit participation in a manner consistent with the requirements of that section
of the Code .
2. Definitions.
(a) "Board" shall mean the Board of Directors of the Company.
(b) "Code" shall mean the Internal Revenue Code of 1986, as amended.
(c) "Common Stock" shall mean the Common Stock of the Company.
(d) "Company" shall mean Rambus Inc. and any Designated Subsidiary of
the Company.
(e) "Compensation" shall mean all base straight time gross earnings,
but exclusive of payments for overtime, shift premium, incentive compensation,
incentive payments, bonuses and other compensation.
(f) "Designated Subsidiary" shall mean any Subsidiary which has been
designated by the Board from time to time in its sole discretion as eligible to
participate in the Plan.
(g) "Employee" shall mean any individual who is an Employee of the
Company for tax purposes whose customary employment with the Company is at least
twenty (20) hours per week and more than five (5) months in any calendar year.
For purposes of the Plan, the employment relationship shall be treated as
continuing intact while the individual is on sick leave or other leave of
absence approved by the Company. Where the period of leave exceeds 90 days and
the individual's right to reemployment is not guaranteed either by statute or by
contract, the employment relationship shall be deemed to have terminated on the
91st day of such leave.
(h) "Enrollment Date" shall mean the first day of each Offering
Period.
(i) "Exercise Date" shall mean the last day of each Purchase Period.
<PAGE>
(j) "Fair Market Value" shall mean, as of any date, the value of
Common Stock determined as follows:
(1) If the Common Stock is listed on any established stock
exchange or a national market system, including without limitation the Nasdaq
National Market or The Nasdaq SmallCap Market of The Nasdaq Stock Market, its
Fair Market Value shall be the closing sales price for such stock (or the
closing bid, if no sales were reported) as quoted on such exchange or system for
the last market trading day prior to the time of determination, as reported in
The Wall Street Journal or such other source as the Administrator deems
reliable, or;
(2) If the Common Stock is regularly quoted by a recognized
securities dealer but selling prices are not reported, its Fair Market Value
shall be the mean of the closing bid and asked prices for the Common Stock on
the date of such determination, as reported in The Wall Street Journal or such
other source as the Board deems reliable, or;
(3) In the absence of an established market for the Common Stock,
the Fair Market Value thereof shall be determined in good faith by the Board,
or;
(4) For purposes of the Enrollment Date of the first Offering
Period under the Plan, the Fair Market Value shall be the initial price to the
public as set forth in the final prospectus included within the registration
statement in Form S-1 filed with the Securities and Exchange Commission for the
initial public offering of the Company's Common Stock (the "Registration
Statement").
(k) "Offering Periods" shall mean the periods of approximately twenty-
four (24) months during which an option granted pursuant to the Plan may be
exercised, commencing on the first Trading Day on or after May 1 and November 1
of each year and terminating on the last Trading Day in the periods ending
twenty-four months later; provided, however, that the first Offering Period
under the Plan shall commence with the first Trading Day on or after the date on
which the Securities and Exchange Commission declares the Company's Registration
Statement effective and ending on the last Trading Day on or after April 30,
1999. The duration and timing of Offering Periods may be changed pursuant to
Section 4 of this Plan.
(l) "Plan" shall mean this Employee Stock Purchase Plan.
(m) "Purchase Price" shall mean an amount equal to 85% of the Fair
Market Value of a share of Common Stock on the Enrollment Date or on the
Exercise Date, whichever is lower.
(n) "Purchase Period" shall mean the approximately six month period
commencing after one Exercise Date and ending with the next Exercise Date,
except that the first Purchase Period of any Offering Period shall commence on
the Enrollment Date and end with the next Exercise Date.
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<PAGE>
(o) "Reserves" shall mean the number of shares of Common Stock covered
by each option under the Plan which have not yet been exercised and the number
of shares of Common Stock which have been authorized for issuance under the Plan
but not yet placed under option.
(p) "Subsidiary" shall mean a corporation, domestic or foreign, of
which not less than 50% of the voting shares are held by the Company or a
Subsidiary, whether or not such corporation now exists or is hereafter organized
or acquired by the Company or a Subsidiary.
(q) "Trading Day" shall mean a day on which national stock exchanges
and the Nasdaq System are open for trading.
3. Eligibility.
(a) Any Employee who shall be employed by the Company on a given
Enrollment Date shall be eligible to participate in the Plan.
(b) Any provisions of the Plan to the contrary notwithstanding, no
Employee shall be granted an option under the Plan (i) to the extent that,
immediately after the grant, such Employee (or any other person whose stock
would be attributed to such Employee pursuant to Section 424(d) of the Code)
would own capital stock of the Company and/or hold outstanding options to
purchase such stock possessing five percent (5%) or more of the total combined
voting power or value of all classes of the capital stock of the Company or of
any Subsidiary, or (ii) to the extent that his or her rights to purchase stock
under all employee stock purchase plans of the Company and its subsidiaries
accrues at a rate which exceeds Twenty-Five Thousand Dollars ($25,000) worth of
stock (determined at the fair market value of the shares at the time such option
is granted) for each calendar year in which such option is outstanding at any
time.
4. Offering Periods. The Plan shall be implemented by consecutive,
overlapping Offering Periods with a new Offering Period commencing on the first
Trading Day on or after May 1 and November 1 each year, or on such other date as
the Board shall determine, and continuing thereafter until terminated in
accordance with Section 20 hereof; provided, however, that the first Offering
Period under the Plan shall commence with the first Trading Day on or after the
date on which the Securities and Exchange Commission declares the Company's
Registration Statement effective and ending on the last Trading Day on or after
April 30, 1999. The Board shall have the power to change the duration of
Offering Periods (including the commencement dates thereof) with respect to
future offerings without shareholder approval if such change is announced at
least five (5) days prior to the scheduled beginning of the first Offering
Period to be affected thereafter.
5. Participation.
(a) An eligible Employee may become a participant in the Plan by
completing a subscription agreement authorizing payroll deductions in the form
of Exhibit A to this Plan and filing it with the Company's payroll office prior
to the applicable Enrollment Date.
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<PAGE>
(b) Payroll deductions for a participant shall commence on the first
payroll following the Enrollment Date and shall end on the last payroll in the
Offering Period to which such authorization is applicable, unless sooner
terminated by the participant as provided in Section 10 hereof.
6. Payroll Deductions.
(a) At the time a participant files his or her subscription agreement,
he or she shall elect to have payroll deductions made on each pay day during the
Offering Period in an amount not exceeding fifteen (15%) of the Compensation
which he or she receives on each pay day during the Offering Period.
(b) All payroll deductions made for a participant shall be credited to
his or her account under the Plan and shall be withheld in whole percentages
only. A participant may not make any additional payments into such account.
(c) A participant may discontinue his or her participation in the Plan
as provided in Section 10 hereof, or may increase or decrease the rate of his or
her payroll deductions during the Offering Period by completing or filing with
the Company a new subscription agreement authorizing a change in payroll
deduction rate. The Board may, in its discretion, limit the number of
participation rate changes during any Offering Period. The change in rate shall
be effective with the first full payroll period following five (5) business days
after the Company's receipt of the new subscription agreement unless the Company
elects to process a given change in participation more quickly. A participant's
subscription agreement shall remain in effect for successive Offering Periods
unless terminated as provided in Section 10 hereof.
(d) Notwithstanding the foregoing, to the extent necessary to comply
with Section 423(b)(8) of the Code and Section 3(b) hereof, a participant's
payroll deductions may be decreased to zero percent (0%) at any time during a
Purchase Period. Payroll deductions shall recommence at the rate provided in
such participant's subscription agreement at the beginning of the first Purchase
Period which is scheduled to end in the following calendar year, unless
terminated by the participant as provided in Section 10 hereof.
(e) At the time the option is exercised, in whole or in part, or at
the time some or all of the Company's Common Stock issued under the Plan is
disposed of, the participant must make adequate provision for the Company's
federal, state, or other tax withholding obligations, if any, which arise upon
the exercise of the option or the disposition of the Common Stock. At any time,
the Company may, but shall not be obligated to, withhold from the participant's
compensation the amount necessary for the Company to meet applicable withholding
obligations, including any withholding required to make available to the Company
any tax deductions or benefits attributable to sale or early disposition of
Common Stock by the Employee.
-4-
<PAGE>
7. Grant of Option. On the Enrollment Date of each Offering Period, each
eligible Employee participating in such Offering Period shall be granted an
option to purchase on each Exercise Date during such Offering Period (at the
applicable Purchase Price) up to a number of shares of the Company's Common
Stock determined by dividing such Employee's payroll deductions accumulated
prior to such Exercise Date and retained in the Participant's account as of the
Exercise Date by the applicable Purchase Price; provided that such purchase
shall be subject to the limitations set forth in Sections 3(b) and 12 hereof.
Exercise of the option shall occur as provided in Section 8 hereof, unless the
participant has withdrawn pursuant to Section 10 hereof. The option shall expire
on the last day of the Offering Period.
8. Exercise of Option. Unless a participant withdraws from the Plan as
provided in Section 10 hereof, his or her option for the purchase of shares
shall be exercised automatically on the Exercise Date, and the maximum number of
full shares subject to option shall be purchased for such participant at the
applicable Purchase Price with the accumulated payroll deductions in his or her
account. No fractional shares shall be purchased; any payroll deductions
accumulated in a participant's account which are not sufficient to purchase a
full share shall be retained in the participant's account for the subsequent
Purchase Period or Offering Period, subject to earlier with drawal by the
participant as provided in Section 10 hereof. Any other monies left over in a
participant's account after the Exercise Date shall be returned to the
participant. During a participant's lifetime, a participant's option to purchase
shares hereunder is exercisable only by him or her.
9. Delivery. As promptly as practicable after each Exercise Date on which
a purchase of shares occurs, the Company shall arrange the delivery to each
participant, as appropriate, of a certificate representing the shares purchased
upon exercise of his or her option.
10. Withdrawal.
(a) A participant may withdraw all but not less than all the payroll
deductions credited to his or her account and not yet used to exercise his or
her option under the Plan at any time by giving written notice to the Company in
the form of Exhibit B to this Plan. All of the participant's payroll deductions
credited to his or her account shall be paid to such participant promptly after
receipt of notice of withdrawal and such participant's option for the Offering
Period shall be automatically terminated, and no further payroll deductions for
the purchase of shares shall be made for such Offering Period. If a participant
withdraws from an Offering Period, payroll deductions shall not resume at the
beginning of the succeeding Offering Period unless the participant delivers to
the Company a new subscription agreement.
(b) A participant's withdrawal from an Offering Period shall not have
any effect upon his or her eligibility to participate in any similar plan which
may hereafter be adopted by the Company or in succeeding Offering Periods which
commence after the termination of the Offering Period from which the participant
withdraws.
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<PAGE>
11. Termination of Employment.
Upon a participant's ceasing to be an Employee, for any reason, he or
she shall be deemed to have elected to withdraw from the Plan and the payroll
deductions credited to such participant's account during the Offering Period but
not yet used to exercise the option shall be returned to such participant or, in
the case of his or her death, to the person or persons entitled thereto under
Section 15 hereof, and such participant's option shall be automatically
terminated. The preceding sentence notwithstanding, a participant who receives
payment in lieu of notice of termination of employment shall be treated as
continuing to be an Employee for the participant's customary number of hours per
week of employment during the period in which the participant is subject to such
payment in lieu of notice.
12. Interest. No interest shall accrue on the payroll deductions of a
participant in the Plan.
13. Stock.
(a) Subject to Section 19, the maximum number of shares of the
Company's Common Stock which shall be made available for sale under the Plan
shall be 400,000 shares, plus an annual increase as of the last day of each of
the Company's immediately preceding fiscal years during the term of Plan equal
to the lesser of (i) the number of Shares needed to restore the maximum
aggregate number of Shares which may be optioned and sold under the Plan to
400,000 Shares, (ii) one percent (1%) of the outstanding Shares on such date, or
(iii) a lesser amount determined by the Board. If, on a given Exercise Date, the
number of shares with respect to which options are to be exercised exceeds the
number of shares then available under the Plan, the Company shall make a pro
rata allocation of the shares remaining available for purchase in as uniform a
manner as shall be practicable and as it shall determine to be equitable.
(b) The participant shall have no interest or voting right in shares
covered by his option until such option has been exercised.
(c) Shares to be delivered to a participant under the Plan shall be
registered in the name of the participant or in the name of the participant and
his or her spouse.
14. Administration. The Plan shall be administered by the Board or a
committee of members of the Board appointed by the Board. The Board or its
committee shall have full and exclu sive discretionary authority to construe,
interpret and apply the terms of the Plan, to determine eligibility and to
adjudicate all disputed claims filed under the Plan. Every finding, decision and
determination made by the Board or its committee shall, to the full extent
permitted by law, be final and binding upon all parties.
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<PAGE>
15. Designation of Beneficiary.
(a) A participant may file a written designation of a beneficiary who
is to receive any shares and cash, if any, from the participant's account under
the Plan in the event of such partici pant's death subsequent to an Exercise
Date on which the option is exercised but prior to delivery to such participant
of such shares and cash. In addition, a participant may file a written
designation of a beneficiary who is to receive any cash from the participant's
account under the Plan in the event of such participant's death prior to
exercise of the option. If a participant is married and the designated
beneficiary is not the spouse, spousal consent shall be required for such
designation to be effective.
(b) Such designation of beneficiary may be changed by the participant
at any time by written notice. In the event of the death of a participant and in
the absence of a beneficiary validly designated under the Plan who is living at
the time of such participant's death, the Company shall deliver such shares
and/or cash to the executor or administrator of the estate of the participant,
or if no such executor or administrator has been appointed (to the knowledge of
the Company), the Company, in its discretion, may deliver such shares and/or
cash to the spouse or to any one or more dependents or relatives of the
participant, or if no spouse, dependent or relative is known to the Company,
then to such other person as the Company may designate.
16. Transferability. Neither payroll deductions credited to a
participant's account nor any rights with regard to the exercise of an option or
to receive shares under the Plan may be assigned, transferred, pledged or
otherwise disposed of in any way (other than by will, the laws of descent and
distribution or as provided in Section 15 hereof) by the participant. Any such
attempt at assignment, transfer, pledge or other disposition shall be without
effect, except that the Company may treat such act as an election to withdraw
funds from an Offering Period in accordance with Section 10 hereof.
17. Use of Funds. All payroll deductions received or held by the Company
under the Plan may be used by the Company for any corporate purpose, and the
Company shall not be obligated to segregate such payroll deductions.
18. Reports. Individual accounts shall be maintained for each participant
in the Plan. Statements of account shall be given to participating Employees at
least annually, which statements shall set forth the amounts of payroll
deductions, the Purchase Price, the number of shares purchased and the remaining
cash balance, if any.
19. Adjustments Upon Changes in Capitalization, Dissolution, Liquidation,
Merger or Asset Sale.
(a) Changes in Capitalization. Subject to any required action by the
shareholders of the Company, the Reserves, the maximum number of shares each
participant may purchase each Purchase Period (pursuant to Section 7), as well
as the price per share and the number of shares of Common Stock covered by each
option under the Plan which has not yet been exercised shall be proportionately
adjusted for any increase or decrease in the number of issued shares of Common
-7-
<PAGE>
Stock resulting from a stock split, reverse stock split, stock dividend,
combination or reclassification of the Common Stock, or any other increase or
decrease in the number of shares of Common Stock effected without receipt of
consideration by the Company; provided, however, that conversion of any
convertible securities of the Company shall not be deemed to have been "effected
without receipt of consideration". Such adjustment shall be made by the Board,
whose determination in that respect shall be final, binding and conclusive.
Except as expressly provided herein, no issuance by the Company of shares of
stock of any class, or securities convertible into shares of stock of any class,
shall affect, and no adjustment by reason thereof shall be made with respect to,
the number or price of shares of Common Stock subject to an option.
(b) Dissolution or Liquidation. In the event of the proposed
dissolution or liquidation of the Company, the Offering Periods shall terminate
immediately prior to the consummation of such proposed action, unless otherwise
provided by the Board.
(c) Merger or Asset Sale. In the event of a proposed sale of all or
substantially all of the assets of the Company, or the merger of the Company
with or into another corporation, any Purchase Periods then in progress shall be
shortened by setting a new Exercise Date (the "New Exercise Date") and any
Offering Periods then in progress shall end on the New Exercise Date. The New
Exercise Date shall be before the date of the Company's proposed sale or merger.
The Board shall notify each participant in writing, at least ten (10) business
days prior to the New Exercise Date, that the Exercise Date for the
participant's option has been changed to the New Exercise Date and that the
participant's option shall be exercised automatically on the New Exercise Date,
unless prior to such date the participant has withdrawn from the Offering Period
as provided in Section 10 hereof.
20. Amendment or Termination.
(a) The Board of Directors of the Company may at any time and for any
reason terminate or amend the Plan. Except as provided in Section 19 hereof, no
such termination can affect options previously granted, provided that an
Offering Period may be terminated by the Board of Directors on any Exercise Date
if the Board determines that the termination of the Plan is in the best
interests of the Company and its shareholders. Except as provided in Section 19
hereof, no amendment may make any change in any option theretofore granted which
adversely affects the rights of any participant. To the extent necessary to
comply with Section 423 of the Code (or any successor rule or provision or any
other applicable law, regulation or stock exchange rule), the Company shall
obtain shareholder approval in such a manner and to such a degree as required.
(b) Without shareholder consent and without regard to whether any
participant rights may be considered to have been "adversely affected," the
Board (or its committee) shall be entitled to change the Offering Periods, limit
the frequency and/or number of changes in the amount withheld during an Offering
Period, establish the exchange ratio applicable to amounts withheld in a
currency other than U.S. dollars, permit payroll withholding in excess of the
amount designated by a participant in order to adjust for delays or mistakes in
the Company's processing of properly completed withholding elections, establish
reasonable waiting and adjustment periods and/or
-8-
<PAGE>
accounting and crediting procedures to ensure that amounts applied toward the
purchase of Common Stock for each participant properly correspond with amounts
withheld from the participant's Compensation, and establish such other
limitations or procedures as the Board (or its committee) determines in its sole
discretion advisable which are consistent with the Plan.
21. Notices. All notices or other communications by a participant to the
Company under or in connection with the Plan shall be deemed to have been duly
given when received in the form specified by the Company at the location, or by
the person, designated by the Company for the receipt thereof.
22. Conditions Upon Issuance of Shares. Shares shall not be issued with
respect to an option unless the exercise of such option and the issuance and
delivery of such shares pursuant thereto shall comply with all applicable
provisions of law, domestic or foreign, including, without limitation, the
Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as
amended, the rules and regulations promulgated thereunder, and the requirements
of any stock exchange upon which the shares may then be listed, and shall be
further subject to the approval of counsel for the Company with respect to such
compliance.
As a condition to the exercise of an option, the Company may require
the person exercising such option to represent and warrant at the time of any
such exercise that the shares are being purchased only for investment and
without any present intention to sell or distribute such shares if, in the
opinion of counsel for the Company, such a representation is required by any of
the aforementioned applicable provisions of law.
23. Term of Plan. The Plan shall become effective upon the earlier to
occur of its adoption by the Board of Directors or its approval by the
shareholders of the Company. It shall continue in effect for a term of ten (10)
years unless sooner terminated under Section 20 hereof.
24. Automatic Transfer to Low Price Offering Period. To the extent
permitted by any applicable laws, regulations, or stock exchange rules if the
Fair Market Value of the Common Stock on any Exercise Date in an Offering Period
is equal to or lower than the Fair Market Value of the Common Stock on the
Enrollment Date of such Offering Period, then all participants in such Offering
Period shall be automatically withdrawn from such Offering Period immediately
after the exercise of their option on such Exercise Date and automatically re-
enrolled in the immediately following Offering Period as of the first day
thereof.
-9-
<PAGE>
EXHIBIT A
RAMBUS INC.
1997 EMPLOYEE STOCK PURCHASE PLAN
SUBSCRIPTION AGREEMENT
_____ Original Application Enrollment Date: ___________
_____ Change in Payroll Deduction Rate
_____ Change of Beneficiary(ies)
1. _____________________________________________________ hereby elects to
participate in the Rambus Inc. 1997 Employee Stock Purchase Plan (the "Employee
Stock Purchase Plan") and subscribes to pur chase shares of the Company's Common
Stock in accordance with this Subscription Agreement and the Employee Stock
Purchase Plan.
2. I hereby authorize payroll deductions from each paycheck in the amount of
____% of my Compensation on each payday (from 1 to 15%) during the Offering
Period in accordance with the Employee Stock Purchase Plan. (Please note that
no fractional percentages are permitted.)
3. I understand that said payroll deductions shall be accumulated for the
purchase of shares of Common Stock at the applicable Purchase Price determined
in accordance with the Employee Stock Purchase Plan. I understand that if I do
not withdraw from an Offering Period, any accumulated payroll deductions will be
used to automatically exercise my option.
4. I have received a copy of the complete Employee Stock Purchase Plan. I
understand that my participation in the Employee Stock Purchase Plan is in all
respects subject to the terms of the Plan. I understand that my ability to
exercise the option under this Subscription Agreement is subject to shareholder
approval of the Employee Stock Purchase Plan.
5. Shares purchased for me under the Employee Stock Purchase Plan should be
issued in the name(s) of (Employee or Employee and Spouse only):
______________________________________________________________________.
6. I understand that if I dispose of any shares received by me pursuant to the
Plan within 2 years after the Enrollment Date (the first day of the Offering
Period during which I purchased such shares) or one year after the Exercise
Date, I will be treated for federal income tax purposes as having received
ordinary income at the time of such disposition in an amount equal to the excess
of the fair market value of the shares at the time such shares were purchased by
me over the price which I paid for the shares. I hereby agree to notify the
Company in writing
<PAGE>
within 30 days after the date of any disposition of my shares and I will make
adequate provision for Federal, state or other tax withholding obligations, if
any, which arise upon the disposition of the Common Stock. The Company may, but
will not be obligated to, withhold from my compensation the amount necessary to
meet any applicable withholding obligation including any withholding necessary
to make available to the Company any tax deductions or benefits attributable to
sale or early disposition of Common Stock by me. If I dispose of such shares at
any time after the expiration of the 2-year and 1-year holding periods, I
understand that I will be treated for federal income tax purposes as having
received income only at the time of such disposition, and that such income will
be taxed as ordinary income only to the extent of an amount equal to the lesser
of (1) the excess of the fair market value of the shares at the time of such
disposition over the purchase price which I paid for the shares, or (2) 15% of
the fair market value of the shares on the first day of the Offering Period. The
remainder of the gain, if any, recognized on such disposition will be taxed as
capital gain.
7. I hereby agree to be bound by the terms of the Employee Stock Purchase
Plan. The effectiveness of this Subscription Agreement is dependent upon my
eligibility to participate in the Employee Stock Purchase Plan.
8. In the event of my death, I hereby designate the following as my
beneficiary(ies) to receive all payments and shares due me under the Employee
Stock Purchase Plan:
NAME: (Please print)___________________________________________________________
(First) (Middle) (Last)
_______________________________ ____________________________________________
Relationship
____________________________________________
(Address)
-2-
<PAGE>
Employee's Social
Security Number: ____________________________________
Employee's Address: ____________________________________
____________________________________
____________________________________
I UNDERSTAND THAT THIS SUBSCRIPTION AGREEMENT SHALL REMAIN IN EFFECT THROUGHOUT
SUCCESSIVE OFFERING PERIODS UNLESS TERMINATED BY ME.
Dated:_________________________ ________________________________________
Signature of Employee
_______________________________________
Spouse's Signature (If beneficiary other
than spouse)
-3-
<PAGE>
EXHIBIT B
RAMBUS INC.
1997 EMPLOYEE STOCK PURCHASE PLAN
NOTICE OF WITHDRAWAL
The undersigned participant in the Offering Period of the Rambus Inc. 1997
Employee Stock Purchase Plan which began on ____________, 1997 (the "Enrollment
Date") hereby notifies the Company that he or she hereby withdraws from the
Offering Period. He or she hereby directs the Company to pay to the undersigned
as promptly as practicable all the payroll deductions credited to his or her
account with respect to such Offering Period. The undersigned understands and
agrees that his or her option for such Offering Period will be automatically
terminated. The undersigned under stands further that no further payroll
deductions will be made for the purchase of shares in the current Offering
Period and the undersigned shall be eligible to participate in succeeding
Offering Periods only by delivering to the Company a new Subscription Agreement.
Name and Address of Participant:
________________________________
________________________________
________________________________
Signature:
________________________________
Date:__________________________
<PAGE>
EXHIBIT 11.1
RAMBUS INC. AND SUBSIDIARY
STATEMENT RE: COMPUTATION OF LOSS PER SHARE
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
HISTORICAL NET INCOME (LOSS) PER SHARE
<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED SEPTEMBER ENDED DECEMBER
30, 31,
------------------------- ----------------
1996 1995 1996 1995 1996
------- ------- ------- ------- -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net income (loss).................. $(6,629) $(7,020) $(4,415) $(1,126) $ 92
======= ======= ======= ======= =======
Shares used in computing net income
(loss) per share:
Weighted average common shares
outstanding..................... 4,723 5,264 5,686 5,596 5,840
Net effect of Convertible
Preferred Stock (using the as
converted method)............... -- -- -- -- 11,297
Options issued within twelve
months based on the Treasury
Stock method.................... 449 449 449 449 449
Additional dilutive options...... -- -- -- -- 2,432
------- ------- ------- ------- -------
5,172 5,713 6,135 6,045 20,018
======= ======= ======= ======= =======
Net income (loss) per share........ $ (1.28) $ (1.23) $ (0.72) $ (0.19) $ 0.01
======= ======= ======= ======= =======
</TABLE>
PRO FORMA NET INCOME (LOSS) PER SHARE
<TABLE>
<CAPTION>
YEAR ENDED THREE MONTHS
SEPTEMBER 30, ENDED
1996 DECEMBER 31, 1996
------------- -----------------
(UNAUDITED)
<S> <C> <C>
Net income (loss).............................. $(4,415) $92
======= =======
Pro forma shares used in computing net income
(loss) per share:
Weighted average common shares outstanding... 5,686 5,840
Net effect of Convertible Preferred Stock
(using the as converted method)............. 11,297 11,297
Options issued within twelve months based on
the Treasury Stock method................... $ 449 $ 449
Additional dilutive options.................. -- 2,432
------- -------
17,432 20,018
======= =======
Pro forma net income (loss) per share.......... $ (0.25) $ 0.01
======= =======
</TABLE>
<PAGE>
EXHIBIT 21.1
Subsidiaries
------------
Rambus K.K. (Japan)
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in this registration statement on Form S-1 (File
No. 333- ) of our report dated November 1, 1996, except for Note 17 for
which the date is February 28, 1997, on our audits of the consolidated
financial statements and financial statement schedule of Rambus Inc. and
Subsidiary as of September 30, 1995 and 1996 and for the years ended September
30, 1994, 1995 and 1996. We also consent to the reference to our firm under
the caption "Experts."
Coopers & Lybrand L.L.P.
March 6, 1997
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> YEAR 3-MOS
<FISCAL-YEAR-END> SEP-30-1996 SEP-30-1997
<PERIOD-START> OCT-01-1995 OCT-01-1996
<PERIOD-END> SEP-30-1996 DEC-31-1996
<CASH> 742 2,108
<SECURITIES> 7,812 8,820
<RECEIVABLES> 718 2,919
<ALLOWANCES> 0 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 10,145 14,718
<PP&E> 7,545 8,075
<DEPRECIATION> (5,205) (5,531)
<TOTAL-ASSETS> 12,868 18,703
<CURRENT-LIABILITIES> 15,072 16,890
<BONDS> 0 0
0 0
11 11
<COMMON> 6 6
<OTHER-SE> 0 0
<TOTAL-LIABILITY-AND-EQUITY> 12,868 18,703
<SALES> 11,270 5,491
<TOTAL-REVENUES> 11,270 5,491
<CGS> 4,821 1,037
<TOTAL-COSTS> 4,821 1,037
<OTHER-EXPENSES> 11,017 4,351
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> (298) (64)
<INCOME-PRETAX> (4,129) 148
<INCOME-TAX> (4,415) 92
<INCOME-CONTINUING> 0 0
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (4,415) 92
<EPS-PRIMARY> (.72) 0.005
<EPS-DILUTED> (.72) 0.005
</TABLE>
