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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_________________________
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED): MARCH 4, 1998
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DISCREET LOGIC INC.
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(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
QUEBEC 0-26100 98-0150790
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(STATE OR OTHER JURISDICTION (COMMISSION (I.R.S. EMPLOYER
OF INCORPORATION) FILE NUMBER) IDENTIFICATION NO.)
10 DUKE STREET
MONTREAL, QUEBEC, CANADA H3C 2L7
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(ADDRESS OF PRINCIPAL (ZIP CODE)
EXECUTIVE OFFICES)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (514) 393-1616
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ITEM 5. OTHER EVENTS.
A. Private Placement of Common Shares.
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On March 4, 1998, Discreet Logic Inc. (the "Company") completed a
private placement of 645,000 shares of its common shares, no par value per share
(the "Shares"), for net proceeds to the Company of approximately $13,545,000.
The Company is claiming an exemption from registration of the Shares
under the Securities Act of 1933, as amended, pursuant to Rule 506 of Regulation
D under such act, in reliance upon information available to the Company as of
March 4, 1998, including certain representations and warranties of Intel
Corporation ("Intel"), the purchaser of the Shares. The Shares were offered
only to Intel, an "Accredited Investor" as such term is defined in Rule 501 of
Regulation D.
In connection with this transaction, the Company agreed to file, within
90 days after the closing on March 4, 1998, a registration statement with the
Securities and Exchange Commission covering the resale from time to time of the
Shares issued in connection with this private placement and to use its
commercially reasonable best efforts to cause such registration statement to
become effective.
B. Execution of Definitive Agreement to Acquire MGI Software Corp.
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On March 9, 1998, the Company entered into a definitive agreement to
acquire MGI Software Corp. and issued a press release announcing the agreement.
A copy of the press release is attached as Exhibit 99.1 to this Current Report
on Form 8-K.
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ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(C) EXHIBITS.
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Exhibit No. Description
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4.1 Common Shares Purchase Agreement by and between Discreet Logic
Inc. and Intel Corporation made and entered into as of
March 4, 1998.
4.2 Investor Rights Agreement by and among Discreet Logic Inc. and
Intel Corporation made and entered into as of March 4, 1998.
99.1 Press release of the Company dated March 9, 1998.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
DISCREET LOGIC INC.
March 25, 1998
By: /s/Francois Plamondon
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Francois Plamondon
Senior Vice President,
Chief Financial Officer,
Treasurer and Secretary
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EXHIBIT INDEX
Exhibit No. Description
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4.1 Common Shares Purchase Agreement by and between Discreet
Logic Inc. and Intel Corporation made and entered into as
of March 4, 1998.
4.2 Investor Rights Agreement by and among Discreet Logic Inc.
and Intel Corporation made and entered into as of March 4,
1998.
99.1 Press release of the Company dated March 9, 1998.
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EXHIBIT 4.1
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DISCREET LOGIC INC.
COMMON SHARES PURCHASE AGREEMENT
This Common Shares Purchase Agreement (this "Agreement") is made and
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entered into as of March 4, 1998, by and between DISCREET LOGIC INC., a company
incorporated under the laws of Quebec (the "Company"), and INTEL CORPORATION, a
Delaware corporation (the "Investor").
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R E C I T A L
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WHEREAS, the Company desires to sell to the Investor, and the Investor
desires to purchase from the Company, the Company's Common Shares, without par
value ("Common Shares"), on the terms and conditions set forth in this
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Agreement;
NOW, THEREFORE, in consideration of the foregoing recital, the mutual
promises hereinafter set forth, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
1. AGREEMENT TO PURCHASE AND SELL STOCK.
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1.1 Authorization. As of the Closing (as defined below), the
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Company's Board of Directors will have authorized the issuance, pursuant to the
terms and conditions of this Agreement, of 645,000 (the "Purchased Shares") of
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the Company's Common Shares.
1.2 Agreement to Purchase and Sell Common Shares. The Company hereby
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agrees to sell to the Investor at the Closing, and the Investor agrees to
purchase from the Company at the Closing, the Purchased Shares at a price per
share equal to the Per Share Purchase Price.
1.3 Per Share Purchase Price. The "Per Share Purchase Price" shall
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be $21.00.
2. CLOSING
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2.1 The Closing. The purchase and sale of the Purchased Shares will
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take place at the offices of Gibson, Dunn & Crutcher LLP, 1530 Page Mill Road,
Palo Alto, California 94304, at 10:00 a.m. California time, within three (3)
business days after the conditions set forth in Articles 5 and 6 have been
satisfied, or at such other time and place as the Company and the Investor
mutually agree upon (which time and place are referred to in this Agreement as
the "Closing"). At the Closing, the Company will deliver to the Investor a
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certificate representing the Purchased Shares, against delivery to the
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Company by the Investor of the full purchase price of the Purchased Shares, paid
by wire transfer of funds to the Company.
3. REPRESENTATLONS AND WARRANTIES OF THE COMPANY. The Company hereby
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represents and warrants to the Investor that the statements in this Section 3
are true and correct, except as set forth in the Disclosure Letter from the
Company dated as of the date hereof (the "Disclosure Letter").
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3.1 Organization, Good Standing and Qualification. The Company is a
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corporation duly organized, validly existing and in good standing under the laws
of the Province of Quebec and has all corporate power and authority required to
(a) carry on its business as presently conducted, and (b) enter into this
Agreement, the Investor Rights Agreement (as defined in Section 5.7), and to
consummate the transactions contemplated hereby and thereby. The Company is
qualified to do business and is in good standing in each jurisdiction in which
the failure to so qualify would have a Material Adverse Effect. As used in this
Agreement, "Material Adverse Effect" means a material adverse effect on, or a
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material adverse change in, the business, operations, financial condition,
results of operations, assets or liabilities of the Company.
3.2 Capitalization. As of the date hereof, the capitalization of the
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Company is as follows:
(a) Preferred Shares. An unlimited number of authorized Preferred
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Shares, without par value per share (the "Preferred Shares"), none of which is
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issued or outstanding.
(b) Common Shares. As of March 3, 1998, an unlimited number of
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authorized Common Shares, without par value, of which 28,899,261 shares are
issued and outstanding. All of such outstanding shares are validly issued,
fully paid and non-assessable. No such outstanding shares were issued in
violation of any preemptive right.
(c) Options, Warrants, Reserved Shares. Except for the plans set
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forth in the SEC Documents (as defined below) (the "Plans"), there are not
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outstanding any options, warrants, rights (including conversion or preemptive
rights) or agreements for the purchase or acquisition from the Company of any
shares of its capital stock or any securities convertible into or ultimately
exchangeable or exercisable for any shares of the Company's capital stock.
Except for any stock repurchase rights of the Company under the Plans, no shares
of the Company's outstanding capital stock, or stock issuable upon exercise,
conversion or exchange of any outstanding options, warrants or rights, or other
stock issuable by the Company, are subject to any rights of first refusal or
other rights to purchase such stock (whether in favor of the Company or any
other person), pursuant to any agreement, commitment or other obligation of the
Company.
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3.3 Subsidiaries. The Company does not presently own or control,
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directly or indirectly, any interest in any other corporation, partnership,
limited liability company, trust, joint venture, association or other entity.
3.4 Due Authorization. All corporate action on the part of the
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Company, its officers, directors and shareholders necessary for the
authorization, execution, delivery of, and the performance of all obligations of
the Company under, this Agreement, the Investor Rights Agreement (as defined
below), and the authorization, issuance, reservation for issuance and delivery
of all of the Purchased Shares being sold under this Agreement has been taken or
will be taken prior to the Closing, and this Agreement constitutes, and the
Investor Rights Agreement when executed, will constitute, valid and legally
binding obligations of the Company, enforceable against the Company in
accordance with their respective terms, except as may be limited by (a)
applicable bankruptcy, insolvency, reorganization or others laws of general
application relating to or affecting the enforcement of creditors' rights
generally, (b) the effect of rules of law governing the availability of
equitable remedies and (c) the fact that any indemnification or contribution
provision contained in the Investor Rights Agreement or this Agreement may be
unenforceable insofar as the enforceability of such provision may be sought
under Canadian or United States federal, provincial or state securities laws.
3.5 Valid Issuance of Stock.
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(a) The Purchased Shares, when issued, sold and delivered in
accordance with the terms of this Agreement for the consideration provided for
herein, will be duly and validly issued, fully paid and nonassessable.
(b) Based in part on the representations made by the investors in
Section 4 hereof, the Purchased Shares will be issued in compliance with the
registration and prospectus delivery requirements of the Securities Act of 1933,
as amended (the "1933 Act"), or in compliance with applicable exemptions
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therefrom, and the registration and qualification requirements of all applicable
securities laws of Canada, the Province of Quebec and the state of California .
3.6 Governmental Consents. No consent, approval, order or
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authorization of, or registration, qualification, designation, declaration or
filing with, any Canadian or United States federal, provincial, state or local
governmental authority on the part of the Company is required in connection with
the consummation of the transactions contemplated by this Agreement, except for
the filing of such qualifications or filings under the 1933 Act and the
regulations thereunder under NASDAQ national market rules and all applicable
Canadian or United States provincial and state securities laws as may be
required in connection with the transactions contemplated by this Agreement.
All such qualifications will be effective on the Closing and all such filings
have been or will be made within the time prescribed by law.
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3.7 Non-Contravention. The execution, delivery and performance of
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this Agreement and the Investor Rights Agreement by the Company, and the
consummation by the Company of the transactions contemplated hereby and thereby,
do not and will not (i) contravene or conflict with the Articles of
Incorporation or Bylaws of the Company; (ii) constitute a material violation of
any provision of any Canadian or United States federal, provincial, state, local
or, to the Company's knowledge, foreign (non-Canadian or non-United States) law
binding upon or applicable to the Company; or (iii) constitute a default or
require any consent under, give rise to any right of termination, cancellation
or acceleration of, or to a loss of any benefit to which the Company is entitled
under, or result in the creation or imposition of any lien, claim or encumbrance
on any assets of the Company under, any contract to which the Company is a party
or any permit, license or similar right relating to the Company or by which the
Company may be bound or affected in such a manner as would have Material Adverse
Effect.
3.8 Litigation. Except as disclosed in the SEC documents, there is
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no action, suit, proceeding, claim, arbitration or investigation ("Action")
pending: (a) against the Company, its activities, properties or assets or, to
the best of the Company's knowledge, against any officer, director or employee
of the Company in connection with such officer's, director's or employee's
relationship with, or actions taken on behalf of, the Company which is
reasonably likely to have a Material Adverse Effect, (b) that seeks to prevent,
enjoin, alter or delay the transactions contemplated by this Agreement or the
Investor Rights Agreement. Except as individually or in the aggregate is not
reasonably likely to have a Material Adverse Effect, (i) there is no Action
pending or, to the best of the Company's knowledge, threatened, or any basis
therefor, relating to the current or prior employment of any of the Company's
current or former employees or consultants, their use in connection with the
Company's business of any information, technology or techniques allegedly
proprietary to any of their former employers, clients or other parties, or their
obligations under any agreements with prior employers, clients or other parties,
and (ii) the Company is not a party to or subject to the provisions of any
order, writ, injunction, judgment or decree of any court or government agency or
instrumentality. No Action by the Company is currently pending nor does the
Company have a current intent to initiate any Action which is reasonably likely
to have a Material Adverse Effect.
3.9 Intellectual Property.
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(a) Ownership or Right to Use. To the best of the Company's
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knowledge, the Company has title to and owns, or is licensed or otherwise
possesses legally enforceable rights to use, all patents or patent applications,
software, know-how, registered or unregistered trademarks and service marks and
any applications therefor, registered or unregistered copyrights, trade names,
and any applications therefor, trade secrets or other confidential or
proprietary information ("Intellectual Property") necessary to enable the
---------------------
Company to carry on its business as currently conducted or as presently proposed
to be conducted, except where any deficiency therein would not have a Material
Adverse Effect.
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(b) Licenses; Other Agreements. The Company is not currently subject
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to any exclusive licenses (whether such exclusivity is temporary or permanent)
to any material portion of the Intellectual Property of the Company. To the
best of the Company's knowledge, there are not outstanding any licenses or
agreements of any kind relating to any Intellectual Property of the Company,
except for agreements with OEM's and other customers of the Company entered into
in the ordinary course of the Company's business. The Company is not obligated
to pay any royalties or other payments to third parties with respect to the
marketing, sale, distribution, manufacture, license or use of any Intellectual
Property, except as the Company may be so obligated in the ordinary course of
its business or as disclosed in the Company's SEC Documents (as defined below)
or where the failure to make such payments would not have a Material Adverse
Effect.
(c) No Infringement. To the best of the Company's knowledge, the
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Company has not violated or infringed and is not currently violating or
infringing, and the Company has not received any communications alleging that
the Company (or any of its employees or consultants) has violated or infringed,
any Intellectual Property of any other person or entity, to the extent that any
such violation or infringement, either individually or together with all other
such violations and infringements, would have a Material Adverse Effect.
(d) Employees and Consultants. To the best of the Company's
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knowledge, no employee of or consultant to the Company is in default under any
term of any employment contract, agreement or arrangement relating to
Intellectual Property of the Company or any non-competition arrangement, other
contract, or any restrictive covenant relating to the Intellectual Property of
the Company, which default would have a Material Adverse Effect.
3.10 Compliance with Law and Charter Documents. The Company is not
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in violation or default of any provisions of its Articles of Incorporation or
Bylaws, both as amended, and except for any violations that would not, either
individually or in the aggregate, have a Material Adverse Effect. The Company
has complied and is in compliance with all applicable statutes, laws, and
regulations and executive orders of the United States of America, Canada and all
states, provinces, and to the Company's knowledge foreign countries (non-
Canadian or non-United States) and other governmental bodies and agencies having
jurisdiction over the Company's business or properties except where such
noncompliance would not, either individually or in the aggregate, have a
Material Adverse Effect.
3.11 Registration Rights. Except as provided in the Investor Rights
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Agreement or as described in, or filed as exhibits to, the SEC Documents
effective upon the Closing, the Company is not currently subject to any grant or
agreement to grant to any person or entity any rights (including piggyback
registration rights) to have any securities of the Company registered with the
United States Securities and Exchange Commission ("SEC") or any other
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governmental authority.
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3.12 SEC Documents.
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(a) The Company has furnished to the Investor prior to the date hereof
copies of its Annual Report on Form 10-K for the fiscal year ended June 30, 1997
("Form 10-K"), and all other registration statements, reports and proxy
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statements filed by the Company with the Securities and Exchange Commission
("Commission") on or after June 30, 1997 (the Form 10-K and such registration
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statements, reports and proxy statements, are collectively referred to herein as
the "SEC Documents"). Each of the SEC Documents, as of the respective date
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thereof, did not, and each of the registration statements, reports and proxy
statements filed by the Company with the Commission after the date hereof and
prior to the Closing will not, as of the date thereof, contain any untrue
statement of a material fact or omit to state a material fact necessary in order
to make the statements made therein, in light of the circumstances under which
they were made, not misleading, except as may have been corrected in a
subsequent SEC Document. The Company is not a party to any material contract,
agreement or other arrangement which was required to have been filed as an
exhibit to the SEC Documents that is not so filed.
(b) The Company has provided the Investor with its audited financial
statements (the "Audited Financial Statements") for the fiscal year ended June
----------------------------
30, 1997 (the "Balance Sheet Date"). Since July 1, 1997 , the Company has duly
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filed with the Commission all registration statements, reports and proxy
statements required to be filed by it under the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), and the 1933 Act. The audited and unaudited
------------
consolidated financial statements of the Company included in the SEC Documents
filed prior to the date hereof fairly present, in conformity with United States
generally accepted accounting principles ("GAAP") applied on a consistent basis
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(except as may be indicated in the notes thereto), the consolidated financial
position of the Company and its consolidated subsidiaries as at the date thereof
and the consolidated results of their operations and cash flows for the periods
then ended (subject to normal year and audit adjustments in the case of
unaudited interim financial statements).
(c) Except as and to the extent reflected or reserved against in the
Company's Audited Financial Statements (including the notes thereto), the
Company has no material liabilities (whether accrued or unaccrued, liquidated or
unliquidated, secured or unsecured, joint or several, due or to become due,
vested or unvested, executory, determined or determinable) other than: (i)
liabilities incurred in the ordinary course of business since the Balance Sheet
Date that are consistent with the Company's past practices, (ii) liabilities
with respect to agreements to which the Investor is a party, and (iii) other
Liabilities that either individually or in the aggregate, would not result in a
Material Adverse Effect.
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3.13 Absence of Certain Changes Since Balance Sheet Date. Since the
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Balance Sheet Date, the business and operations of the Company have been
conducted in all material respects in the ordinary course consistent with past
practice and there has not been:
(a) any declaration, setting aside or payment of any dividend or other
distribution of the assets of the Company with respect to any shares of capital
stock of the Company, or any repurchase, redemption or other acquisition by the
Company or any subsidiary of the Company of any outstanding shares of the
Company's capital stock;
(b) any damage, destruction or loss, whether or not covered by
insurance, except for such occurrences that have not resulted, and are not
expected to result, in a Material Adverse Effect;
(c) any waiver by the Company of a valuable right or of a material
debt owed to it, except for such waivers that have not resulted, and are not
expected to result, in a Material Adverse Effect;
(d) any material change or amendment to, or any waiver of any material
rights under, a material contract or arrangement by which the Company or any of
its assets or properties is bound or subject, except for changes, amendments, or
waivers that are expressly provided for or disclosed in this Agreement or that
have not resulted, and are not expected to result, in a Material Adverse Effect;
(e) any change by the Company in its accounting principles, methods or
practices or in the manner it keeps its accounting books and records, except any
such change required by a change in GAAP; and
(f) any other event or condition of any character, except for such
events and conditions that have not resulted, and are not expected to result, in
a Material Adverse Effect.
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3.14 Tax Matters. The Company and each of its subsidiaries have
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filed all material tax returns required to be filed with respect to any Canadian
or United States federal, provincial, state, local or other taxes (collectively,
"Taxes"), which returns are true and correct in all material respects, and
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neither the Company nor any of its subsidiaries is in default in the payment of
any material amount of Taxes, including penalties and interest, assessments,
fees and other charges, shown thereon due or otherwise assessed, other than
those being contested in good faith and for which adequate reserves have been
provided or those currently payable without interest which were payable pursuant
to said returns or any assessments with respect thereto. The provisions for
taxes in the audited and unaudited financial statements included in the SEC
Documents have determined in accordance with GAAP.
3.15 Real Property Holding Corporation Status. Since its inception,
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the company has not been a "United States real property holding corporation," as
defined in Section 897(c)(2) of the United States Internal Revenue Code of 1986,
as amended, and in Section 1.897-2(b) of the Treasury Regulations issued
thereunder (the "Regulations"), and the Company has filed with the Internal
Revenue Service all statements, if any, with its United States income tax
returns which are required under Section 1.897-2(h) of the Regulations.
3.16 Full Disclosure. This Agreement, the Disclosure Letter and the
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SEC documents with respect to the business, operations, assets, results of
operations and financial condition of the Company, and the transactions
contemplated by this Agreement and the Investor Rights Agreement do not contain
any untrue statement of material fact or omit to state any material fact
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading.
4. REPRESENTATIONS, WARRANTIES AND CERTAIN AGREEMENTS OF THE INVESTOR.
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The Investor hereby represents and warrants to the Company, and agrees that:
4.1 Authorization. This Agreement and the Investor Rights Agreement
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have been duly authorized by all necessary corporate action on the part of the
Investor. This Agreement and the Investor Rights Agreement constitute the
Investor's valid and legally binding obligations, enforceable in accordance with
their respective terms, except as may be limited by (a) applicable bankruptcy,
insolvency, reorganization or other laws of general application relating to or
affecting the enforcement of creditors' rights generally, (b) the effect of
rules of law governing the availability of equitable remedies, and (c) the fact
that any indemnification or contribution provision contained in the Investor
Rights Agreement or this Agreement may be unenforceable insofar as the
enforceability of such provision may be sought under Canadian or United States
federal, provincial or state securities laws. The Investor has full corporate
power and authority to enter into this Agreement and the Investor Rights
Agreement.
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4.2 Purchase for Own Account. The Purchased Shares are being
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acquired for investment for the Investors own account, not as a nominee or
agent, and not with a view to the public resale or distribution thereof within
the meaning of the 1933 Act, and the Investor has no present intention of
selling, granting any participation in, or otherwise distributing the same. The
Investor also represents that it has not been formed for the specific purpose of
acquiring the Purchased Shares.
4.3 Disclosure of Information. The Investor has received or has had
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full access to all the information it considers necessary or appropriate to make
an informed investment decision with respect to the Purchased Shares to be
purchased by the Investor under this Agreement. The Investor further has had an
opportunity to ask questions and receive answers from the Company regarding the
terms and conditions of the offering of the Purchased Shares and to obtain
additional information (to the extent the Company possessed such information or
could acquire it without unreasonable effort or expense) necessary to verify any
information furnished to the investor or to which the Investor had access. The
foregoing, however, does not in any way limit or modify the representations and
warranties made by the Company in Article 3.
4.4 Investment Experience. The Investor understands that the
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purchase of the Purchased Shares involves substantial risk. The Investor (a)
has experience as an investor in securities of companies and acknowledges that
it is able to fend for itself, can bear the economic risk of its investment in
the Purchased Shares and has such knowledge and experience in financial or
business matters that it is capable of evaluating the merits and risks of this
investment in the Purchased Shares and protecting its own interests in
connection with this investment and/or (b) has a preexisting personal or
business relationship with the Company and certain of its officers, directors or
controlling persons of a nature and duration that enables the Investor to be
aware of the character, business acumen and financial circumstances of such
persons.
4.5 Accredited Investor Status. The Investor is an "accredited
--------------------------
investor" within the meaning of Regulation D promulgated under the 1933 Act.
4.6 Restricted Securities. The Investor understands that the
---------------------
Purchased Shares to be purchased by the Investor hereunder are characterized as
"restricted securities" under the 1933 Act inasmuch as they are being acquired
from the Company in a transaction not involving a public offering and that under
the 1933 Act and applicable regulations thereunder such securities may be resold
without registration under the 1933 Act only in certain limited circumstances.
The Investor is familiar with Rule 144 of the SEC, as presently in effect, and
understands the resale limitations imposed thereby and by the 1933 Act. The
Investor understands that the Company is under no obligation to register any of
the securities sold hereunder except as provided in the Investor Rights
Agreement.
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4.7 Further Limitations on Disposition. Without in any way limiting
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the representations set forth above, the Investor further agrees not to make any
disposition of all or any portion of the Purchased Shares unless and until:
(a) there is then in effect a registration statement under the 1933
Act covering such proposed disposition and such disposition is made in
accordance with such registration statement; or
(b) the Investor has notified the Company of the proposed disposition
and has furnished the Company with a statement of the circumstances surrounding
the proposed disposition, and the Investor has furnished the Company, at the
expense of the Investor or its transferee, with an opinion of counsel,
reasonably satisfactory to the Company, that such disposition will not require
registration of such securities under the 1933 Act.
Notwithstanding the provisions of paragraphs (a) and (b) of this Section 4.7, no
such registration statement will be required for any transfer of any Purchased
Shares in compliance with SEC Rule 144, Rule 144A or Rule 145(d), or if such
transfer otherwise is exempt, in the reasonable opinion of the Company's legal
counsel, from the registration requirements of the 1933 Act. The Investor
agrees that, without the prior written consent of the Company, it shall not sell
any of the Purchased Shares during the period from the date of this Agreement
through two (2) business days after the Company has announced financial results
for the quarter and year ended June 30, 1998.
4.8 Legends. Certificates evidencing the Purchased Shares will bear
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each of the legends set forth below:
(a) THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR UNDER THE SECURITIES LAWS
OF CERTAIN STATES. THESE SECURITIES ARE SUBJECT TO RESTRICTIONS ON
TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS
PERMITTED UNDER THE ACT AND THE APPLICABLE STATE SECURITIES LAWS, PURSUANT TO
REGISTRATION OR EXEMPTION THEREFROM. INVESTORS SHOULD BE AWARE THAT THEY MAY BE
REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS INVESTMENT FOR AN INDEFINITE PERIOD
OF TIME. THE ISSUER OF THESE SECURITIES MAY REQUIRE AN OPINION OF COUNSEL IN
FORM AND SUBSTANCE REASONABLY SATISFACTORY TO THE ISSUER TO THE EFFECT THAT ANY
PROPOSED TRANSFER OR RESALE IS IN COMPLIANCE WITH THE ACT AND ANY APPLICABLE
STATE SECURITIES LAWS.
(b) THE SHARES EVIDENCED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN
RESTRICTIONS SPECIFIED IN A CERTAIN INVESTOR RIGHTS AGREEMENT BETWEEN THE
COMPANY AND THE ORIGINAL HOLDER OF SUCH SHARES DATED AS OF MARCH 3, 1998, A COPY
OF WHICH IS AVAILABLE FOR EXAMINATION AT THE ISSUER'S PRINCIPAL OFFICE.
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(c) Any Legends required by any applicable state securities laws.
The Legend set forth in Section 4.8(a) hereof will be removed by the Company
from any certificate evidencing Purchased Shares upon delivery to the Company of
an opinion by counsel, reasonably satisfactory to the Company, that a
registration statement under the 1933 Act is at that time in effect with respect
to the legended security or that such security can be freely transferred in a
public sale without such a registration statement being in effect and that such
transfer will not jeopardize the exemption or exemptions from registration
pursuant to which the Company issued the Purchased Shares.
5. CONDITIONS TO THE INVESTOR'S OBLIGATIONS AT CLOSING. The obligations
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of the Investor under Sections l and 2 of this Agreement are subject to the
fulfillment or waiver, on or before the Closing, of each of the following
conditions:
5.1 Representations and Warranties True. Each of the representations
-----------------------------------
and warranties of the Company contained in Section 3 will be true and correct on
and as of the date hereof and on and as of the date of the Closing, except as
set forth in the Disclosure Letter, as amended through the Closing, with the
same effect as though such representations and warranties had been made as of
the Closing.
5.2 Performance. The Company will have performed and complied with
-----------
all agreements, obligations and conditions contained in this Agreement that are
required to be performed or complied with by it on or before the Closing and
will have obtained all approvals, consents and qualifications necessary to
complete the purchase and sale described herein.
5.3 Compliance Certificate. The Company will have delivered to the
----------------------
Investor at the Closing a certificate signed on its behalf by its Chief
Executive Officer or Chief Financial Officer certifying that the conditions
specified in Sections 5.1 and 5.2 hereof have been fulfilled.
5.4 Securities Exemptions. The offer and sale of the Purchased
---------------------
Shares to the Investor pursuant to this Agreement will be exempt from the
registration requirements of the 1933 Act and the registration and/or
qualification requirements of all applicable Canadian, provincial and state
securities laws.
5.5 Proceedings and Documents. All corporate and other proceedings
-------------------------
in connection with the transactions contemplated at the Closing and all
documents incident thereto will be reasonably satisfactory in form and substance
to the Investor, and the Investor will have received all such counterpart
originals and certified or other copies
<PAGE>
-12-
of such documents as it may reasonably request. Such documents shall include
(but not be limited to) the following:
(a) Certified Charter Documents. A copy of (i) the Articles of
---------------------------
Incorporation and (ii) the Bylaws of the Company (each as amended through the
date of the Closing) certified by the Secretary of the Company as true and
correct copies thereof as of the Closing.
(b) Board Resolutions. A copy, certified by the Secretary of the
-----------------
Company, of the resolutions of the Board of Directors of the Company providing
for the approval of this Agreement and the Investor Rights Agreement and the
issuance of the Purchased Shares and the other matters contemplated hereby.
5.6 Opinion of Company Counsel. The Investor will have received an
--------------------------
opinion on behalf of the Company, dated as of the date of the Closing, from
counsel to the Company, , in form and substance reasonably satisfactory to the
Investor.
5.7 Investor Rights Agreement. The Company will have executed and
-------------------------
delivered the Investor Rights Agreement substantially in the form attached to
this Agreement as Exhibit A (the "Investor Rights Agreement").
--------- -------------------------
5.8 No Material Adverse Effect. Between the date hereof and the
--------------------------
Closing, there shall not have occurred any Material Adverse Effect.
6. CONDITIONS TO THE COMPANY'S OBLIGATIONS AT CLOSING. The obligations of
--------------------------------------------------
the Company to the Investor under this Agreement are subject to the fulfillment
or waiver on or before the Closing, of each of the following conditions:
6.1 Representations and Warranties True. The representations and
-----------------------------------
warranties of the Investor contained in Section 4 will be true and correct on
and as of the date hereof and on and as of the date of the Closing with the same
effect as though such representations and warranties had been made as of the
Closing.
6.2 Payment of Purchase Price. The Investor will have delivered to
-------------------------
the Company the full purchase price of the Purchased Shares as specified in
Section 1.2.
6.3 Securities Exemptions. The offer and sale of the Purchased
---------------------
Shares to the Investor pursuant to this Agreement will be exempt from the
registration requirements of the 1933 Act and the registration and/or
qualification requirements of all applicable Canadian, provincial and state
securities laws.
6.4 Proceedings and Documents. All corporate and other proceedings
-------------------------
in connection with the transactions contemplated at the Closing and all
documents incident thereto will be reasonably satisfactory in form and substance
to the Company and to the Company's legal counsel, and the Company will have
received all such counterpart originals and certified or other copies of such
documents as it may reasonably request.
<PAGE>
-13-
6.5 Investor Rights Agreement. The Investor will have executed and
-------------------------
delivered the Investor Rights Agreement.
7. INDEMNIFICATION.
---------------
7.1 Agreement to Indemnify.
----------------------
(a) Company Indemnity. The Investor, its Affiliates, and each officer
-----------------
and director, of any of the foregoing (collectively, the "Investor Indemnitees")
--------------------
shall each be indemnified and held harmless to the extent set forth in this
Section 7 by the Company with respect to any and all Damages (as defined below)
incurred by any Investor Indemnitee as a proximate result of any inaccuracy or
misrepresentation in, or breach of, any representation, warranty, covenant or
agreement made by the Company in this Agreement or the Investor Rights Agreement
(including any Exhibits and Schedules hereto).
(b) Investor Indemnity. The Company, its respective Affiliates, and
------------------
each officer and director, of any of the foregoing (collectively, the "Company
-------
Indemnitees") shall each be indemnified and held harmless to the extent set
- -----------
forth in this Section 7, by the Investor, in respect of any and all Damages
incurred by any Company Indemnitee as a result of any inaccuracy or
misrepresentation in, or breach of, any representation, warranty, covenant or
agreement made by the Investor in this Agreement or the Investor Rights
Agreement.
(c) Equitable Relief. Nothing set forth in this Section 7 shall be
----------------
deemed to prohibit or limit any Investor Indemnitee's or Company Indemnitee's
right at any time before, on or after the Closing Date, to seek injunctive or
other equitable relief for the failure of any Indemnifying Party to perform or
comply with any covenant or agreement contained herein.
7.2 Survival. All representations and warranties of the Investor and
--------
the Company contained herein or in the Investor Rights Agreement, and all claims
of any Investor Indemnitee or Company Indemnitee in respect of any inaccuracy or
misrepresentation in or breach thereof, shall survive the Closing until 18
months from the date of this Agreement, regardless of whether the applicable
statute of limitations, including extensions thereof, may expire (except to the
extent any such covenant or agreement shall expire by its terms). All covenants
and agreements of the Investor and the Company contained herein or in the
Investor Rights Agreement shall survive the Closing in perpetuity (except to the
extent any such covenant or agreement shall expire by its terms). All claims of
any Investor Indemnitee or Company Indemnitee in respect of any breach of such
covenants or agreements shall survive the Closing until the expiration of 18
months following the non-breaching party's obtaining actual knowledge of such
breach.
<PAGE>
-14-
7.3 Claims for Indemnification. If any Investor Indemnitee or
--------------------------
Company Indemnitee (an "Indemnitee") shall believe that such Indemnitee is
----------
entitled to indemnification pursuant to this Section 7 in respect of any
Damages, such Indemnitee shall give the appropriate Indemnifying Party (which
for purposes hereof, in the case of an Investor Indemnitee, means the Company,
and in the case of a Company Indemnitee, means the Investor) prompt written
notice thereof. Any such notice shall set forth in reasonable detail and to the
extent then known the basis for such claim for indemnification. The failure of
such Indemnitee to give notice of any claim for indemnification promptly shall
not adversely affect such Indemnitee's right to indemnity hereunder except to
the extent that such failure adversely affects the right of the Indemnifying
Party to assert any reasonable defense to such claim. Each such claim for
indemnity shall expressly state that the Indemnifying Party shall have only the
twenty (20) business day period referred to in the next sentence to dispute or
deny such claim. The Indemnifying Party shall have twenty (20) business days
following its receipt of such notice either (a) to acquiesce in such claim by
giving such Indemnitee written notice of such acquiescence or (b) to object to
the claim by giving such Indemnitee written notice of the objection. If
Indemnifying Party does not object thereto within such twenty (20) business day
period, such Indemnitee shall be entitled to be indemnified for all Damages
reasonably and proximately incurred by such Indemnitee in respect of such claim.
If the Indemnifying Party objects to such claim in a timely manner, the senior
management of the Company and the Investor shall meet to attempt to resolve such
dispute. If the dispute cannot be resolved by the senior management either
party may make a written demand for formal dispute resolution and specify
therein the scope of the dispute. Within thirty days after such written
notification, the parties agree to meet for one day with an impartial mediator
and consider dispute resolution alternatives other than litigation. If an
alternative method of dispute resolution is not agreed upon within thirty days
after the one day mediation, either party may begin litigation proceedings.
Nothing in this section shall be deemed to require arbitration.
7.4 Defense of Claims. In connection with any claim that may give
-----------------
rise to indemnity under this Section 7 resulting from or arising out of any
claim or Proceeding against an Indemnitee by a person or entity that is not a
party hereto, the Indemnifying Party may but shall not be obligated to (unless
such Indemnitee elects not to seek indemnity hereunder for such claim), upon
written notice to the relevant Indemnitee, assume the defense of any such claim
or proceeding if the Indemnifying Party with respect to such claim or Proceeding
acknowledges to the Indemnitee the Indemnitee's right to indemnity pursuant
hereto to the extent provided herein (as such claim may have been modified
through written agreement of the parties or arbitration hereunder) and provides
assurances, satisfactory to such Indemnitee, that the Indemnifying Party will be
financially able to satisfy such claim to the extent provided herein if such
claim or Proceeding is decided adversely; provided, however, that nothing set
-------- -------
forth herein shall be deemed to require the Indemnifying Party to waive any
crossclaims or counterclaims the Indemnifying Party may have against the
Indemnified Party for damages. The Indemnified Party shall be entitled to
retain separate counsel, reasonably acceptable to the Indemnifying Party, if the
Indemnified Counsel shall
<PAGE>
-15-
determine, upon the written advice of counsel, that an actual or potential
conflict of interest exists between the Indemnifying Party and the Indemnified
Party in connection with such Proceeding. The Indemnifying Party shall be
obligated to pay the reasonable fees and expenses of such separate counsel to
the extent the Indemnified Party is entitled to indemnification by the
Indemnifying Party with respect to such claim or Proceeding under this Section
7.4. If the Indemnifying Party assumes the defense of any such claim or
Proceeding, the Indemnifying Party shall select counsel reasonably acceptable to
such Indemnitee to conduct the defense of such claim or Proceeding, shall take
all steps necessary in the defense or settlement thereof and shall at all times
diligently and promptly pursue the resolution thereof. If the Indemnifying Party
shall have assumed the defense of any claim or Proceeding in accordance with
this Section 7.4, the Indemnifying Party shall be authorized to consent to a
settlement of, or the entry of any judgment arising from, any such claim or
Proceeding, with the prior written consent of such Indemnitee, not to be
unreasonably withheld; provided, however, that the Indemnifying Party shall
-------- -------
pay or cause to be paid all amounts arising out of such settlement or judgment
concurrently with the effectiveness thereof; provided, further, that the
-------- -------
Indemnifying Party shall not be authorized to encumber any of the assets of any
Indemnitee or to agree to any restriction that would apply to any Indemnitee or
to its conduct of business; and provided, further, that a condition to any such
settlement shall be a complete release of such Indemnitee and its Affiliates,
directors, officers, employees and agents with respect to such claim, including
any reasonably foreseeable collateral consequences thereof. Such Indemnitee
shall be entitled to participate in (but not control) the defense of any such
action, with its own counsel and at its own expense. Each Indemnitee shall, and
shall cause each of its Affiliates, directors, officers, employees and agents
to, cooperate fully with the Indemnifying Party in the defense of any claim or
Proceeding being defended by the Indemnifying Party pursuant to this Section
7.4. If the Indemnifying Party does not assume the defense of any claim or
Proceeding resulting therefrom in accordance with the terms of this Section 7.4,
such Indemnitee may defend against such claim or Proceeding in such manner as it
may deem appropriate, including settling such claim or proceeding after giving
notice of the same to the Indemnifying Party, on such terms as such Indemnitee
may deem appropriate. If any Indemnifying Party seeks to question the manner in
which such Indemnitee defended such claim or Proceeding or the amount of or
nature of any such settlement, such Indemnifying Party shall have the burden to
prove by a preponderance of the evidence that such Indemnitee did not defend
such claim or Proceeding in a reasonably prudent manner.
7.5 Certain Definitions. As used in this Section 7, (a) "Affiliate"
------------------- ---------
means, with respect to any person or entity, any person or entity directly or
indirectly controlling, controlled by or under direct or indirect common control
with such other person or entity; (b) "Damages" means all damages, costs,
-------
expenses, or amounts paid in settlement to third parties, including (1) interest
on cash disbursements in respect of any of the foregoing at the prime rate of
Bank of America, NT & SA, as in effect from time to time, compounded quarterly,
from the date each such cash disbursement is made until the date the party
incurring such cash disbursement shall have been indemnified in respect thereof,
and (2) reasonable out-of-pocket costs, fees and expenses (including reasonable
<PAGE>
-16-
costs, fees and expenses of attorneys, accountants and other agents of, or other
parties retained by, such party), and (c) "Proceeding" means any action, suit,
----------
hearing, arbitration, proceeding (public or private) or investigation that is
brought or initiated by or against any Canadian or United States federal,
provincial, state, local or foreign governmental authority or any other person
or entity.
7.6 Limitations on Indemnities. Notwithstanding any other provision
--------------------------
in this Section 7, neither party shall have any obligation to indemnify the
other party under Section 7.1 unless the aggregate for all such claims exceeds
$500,000, in which case to the full extent of Damages (including such initial
$500,000) up to a maximum aggregate indemnity of 645,000 multiplied by the Per
Share Purchase Price. NEITHER PARTY TO THIS AGREEMENT NOR ANY OF ITS AFFILIATES
SHALL BE LIABLE FOR INCIDENTAL OR CONSEQUENTIAL DAMAGES SUFFERED BY A PARTY OR
ITS AFFILIATES WITH RESPECT TO ANY TERM OR THE SUBJECT MATTER OF THIS AGREEMENT.
8. MISCELLANEOUS.
-------------
8.1 Successors and Assigns. The terms and conditions of this
----------------------
Agreement will inure to the benefit of and be binding upon the respective
successors and permitted assigns of the parties. Neither party may assign this
Agreement or any rights hereunder without the consent of the other party, except
that Investor may assign its rights hereunder to a wholly-owned subsidiary.
8.2 Governing Law. This Agreement will be governed by and construed
-------------
under the internal laws of the State of Delaware as applied to agreements among
Delaware residents entered into and to be performed entirely within Delaware,
without reference to principles of conflict of laws or choice of laws.
8.3 Counterparts. This Agreement may be executed in counterparts,
------------
each of which will be deemed an original, but all of which together will
constitute one and the same instrument.
8.4 Headings. The headings and captions used in this Agreement are
--------
used for convenience only and are not to be considered in construing or
interpreting this Agreement. All references in this Agreement to sections,
paragraphs, exhibits and schedules will, unless otherwise provided, refer to
sections and paragraphs hereof and exhibits and schedules attached hereto, all
of which exhibits and schedules are incorporated herein by this reference.
8.5 Notices. Any notice required or permitted under this Agreement
-------
will be given in writing, shall be effective when received, and shall in any
event be deemed received and effectively given upon personal delivery to the
party to be notified one (1) business day after deposit with a nationally
recognized courier service such as FedEx for next business day delivery, or one
(1) business day after being sent by facsimile with copy delivered by a
nationally recognized courier service such as FedEx
<PAGE>
-17-
for next business day delivery, addressed to the party to be notified at the
address indicated for such party on the signature page hereof or at such other
address as the Investor or the Company may designate by giving at least ten (10)
days advance written notice pursuant to this Section 8.5.
8.6 No Finder's Fees. Each party represents that it neither is nor
----------------
will be obligated for any finder's or broker's fee or commission in connection
with this transaction. The Investor will indemnify and hold harmless the Company
from any liability for any commission or compensation in the nature of a
finders' or broker's fee for which the Investor or any of its officers,
partners, employees or consultants, or representatives is responsible. The
Company will indemnify and hold harmless the Investor from any liability for any
commission or compensation in the nature of a finder's or broker's fee for which
the Company or any of its officers, employees or consultants or representatives
is responsible.
8.7 Amendments and Waivers. This Agreement may be amended and the
----------------------
observance of any term of this Agreement may be waived (either generally or in a
particular instance and either retroactively or prospectively), only with the
written consent of the Company and the Investor. Any amendment or waiver
effected in accordance with this Section 8.7 will be binding upon the Investor,
the Company and their respective successors and assigns.
8.8 Severability. If any provision of this Agreement is held to be
------------
unenforceable under applicable law, such provision will be excluded from this
Agreement and the balance of the Agreement will be interpreted as if such
provision were so excluded and will be enforceable in accordance with its terms.
8.9 Entire Agreement. This Agreement, together with all Exhibits and
----------------
schedules hereto, constitutes the entire agreement and understanding of the
parties with respect to the subject matter hereof and supersedes any and all
prior negotiations, correspondence, agreements, understandings duties or
obligations between the parties with respect to the subject matter hereof.
8.10 Further Assurances. From and after the date of this Agreement
------------------
upon the request of the Investor or the Company, the Company and the Investor
will execute and deliver such instruments, documents or other writings as may be
reasonably necessary or desirable to confirm and carry out and to effectuate
fully the intent and purposes of this Agreement.
8.11 Meaning of Include and Including. Whenever in this Agreement
--------------------------------
the word "include" or "including" is used, it shall be deemed to mean "include,
without limitation" or "including, without limitation," as the case may be, and
the language following "include" or "including" shall not be deemed to set forth
an exhaustive list.
8.12 Fees, Costs and Expenses. All fees, costs and expenses
------------------------
(including attorneys' fees and expenses) incurred by either party hereto in
connection with the
<PAGE>
-18-
preparation, negotiation and execution of this Agreement and the Investor Rights
Agreement and the consummation of the transactions contemplated hereby and
thereby, shall be the sole and exclusive responsibility of such party.
8.13 Intellectual Property Covenant. For the term of 18 months from
-------------------------------
the date of this Agreement, the Company covenants that it will, where the
Company, in the exercise of reasonable judgment deems it appropriate, use
reasonable business efforts to seek copyright and patent registration, and other
appropriate intellectual property protection, for Intellectual Property of the
Company.
[The remainder of this page is intentionally left blank.]
<PAGE>
-19-
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
DISCREET LOGIC INC. INTEL CORPORATION
By: /s/ Francois Plamondon By: /s/ Arvind Sodhani
----------------------------- ---------------------------------
Name: Francois Plamondon Name: Arvind Sodhani
--------------------------- -------------------------------
Title: Sr. Vice President and Title: Vice President and Treasurer
Chief Financial Officer, ------------------------------
Treasurer and Secretary
--------------------------
Address: 10 Duke Street Address: 2200 Mission College Boulevard
Montreal, Quebec Mail Stop SC4-210
Canada H3D 2L7 Santa Clara, California 95052
Attention: General Counsel Attention: Treasurer and General
Counsel
Telephone No.: (514) 393-1616 Telephone No.: (408) 765-8964
Facsimile No.: (514) 393-0110 Facsimile No.: (408) 765-6038
WITH A COPY TO:
Mark J. Macenka, Esq.
Testa, Hurwitz & Thibeault, LLP
125 High Street; High Street Tower
Boston, MA 02110
[SIGNATURE PAGE TO COMMON SHARES PURCHASE AGREEMENT]
<PAGE>
-20-
COMMON SHARES PURCHASE AGREEMENT
LIST OF EXHIBITS
----------------
Exhibit A - Form of Investor Rights Agreement
<PAGE>
-1-
EXHIBIT 4.2
-----------
INVESTOR RIGHTS AGREEMENT
This INVESTOR RIGHTS AGREEMENT (the "AGREEMENT") is made and entered into
---------
as of March 4, 1998 by and among DISCREET LOGIC INC., a company incorporated
under the laws of Quebec ("the "COMPANY"), and Intel Corporation, a Delaware
-------
corporation ("INVESTOR").
--------
RECITALS
A. The Company and Investor have entered into a Common Shares Purchase
Agreement dated as of the date hereof (the "PURCHASE AGREEMENT") pursuant to
------------------
which Investor has agreed to purchase 645,000 shares of the Company's Common
Shares, without par value ("COMMON SHARES").
-------------
B. The execution and delivery of this Agreement by the parties hereto is a
condition precedent to the obligations of the parties under the Purchase
Agreement.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
contained herein, the parties hereto agree as follows:
1. DEFINITIONS
For the purposes of this Agreement, the following terms have the meanings
indicted below:
1933 ACT. The Securities Act of 1933, as amended and the rules and
--------
regulations promulgated thereunder, as in effect from time to time.
1934 ACT. The Securities Exchange Act of 1934, as amended, and the
--------
rules and regulations promulgated thereunder, as in effect from time to time.
BUSINESS DAY. Each weekday that is not a day on which banking
------------
institutions in California are authorized or obligated by law or executive order
to close.
BLACK-OUT PERIOD. The period beginning on July 1, 1998 and ending 48
----------------
hours after the Company's public announcement of its quarterly results for the
quarter and year ended June 30, 1998.
COMMISSION. The United States Securities and Exchange Commission.
----------
HOLDER. Any person owning Registrable Securities who is a party to
------
this Agreement, and any transferee thereof in accordance with this Agreement.
<PAGE>
-2-
PROSPECTUS. The prospectus included in any Registration Statement, as
----------
amended or supplemented by any prospectus supplement (including, without
limitation, any prospectus supplement with respect to the terms of the offering
of any portion of the Registrable Securities covered by such Registration
Statement), and all other amendments and supplements to the Prospectus,
including post-effective amendments, and all material incorporated by reference
or deemed to be incorporated by reference in such Prospectus.
REGISTER, REGISTRATION AND REGISTERED. A registration effected by
-------------------------------------
preparing and filing a registration statement or similar document with the
Commission in compliance with the 1933 Act, and the declaration or ordering of
effectiveness of such registration statement or document.
REGISTRABLE SECURITIES. The Common Shares issued to Investor pursuant
----------------------
to the Purchase Agreement and any securities that may be issued by the Company
or any successor to the Company from time to time with respect to, in exchange
for, or in replacement of such shares of Common Shares, including, without
limitation, securities issued as a stock dividend on or pursuant to a stock
split of such shares of Common Shares; provided, however, that those shares as
-------- -------
to which the following apply shall cease to be Registrable Securities when: (a)
a Registration Statement with respect to the sale of such Registrable Securities
shall have become effective under the 1933 Act and such Registrable Securities
shall have been disposed of under such Registration Statement; (b) such
Registrable Securities shall have become transferable, or have become eligible
and remain eligible for transfer (whether or not so transferred), in accordance
with Rule 144(k), or any successor rule or provision, under the 1933 Act; (c)
such Registrable Securities shall have been transferred in a transaction in
which the Holder's rights and obligations under this Agreement were not assigned
in accordance with this Agreement; (d) such Registrable Securities shall have
ceased to be outstanding; or (e) such Registrable Securities shall have been
sold pursuant to Rule 144.
REGISTRATION EXPENSES. All expenses incident to the Company's
---------------------
performance of or compliance with Sections 2 and 3 hereof; including, without
limitation, all registration and filing fees (including filing fees with respect
to the Commission and to the National Association of Securities Dealers, Inc.
and listing fees of the Nasdaq National Market), all fees and expenses of
complying with state securities or "blue sky" laws (including fees and
disbursements of underwriters' counsel in connection with any "blue sky"
memorandum or survey, but excluding any fees and expenses for foreign
qualification in such jurisdictions), all printing expenses, all registrars' and
transfer agents' fees and all fees and disbursements of the Company's counsel
and independent public accountants; provided, however that Registration Expenses
--------
shall not include the fees and expenses of more than one counsel to the holders
of Registrable Securities, or underwriters' discounts and commissions, or
brokerage fees, associated with the sale of the Registrable Securities.
REGISTRATION STATEMENT. A registration statement prepared and filed
----------------------
with the Commission in compliance with the 1933 Act.
<PAGE>
-3-
SELLER. Any person, including any Holder, selling any Registrable
------
Securities in an offering of any Registrable Securities of the Company pursuant
to this Agreement.
SELLING EXPENSES. All applicable discounts and commissions, brokerage
----------------
fees, transfer taxes and any fees and disbursements of more than one counsel or
any accountants or other advisors for the Sellers of the Registrable Securities
being registered.
2. "PIGGY-BACK" REGISTRATION RIGHTS
If at any time the Company shall determine to register pursuant to an
underwritten public offering under the 1933 Act any of its Common Shares for its
own account, or the account of other stockholders of the Company desiring to
sell "restricted securities" of the Company (as defined in Rule 144 of the 1933
Act) pursuant to an underwritten public offering, it shall send to the Holder
written notice of such determination and, if within 15 calendar days after
receipt of such notice, Holder shall so request in writing, the Company shall
include in such registration statement all or any part of the Registrable
Securities the Holder requests to be registered. This right shall not apply to a
registration of Common Shares on Form S-8 or Form S-4 (or their then
equivalents) relating to Common Shares to be issued by the Company in connection
with any acquisition of any entity or business, or shares of Common Shares
issuable in connection with any stock option, stock purchase plan or other
employee benefit plan.
If, in connection with any offering involving an underwriting of Common
Shares to be issued for the account of the Company or selling securityholders,
the managing underwriter shall impose a limitation on the number of Common
Shares which may be included in any such registration statement because, in its
judgment, such limitation is necessary to effect an orderly public distribution
of the Common Shares and to maintain a stable market for the securities of the
Company, then the Company shall be obligated to include in such registration
statement only such limited portion of the stock with respect to which the
Holder has requested inclusion hereunder, on a pro rata basis based on the
--------
number of Common Shares owned by the Holder and all other selling
securityholders; provided, however, that such number of shares requested to be
-----------------
included in the registration statement pursuant hereto may be reduced to 25% of
such requested amount prior to any reduction in the number of shares included
therein by the Company.
3. SHELF REGISTRATION
3.1 Undertaking to Register
Within ninety (90) days following the Closing (as that term is defined
in the Purchase Agreement), upon written request of Investor, the Company will
use its commercially reasonable best efforts to prepare, file and have declared
effective a registration statement under the Securities Act to register all of
the Registrable Securities for resale in the public market in brokerage
transactions or transactions with market makers, in block trades, and in
privately negotiated transactions.
<PAGE>
-4-
3.2 SELLING PROCEDURES; SUSPENSION
(a) Except in the event that paragraph (b) below applies, the Company
shall (i) if deemed necessary by the Company, prepare and file from time to time
with the Commission a post-effective amendment to the Registration Statement or
a supplement to the related Prospectus or a supplement or amendment to any
document incorporated therein by reference or file any other required document
so that such Registration Statement will not contain an untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading, and so that, as
thereafter delivered to purchasers of the Registrable Securities being sold
thereunder, such Prospectus will not contain an untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary
to make the statements therein, in light of the circumstances under which they
were made, not misleading; (ii) provide the Holders of the Registrable
Securities copies of any documents filed pursuant to Section 3.2(a)(i); and
(iii) inform each Holder that the Company has complied with its obligations in
Section 3.2(a)(i) (or that, if the Company has filed a post-effective amendment
to the Registration Statement which has not yet been declared effective, the
Company will notify each such Holder to that effect, it will use its best
efforts to secure the effectiveness of such post-effective amendment and will
immediately notify each such Holder pursuant to Section 3.2(a)(i) hereof when
the amendment has become effective).
(b) In the event (i) of any request by the Commission or any other
federal or state governmental authority during the period of effectiveness of
the Registration Statement for amendments or supplements to a Registration
Statement or related Prospectus or for additional information; (ii) of the
issuance by the Commission or any other federal or state governmental authority
of any stop order suspending the effectiveness of a Registration Statement or
the initiation of any proceedings for that purpose; (iii) of the receipt by the
Company of any notification with respect to the suspension of the qualification
or exemption from qualification of any of the Registrable Securities for sale in
any jurisdiction or the initiation or threatening of any proceeding for such
purpose; (iv) of any event or circumstance which necessitates the making of any
changes in the Registration Statement or Prospectus, or any document
incorporated or deemed to be incorporated therein by reference, so that, in the
case of the Registration Statement, it will not contain any untrue statement of
a material fact or any omission to state a material fact required to be stated
therein or necessary to make the statements therein not misleading, and that in
the case of the Prospectus, it will not contain any untrue statement of a
material fact or any omission to state a material fact required to be stated
therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading; or (v) that, in the
reasonable, good faith judgment of the Company's management or Board of
Directors, (A) the offering of securities pursuant thereto would materially and
adversely affect (i) a pending or scheduled public offering or private placement
of the Company's securities, (ii) a pending or proposed acquisition, merger,
consolidation, reorganization, restructuring or similar transaction of or by the
Company or other material corporate activity or
<PAGE>
-5-
transaction, (iii) bona fide negotiations, discussions or proposals with respect
to any of the foregoing, or (iv) the position or strategy of the Company in
connection with any pending or threatened litigation, claim, assessment or
government investigation, and (B) in the event sales of Registrable Securities
were made under the Registration Statement and disclosure of all material
information with respect to the applicable circumstance(s) described in
subsection (A) had not been made, such circumstance(s) could reasonably be
expected to cause a violation of the 1933 Act or the 1934 Act (each a
"SUSPENSION EVENT"); then, subject to paragraph (d) below, the Company shall
----------------
deliver a notice in writing to the Holders (the "SUSPENSION NOTICE") to the
-----------------
effect of the foregoing and, upon receipt of such Suspension Notice, each such
Holder will refrain from selling any Registrable Securities pursuant to the
Registration Statement (a "SUSPENSION") until such Holder's receipt of copies of
----------
the supplemented or amended Prospectus provided for in Section 3.2(a)(i) hereof,
or until it is advised in writing by the Company that the Prospectus may be
used, and has received copies of any additional or supplemental filings that are
incorporated or deemed incorporated by reference in such Prospectus.
(c) In the event of any Suspension Event, or any delay in effecting
the Registration under Section 3.2 above, the Company will use its commercially
reasonable efforts to ensure that the use of the Prospectus so suspended or
delayed may be commenced or resumed, as the case may be, and that the Suspension
will terminate and the Holder's ability to sell pursuant to the Prospectus so
suspended will commence or resume, as the case may be, as soon as practicable
and, in the case of a pending development, filing or event referred to in
Section 3.2(b)(iv) or (v) hereof, as soon, in the judgment of the Company's
management or Board of Directors (in accordance with the provisions of Section
3.2), as disclosure of such pending development, filing or event or the
resumption of sales pursuant to the Registration Statement would not have a
material adverse effect on the Company's ability to consummate or materially
prejudice the Company's interest with respect to the transaction, if any,
contemplated by such development, filing or event. Notwithstanding any other
provision of this Agreement, the Company shall have the right to cause a maximum
of two (2) Suspensions pursuant to Section 3.2(b)(iv) and (v), neither of which
may be within 60 days of the other, as provided above (including for this
purpose a delay in effecting the Registration pursuant to Section 3.2 above)
during any 12-month period after the initial effective date of the Registration
Statement, and the total number of days for which all Suspensions (including for
this purpose a delay in effecting the Registration Statement pursuant to Section
3.2 above) during any 12-month period shall not exceed 90 days in the aggregate.
(d) The Company will use its commercially reasonable best efforts to
maintain the effectiveness of any registration statement pursuant to which any
of the Registrable Securities are being offered for (i) up to 180 days (or such
shorter period of time as the underwriters need to complete the distribution of
the registered offering in any Company-primary or secondary offering), in the
case of a registration pursuant to Section 2, or (ii) in the case of a "shelf"
Registration Statement pursuant to Section 3 until the date on which each Holder
may sell all Registrable Securities then held by such Holder without restriction
by the volume limitations of Rule 144(e). The Company from
<PAGE>
-6-
time to time will amend or supplement such Registration Statement and the
Prospectus contained therein to the extent necessary to comply with the 1933 Act
and any applicable state securities statue or regulation. The 180-day time
period referenced in clause (i) above during which the Company is obligated to
keep the registration statement effective shall be extended for a number of days
equal to the number of days during which the Company has effected a Suspension.
The Company shall use commercially reasonable best efforts to obtain the
withdrawal of any order suspending the effectiveness of the Registration
Statement, or the lifting of any suspension of the qualification (or exemption
from qualification) of any of the securities for sale in any jurisdiction, at
the earliest practicable moment.
(e) Notwithstanding the foregoing, during the Black-Out Period the
Holder shall not offer or sell any Registrable Securities, or engage in any
other transaction involving or relating to the Registrable Securities, until the
Black-Out Period has expired.
3.3 UNDERWRITING AGREEMENT
If in connection with any proposed distribution by the Holder under
the "piggy back" registration referred to in Section 2, the Company in its
discretion shall determine that it is in the best interests of the Company to
effect distribution by means of an underwriting, the Company shall promptly
notify the Holder of such determination. In such event, in addition to the
limitations set forth in Section 2, the right of Holder to participate in such
distribution shall be conditioned upon such Holder's participation in the
underwriting arrangements required by this Section 3.3, including without
limitation, the requirement that the Holder enter into an underwriting agreement
and a lock-up agreement (for a period determined by the managing underwriter not
to exceed the period agreed to by all directors and officers of the Company),
each in customary form with the managing underwriter selected for the
underwriting by the Company.
4. EXPENSES
The Company will pay all Registration Expenses in connection with the
registration of Registrable Securities effected by the Company pursuant to
Section 2 or 3. Holders of Registrable Securities registered pursuant to this
Agreement shall pay all Selling Expenses with each such Holder bearing a pro
rata portion of the Selling Expenses based upon the number of Registrable
Securities registered by each such Holder.
5. EXPIRATION OF REGISTRATION RIGHTS
The obligations of the Company under Section 2 of this Agreement to
register the Registrable Securities shall expire and terminate at the earlier of
(a) three (3) years following the Closing or (b) such time as the Holder shall
be entitled or eligible to sell, within any ninety (90) day period, all such
securities without restriction and without a need for the filing of a
registration statement under the Securities Act, including without
<PAGE>
-7-
limitation, for any resales of restricted securities made pursuant to Rule
144(k) as promulgated by the Securities and Exchange Commission. The
determination as to whether the Holder is entitled or eligible to sell all
Registrable Securities without the need for registration under the Securities
Act shall be based on a written opinion of counsel that registration of the
Registrable Securities is not required under the Securities Act, sufficient to
permit the transfer agent to transfer such securities upon a sale by the Holder.
The obligations of the Company under Section 3 of this Agreement shall expire at
the time specified in Section 3.2(d)(ii).
6. REGISTRATION PROCEDURES
In connection with the registration of Registrable Securities under this
Agreement, and subject to the other provisions of this Agreement, the Company
shall:
(a) use its commercially reasonable best efforts to cause the
Registration Statement filed in accordance with Section 2 or Section 3 to become
effective as soon as practicable after the date of filing thereof;
(b) prepare and file with the Commission such amendments and
supplements to such Registration Statement and the Prospectus used in connection
therewith as may be necessary to keep such Registration Statement continuously
effective for the shorter of (i) the duration of its registration obligations,
or (ii) until there are no Registrable Securities outstanding, and to comply
with the provisions of the 1933 Act with respect to the disposition of the
Registrable Securities;
(c) furnish to each Seller of such Registrable Securities such number
of copies of the Prospectus included in such Registration Statement as such
Seller may reasonably request in order to facilitate the sale or disposition of
such Registrable Securities;
(d) use its commercially reasonable best efforts to register or
qualify all securities covered by such Registration Statement under such other
securities or "blue sky" laws of such jurisdictions as each Seller shall
reasonably request, and do any and all other acts and things that may be
necessary to enable such Seller to consummate the disposition in such
jurisdictions of its Registrable Securities covered by such Registration
Statement, except that the Company shall not for any such purpose be required to
qualify generally to do business as a foreign corporation in any jurisdiction
wherein it is not so qualified, or to subject itself to taxation in respect of
doing business in any such jurisdiction, or to consent to general service of
process in any such jurisdiction;
(e) notify each Seller of Registrable Securities covered by such
Registration Statement, at any time when a Prospectus relating thereto is
required to be delivered under the 1933 Act, of the happening of any event as a
result of which the Prospectus included in such Registration Statement, as then
in effect, includes an untrue statement of a material fact or omits to state any
material fact required to be stated therein or necessary to make the statements
therein not misleading in light of the circumstances
<PAGE>
-8-
then existing or if it is necessary to amend or supplement such Prospectus to
comply with the law, and at the request of any such Seller, prepare and furnish
to such Seller a reasonable number of copies of a supplement to or an amendment
of such Prospectus as may be necessary so that, as thereafter delivered to the
purchasers of such Registrable Securities or securities, such Prospectus, as
amended or supplemented, will comply with the law;
(f) use its best efforts to qualify such securities for inclusion in
the Nasdaq National Market, and provide a transfer agent and registrar for such
Registrable Securities not later than the effective date of such Registration
Statement; and
(g) issue to any person (who is not an affiliate of the Company) to
which any Holder of Registrable Securities may sell such Registrable Securities
in connection with such registration certificates evidencing such Registrable
Securities without any legend restricting the transferability of the Registrable
Securities (unless otherwise required by law).
7. 1934 ACT REGISTRATION
The Company shall timely file with the Commission such information as the
Commission may prescribe under Section 13 or 15(d) of the 1934 Act and shall use
its best efforts to take all action and make all filings of information
referenced in Rule 144(c) as may be required as a condition to the availability
of Rule 144 under the 1933 Act (or any successor exemptive rule hereinafter in
effect) with respect to such Common Shares. The Company shall furnish to any
holder of Registrable Securities forthwith upon five (5) days written request
(i) a written statement by the Company as to its compliance with the reporting
requirements of Rule 144(c), (ii) a copy of the most recent annual or quarterly
report of the Company as filed with the Commission, and (iii) such other
publicly-filed reports and documents as a holder may reasonably request in
availing itself of any rule or regulation of the Commission allowing a holder to
sell any such Registrable Securities without registration.
8. INVESTOR INFORMATION
It shall be a condition precedent to the obligations of the Company to take
any action pursuant to this Agreement that all Holders of Registrable Securities
shall furnish to the Company such information regarding themselves, the
Registrable Securities held by them and the intended method of disposition of
such Registrable Securities as shall be reasonably required to effect the
registration of their Registrable Securities and to execute such documents in
connection with such registration as the Company may reasonably request.
9. INDEMNIFICATION AND CONTRIBUTION
In the event any Registrable Securities are included in a Registration
Statement under Sections 2 and 3:
<PAGE>
-9-
(a) The Company will indemnify and hold harmless each Seller, the
officers, directors, partners, agents and employees of each Seller, any
underwriter (as defined in the 1933 Act) for such Seller and each person, if
any, who controls such Seller or underwriter within the meaning of the 1933 Act
or the 1934 Act, against any losses, claims, damages or liabilities (joint or
several) to which they may become subject under the 1933 Act, the 1934 Act or
other federal or state law, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon any
of the following statements, omissions or violations (collectively, a
"VIOLATION"): (i) any untrue statement or alleged untrue statement of a material
---------
fact contained in such Registration Statement, including any preliminary
Prospectus or final Prospectus contained therein or any amendments or
supplements thereto; (ii) the omission or alleged omission to state in such
Registration Statement a material fact required to be stated therein, or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading; or (iii) any violation or alleged
violation by the Company of the 1933 Act, the 1934 Act, any state securities law
or any rule or regulation promulgated under the 1933 Act, the 1934 Act or any
state securities law applicable to the Company in connection with such
Registration Statement; and the Company will reimburse each such Seller,
officer, director, partner, agent, employee, underwriter or controlling person
for any reasonable legal or other expenses reasonably incurred by them in
connection with investigating or defending any such loss, claim, damage,
liability or action; provided, however, that the indemnity agreement contained
-------- -------
in this Section 9(a) shall not apply to amounts paid in settlement of any such
loss, claim, damage, liability or action if such settlement is effected without
the consent of the Company (which consent shall not be unreasonably withheld or
delayed), nor shall the Company be liable in any such case for any such loss,
claim, damage, liability or action to the extent that it arises out of or is
based upon a Violation (i) which occurs in reliance upon and in conformity with
written information finished expressly for use in connection with such
registration by any such Seller, underwriter or controlling person or (ii) which
is based upon any information in a Prospectus that has been amended or
supplemented if such Seller had been notified of such amendment or supplement
and the use of such amendment or supplement by the Seller would have avoided the
Violation.
(b) Each Seller will indemnify and hold harmless the Company, each of
its officers, directors, partners, agents or employees, each person, if any, who
controls the Company within the meaning of the 1933 Act, any underwriter and any
other Seller or any of its directors, officers, partners, agents or employees or
any person who controls such Seller, against any losses, claims, damages or
liabilities joint or several) to which the Company or any such director,
officer, partner, agent, employee, controlling person or underwriter, or other
such Seller or director, officer, partner, agent, employee or controlling person
may become subject, under the 1933 Act, the 1934 Act or other federal or state
law, insofar as such losses, claims, damages or liabilities (or actions in
respect thereto) arise out of or are based upon any Violation, in each case to
the extent (and only to the extent) that such Violation occurs in reliance upon
and in conformity with written information finished by such Seller expressly for
use in connection with such registration; and each such Seller will reimburse
any reasonable legal or other expenses reasonably
<PAGE>
-10-
incurred by the Company or any such director, officer, partner, agent, employee,
controlling person or underwriter, other Seller, officer, director, partner,
agent, employee or controlling person in connection with investigating or
defending any such loss, claim, damage, liability or action. Notwithstanding
anything contained in this Agreement to the contrary, the indemnity agreement
contained in this Section 9(b) shall not apply to amounts paid in settlement of
any such loss, claim, damage, liability or action if such settlement is effected
without the consent of the Seller, which consent shall not be unreasonably
withheld or delayed; provided, further, that the aggregate liability of each
-------- -------
Seller in connection with any sale of Registrable Securities pursuant to a
Registration Statement in which a Violation occurred shall be limited to the net
proceeds from such sale.
(c) Promptly after receipt by an indemnified party under this Section
9 of notice of the commencement of any action (including any governmental
action), such indemnified party will, if a claim in respect thereof is to be
made against any indemnifying party under this Section 9, deliver to the
indemnifying party a written notice of the commencement thereof and the
indemnifying party shall have the right to participate in, and, to the extent
the indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume the defense thereof with counsel selected by the
indemnifying party and reasonably acceptable to the indemnified party; provided,
--------
however, that an indemnified party shall have the right to retain its own
- -------
counsel, with the reasonable fees and expenses to be paid by the indemnifying
party, if representation of such indemnified party by the counsel retained by
the indemnifying party would be inappropriate due to actual or potential
differing or conflicting interests between such indemnified party and any other
party represented by such counsel in such proceeding. The failure to deliver
written notice to the indemnifying party within a reasonable time of the
commencement of any such action, if and to the extent prejudicial to its ability
to defend such action, shall relieve such indemnifying party of liability to the
indemnified party under this Section 9 to the extent of such prejudice, but the
omission so to deliver written notice to the indemnifying party will not relieve
it of any liability that it may have to any indemnified party otherwise than
under this Section 9.
(d) If recovery is not available under the foregoing indemnification
provisions of this Section 9, for any reason other than as specified therein,
the parties entitled to indemnification by the terms thereof shall be entitled
to contribution to liabilities and expenses in such proportion as is appropriate
to reflect the relative fault of the indemnifying parties and the indemnified
parties, except to the extent that contribution is not permitted under Section
11(f) of the 1933 Act. The relative fault of such indemnifying party and
indemnified party shall be determined by reference to, among other things, the
parties' relative knowledge and access to information concerning the matter with
respect to which the claim was asserted, the opportunity to correct and prevent
any statement or omission and any other equitable considerations appropriate
under the circumstances, including, without limitation, whether any untrue
statement or alleged untrue statement of a material fact or omission or alleged
omission to state a material fact relates to information supplied by the
Company, on the one hand, or by the
<PAGE>
-11-
Holder of Registrable Securities, on the other hand. The Company and Investors
of the Registrable Securities covered by such Registration Statement agree that
it would not be equitable if the amount of such contribution were determined by
pro rata or per capita allocation. No seller of Registrable Securities covered
by such Registration Statement or person controlling such Seller shall be
obligated to make any contribution hereunder which in the aggregate exceeds the
net proceeds of the securities sold by such seller, less the aggregate amount of
any damages which such seller and its controlling persons have otherwise been
required to pay in respect of the same claim or any substantially similar claim.
The obligations of such Investors to contribute are several in proportion to
their respective ownership of the Registrable Securities covered by such
Registration Statement and not joint. Notwithstanding the foregoing, in no event
shall any contribution by a Holder under this Section 9(d) exceed the net
proceeds from the offering received by such Holder.
10. TRANSFERABILITY
Each Holder agrees that he will not make any disposition of all or any
portion of the Registrable Securities (a) except in a registered public offering
pursuant to the rights granted in this Agreement; or (b) until (i) such Holder
shall have furnished the Company with a statement of the circumstances
surrounding the proposed disposition and (ii) if reasonably requested by the
Company, such Holder shall have furnished the Company with an opinion of
counsel, reasonably satisfactory to counsel for the Company, that such
disposition will not require registration of such Registrable Securities or such
transaction under the 1933 Act or applicable state securities laws.
11. COVENANTS
11.1 Board Observership
During the period from the date hereof until the earlier of the date
that is six months after the completion of the final milestone set forth in the
Strategic Development Agreement, dated as of the date hereof between Investor
and the Company (the "DEVELOPMENT AGREEMENT"), or immediately upon termination
---------------------
of the Development Agreement, and for so long as Investor holds at least 483,750
Common Shares of the Purchased Shares (as adjusted for stock splits, stock
dividends and similar transactions), Investor shall be entitled to appoint a
non-voting observer to the Company's Board of Directors who is acceptable to the
Company; and such observer shall be entitled to attend all meetings of the
Company's Board of Directors and committees thereof (other than the audit,
nomination, governance, and compensation committees) and shall receive notice of
all meetings and all materials furnished to members of the Company's Board of
Directors in their capacities as such at the same time and in the same manner as
such notice and materials are provided to the Board of Directors, unless the
Board of Directors or management of the Company shall reasonably determine that
delivery of such notice and/or materials to Investor may be detrimental to the
Company. Upon the request of the Board of Directors of the Company, the
observer will excuse himself from any portion of
<PAGE>
-12-
the Board or committee meetings if the Board of Directors shall reasonably
determine that the observer's presence may violate the attorney-client privilege
or may create a conflict of interest or if the Chairman of the Board of the
Company shall reasonably determine that the observer's presence is detrimental
to the Company. The materials furnished to Investor and the discussions and
presentations in connection with or at such meetings shall be considered
confidential information and Investor shall not disclose such materials and
discussions to any third party under the terms of the Confidentiality and
Nondisclosure Agreement No. 98073, dated September 25, 1997, between the Company
and Investor.
The Investor acknowledges that the use or disclosure of any information
which is material and non-public ("Inside Information"), or trading in the
securities of the Company on the basis of such Inside Information, may result in
civil and criminal penalties and enforcement proceedings commenced by the
Securities and Exchange Commission and others in the event it engages in
transactions involving the capital stock of the Company. Because of receipt of
the confidential information provided to the Investor and its Nominee, the
Investor and its Nominee may be deemed to have Inside Information regarding the
Company.
The Company acknowledges that an observer designated by Investor will
likely have, from time to time, information that may be of interest to the
Company ("INFORMATION") regarding a wide variety of matters including, by way of
-----------
example only, (a) Investor's technologies, plans and services, and plans and
strategies relating thereto, (b) current and future investments Investor has
made, may make, may consider or may become aware of with respect to other
companies and other technologies, products and services, including, without
limitation, technologies, products and services that may be competitive with the
Company's, and (c) developments with respect to the technologies, products and
services, and plans and strategies relating thereto, of other companies,
including, without limitation, companies that may be competitive with the
Company. The Company recognizes that a portion of such Information may be of
interest to the Company. Such Information may or may not be known by the
Observer. The Company, as a material part of the consideration for this
Agreement, agrees that Investor and its Observer shall have no duty to disclose
any Information to the Company or permit the Company to participate in any
projects or investments based on any Information, or to otherwise take advantage
of any opportunity that may be of interest to the Company if it were aware of
such Information, and hereby waives, to the extent permitted by law, any claim
based on the corporate opportunity doctrine or otherwise that could limit
Investor's ability to pursue opportunities based on such Information or that
would require Investor or Observer to disclose any such Information to the
Company or offer any opportunity relating thereto to the Company.
11.2 DISCLOSURE
(a) Except to the extent required by law or judicial order or except
as provided herein, neither party shall disclose this Agreement, the Purchase
Agreement or
<PAGE>
-13-
any of the terms hereof or thereof without the other's prior written approval,
which approval will not be delayed or unreasonably withheld. Either party may
disclose this Agreement to the extent required by law or judicial order,
provided that if such disclosure is pursuant to judicial order or proceedings,
the disclosing party will notify the other party promptly before such disclosure
and will cooperate with the other party to seek confidential treatment with
respect to the disclosure if requested by the other party and provided further
that if such disclosure is required pursuant to the rules and regulations of any
federal, state or local organization, the parties will cooperate to seek
confidential treatment of this Agreement to the maximum extent possible under
law.
(b) Prior to the execution of this Agreement, the parties will agree
on the content of a joint press release announcing the existence of this
Agreement, which press release will be issued as mutually agreed by the parties.
(c) Neither party will be required to disclose to the other any
confidential information of any third party without having first obtained such
third party's prior written consent.
12. MISCELLANEOUS
12.1 Amendments and Waivers
Any provision of this Agreement may be amended and the observance
thereof may only be waived (either generally or in a particular instance and
either retroactively or prospectively), with the written consent of the Company
and the Holders of a majority of the Registrable Securities then outstanding.
Any amendment or waiver effected in accordance with this Section 12.1 shall be
binding upon each Holder of Registrable Securities at the time outstanding, each
future Holder of Registrable Securities, and the Company.
12.2 NOTICES
Any notice required or permitted under this Agreement will be given in
writing, shall be effective when received, and shall in any event be deemed
received and effectively given upon personal delivery to the party to be
notified or one (1) business day after deposit with a nationally recognized
courier service such as FedEx for next business day delivery, or one (1)
business day after sent by facsimile with copy deposited with a nationally
recognized courier service such as FedEx for next business day delivery,
addressed to the party to be notified at the address indicated for such party on
the signature page hereof or at such other address as the Shareholder or the
Company may designate by giving at least ten (10) days advance written notice
pursuant to this Section 12.2
<PAGE>
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12.3 GOVERNING LAW
This Agreement shall for all purposes be governed by and construed in
accordance with the internal laws of the State of Delaware without regard to
conflicts-of-laws principles. The parties hereto agree to submit to the non-
exclusive jurisdiction of the federal and state courts of the County of Santa
Clara in the State of California with respect to the breach or interpretation of
this Agreement or the enforcement of any and all rights, duties, liabilities,
obligations, powers and other relations between parties arising under this
Agreement.
12.4 SEVERABILITY
If one or more provisions of this Agreement are held to be
unenforceable under applicable law, such provision shall be excised from this
Agreement, and the remainder of this Agreement shall be interpreted as if such
provision were so excised and shall be enforceable in accordance with its
remaining terms.
12.5 COUNTERPARTS
This Agreement may be executed in counterparts, each of which shall be
deemed to be an original and all of which together shall constitute one and the
same instrument.
12.6 ASSIGNMENT
The rights set forth in this Agreement are not transferable except to
a person controlling, controlled by, or under common control with Holder who
receives at least 35% of such shares. All transferees shall agree in writing to
be bound by all of the provisions of this Agreement. A Holder shall promptly
advise the Company in writing of the identity and address of any person to whom
it transferred its registration rights hereunder.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
DISCREET LOGIC INC. INTEL CORPORATION
By: /s/ Francois Plamondon By: /s/ Arvind Sodhani
----------------------------- ---------------------------------
Name: Francois Plamondon Name: Arvind Sodhani
--------------------------- -------------------------------
Title: Sr. Vice President and Title: Vice President and Treasurer
Chief Financial Officer, ------------------------------
Treasurer and Secretary
--------------------------
Address: 10 Duke Street Address: 2200 Mission College Boulevard
Montreal, Quebec Mail Stop SC4-210
Canada H3D 2L7 Santa Clara, California 95052
Attention: General Counsel Attention: Treasurer and General
Counsel
Telephone No.: (514) 393-1616 Telephone No.: (408) 765-1240
Facsimile No.: (514) 393-0110 Facsimile No.: (408) 765-6038
WITH A COPY TO:
Mark J. Macenka, Esq. Address: 2200 Mission College Boulevard
Testa, Hurwitz & Thibeault, LLP Mail Stop SC4-210
125 High Street; High Street Tower Santa Clara, California 95052
Boston, MA 02110 Attention: Treasurer and General
Counsel
Telephone No.: (408) 765-1125
Facsimile No.: (408) 765-5859
[SIGNATURE PAGE TO INVESTOR RIGHTS AGREEMENT]
<PAGE>
-1-
Exhibit 99.1
------------
Discreet Logic and MGI Software Sign Definitive Merger Agreement
Amalgamation of Consumer Digital Imaging and Video Editing
Software Leader Forms Cornerstone of Discreet Logic Consumer Initiative
MONTREAL, Quebec and TORONTO, Ontario --- March 9, 1998 - Discreet Logic Inc.
(Nasdaq: DSLGF) and MGI Software Corp. (TSE: MGI) today announced a definitive
agreement under which Discreet Logic will combine with MGI Software (MGI). MGI,
based in Toronto, Ontario, develops and distributes award-winning market-leading
products including PhotoSuite and VideoWave for Microsoft Windows95 and
WindowsNT. PhotoSuite enables people to edit, enhance, transform, organize,
present, print and share photos on their personal computers and over the
Internet. VideoWave turns a personal computer into a video studio by enabling
the user to quickly and easily capture, edit and produce videos using a unique
"StoryLine" interface.
The combination advances Discreet Logic's goal to become the leading provider of
digital media solutions to professional and consumer markets including home and
business PC users. Discreet Logic will augment its advanced systems and new
media software businesses with MGI's leading product lines, extensive worldwide
consumer distribution network and OEM partnerships, and proven management
expertise.
According to the agreement, each share of MGI common stock will be exchanged for
0.162 shares of Discreet Logic stock. Outstanding options to purchase MGI
common stock will be converted at this exchange ratio into options to acquire
Discreet Logic stock. Based on today's closing price of Discreet Logic's common
stock, the deal is valued at approximately US $108 million (approximately CDN
$153 million). The transaction is intended to be accounted for as a pooling of
interests and is expected to be slightly dilutive to Discreet Logic's earnings
in fiscal 1999, excluding the one-time charge noted below. In connection with
the transaction, MGI granted Discreet Logic an option, exerciseable under
certain conditions, to purchase shares up to approximately 20% of MGI's
outstanding shares, and in addition Mr. Oren Asher, chairman of MGI, has agreed
to vote his shares in favour of the transaction. The transaction is to be
implemented through a plan of arrangement and is subject to various customary
conditions, including clearance under the Hart-Scott-Rodino Antitrust
Improvements Act, approval of Canadian regulatory and governmental agencies and
courts, and approval by MGI stockholders. Discreet Logic expects to recognize a
one-time charge related to certain merger costs and related expenses in its
fourth fiscal quarter, or first quarter of fiscal 1999, when the deal is
expected to close.
On March 5, 1998, Discreet Logic and Intel Corporation announced a joint
development agreement supported by an equity investment by Intel to build
products targeted at professional markets. MGI's award winning consumer
technology has also received recognition through an equity investment by Intel
in September 1997. As further
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recognition, in January 1998 Intel began shipping VideoWave on its motherboards
under a multi-year worldwide agreement.
MGI brings proven consumer management expertise led by Anthony DeCristofaro,
president and CEO of MGI, who was previously vice president and general manager
of AST Canada, a computer hardware company which during DeCristofaro's tenure
delivered an annual revenue increase from US $21 million to over US $211 million
in four years. DeCristofaro was also a founding board member of Delrina
Corporation, a PC software company. Other MGI management team members come from
Corel and Delrina. DeCristofaro will become senior vice president of a newly
created Discreet Logic Consumer Products Division, reporting to Richard
Szalwinski, Discreet Logic's, chairman, president and CEO.
"The addition of MGI builds on our goal of providing design-driven solutions
across the broad entertainment and consumer market," said Szalwinski. "The
combined company will be better positioned to take advantage of the analogue to
digital conversion and the growing demand for digital imagery across all
markets. Together we will have seasoned management, award winning products, and
extensive distribution for professional and consumer digital media
marketplaces."
"Our mission has always been to change the way people picture the world by
creating products that inspire users with new found creativity on their PCs and
the Internet," said DeCristofaro. "The success of our mission is evidenced by
MGI's substantial year over year revenue growth as well as our sales of over 10
million units since inception. We expect to further this leadership position
with the release of PhotoSuite II, our next generation, Internet-based product
due to be released in the second calendar quarter of this year. Our fit with
Discreet Logic is excellent because we share a common philosophy including the
development of best of breed products that enhance the user's experience."
Since it was founded in 1995, MGI has built a market leading position with PC
Photography and Video Publishing with its award-winning products and key
relationships with some of the leading manufacturers driving the convergence of
computers with still and motion pictures. MGI's partners include Intel
Corporation, Mitsui & Co. of Japan, and major digital camera, computer, and
peripheral manufacturers. MGI's PhotoSuite and VideoWave are the leading brands
in retail stores and OEM distribution. MGI's products are available in 14
different languages through a worldwide network of distributors and retailers
spanning 19 countries. For more information visit MGI's website at
www.mgisoft.com.
Discreet Logic Inc. develops advanced systems and new media software that are
used in the creation of digital imagery and serve three key markets: visual
effects, editing and production. Artists, editors and designers use Discreet
Logic's products to develop imagery for video, broadcast, HDTV, the web, new
media and feature films, including the following 1998 Visual Effects Academy
Awards nominees "Titanic", "The Lost World: - 3 - Jurassic Park" and
"Starship Troopers"; as well as previous Academy Award winners "Independence
Day" and "Forrest Gump".
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Except for the factual information contained herein, certain of the matters
discussed in this news release constitute forward-looking statements that
involve risks and uncertainties. Actual results, including the level of
earnings of both Discreet Logic and MGI, the success of the proposed merger, and
the release of new products may differ from the results discussed in the
forward-looking statements. Factors that may cause such a difference include,
but are not limited to, risks associated with acquisitions, such as obtaining
necessary governmental and stockholder approvals; the successful closing of the
transaction and other risks associated with acquisitions such as the integration
of MGI's products into the Company's product line; continued market acceptance
of MGI's products; difficulties in the assimilation of operations, technologies,
and distribution channels of the companies; diversion of management's attention
from other business concerns; and a downturn in the digital media industry, as
well as other factors such as the timely development, release and acceptance of
new products; the impact of competitive products and pricing; the timely
development and release of products by strategic suppliers; and the other risks
detailed in the Company's Form 10-K for the year ended June 30, 1997,
particularly in the section entitled Certain Factors That May Affect Future
Results as well as in other reports and forms filed with the Securities Exchange
Commission from time to time.
For further information, contact Discreet Logic Corporate Headquarters: 10 Duke,
Montreal, Quebec, Canada H3C 2L7; Tel: 514/393-1616; Fax: 514/393-0110; E-mail:
[email protected]; Web; www.discreet.com.
NOTE: All amounts are in U.S. dollars unless otherwise noted. Discreet Logic
and its products are trademarks of Discreet Logic Inc. MGI and its products are
trademarks of MGI. All other trademarks are the properties of their respective
owners.
CONTACT:
Discreet Logic, Montreal
Media: Emma Shield, 514/954-7151
Analysts/investors:
Fleishman-Hillard:
Toronto: Anne Lachance, 416/214-0701
New York: Thomas Smith, 212/265-9150 ext. 2244
MGI, Toronto
Media/Analysts/investors:
Josef Zankowicz, 905/707-3650
